LKQ (US:LKQ)2021-04-29 18:26Financial Data and Key Metrics Changes - Revenue for Q1 2021 was $3.17 billion, an increase of 5.7% compared to $3 billion in Q1 2020 [13] - Net income for Q1 was $266 million, an increase of 83% year-over-year [16] - Diluted earnings per share for Q1 was $0.88, a 83% increase [17] - Adjusted diluted earnings per share was $0.94, a 65% increase year-over-year [17] - Consolidated segment EBITDA margins were 14.2%, a 350 basis point increase from Q1 2020 [18] Business Line Data and Key Metrics Changes - North American organic revenue for parts and services declined 8.4% on a reported basis [23] - European organic revenue for parts and services increased by 30 basis points [29] - Specialty segment reported organic revenue growth of 30.9%, the highest quarterly growth since acquisition in 2014 [37] Market Data and Key Metrics Changes - Vehicle miles traveled (VMT) in the U.S. was down approximately 5% recently, with expectations to return to 2019 levels in 2022 [93] - In Europe, VMT is expected to recover to 2019 levels in Q3 or Q4 2021, depending on vaccine rollout [93] Company Strategy and Development Direction - The company aims to integrate businesses and simplify its operating model while focusing on profitable revenue growth and sustainable margin expansion [10] - Continued investment in ESG initiatives, including the release of a Corporate Sustainability Report [12] - The company plans to maintain a balanced capital allocation strategy while driving high levels of cash flow [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in gaining market share from smaller competitors facing capital constraints [24] - The company anticipates continued revenue recovery in the second half of 2021, although it does not expect to return to 2019 revenue levels until 2022 [69] - Inflationary pressures are expected to persist, but the company has strategies in place to mitigate these risks [73] Other Important Information - The company processed 190,000 vehicles in Q1, recycling significant amounts of fuel, waste oil, tires, and batteries [28] - The company acquired a diagnostics business in Q1, which will be integrated into its Elitek Vehicle Services brand [44] Q&A Session Summary Question: Impact of inflationary environment and pricing actions - Management indicated they have been disciplined on pricing and have not seen significant pushback from customers despite inflationary pressures [85] Question: Salvage side of the business and procurement challenges - Management noted that salvage markets are tight, with higher prices for cars at auction, but they are maintaining healthy margins through effective remanufacturing operations [87] Question: Trends in driving in the U.S. and Europe - Management observed a gradual recovery in VMT, with expectations for the U.S. to return to 2019 levels in 2022 and Europe potentially in late 2021 [93] Question: Competitive advantage in inventory availability - Management emphasized their scale and strong vendor relationships, which provide a competitive edge in inventory procurement [109] Question: Demand for EV parts - Management reported very little demand for electric vehicle parts currently, as the market for such parts is expected to lag behind the introduction of EVs [117] Question: Usage of free cash flow and capital deployment - Management indicated that free cash flow will be used for inventory replenishment and potentially for share buybacks, given the improved leverage position [130]