LKQ Corporation Announces Results for First Quarter 2023
Company / Press Release
April 28, 2023
Revenue of $3.3 billion; parts and services organic revenue growth of 7.9% (7.1% on a per day basis)
Diluted EPS2 of $1.01 (up 7.4%); adjusted diluted EPS1, 2 of $1.04 (up 4.0%)
Negative effect of $0.05 ($0.04 on an adjusted basis) resulting from increased interest rates and related expense
Operating cash flow of $223 million; free cash flow1 of $153 million
Dividend of $0.275 per share approved to be paid in the second quarter of 2023
2023 guidance reiterated
Entered definitive agreement to acquire Uni-Select Inc.
Chicago, IL. LKQ Corporation (Nasdaq: LKQ) yesterday reported first quarter 2023 financial results. “Overall, the first quarter was a terrific start to the year, and we remain on track to deliver on our full year guidance. Our two largest segments, Wholesale - North America and Europe, exceeded our expectations in the quarter as our teams continue to embrace operational excellence and execute our key initiatives. Our Wholesale - North America segment delivered its highest first quarter parts and services organic revenue growth rate and quarterly Segment EBITDA margin on record, at 14.4% and 20.5%, respectively. I am also pleased with our Europe segment reporting organic revenue growth of 9.7% and Segment EBITDA margin of 9.7%, the latter reflecting a year-over-year improvement of 90 basis points and the best first quarter performance since 2016 when it was a much smaller operation,” noted Dominick Zarcone, President and Chief Executive Officer. “We are excited about the balance of the year and the pending acquisition of Uni-Select to strengthen our existing LKQ operations.”
First Quarter 2023 Financial Results
Revenue was $3.3 billion in the first quarter of both 2023 and 2022. For the first quarter of 2023, parts and services organic revenue increased 7.9% (7.1% on a per day basis), while the net impact of acquisitions and divestitures decreased revenue by 3.3% and foreign exchange rates decreased revenue by 3.0%, for a total parts and services revenue increase of 1.5%. Other revenue fell 19.2% in the first quarter of 2023 primarily due to weaker commodity prices relative to the same period in 2022.
Net income2 for the first quarter of 2023 was $270 million as compared to $269 million for the same period in 2022. Diluted earnings per share2 for the quarter was $1.01 as compared to $0.94 for the same period of 2022, an increase of 7.4%.
On an adjusted basis, net income1, 2 in the first quarter of 2023 was $279 million as compared to $287 million for the same period of 2022, a decrease of 2.8%. Adjusted diluted earnings per share1, 2 for the first quarter of 2023 was $1.04 as compared to $1.00 for the same period of 2022, an increase of 4.0%.
Cash Flow and Balance Sheet
Cash flow from operations and free cash flow1 were $223 million and $153 million, respectively, for the first quarter of 2023. As of March 31, 2023, the balance sheet reflected total debt of $2.7 billion and total leverage, as defined in our credit facility, was 1.6x EBITDA.
Stock Repurchase and Dividend Programs
During the first quarter of 2023, the Company invested $5 million to repurchase 0.1 million shares of its common stock. Since initiating the stock repurchase program in late October 2018, the Company has repurchased approximately 55 million shares for a total of $2.4 billion through March 31, 2023.
On April 25, 2023, the Board of Directors declared a quarterly cash dividend of $0.275 per share of common stock, payable on June 1, 2023, to stockholders of record at the close of business on May 18, 2023.
On February 27, 2023, the Company announced that it entered into a definitive agreement to acquire all of Uni-Select Inc.'s issued and outstanding shares for C$48.00 per share in cash, representing a total enterprise value of approximately C$2.8 billion (US$2.1 billion). Founded in Boucherville, Québec, Canada in 1968, Uni-Select is a leader in the distribution of automotive refinish and industrial coatings and related products in North America through its FinishMaster segment, in the automotive aftermarket parts business in Canada through its Canadian Automotive Group segment and in the U.K. through its GSF Car Parts segment. This acquisition will complement the Company's existing North American paint distribution operations and provides a scaled position in the Canadian mechanical parts space, with opportunity for future consolidation and growth. The Company intends to divest Uni-Select's GSF Car Parts segment on or shortly after the acquisition closing date, which the Company expects to occur during the second half of this year after receiving the required approvals to close the acquisition and the satisfaction of other customary closing conditions.
Rick Galloway, Senior Vice President and Chief Financial Officer, commented: “The Wholesale - North America and Europe segments are performing ahead of expectations, offsetting the softness in the Specialty and Self Service segments, including lower precious metal prices, and the higher effective tax rate. Therefore, with these offsetting effects, we are maintaining our prior guidance.”
For 2023, management reiterated the outlook as set forth below:
2023 Full Year Outlook
Organic revenue growth for parts and services
6.0% to 8.0%
$3.68 to $3.98
Adjusted diluted EPS1, 2
$3.90 to $4.20
Operating cash flow
approx. $1.275 billion
Free cash flow1
approx. $975 million
Free cash flow conversion of EBITDA1
55% to 60%
Our outlook for the full year 2023 is based on current conditions and recent trends, and assumes a global effective tax rate of 26.6%, the prices of scrap and precious metals hold near the March average, and no further deterioration due to the Ukraine/Russia conflict. We have applied foreign currency exchange rates near March and April average levels, including $1.08 and $1.23 for the euro and pound sterling, respectively, for the balance of the year. Changes in these conditions may impact our ability to achieve the estimates. The full year GAAP outlook includes transactions and costs related to the potential Uni-Select acquisition that occurred through March 31, 2023 but does not include any projected operational results for Uni-Select, which will only be incorporated after the closing date. Adjusted figures exclude (to the extent applicable) the impact of restructuring and transaction related expenses; amortization expense related to acquired intangibles; excess tax benefits and deficiencies from stock-based payments; losses on debt extinguishment; impairment charges; direct impacts of the Ukraine/Russia conflict (including provisions for and subsequent adjustments to reserves for asset recoverability and expenditures to support our employees and their families), interest and financing costs related to the Uni-Select transaction prior to closing and gains and losses related to acquisitions or divestitures (including changes in the fair value of contingent consideration liabilities and gains or losses on foreign currency forward contracts related to the Uni-Select acquisition).
1 Non-GAAP measure. See the table accompanying this release that reconciles the actual or forecasted U.S. GAAP measure to the actual or forecasted adjusted measure, which is non-GAAP.
2 References in this release to Net income and Diluted earnings per share, and the corresponding adjusted figures, reflect amounts from continuing operations.
Non-GAAP Financial Measures
This release contains (and management’s presentation on the related conference call will refer to) non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission.
Webcast and Presentation Details
The audio webcast and accompanying slide presentation can be accessed at (www.lkqcorp.com) in the Investor Relations section.
A replay of the conference call will be available by telephone at (800) 770-2030 or (647) 362-9199 for international calls. The telephone replay will require you to enter conference ID: 5232422#. An online replay of the audio webcast will be available on the Company's website. Both formats of replay will be available through May 12, 2023. Please allow approximately two hours after the live presentation before attempting to access the replay.
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 OEM recycled and aftermarket parts, replacement systems, components, equipment, and services to repair and accessorize automobiles, trucks, and recreational and performance vehicles.
About LKQ Europe
LKQ Europe, a subsidiary of LKQ Corporation (www.lkqcorp.com), headquartered in Zug, Switzerland, is the leading distributor of automotive aftermarket parts for cars, commercial vans, and industrial vehicles in Europe. It currently employs approximately 26,000 people with a network of more than 1,000 branches and approximately $5.7 billion in revenue in 2022. The organization supplies more than 100,000 workshops in over 20 European countries.
The group includes LKQ Euro Car Parts, LKQ Benelux & France, LKQ RHIAG Group, Elit, LKQ CZ, and LKQ DACH, as well as recycling specialist, Atracco. LKQ is the largest shareholder in MEKO Group.
Investor Relations Contact
Joseph P. Boutross
Vice President, Investor Relations
T +1 312 621-2793
E [email protected]
Media Contact Europe
Head of External Communications
T +41 41 884 8442
E [email protected]