LKQ Corporation (Nasdaq:LKQ), the parent company of Keystone Automotive and its NTP-STAG RV distribution division, today (April 29) reported first quarter 2021 results that reflect strength for the company in a number of key metrics including overall profitability, segment margins and free cash flow.
- First quarter revenue of $3.2 billion (up 5.7% year-over-year)
- Parts and services organic revenue increased 0.6% (2.2% on a per day basis)
- Diluted EPS 1 of $0.88 (up 83.3%); adjusted diluted EPS 1 of $0.94 (up 64.9%)
- First quarter Segment EBITDA margin of 19.9% for North America
- Europe first quarter Segment EBITDA margin up 390 basis points to 9.6%
- First quarter Segment EBITDA margin of 13.4% for Specialty
- First quarter operating cash flow of $523 million (up 169% YoY); free cash flow of $481 million (up 220% YoY)
- Net leverage down t o 1.4x EB ITDA
- 2021 outlook raised
“We significantly exceeded our expectations for the quarter as our segment teams continue to embrace operational excellence and execute on our key initiatives. Our North America team delivered a 19.9% Segment EBITDA 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% and first quarter Segment EBITDA margin of 13.4%. I am also pleased with the Europe Segment EBITDA margin of 9.6% 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,” noted Dominick Zarcone, president and chief executive officer.
First Quarter 2021 Financial Results
Revenue for the first quarter of 2021 was $3.2 billion, an increase of 5.7% as compared to $3.0 billion in the first quarter of 2020. For the first quarter of 2021, parts and services organic revenue increased 0.6% (2.2% on a per day basis), while the net impact of acquisitions and divestitures decreased revenue 0.6% and foreign exchange rates increased revenue 4.2%, for a total parts and services revenue increase of 4.2%. The organic revenue growth for the quarter reflects the annualization of the initial pandemic impact last March. Through February, organic parts and services revenue was 4.4% lower on a per day basis, primarily as a result of mobility restrictions from COVID-19. In March 2021, compared to a lower prior year period, organic parts and services revenue grew by 15.7% on a per day basis. Other revenue grew 27.0% in the first quarter of 2021, driven by higher scrap steel and precious metals prices.
Net income1 for the first quarter of 2021 was $266 million as compared to $146 million for the same period in 2020, an increase of 81.9%. Diluted earnings per share1 for the first quarter was $0.88 as compared to $0.48 for the same period of 2020, an increase of 83.3%.
On an adjusted basis, net income1 in the first quarter was $286 million compared to $176 million in the same period of 2020, a 62.4% increase. Adjusted diluted earnings per share1 for the first quarter was $0.94 as compared to $0.57 for the same period of 2020, a 64.9% increase.
Cash Flow and Balance Sheet
Cash flow from operations totaled $523 million during the first quarter of 2021, up 169% from a year ago. Free cash flow in the quarter totaled $481 million, up 220% year-over-year. We made $83 million of net repayments on borrowings during the first quarter. As of March 31, 2021, LKQ’s balance sheet reflected net debt of $2.1 billion, down from $2.6 billion as of December 31, 2020. Net leverage, as defined in the company’s credit facility, decreased to 1.4x EBITDA.
On April 1, 2021, LKQ used a portion of the available liquidity to redeem the €750 million 3.625% Senior Notes due 2026. The redemption was financed by lower cost revolver borrowings and cash on hand.
During the first quarter of 2021, S&P Global and Moody’s upgraded LKQ’s credit ratings to BB+ and Ba1, respectively.
In the first quarter of 2021, the company repurchased approximately 1.5 million shares of its common stock. Since initiating its plan in late October 2018, LKQ has repurchased 18.8 million shares for a total of $526 million.
Varun Laroyia, executive vice president and chief financial officer, commented, “I want to thank our team for driving our operational excellence initiatives to deliver yet another outstanding outcome in the quarter. 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, management is anticipating the following revised outlook:
- Full year parts and services revenue growth expected
- Q2 growth on a light comparable period, followed by gradual recovery in the second half of the year
- Two fewer selling days in North America, one each in Q1 and Q4
- Diluted EPS attributable to LKQ stockholders in the range of $2.68 to $2.88 (a)
- Adjusted diluted EPS attributable to LKQ stockholders in the range of $3.00 to $3.20 (a)(b)
- Free cash flow in the range of $850 million to $950 million (b)
Note: LKQ’s outlook for the full year 2021 is based on current conditions and recent trends, and it 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 company’s outlook is also based on management’s current expectations regarding the recovery from the coronavirus outbreak. Changes in these conditions may impact the company’s ability to achieve the estimates. Adjusted figures exclude (to the extent applicable) the impact of restructuring and acquisition related expenses; amortization expense related to acquired intangibles; excess tax benefits and deficiencies from stock-based payments; losses on debt extinguishment; impairment charges; and gains and losses related to acquisitions or divestitures (including changes in the fair value of contingent consideration liabilities).
About LKQ Corporation
LKQ Corporation (www.lkqcorp.com) is a leading provider of alternative and specialty parts to repair and accessorize automobiles and other vehicles. LKQ has operations in North America, Europe and Taiwan. LKQ offers its customers a broad range of OE recycled and aftermarket parts, replacement systems, components, equipment, and services to repair and accessorize automobiles, trucks, and recreational and performance vehicles.