Lkq Corporation · NASDAQ:LKQ
Lkq — Q1 2018 Earnings Presentation
32 slides from Lkq's earnings presentation, Apr 26, 2018
Slide 1: First Quarter 2018 Earnings Call
First Quarter 2018 Earnings Call April 26, 2018 Nick Zarcone – President & Chief Executive Officer Varun Laroyia – Executive Vice President & Chief Financial Officer Joe Boutross – Vice President, Investor Relations 1
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 Q1 2018 Revenue* $2,800 $2,721 $2,600 $2,400 $2,343 $2,200 1% $2,000 16. $1,800 $1,600 $1,400 Q1 2017 Q1 2018 • Organic growth of parts and services revenue of 3.7% on a reported basis • Net income from continuing operations attributable to LKQ stockholde
Slide 5: Consolidated Results - Continuing operations
Consolidated Results - Continuing operations Q1 2018 EPS* $0.60 $0.60 $0.55 $0.50 $0.49 $0.50 $0.49 $0.45 $0.40 $0.40 % .2 % 8.9 12 $0.30 $0.30 $0.20 $0.20 Q1 2017 Q1 2018 Q1 2017 Q1 2018 Diluted EPS Adjusted Diluted EPS** * Earnings per share figures refer to net income from continuing operations a
Slide 6: Q1 2018 Revenue Growth
Q1 2018 Revenue Growth Revenue Changes by Source: Organic Acquisition Foreign Exchange Total(1) North America 6.5% 1.8% 0.3% 8.6% Europe 1.2% 11.3% 14.1% 26.6% Specialty 0.3% 11.0% 0.4% 11.7% Parts and Services 3.7% 6.6% 5.4% 15.7% Other Revenue 22.4% 0.9% 0.2% 23.5% Total 4.7% 6.3% 5.1% 16.1% • Org
Slide 7: Q1 2018 Operating Highlights
Q1 2018 Operating Highlights North America • PGW was awarded an exclusive agreement with Mopar, the parts division of Fiat Chrysler Automotive, for the distribution of Mopar batteries to their dealer network. PGW is now the exclusive OE supplier of glass and batteries to all Mopar dealerships • We i
Slide 8: Inventory
Inventory Inventory Procurement: ($ in millions, Vehicles purchased in 000s) Q1 2018 Q1 2017 % Change Total aftermarket procurement $1,322 $1,025 29.0% Wholesale salvage cars and trucks 73 75 (2.7)% Europe wholesale salvage cars and trucks 8 7 14.3% Self service and "crush only" cars 141 133 6.0% •
Slide 9: Financial Results
Corporation Financial Results
Slide 10: Operating Results - Continuing Operations
Operating Results - Continuing Operations First Quarter ($ in millions,except per share data) 2018 2017 Change Revenue $2,721 $2,343 16.1% Gross Margin 1,054 930 13.3% Operating Income 227 236 (3.9)% Pre-tax Income 201 213 (5.6)% Net income from continuing operations attributable 153 141 8.6% to LKQ
Slide 11: Q1 2018 Consolidated Margins - Continuing operations
Q1 2018 Consolidated Margins - Continuing operations Q1 Q1 Change (as a % of Revenue) 2018 2017 F/(U) Q1 2018 Commentary Revenue 100.0% 100.0% —% Gross Margin 38.7% 39.7% (1.0)% Decreased by 0.6% and 0.5% as a result of our North America and Europe segments, respectively Selling, General and The inc
Slide 12: Components of Revenue
Components of Revenue $2.72B $2.34B 100.0% 5.9% 5.5% • A portion of change in margins on a 12.9% 13.4% consolidated basis is attributable to 80.0% change in revenue mix • North America historically has the 38.1% 35.0% highest Gross margins and EBITDA 60.0% margins relative to the other segments • In
Slide 13: North America – Q1 2018 Results
North America – Q1 2018 Results % of Revenue Gross Margin ($ in millions) 2018 2017 Change 2018 2017 46.0% Total Revenue $1,330 $1,208 10.1% 44.4% 44.0% 43.6% Gross Margin $576 $536 7.3% 43.3% 44.4% 43.3% 43.9% 43.5% SG&A Expenses $403 $362 11.3% 30.3% 29.9% 42.0% Segment EBITDA* $178 $176 0.9% 13.4
Slide 14: Scrap Steel Prices
Scrap Steel Prices Q1 YoY scrap steel prices per ton up 37% $225 $200 $197 • Average price we received for scrap steel in Q1 increased by $175 37%, from $144 per ton in Q1 2017 $162 $163 to $197 per ton in Q1 2018 $150 $150 $144 • About 3¢ favorable impact on EPS $125 $100 Monthly Scrap Steel Price
Slide 15: Europe – Q1 2018 Results
Europe – Q1 2018 Results % of Revenue Gross Margin ($ in millions) 2018 2017 Change 2018 2017 Total Revenue $1,040 $821 26.7% 40.0% Gross Margin $373 $304 22.7% 35.9% 37.0% 39.0% SG&A Expenses $300 $226 32.4% 28.8% 27.6% 38.0% 37.2% 37.0% Segment EBITDA* $76 $79 (4.0)% 7.3% 9.6% 37.0% 35.7% 35.9% 36
Slide 16: Foreign Exchange
Foreign Exchange $1.45 • £ up 12% Q1 2018 vs. Q1 2017 $1.40 $1.39 • € up 15% Q1 2018 vs. Q1 2017 $1.35 $1.33 $1.31 • $116 million positive impact of $1.30 $1.28 translation of weaker dollar on $1.24 Europe revenue growth $1.25 $1.20 $1.23 • Europe constant currency* parts and services revenue growth
Slide 17: Specialty – Q1 2018 Results
Specialty – Q1 2018 Results % of Revenue Gross Margin ($ in millions) 2018 2017 Change 2018 2017 Total Revenue $352 $315 11.7% 31.0% 30.0% Gross Margin $105 $90 17.3% 30.0% 28.5% 28.9% 28.5% 28.6% 29.0% SG&A Expenses $65 $55 17.9% 18.4% 17.4% 27.0% 26.3% Segment EBITDA* $42 $35 18.4% 11.9% 11.3% 25.
Slide 18: 2018 Capital Allocation - Continuing operations
2018 Capital Allocation - Continuing operations $ in millions $500 $145 $(62) $(2) $280 $3 $246 $250 $(118) $0 Beginning Cash Operating Cash Capex Other Financing Other Ending Cash 12/31/17 Flows Investing Cash Flows and FX 3/31/18 Cash Flows • Operating cash flows: ◦ The $31 million year over year
Slide 19: Leverage & Liquidity
Leverage & Liquidity Total ($ in millions ) ($ in millions ) Capacity(1) $3,600 $3,428 $4,000 $3,339 $280 $3,454 $3,200 $246 $3,500 $3,451 $3,148 $3,093 $2,800 $3,000 $1,395 $1,513 $2,400 $2,500 $2,000 $2,000 $71 $65 $1,600 2.7x 2.7x $1,500 $1,200 $1,000 $1,988 $1,873 $800 $400 $500 $0 $0 December 3
Slide 20: Key Return Metrics
Key Return Metrics Return on Equity Return on Invested Capital* 14.0% 14.9% 15.0% 14.5% 14.5% 14.1% 13.8% 13.7% 12.0% 10.9% 10.8% 10.9% 12.0% 10.0% 9.7% 9.6% 10.0% 9.0% 8.0% 6.0% 6.0% 4.0% 3.0% 2.0% 0.0% 0.0% 2013 2014 2015 2016 2017 TTM Q1 2013 2014 2015 2016 2017 TTM Q1 2018 2018 * Amortization of
Slide 21: Guidance 2018
Guidance 2018 (effective only on the date issued: April 26, 2018) Full Year 2017 Full Year 2018 ($ in millions excluding EPS) Actual Guidance(1)(2) Organic Growth, Parts and Services 4.1% 4.0% - 5.5% Net Income - continuing operations attributable to $540 $611 - $641 LKQ stockholders Adjusted Net In
Slide 22: 2018 Adjusted Diluted EPS Guidance Bridge
2018 Adjusted Diluted EPS Guidance Bridge* $2.50 $0.26 $2.25 $2.25 $(0.05) $0.03 $0.04 $2.00 $0.09 $1.88 $1.75 $1.50 2017 Year over Full Year Impact of Tax Reform Tax Reform 2018 Actual year impact of exchange rate Rate Reinvestment Guidance** Business 2017 changes Growth Acquisitions Does not inclu
Slide 23: Q1 2018 Key Takeaways
Q1 2018 Key Takeaways • Organic revenue growth of 3.7% for parts and services in Q1 and North America achieved organic revenue growth of 6.5% • Net income from continuing operations attributable to LKQ stockholders improvement of 8.6% for Q1 • Q1 Diluted EPS of $0.49 vs. $0.45, a 8.9% increase • Q1
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 24
Slide 25: 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. 25
Slide 26: Appendix - 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 March 31, 2018 Consolidated Europe Parts & Services Revenue Growth as reported 15.7%
Slide 27: Appendix - Revenue and Segment EBITDA by segment
Appendix 2 - Revenue and Segment EBITDA by segment Three Months Ended March 31* % of % of (in millions) 2018 revenue 2017 revenue Revenue North America $1,330 $1,208 Europe 1,040 821 Specialty 352 315 Eliminations (1) (1) Total Revenue $2,721 $2,343 Segment EBITDA North America $178 13.4% $176 14.6%
Slide 28: Appendix - Reconciliation of Net Income to EBITDA and Segment EBITDA
Appendix 3 - Reconciliation of Net Income to EBITDA and Segment EBITDA Three Months Ended March 31* (in millions) 2018 2017 Net income $153 $136 Subtract: Net loss attributable to noncontrolling interest (0) — Net income attributable to LKQ stockholders $153 $136 Subtract: Net loss from discontinued
Slide 29: Appendix - 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 ne
Slide 30: Appendix - Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS
Appendix 4 - Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS from Continuing Operations Three Months Ended March 31* (in millions, except per share data) 2018 2017 Net income $153 $136 Subtract: Net loss attributable to noncontrolling interest (0) — Net income attributab
Slide 31: Appendix - Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS
Appendix 4 - Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS from Continuing Operations We have presented Adjusted Net Income and Adjusted Diluted Earnings per Share from Continuing Operations Attributable to LKQ Stockholders as we believe these measures are useful for e
Slide 32: Appendix - Forecasted EPS reconciliation
Appendix 5 - Forecasted EPS reconciliation* For the year ending December 31, 2018 (in millions, except per share data) Minimum Guidance Maximum Guidance Net income from continuing operations attributable to LKQ stockholders $611 $641 Adjustments: Amortization of acquired intangibles 100 100 Restruct