Lkq Corporation · NASDAQ:LKQ
Lkq — Q1 2021 Earnings Presentation
35 slides from Lkq's earnings presentation, Apr 29, 2021
Slide 1: First Quarter 2021 Earnings Call
First Quarter 2021 Earnings Call April 29, 2021 Nick Zarcone – President & Chief Executive Officer Varun Laroyia – Executive Vice President & Chief Financial Officer Joe Boutross – Vice President, Investor Relations
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: Q1 2021 Highlights
Q1 2021 Highlights • Focus on operational excellence, the ongoing benefits from rightsizing actions enacted in prior periods, and the sequential rise in scrap and precious metal prices drove record profitability in Q1 2021 ◦ Highest diluted EPS and Segment EBITDA $ in LKQ history • Total revenue gro
Slide 4: Consolidated Results - Continuing Operations
Consolidated Results - Continuing Operations Q1 2021 Revenue(1) Q1 2021 EPS(2) +83.3% +64.9% 5.7% $3,400 $1.00 $1.00 $0.94 $3,171 $0.90 $0.88 $0.90 $0.94 $3,200 $0.88 $3,001 $0.80 $0.80 $3,000 $0.70 $0.70 $2,800 $0.60 $0.60 $0.57 $2,600 $0.57 $0.50 $0.48 $0.50 $0.48 $2,400 $0.40 $0.40 $2,200 $0.30 $
Slide 5: Demand Impact
Demand Impact Organic Parts & Services Revenue Change (Per Day) 65% 60.7% 60% 55% 50% 45% 40% 35% 30% 25% 20% 16.6% 17.7% 17.3% 15% 13.1% 10% 4.1% 5% 1.1% 0% (1.4)% (1.0)% (0.1)% (5)% (2.9)% (10)% (5.6)% (4.5)% (5.0)% (6.3)% (15)% (11.3)% (10.9)% (13.7)% (14.0)% (20)% (16.6)% (25)% (22.5)% (30)% Q1
Slide 6: Q1 2021 Revenue
Q1 2021 Revenue Revenue Changes by Source: Components of Revenue Acquisition 100.0% and Foreign 7.5% 6.3% Organic Divestiture Exchange Total(1) North America (8.4)% 0.0% 0.4% (8.0)% 14.4% 11.6% Europe 0.3% (1.4)% 8.3% 7.2% 80.0% Specialty 30.9% 0.4% 0.5% 31.8% Parts and Services 0.6% (0.6)% 4.2% 4.2
Slide 7: Cost Structure Actions
Cost Structure Actions Opex quarterly run rate Key cost reductions vs Q1 2020 • Personnel costs down 6% Opex 18% Opex 10% Opex 0% Opex 4% Rev 12% Rev 16% Rev 3% Rev 7% – Headcount actions totaling ~5K FTEs include furlough, RIFs, decreased hours, reduction of % of Rev overtime, temp workers and hiri
Slide 8: Financial Results
Financial Results ( - -
Slide 9: Operating Results - Continuing Operations
Operating Results - Continuing Operations First Quarter ($ in millions, except per share data) 2021 2020 Change Revenue $3,171 $3,001 5.7% Gross Margin 1,294 1,214 6.6% Operating Expenses 849 900 (5.7)% Operating Income 371 242 53.6% Pre-tax Income 353 207 70.9% Net income from continuing operations
Slide 10: North America – Q1 2021 Results
North America – Q1 2021 Results Change % of Revenue Gross Margin ($ in millions) 2021 2020 F/(U) 2021 2020 49.0% 48.0% Total Revenue $1,250 $1,290 (3.1)% 48.0% 47.4% 48.0% 46.9% Gross Margin $599 $612 (2.0)% 48.0% 47.4% 47.0% 46.0% Operating Expenses $353 $405 12.7% 28.3% 31.4% 46.0% 45.2% 46.8% 45.
Slide 11: Europe – Q1 2021 Results
Europe – Q1 2021 Results Change % of Revenue Gross Margin ($ in millions) 2021 2020 F/(U) 2021 2020 Total Revenue $1,463 $1,364 7.3% 39.0% 38.4% Gross Margin $562 $507 10.8% 38.4% 37.2% Operating Expenses $424 $431 1.8% 28.9% 31.6% 38.0% 37.2% 37.1% 37.0% Other Income (Expense), net $2 $(1) 37.0% (1
Slide 12: Specialty – Q1 2021 Results
Specialty – Q1 2021 Results Change % of Revenue Gross Margin ($ in millions) 2021 2020 F/(U) 2021 2020 30.0% 28.8% Total Revenue $459 $349 31.7% 28.5% Gross Margin $132 $95 39.2% 28.8% 27.3% 27.7% 28.0% 27.3% 27.2% Operating Expenses $72 $64 (12.5)% 15.6% 18.3% Segment EBITDA(1) $61 $32 90.7% 13.4%
Slide 13: 2021 Capital Allocation
2021 Capital Allocation $ in millions $1,000 $523 $750 $(42) $(83) $590 $(57) $(57) $(3) $(3) $500 $312 $250 $0 Beginning Cash Operating Capex Net Share Derivative Other FX Ending Cash 12/31/20 Cash Repayments of Repurchases Settlement Investing 3/31/2021 Flows Credit and Financing Facilities Activi
Slide 14: Operating Cash Flow and Free Cash Flow
Operating Cash Flow and Free Cash Flow* $1,600 120% $ in millions 106% $1,400 98% 100% $1,200 80% $1,000 66% $800 60% 42% $1,444 $1,271 $600 42% $1,064 40% $400 $798 $715 $481 $523 20% $465 $200 $0 0% 2018 2019 2020 YTD March 2021 Free Cash Flow ("FCF")* Operating Cash Flow FCF/EBITDA** Note: FCF am
Slide 15: Leverage & Liquidity
Leverage & Liquidity ($ in millions ) ($ in millions ) Total Capacity(1) $4,500 $4,000 $3,474 $3,469 $3,469 $4,000 $3,500 $3,500 $3,000 $3,000 $2,897 $2,500 $1,792 $2,735 $312 $2,436 $2,545 $2,500 $590 $2,000 $2,585 $71 $2,000 $2,145 $1,500 $1,500 $71 1.9x 1.4x $1,000 $71 $1,606 $1,000 $500 $967 $85
Slide 16: Enabling a Circular and Inclusive Economy: 2020 Sustainability Report Highlights
Enabling a Circular and Inclusive Economy 2020 Sustainability Report Highlights ENVIRONMENTAL Global Leader in Automobile Recycling 2020 Our salvage operations recycle more than 90% of materials Our North American from end-of-life vehicles Recycling Achievements • Focused on employee health & safety
Slide 17: Outlook 2021
Outlook 2021 (effective only on the date issued: April 29, 2021) 2021 outlook(1): • 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 less selling days in North America, one fewer in Q1 and
Slide 18: Supplementary Information
Supplementary Information (
Slide 19: Liquidity as of March 31, 2021
Liquidity as of March 31, 2021 Credit Rating • Rated Ba1 / BB+ by Moody’s and S&P, respectively • Fixed Interest Rate Bonds: €1.50 billion ($1.76 billion) • Variable Interest Rate Bank Debt: $853 million ($150 million hedged to fixed rates) Debt Structure • Receivables Securitization Facility: $0 ou
Slide 20: Metal Prices
Metal Prices Q1 scrap steel prices Q1 precious metal prices increased YoY and QoQ increased YoY and QoQ • Average price for scrap steel $250 $23,167 increased from from $128 per ton in Q1 2020 to $213 per ton in Q1 2021 $225 $213 $11,050 $14,600 $9,600 $6,867 • Sequential change was positive $200 $5
Slide 21: Foreign Exchange
Foreign Exchange $1.45 • £ up 7.8% Q1 2021 vs Q1 2020 $1.40 $1.38 .8% GBP 7 • € up 9.3% Q1 2021 vs Q1 2020 $1.35 $1.32 • $113 million favorable impact of translation of stronger Q1 rates $1.29 $1.30 $1.28 relative to the US dollar on European parts and services $1.25 $1.24 revenue growth 3% $1.21 EU
Slide 22: Inventory
Inventory Inventory Procurement: Q1 ($ in millions, Vehicles purchased in 000s) 2021 2020 % Change Total aftermarket procurement $1,545 $1,504 2.7% Wholesale salvage cars and trucks 50 72 (30.6)% Europe wholesale salvage cars and trucks 7 7 0.0% Self service and "crush only" cars 137 149 (8.1)% • Ne
Slide 23: Non-GAAP Financial Measures
Appendix Non-GAAP Financial Measures This presentation contains non-GAAP financial measures. Following are reconciliations of each non-GAAP financial measure with the most directly comparable financial measure calculated in accordance with GAAP. 23
Slide 24: Appendix 1: Constant Currency Reconciliation
Appendix 1 Constant Currency Reconciliation • The following unaudited table reconciles revenue growth for Parts & Services to constant currency revenue growth for the same measure: Three Months Ended March 31, 2021 Consolidated Europe Parts & Services Revenue growth as reported 4.2% 7.2% Less: Curre
Slide 25: Appendix 2: Revenue and Segment EBITDA by Segment
Appendix 2 Revenue and Segment EBITDA by segment Three Months Ended March 31(1) % of % of (in millions) 2021 revenue 2020 revenue Revenue North America $1,250 $1,290 Europe 1,463 1,364 Specialty 459 349 Eliminations (1) (1) Total Revenue $3,171 $3,001 Segment EBITDA North America $249 19.9% $211 16.
Slide 26: Appendix 3: 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(1) (in millions) 2021 2020 Net income $266 $146 Subtract: Net income attributable to continuing noncontrolling interest 0 1 Net income attributable to discontinued noncontrolling interest — 0 Net income
Slide 27: Appendix 3: 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 net
Slide 28: Appendix 4: 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(1) (in millions, except per share data) 2021 2020 Net income $266 $146 Subtract: Net income attributable to continuing noncontrolling interest 0 1 Net income
Slide 29: Appendix 4: 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 eva
Slide 30: Appendix 5: Forecasted EPS Reconciliation
Appendix 5 Forecasted EPS Reconciliation(1) For the year ending December 31, 2021 (in millions, except per share data) Minimum Outlook Maximum Outlook Net income from continuing operations attributable to LKQ stockholders $813 $874 Adjustments: Amortization of acquired intangibles 78 78 Restructurin
Slide 31: Appendix 6: Operating Cash Flow to Free Cash Flow
Appendix 6 Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow Three Months Ended March 31(1) (in millions) 2021 2020 Net cash provided by operating activities $523 $195 Less: purchases of property, plant and equipment 42 45 Free cash flow $481 $150 Year Ended December 31 (
Slide 32: Appendix 6: Operating Cash Flow to Free Cash Flow
Appendix 6 Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow We have presented free cash flow solely as a supplemental disclosure that offers investors, securities analysts and other interested parties useful information to evaluate our liquidity. We calculate free cash f
Slide 33: Reconciliation of Gross Margin to Adjusted Gross Margin
Appendix 7 Reconciliation of Gross Margin to Adjusted Gross Margin Consolidated Adjusted Gross Margin Three Months Ended(1) March 31, March 31, (in millions) 2021 2020 Gross margin $1,294 $1,214 Add: Restructuring expenses - cost of goods sold (0) 0 Adjusted gross margin $1,294 $1,214 Gross margin %
Slide 34: Appendix 7: Gross Margin to Adjusted Gross Margin
Appendix 7 Reconciliation of Gross Margin to Adjusted Gross Margin We have presented adjusted gross margin solely as a supplemental disclosure that offers investors, securities analysts and other interested parties useful information to evaluate the operating performance of our continuing business a
Slide 35: Appendix 8: Reconciliation of Total Debt to Net Debt
Appendix 8 Reconciliation of Total Debt to Net Debt March 31, December 31, (in millions) 2021(1) 2020(1) Current portion of long-term obligations $240 $58 Long-term obligations, excluding current portion 2,472 2,813 Total debt, net of debt issuance costs $2,712 $2,871 Add: Debt issuance costs 23 26