LKQ posts revenue increase in Q1
LKQ posts revenue increase in Q1
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LKQ Corp., headquartered in Chicago, has reported first-quarter 2021 results that show strength in key metrics such as overall profitability, segment margins and free cash flow.
LKQ provides original equipment recycled and aftermarket parts, replacement systems, components, equipment and services to repair and accessorize automobiles, trucks and recreational and performance vehicles. The company has operations in North America, Europe and Taiwan.
"We significantly exceeded our expectations for the quarter as our segment teams continue to embrace operational excellence and execute on our key initiatives,” says Dominick Zarcone, president and chief executive officer at LKQ Corp. “Our North America team delivered a 19.9 percent segment EBITDA (earnings before interest, taxes, depreciation and amortization) margin in the first quarter, the highest level in the company’s history. Additionally, our Specialty team delivered its highest quarterly organic revenue growth at 30.9 percent and first-quarter segment EBITDA margin of 13.4 percent. I am also pleased with the Europe Segment EBITDA margin of 9.6 percent in the quarter, a year-over-year improvement of 390 basis points. This level of performance gives us confidence regarding the progress of our 1 LKQ Europe program and our team’s ability to achieve the longer-term margin targets we set forth in 2019.”
According to its Q1 earnings call the morning of April 29, the increase in its specialty organic revenue for parts and services largely was because of strong demand across its recreational vehicle and auto and light truck product lines and from drop-shipment customers.
LKQ’s revenue for the first quarter totaled $3.2 billion, an increase of 5.7 percent as compared with $3 billion in the first quarter of 2020. For the first quarter of 2021, parts and services organic revenue increased 0.6 percent (2.2 percent on a per-day basis), while the net impact of acquisitions and divestitures decreased revenue 0.6 percent and foreign exchange rates increased revenue 4.2 percent, for a total parts and services revenue increase of 4.2 percent, the company says.
Organic revenue growth for the quarter reflects the annualization of the initial pandemic impact last March, LKQ notes. Through February, organic parts and services revenue was 4.4 percent lower on a per-day basis, primarily as a result of mobility restrictions from COVID-19. In March 2021 compared with a lower prior-year period, organic parts and services revenue grew by 15.7 percent on a per-day basis. Other revenue grew 27 percent in the first quarter of 2021, driven by higher scrap steel and platinum group metals prices, LKQ adds.
According to the company’s earnings call presentation, the average price for ferrous scrap increased from $128 per ton in Q1 2020 to $213 per ton in Q1 2021. Sequentially, the price of ferrous scrap increased $55 per ton, or 35 percent. The average rhodium and platinum scrap prices increased 141 percent and 37 percent, respectively, from Q1 2020 while average palladium prices were level with Q1 2020.
The company’s total aftermarket inventory procurement increased 2.7 percent in Q1 2021 compared with Q1 of 2020. However, purchases in North America and Europe were lower than projected owing to ocean freight-driven delays in shipments and overall pandemic-driven lower production volumes, the company noted in its earnings call presentation. Salvage purchases also decreased compared with the prior year primarily because of limitations on vehicles at auctions arising from the COVID-19 pandemic. Self-service vehicle purchases also declined owing to increased competition in the market in light of rising scrap steel and precious metals prices and a reduction in the number of locations relative to Q1 2020, LKQ says. The cost per vehicle in LKQ’s self-service operations increased 41 percent year over year in Q1 largely from increases in scrap steel and precious metal prices, the company noted, while the average cost per vehicle in its full-service salvage operations increased 30 percent year over year in light of limitations on vehicles at auctions arising from COVID-19, high used car prices and increases in scrap steel and precious metal prices.
Net income for the first quarter of 2021 was $266 million compared with $146 million for the same period in 2020, an increase of 81.9 percent.
On an adjusted basis, net income in the first quarter was $286 million compared with $176 million in the same period of 2020, a 62.4 percent increase.
Cash flow from operations totaled $523 million during the first quarter of 2021, up 169 percent from a year ago. Free cash flow in the quarter totaled $481 million, up 220 percent year over year. The company says it made $83 million of net repayments on borrowings during the first quarter, decreasing its net leverage to 1.4x EBITDA, LKQ says.
2021 outlook
Varun Laroyia, executive vice president and chief financial officer at LKQ, says, “Based on this strong start to the year and with confidence in our operating strengths and execution of our strategies, we are raising our 2021 outlook on profitability and free cash flow.”
For 2021, the company’s management says it is anticipating the following revised outlook:
- full-year parts and services revenue growth;
- diluted earnings per share attributable to LKQ stockholders in the range of $2.68 to $2.88;
- adjusted diluted EPS attributable to LKQ stockholders in the range of $3 to $3.20; and
- free cash flow in the range of $850 million to $950 million.
The company says this outlook is based on current conditions and recent trends and assumes current U.S. federal tax legislation remains unchanged, exchange rates for the Canadian dollar, euro and pound sterling hold near recent levels and the price of scrap and precious metals trend lower in the second half of the year. The outlook also is based on management’s current expectations regarding the recovery from the coronavirus outbreak, though changes in any of these conditions could affect LKQ’s ability to achieve these estimates, according to the company.
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Source: Recycling Today
LKQ posts revenue increase in Q1
<![CDATA[LKQ Corp., headquartered in Chicago, has reported first-quarter 2021 results that show strength in key metrics such as overall profitability, segment margins and free cash flow.LKQ provides original equipment recycled and aftermarket parts, replacement systems, components, equipment and services to repair and accessorize automobiles, trucks and recreational and performance vehicles. The company has operations in North America, Europe and Taiwan. "We significantly exceeded our expectations for the quarter as our segment teams continue to embrace operational excellence and execute on our key initiatives,” says Dominick Zarcone, president and chief executive officer at LKQ Corp. “Our North America team delivered a 19.9 percent segment EBITDA (earnings before interest, taxes, depreciation and amortization) margin in the first quarter, the highest level in the company’s history. Additionally, our Specialty team delivered its highest quarterly organic revenue growth at 30.9 percent and first-quarter segment EBITDA margin of 13.4 percent. I am also pleased with the Europe Segment EBITDA margin of 9.6 percent in the quarter, a year-over-year improvement of 390 basis points. This level of performance gives us confidence regarding the progress of our 1 LKQ Europe program and our team’s ability to achieve the longer-term margin targets we set forth in 2019.”According to…