Lkq Corporation · NASDAQ:LKQ
Lkq — Raymond James 39th Annual Institutional Investors Conference (March 2018)
42 slides from Lkq's conference presentation, Mar 6, 2018
Slide 1: Raymond James 39th Annual Institutional Investors Conference
Raymond James 39th Annual Institutional Investors Conference
Slide 2: Forward Looking Statements
Forward Looking Statements 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 Act. Forward-looking statements i
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: LKQ's Evolution
LKQ’s Evolution Wholesale Salvage Self Serve Keystone / Paint Reman-US Europe-Benelux Rhiag / PGW 1998 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Aftermarket Refurbished Wheels Heavy Duty Europe-UK Keystone Specialty Collision 2003 2007 2011 2017* Total Revenue Total Revenue To
Slide 5: Operating Unit Overview
Operating Unit Overview North America • Collision – Aftermarket automotive products – Automotive glass distribution – Recycled & Refurbished • Mechanical – Recycled engines & transmissions – Remanufactured engines & transmissions Europe • Mechanical – 175,000+ small part SKUs – Brakes, filters, hose
Slide 6: Historical Financial Performance
Historical Financial Performance ($ in Millions) Revenue** Segment EBITDA** $1,200 $1,117 $12,000 $1,005 $1,000 $9,737 $10,000 $855 $8,584 $791 $800 $8,000 $7,193 $6,740 $629 $6,000 $5,063 $600 $515 $4,123 $4,000 $400 $2,000 $200 $- 2012 2013 2014 2015 2016 2017 $- 2012 2013 2014 2015 2016 2017 Cash
Slide 7: Stahlgruber is a Natural Strategic Fit for LKQ
Stahlgruber is a Natural Strategic Fit for LKQ (€ revenue in billions) €5.1 €1.6 Stahlgruber(1) €0.6 Mekonomen(2) Norway Sweden €2.9 €1.7 €1.6 €1.5 €1.4 €1.4 €0.7 €0.6 €0.3 LKQ FR Ger Ger FR POL CH Swe UK UK Netherlands Europe-… Stahlgruber (1) Autodis (5) Swiss Auto Uni-Select / Poland Group(7) Par
Slide 8: GEAR Forward!
Key Strategic Underpinnings GROW EXPAND ADAPT RATIONALIZE Diversified Offerings Global Footprint To Evolving Asset Base Technology Path to Success: ● DEPENDABLE ● EXCELLENCE ● LEADERSHIP ● INTEGRITY ● VALUE ● EFFICIENT ● RESPONSIVE GEAR Forward! 7
Slide 9: Operating Segments
Corporation Operating Segments
Slide 10: Large & Fragmented US Market
Large & Fragmented US Market Automotive Repair Market $243 bn Do It For Me (DIFM) DIY $194 bn $49 bn Retail Collision Mechanical Price $46 bn $148 bn Parts & Collision Parts Labor Mechanical Parts Labor Labor $25 bn $21 bn $81 bn $67 bn Collision Markup Mechanical Markup (Wholesale) (Wholesale) $27
Slide 11: Clear Value Proposition
Clear Value Proposition 2015 Chrysler Town & Country 2006 Chevrolet Silverado 2012 Chevrolet Malibu Wheel Engine Bumper Cover New OEM $380 $5,896 $335 Remanufactured $261 $2,069 $209 Recycled OEM $85 $1,090 $175 New A/M N/A N/A $209 Average Savings 55% 73% 59% …and Improved Cycle Time for Repairs No
Slide 12: Collision Products, a $17 Billion Industry
Collision Products, a $17 Billion Industry Insurance Companies (Indirect Customers) New OEM Manufacturers 63% Repair Shop Refurbished & Recycled OEM Optional OE 12% Products Aftermarket 6% 19% Alternative parts = 37% of parts costs Source: CCC Information Services –Crash Course 2016. 11
Slide 13: Shift Toward Alternative Parts Usage
Shift Toward Alternative Parts Usage Average Parts Used Per Claim 2012 2013 2014 2015 2016 2017 12.0 10.0 9.7 8.3 8.0 6.6 6.0 6.0 4.0 3.1 2.3 2.0 0.0 OEM Alternative Parts Total Over 20 million vehicle claims Source: CCC Information Services Inc. 12
Slide 14: Regional Distribution Improves Fulfilment
Regional Distribution Improves Fulfilment • Highly fragmented space • 20X size of next competitor • Consistent nationwide coverage and warranty • Strong management team • Strong logistics & footprint • Industry leading fill-rates – Aftermarket: 95% – Salvage • Competitor: 25% • LKQ Single Site: 35%
Slide 15: Wholesale North America Footprint
Wholesale North America Footprint 14
Slide 16: LKQ's Collision "Sweet Spot" is Growing
LKQ’s Collision “Sweet Spot” is Growing Age & Size of U.S. Car Parc 5 year time horizon 180 160 60 Number of Vehicles (Millions) 140 121 118 119 114 117 120 112 108 106 103 101 101 101 103 100 40 80 60 20 40 17 17 16 17 16 14 16 15 13 13 13 20 10 12 0 - 2009 2010 2011 2012 2013 2014 2015 2016 2017 2
Slide 17: Crash Avoidance Systems Growing
Crash Avoidance Systems Growing (24.3%) CY 2050 U.S. EIA Energy Outlook 2014 Light Duty Vehicle Sales by Energy Use (20.8%) CY 2045 (17.3%) CY 2040 (13.8%) CY 2035 22% CCC estimates (10.3%) CY 2030 a 10.3% impact (6.8%) CY 2025 to losses in (3.3%) CY 2020 next 15 years 78% (0.7%) CY 2015 (0.4%) CY 2
Slide 18: Europe - Market Observations
Europe - Market Observations Large Car Parc Supplier Fragmented [Tex Segmentation t] Industry “Country Low Collision [Tex Champion” t] in APU Key Markets DIFM Focused 17
Slide 19: Large European Market
Large European Market Automotive Repair Market €198B Do It For Me (DIFM) DIY (1) €188B €10B Retail Collision Mechanical Price €30B €158B Parts & Collision Parts Labor Mechanical Parts Labor €22B €8B €120B €38B Labor Collision Mechanical Markup Markup (Wholesale) €8B (Wholesale) €42B €14B €78B Market
Slide 20: LKQ's European Platform Acquisitions
LKQ’s European Platform Acquisitions October 2011 April 2013 March 2016 December 2016 • Leading distributor • Leading distributor • Leading automotive • The leading of automotive of automotive aftermarket independent car aftermarket aftermarket mechanical parts parts and service mechanical parts in
Slide 21: Benefits of Scale
Benefits of Scale • Lower procurement costs – OES brands (volume) – Private label brands (margin) • Reduced logistics and warehousing – e.g. Asian sourcing – e.g. long tail products • Improved overhead costs – Back-office activities – Cataloguing – Rationalize ERP systems • Brand economies of scale
Slide 22: Specialty
Specialty Specialty Overview Specialty Directly Addressable Market (1) ($ in billions) • Leading distributor and marketer of specialty aftermarket equipment, accessories, and products in North America Wheels, Tires & Suspension • Critical link between 800+ suppliers and approximately $2.78B Accessor
Slide 23: 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 22
Slide 24: Financial Overview
Corporation Financial Overview
Slide 25: Consolidated Results - Continuing operations
Consolidated Results - Continuing operations Q4 2017 Revenue* 2017 Revenue* • Organic growth of parts and services revenue of 4.8% on a reported basis • Organic growth of parts and services revenue of 4.1% on a reported • Net income from continuing operations attributable to LKQ stockholders $126 mi
Slide 26: Q4 2017 Revenue Growth
Q4 2017 Revenue Growth Revenue Changes by Source: Foreign Organic Acquisition Exchange Total(1) North America 5.0% 1.5% 0.3% 6.8% Europe 5.0% 11.3% 8.2% 24.6% Specialty 3.6% 8.1% 0.5% 12.1% Parts and Services 4.8% 6.1% 3.3% 14.3% Other Revenue 24.9% 1.2% 0.2% 26.2% Total 5.8% 5.8% 3.2% 14.9% • Organ
Slide 27: Consolidated Results - Continuing operations
Consolidated Results - Continuing operations Q4 2017 EPS* 2017 EPS* Diluted EPS*** Adjusted Diluted EPS*** Diluted EPS*** Adjusted Diluted EPS*** * Earnings per share figures refer to income from continuing operations attributable to LKQ stockholders ** Adjusted Diluted EPS is a non-GAAP measure. Re
Slide 28: Q4 2017 Operating Highlights
Q4 2017 Operating Highlights North America • Delivery route initiatives, including Roadnet, are ongoing • Continued to expand acreage for car holding and increased production, which should allow us longer hold times of cars to improve margins • Consolidated 4 PGW autoglass locations into LKQ warehou
Slide 29: 2017 Capital Allocation - Continuing operations
2017 Capital Allocation - Continuing operations $ in millions • Operating cash flows: - Year over year decrease driven primarily by higher investment in inventory of $133 million in our continuing operations as a result of favorable buying conditions in salvage and procurement initiatives to support
Slide 30: Leverage & Liquidity
Leverage & Liquidity Total ($ in millions ) ($ in millions ) Capacity(1) 2.7x 2.7x Effective borrowing rate for Q4 2017 was 3.2% (1) Total capacity includes our term loans and revolving credit facilities * Net leverage per bank covenants is defined as Net Debt/EBITDA. See the definitions of Net Debt
Slide 31: Key Return Metrics
Key Return Metrics Return on Equity Return on Invested Capital* * Amortization of intangibles has been excluded from the calculation of Return on Invested Capital 30
Slide 32: Guidance 2018
Guidance 2018 (effective only on the date issued: February 22, 2018) Full Year 2017 Full Year 2018 ($ in millions excluding EPS) Actual Guidance(1) Organic Growth, Parts and Services 4.1% 4.0% - 6.0% Net Income - continuing operations attributable to LKQ $540 $646 - $676 stockholders Adjusted Net In
Slide 33: 2018 Adjusted Diluted EPS Guidance Bridge
2018 Adjusted Diluted EPS Guidance Bridge* Does not include the pending Stahlgruber acquisition announced in December 2017. Guidance will be updated when the transaction closes. *Adjusted net income and adjusted diluted earnings per share are non-GAAP measures. See page 37 for reconciliation of fore
Slide 34: Why Invest in LKQ?
Why Invest in LKQ? Leading Positions Diversified Revenue Expanding Alternative Clear Solid Financial Metrics In Large Markets Stream Parts Usage Value Proposition • Largest participant in • Global balance with • Increasing availability • Insurers focused on • History of delivering each market served
Slide 35: 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. 34
Slide 36: Appendix - Constant Currency Reconciliation
Appendix 1 - Constant Currency Reconciliation • The following table is unaudited and reconciles consolidated revenue growth for Parts & Services to constant currency revenue growth for the same periods: Three Months Ended Year Ended December 31, 2017 December 31, 2017 Consolidated Europe Consolidate
Slide 37: Appendix - Revenue and Segment EBITDA by segment
Appendix 2 - Revenue and Segment EBITDA by segment Three Months Ended Year Ended December 31* December 31* % of % of % of % of (in millions) 2017 revenue 2016 revenue 2017 revenue 2016 revenue Revenue North America $1,203.0 $1,107.8 $4,799.7 $4,444.6 Europe 971.6 779.3 3,636.8 2,920.5 Specialty 296.
Slide 38: Appendix - Reconciliation of Net Income to EBITDA and Segment EBITDA
Appendix 3 - Reconciliation of Net Income to EBITDA and Segment EBITDA Three Months Ended Year Ended December 31* December 31* (in millions) 2017 2016 2017 2016 Net income $120.7 $86.3 $530.2 $464.0 Subtract: Net loss attributable to noncontrolling interest (3.5) — (3.5) — Net income attributable to
Slide 39: 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 40: 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 Year Ended December 31* December 31* (in millions, except per share data) 2017 2016 2017 2016 Net income $120.7 $86.3 $530.2 $464.0 Subtract: Net loss attributable
Slide 41: 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 42: 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 $646 $676 Adjustments: Amortization of acquired intangibles 100 100 Tax effe
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