Fourth Quarter & Full Year 2018 Earnings Call February 28, 2019 Nick Zarcone – President & Chief Executive Officer Varun Laroyia – Executive Vice President & Chief Financial Officer Joe Boutross – Vice President, Investor Relations
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 Act. Forward-looking statements include, but are not limited to, statements regarding our outlook, guidance, expectations, beliefs, hopes, intentions and strategies. These statements are subject to a number of risks, uncertainties, assumptions and other factors including those identified below. All forward-looking statements are based on information available to us at the time the statements are made. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You should not place undue reliance on our forward-looking statements. Actual events or results may differ materially from those expressed or implied in the forward-looking statements. The risks, uncertainties, assumptions and other factors that could cause actual results to differ from the results predicted or implied by our forward-looking statements include the factors disclosed under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2017 and in our subsequent Quarterly Reports on Form 10-Q. These reports are available on our investor relations website at lkqcorp.com and on the SEC website at sec.gov. This presentation contains non-GAAP financial measures. Included with this presentation is a reconciliation of each non-GAAP financial measure with the most directly comparable financial measure calculated in accordance with GAAP . 2
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 3
Q4 2018 Key Takeaways • Organic revenue growth of 2.5% for parts and services in Q4 despite economic headwinds in certain European markets; total organic revenue growth of 3.0% in Q4 • Specialty and North America achieved organic revenue growth of 5.8% and 3.7%, respectively • Excellent operating cash conversion; delivered $190 million in operating cash flows ◦ Full year operating cash flows of $711 million are the highest in LKQ's history • Continued pursuit of profitable growth through pricing programs and investments in productivity initiatives ◦ North America gross margin initiatives delivered sequential increase; and Specialty delivered higher Y/Y EBITDA margins ◦ Europe Segment EBITDA margin impacted by soft market conditions • Q4 Diluted EPS of $0.13 vs. $0.41, a 68.3% decrease ◦ Q4 2018 includes impairment charges of $75 million (after tax), or $0.23 per share • Q4 Adjusted Diluted EPS (1) of $0.48 vs. $0.41, a 17.1% increase • Net Debt/EBITDA leverage of 2.9x as of December 31, 2018 • $60 million stock repurchased at $26.41 average price (1) Adjusted Diluted EPS is a non-GAAP measure. Refer to EPS reconciliation on Appendix 4 4
Consolidated Results - Continuing Operations Q4 2018 Revenue (1) 2018 Revenue (1) $11,877 $3,200 $12,000 $11,400 $3,003 $3,000 $10,800 $10,200 $9,737 $2,800 $9,600 $2,600 $9,000 22.0% 21.6% $2,470 $8,400 $2,400 $7,800 $7,200 $2,200 $6,600 $2,000 $6,000 Q4 2017 Q4 2018 2017 2018 • Organic revenue growth for parts and services of 2.5% on a reported basis • Organic revenue growth for parts and services of 4.4% on a reported basis • Net income from continuing operations attributable to LKQ stockholders $40 million • Net income from continuing operations attributable to LKQ stockholders (1.3% of revenue) Q4 2018 vs. $126 million (5.1% of revenue) Q4 2017 (Q4 2018 $485 million (4.1% of revenue) 2018 vs. $540 million (5.6% of revenue) includes impairment charges totaling $75 million after tax) 2017 (2018 includes impairment charges of $97 million after tax) Segment EBITDA (2) of $288 million; up 13.6% YOY Segment EBITDA (2) of $1.25 billion; up 12.1% YOY • • Segment EBITDA Margin (2) 9.6% Q4 2018 vs. 10.3% Q4 2017 Segment EBITDA Margin (2) 10.5% 2018 vs. 11.5% 2017 • • (1) Revenue in millions (2) Segment EBITDA is a non-GAAP financial measure. Refer to Segment EBITDA reconciliation on Appendix 3 5
Consolidated Results - Continuing Operations 2018 EPS (1) Q4 2018 EPS (1) $0.50 $0.60 $2.00 $2.40 $0.41 $0.50 $0.48 $2.19 $0.40 $2.20 $1.80 $1.74 $0.41 $0.40 $2.00 $0.30 $1.88 $1.60 $1.53 $1.80 $0.30 $0.20 (12.1%) $1.40 $1.60 $0.20 % $0.13 5 . 6 1 (68.3%) $1.40 17.1% $0.10 $0.10 $1.20 $1.20 $0.00 $0.00 $1.00 $1.00 Q4 2017 Q4 2018 Q4 2017 Q4 2018 2017 2018 2017 2018 Adjusted Diluted EPS (2) Adjusted Diluted EPS (2) Diluted EPS Diluted EPS (1) Earnings per share figures refer to income from continuing operations attributable to LKQ stockholders (2) Adjusted Diluted EPS is a non-GAAP measure. Refer to Appendix 4 for Adjusted Diluted EPS reconciliation 6
Q4 2018 Revenue Growth Revenue Changes by Source: Total (1) Organic Acquisition Foreign Exchange North America 3.7% 0.3% (0.3)% 3.7% Europe 0.3% 49.7% (3.3)% 46.6% Specialty 5.8% 3.5% (0.4)% 8.9% Parts and Services 2.5% 21.2% (1.6)% 22.2% Other Revenue 10.2% 1.1% (0.2)% 11.1% Total 3.0% 20.1% (1.5)% 21.6% • Organic revenue growth for parts and services on a per day basis was 0.8% as there was one additional selling day in Q4 2018 compared to Q4 2017 • Organic revenue growth for parts and services in North America was primarily attributable to favorable pricing in our wholesale operations; 120 bps related to incremental revenue from a battery contract • Organic revenue growth for parts and services in Europe was roughly flat compared to Q4 2017 due to economic headwinds Unfavorable F/X impact on European revenue of $32 million; European constant currency parts and services revenue growth of 49.9% (2) • • European acquisition growth was $481 million, primarily related to the acquisition of Stahlgruber GmbH ("Stahlgruber") (acquired May 30, 2018) • Specialty acquisition growth was $10 million, most of which related to Warn Industries, Inc. ("Warn") (acquired November 1, 2017) • Increase in Other Revenue was attributable to increased volumes and higher prices of scrap steel, other metals and catalytic converters YOY (1) The sum of the individual revenue change components may not equal the total percentage due to rounding (2) Constant currency is a non-GAAP financial measure. Refer to constant currency reconciliation on Appendix 1 7
2018 Revenue Growth Revenue Changes by Source: Total (1) Organic Acquisition Foreign Exchange North America 5.7% 0.8% 0.0% 6.5% Europe 2.9% 36.7% 3.8% 43.4% Specialty 4.6% 8.6% 0.0% 13.2% Parts and Services 4.4% 16.0% 1.5% 22.0% Other Revenue 20.4% 1.4% 0.0% 21.8% Total 5.3% 15.3% 1.4% 22.0% • Organic revenue growth for parts and services on a per day basis was 4.1% as there was one additional day in 2018 compared to 2017 • Organic revenue growth for parts and services in North America was attributable to roughly equal impacts of favorable pricing and increased sales volumes in our wholesale operations • Organic revenue growth for parts and services in Europe was driven by our Eastern European operations (we added 31 new branches in 2018 and 37 new branches in 2017) Favorable F/X impact on European revenue of $137 million; European constant currency parts and services revenue growth of 39.6% (2) • • European acquisition growth was $1.3 billion, primarily related to the acquisition of Stahlgruber (acquired May 30, 2018) • Specialty acquisition growth was $112 million, primarily related to Warn • Increase in Other Revenue was primarily attributable to higher prices of scrap steel, other metals and catalytic converters YOY (1) The sum of the individual revenue change components may not equal the total percentage due to rounding (2) Constant currency is a non-GAAP measure. Refer to constant currency reconciliation on Appendix 1 8
Q4 2018 Operating Highlights North America • Pricing model refinement and pursuing higher margin revenue have contributed to improving aftermarket gross margins • During Q4, launched the implementation of new tools for setting salvage prices • North America headquarters in Nashville opened in December, consolidating three offices to a single location Europe • CEE opened 5 new branches in Eastern Europe in Q4: (2 in the Czech Republic, 1 in Ukraine, 1 in Romania and 1 in Bosnia) and closed 1 branch in Poland • ERP project moving forward with implementation team in place and initial market selected for pilot • Arnd Franz will join LKQ Europe as Chief Operating Officer, on or about April 1, 2019 Specialty • Strong SEMA show presence for WARN Industries, including placement of WARN product (bumpers / winches) on new Ford Ranger pickup in Ford booth • Launch of e-Keystone mobile app • Announced new partnership with GRAND DESIGN, a major RV OE Manufacturer, to handle warranty claim work 9
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