Slide 1: Fourth Quarter & Full Year 2016 Earnings Call
Fourth Quarter & Full Year 2016 Earnings Call February 23, 2017 Rob Wagman – President & Chief Executive Officer Nick Zarcone – Executive Vice President & Chief Financial Officer Joe Boutross – Director, 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: 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- Continuing operations
Consolidated Results- Continuing operations Q4 2016 Revenue* 2016 Revenue* $8,584 $2,400 $8,600 $8,200 $2,200 $2,150 .3% $7,800 19 .0% $2,000 23 $7,400 $7,193 $1,800 $1,749 $7,000 $1,600 $6,600 $1,400 $6,200 Q4 2015 Q4 2016 2015 2016 • Organic growth of parts and services revenue of 3.8% • Organic g
Slide 5: Consolidated Results
Consolidated Results Q4 2016 2016 $0.40 $0.40 $0.39 $1.80 $1.85 $1.80 $0.31 $0.31 $0.04 $0.11 $0.30 $0.35 $0.34 $1.60 $1.65 $1.50 0.0% $0.20 $0.03 $1.49 $0.31 $0.28 $0.30 $1.40 $1.38 $1.45 $0.10 $1.69 $0.35 .4% $0.34 % 13 6.5 $1.47 $1.49 % $1.20 $1.38 $1.25 $0.25 2.9 $0.00 $(0.03) $1.00 $1.05 $(0.10
Slide 6: Q4 2016 Revenue Growth
Q4 2016 Revenue Growth Revenue Changes by Source: Organic Acquisition Foreign Exchange Total(1) North America 1.5% 7.4% —% 8.9% Europe 7.2% 65.8% (12.9)% 60.0% Specialty 5.7% —% —% 5.7% Parts and Services 3.8% 23.5% (3.8)% 23.5% Other Revenue 14.1% 0.3% (0.2)% 14.1% Total 4.3% 22.2% (3.6)% 23.0% • N
Slide 7: 2016 Revenue Growth
2016 Revenue Growth Revenue Changes by Source: Organic Acquisition Foreign Exchange Total(1) North America 2.9% 7.3% (0.2)% 9.9% Europe 7.2% 47.1% (7.9)% 46.4% Specialty 6.9% 6.8% (0.3)% 13.5% Parts and Services 4.8% 19.0% (2.5)% 21.3% Other Revenue (11.2)% 3.1% (0.2)% (8.2)% Total 3.7% 18.0% (2.4)%
Slide 8: Q4 2016 Operating Highlights
Q4 2016 Operating Highlights North America • Since the inception of Roadnet, we have been able to increase miles per route from 101 to 129, allowing us to cover eight miles per stop versus a previous average of six, without any significant increase in headcount. At the end of Q4, Roadnet was operati
Slide 9: ARG Synergy Opportunities
ARG Synergy Opportunities oy oy o vy, y@ “ vy @ ° ee . y o> 4 yy v v 3 5 / \y ® m @ \‘o : z ®o Cary 4 oye! er) ae v ° ° cen ‘Ovo il ° 05! g @ e, 8 6 °° Pew oe ® vo % e de 7 8 > ae 7 ° 9 Sow vo a Ze y a. a) ° ° o 3°} 5 , = ow? © 6 cL at ‘a, yo v J J ve V . * & J ey oy 5 ° & oy? v @ Wholesale Aftermar
Slide 10: Inventory
Inventory Inventory Procurement: ($ in millions, Vehicles purchased in 000s) 2016 2015 % Change Total aftermarket procurement $4,155 $2,944 41.1% Wholesale salvage cars and trucks 291 290 0.3% Europe wholesale salvage cars and trucks 23 20 15.0% Self service and "crush only" cars 524 471 11.3% • We
Slide 11: Acquisition Activity
Acquisition Activity Number of Q4 TTM Number of YTD TTM Acquisitions Revenue* Acquisitions Revenue* North America** 4 $20 million 6 $274 million Europe 3 $274 million 9 $1.3 billion Specialty — — — — Total 7 $294 million 15 $1.6 billion North America • In Q4, we acquired 3 small heavy truck parts di
Slide 12: Financial Results
Corporation Financial Results
Slide 13: Operating Results- Continuing Operations
Operating Results- Continuing Operations Fourth Quarter YTD ($ in millions,except per share data) 2016 2015 Change 2016 2015 Change Revenue $2,150 $1,749 23.0% $8,584 $7,193 19.3% Gross Margin 830 697 19.0% 3,352 2,834 18.3% Operating Income 162 152 6.7% 763 705 8.3% Pre-tax Income 144 139 3.1% 677
Slide 14: Q4 2016 Consolidated Margins-Continuing operations
Q4 2016 Consolidated Margins-Continuing operations Q4 Q4 Change (as a % of Revenue) 2016 2015 F/(U) QTD Commentary Revenue 100.0% 100.0% —% Reflects a negative effect of 0.9% and 0.2% from our Rhiag and PGW acquisitions, respectively. Additionally, reflects a 0.3% negative effect related to Specialt
Slide 15: 2016 Consolidated Margins- Continuing operations
2016 Consolidated Margins- Continuing operations Change (as a % of Revenue) 2016 2015 F/(U) YTD Commentary Revenue 100.0% 100.0% —% The increase in cost of goods sold reflects a negative effect of 0.6% from our Rhiag acquisition and a 0.2% increase as a result of mix, as we generated a greater propo
Slide 16: Components of Quarterly Revenue
Components of Quarterly Revenue $2.15B $1.75B $8.58B $7.19B • A large portion of change in margins on a 100.0% 4.9% 5.3% 5.1% 6.7% consolidated basis is attributable to change in 12.0% 13.9% 13.9% revenue mix 14.6% 80.0% • North America historically has highest Gross margins and EBITDA margins 27.8%
Slide 17: North America – Q4 2016 Results
North America – Q4 2016 Results % of Revenue Gross Margin ($ in millions) 2016 2015 Change 2016 2015 Total Revenue $1,114 $1,018 9.4% 43.6% 43.5% 43.4% 44.0% 43.2% Gross Margin $483 $440 9.7% 43.4% 43.2% 42.7% Operating Expenses $343 $310 10.6% 30.8% 30.5% 42.7% 42.0% 42.4% 42.2% Segment EBITDA* $14
Slide 18: North America – 2016 Results
North America – 2016 Results % of Revenue ($ in millions) 2016 2015 Change 2016 2015 Total Revenue $4,472 $4,147 7.8% Gross Margin $1,936 $1,768 9.5% 43.3% 42.6% Operating Expenses $1,349 $1,227 10.0% 30.2% 29.6% Segment EBITDA* $596 $547 8.9% 13.3% 13.2% *Segment EBITDA is a non-GAAP measure. Refer
Slide 19: Scrap Steel Prices
Scrap Steel Prices $200 • Average price we received for $150 $141 scrap steel in Q4 increased by $140 44%, from $82 per ton in Q4 2015 $138 to $118 per ton in Q4 2016 $118 $118 • Estimated positive EPS impact of $123 half a penny in Q4 and 2¢ YTD $100 due to improved margins as cost $93 to purchase
Slide 20: Europe – Q4 2016 Results
Europe – Q4 2016 Results % of Revenue Gross Margin ($ in millions) 2016 2015 Change 2016 2015 Total Revenue $779 $487 60.0% 40.0% 38.9% Gross Margin $281 $189 48.4% 36.1% 38.9% 37.9% 38.1% Operating Expenses $216 $143 51.2% 27.7% 29.4% 38.0% 38.3% 37.4% Segment EBITDA* $64 $47 34.2% 8.2% 9.7% 37.0%
Slide 21: Europe – 2016 Results
Europe – 2016 Results % of Revenue ($ in millions) 2016 2015 Change 2016 2015 Total Revenue $2,920 $1,995 46.4% Gross Margin $1,077 $759 41.9% 36.9% 38.0% Operating Expenses $794 $559 41.9% 27.2% 28.0% Segment EBITDA* $284 $201 41.4% 9.7% 10.1% ECP Branches 212 199 13 Sator Branches 94 86 8 Rhiag Br
Slide 22: Foreign Exchange
Foreign Exchange $1.65 • UK referendum to leave the EU had an impact on Q4 2016 $1.55 $1.55 $1.53 $1.52 average rate $1.52 • £ down 18% Q4 2016 vs. Q4 2015 $1.45 $1.43 • € relatively flat Q4 2016 vs. Q4 $1.44 2015 $1.35 • Translation impact of stronger $1.31 dollar on Europe revenue growth: $1.25 $1
Slide 23: Specialty – Q4 2016 Results
Specialty – Q4 2016 Results % of Revenue Gross Margin ($ in millions) 2016 2015 Change 2016 2015 30.8% 31.0% 30.3% Total Revenue $259 $245 5.7% 29.2% 30.1% Gross Margin $66 $68 (2.4)% 25.5% 27.7% 29.0% 27.9% Operating Expenses $47 $53 (11.1)% 18.4% 21.8% 27.0% 27.7% 27.9% Segment EBITDA* $19 $15 28.
Slide 24: Specialty – 2016 Results
Specialty – 2016 Results % of Revenue ($ in millions) 2016 2015 Change 2016 2015 Total Revenue $1,197 $1,055 13.5% Gross Margin $339 $307 10.4% 28.3% 29.1% Operating Expenses $216 $201 7.4% 18.1% 19.1% Segment EBITDA* $125 $107 17.3% 10.4% 10.1% *Segment EBITDA is a non-GAAP measure. Refer to total
Slide 25: 2016 Capital Allocation- Continuing operations
2016 Capital Allocation- Continuing operations $ in millions $2,600 $1,802 $2,400 $2,200 $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $571 $600 $400 $227 $87 $(2,047) $200 $(183) $(3) $0 Beginning Cash Operating Cash Financing Acquisitions & Capex F/X and other Ending Cash 2016 Flows Other Investi
Slide 26: Leverage & Liquidity
Leverage & Liquidity ($ in millions ) ($ in millions ) Revolver Availability(1) $3,600 8.0x $4,000 $3,366 $3,200 $227 $3,500 $3,139 $3,183 $2,800 6.0x $3,000 $2,400 $1,019 $2,500 $2,261 $2,000 $73 4.0x $2,000 $1,600 $1,600 $87 $1,513 2.7x $1,304 $1,500 $1,200 2.0x $1,000 $2,091 $800 1.7x $66 $400 $5
Slide 27: Key Return Metrics
Key Return Metrics Return on Equity Return on Invested Capital* 14.0% 14.9% 15.0% 14.4% 14.5% 14.5% 13.7% 13.8% 12.0% 10.9% 10.9% 10.8% 10.9% 10.5% 12.0% 10.0% 10.0% 9.0% 8.0% 6.0% 6.0% 4.0% 3.0% 2.0% 0.0% 0.0% 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 (*) Amortization of intangibl
Slide 28: Guidance 2017
Guidance 2017 (effective only on the date issued: February 23, 2017) Full Year 2016 Full Year 2017 ($ in millions excluding EPS) Actual Guidance(1) Organic Growth, Parts and Services 4.8% 4.0%-6.0% Adjusted Net Income- continuing operations(2) $522 $560-$590 Adjusted Diluted EPS- continuing operatio
Slide 29: 2017 Adjusted Diluted EPS Guidance Bridge
2017 Adjusted Diluted EPS Guidance Bridge $2.00 $0.03 $1.90 $0.03 $(0.01) $0.17 $(0.03) $1.85 $(0.02) $(0.01) $1.80 $1.70 $1.69 $1.60 2016 Year over year Full year Shared PGW Shared PGW Impact of Tamworth 2 Incremental 2017 Actual Business Growth Rhiag & ARG Corporate Corporate exchange rate increme
Slide 30: Q4 2016 Key Takeaways
Q4 2016 Key Takeaways • Organic revenue growth of 3.8% and 4.8% for parts and services in Q4 and YTD, respectively • Constant currency* revenue growth of 27.3% and 23.8% for parts and services in Q4 and YTD, respectively • Income from continuing operations improvement of 1.3% and 7.8% for Q4 and YTD
Slide 31: 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 30
Slide 32: Appendix - Non-GAAP Financial Measures
Appendix - Non-GAAP Financial Measures This presentation contains non-GAAP financial measures. Included with this presentation are reconciliations of each non-GAAP financial measure with the most directly comparable financial measure calculated in accordance with GAAP. 31
Slide 33: Appendix 1- Constant Currency Reconciliation
Appendix 1- Constant Currency Reconciliation • The following unaudited table reconciles consolidated revenue growth for Parts & Services to constant currency revenue growth for the same measure: Three Months Ended Year Ended December 31, 2016 December 31, 2016 Consolidated Europe Consolidated Europe
Slide 34: Appendix 2- Reconciliation of Net Income to EBITDA and Segment EBITDA
Appendix 2- Reconciliation of Net Income to EBITDA and Segment EBITDA Three Months Ended Year Ended December 31** December 31** (in millions) 2016 2015 2016 2015 Net income $86.3 $95.1 $464.0 $423.2 Subtract: (Loss) income from discontinued operations, net of tax (10.0) — 7.9 — Income from continuin
Slide 35: Appendix 2- EBITDA and Segment EBITDA Reconciliation
Appendix 2- 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 36: Appendix 3- Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS
Appendix 3- Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS Three Months Ended Year Ended December 31* December 31* (in millions, except per share data) 2016 2015 2016* 2015 Net income $86.3 $95.1 $464.0 $423.2 Subtract: (Loss) income from discontinued operations, net of
Slide 37: Appendix 3- Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS cont.
Appendix 3- Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS cont. Three Months Ended Year Ended December 31* December 31* (in millions, except per share data) 2016 2015 2016* 2015 Adjusted net income from continuing operations $108.1 $105.6 $522.5 $458.6 (Loss) income fr
Slide 38: Appendix 3- Adjusted Net Income and EPS Reconciliation
Appendix 3- Adjusted Net Income and EPS Reconciliation We have presented Adjusted Net Income and its components and Adjusted Diluted Earnings per Share as we believe these measures are useful for evaluating the core operating performance of our business across reporting periods and in analyzing the
Slide 39: Appendix 4- Forecasted EPS reconciliation
Appendix 4- Forecasted EPS reconciliation* For the year ending December 31, 2017 (in millions, except per share data) Minimum Guidance Maximum Guidance Income from continuing operations $505 $535 Adjustments: Amortization of acquired intangibles 85 85 Tax effect of adjustments (30) (30) Adjusted net
Slide 40: Appendix 5- Adjusted Net Income and EPS Reconciliation for Quarterly Continuing Operations
Appendix 5- Adjusted Net Income and EPS Reconciliation for Quarterly Continuing Operations (in millions, except per share data) Q4 2016* Q3 2016* Q2 2016* Q1 2016* Revenue $2,150.4 $2,207.3 $2,304.8 $1,921.5 Gross margin $830.0 $855.4 $905.8 $760.4 Operating income $161.9 $183.4 $232.4 $185.7 Income
Slide 41: Appendix 6- Revenue and Segment EBITDA by segment
Appendix 6- Revenue and Segment EBITDA by segment Three Months Ended Year Ended December 31* December 31* % of % of % of % of (in millions) 2016 revenue 2015 revenue 2016 revenue 2015 revenue Revenue North America $1,113.5 $1,018.2 $4,471.6 $4,146.8 Europe 779.3 487.1 2,920.5 1,995.5 Specialty 258.7