LKQ Corporation Announces Results for Fourth Quarter and Full Year 2022
Company / Press Release
February 24, 2023
- Fourth quarter 2022 revenue of $3.0 billion; parts and services organic revenue increased 4.5% ( 5.9% on a per day basis); annual increase of 5.0% ( 5.2% on a per day basis)
- Record fourth quarter segment EBITDA margins for Wholesale - North America and Europe of 18.5% (330 basis point increase) and 10.0% (110 basis point increase), respectively
- Fourth quarter 2022 diluted EPS2 of $0.72 (down 11.1% ); adjusted diluted EPS1, 2 of $0.78 (down 10.3% )
- Higher tax provision than prior guidance lowered fourth quarter 2022 diluted EPS2 and adjusted diluted EPS1,2 by $0.05
- Fourth quarter negative effect of $0.03 from increased interest expense
- Annual diluted EPS2 of $4.11 (up 12.3% ); adjusted diluted EPS1,2 of $3.85 (down 2.8% )
- Annual operating cash flow of $1.25 billion; free cash flow 1 of $1.0 billion
- Dividend of $0.275 per share approved to be paid in the first quarter of 2023
- Deployed $1.04 billion in 2022 to repurchase 20.5 million shares
- 2023 outlook provided
CHICAGO, IL. LKQ Corporation (Nasdaq: LKQ) today reported fourth quarter and full year 2022 financial results. “The fourth quarter was a solid operational finish to 2022. Our Wholesale - North America and Europe segments again delivered outstanding organic revenue growth and solid margins, exceeding our expectations for the quarter and year. Importantly, our global teams delivered these results in the midst of rampant inflation, supply chain disruptions, a tight labor market, lower commodity prices, and volatile exchange rates. The execution of our strategy, the resiliency of our business model, and the strength of our balance sheet have the Company well positioned to continue its success and performance in 2023,” noted Dominick Zarcone, President and Chief Executive Officer.
Fourth Quarter and Full Year 2022 Financial Results
Revenue for the fourth quarter of 2022 was $3.0 billion, a decrease of 5.8% as compared to $3.2 billion in the fourth quarter of 2021. On a constant currency basis1, fourth quarter revenue decreased by 0.1%. For the fourth quarter of 2022, parts and services organic revenue increased 4.5% (5.9% on a per day basis), while the net impact of acquisitions and divestitures decreased revenue by 3.1% and foreign exchange rates decreased revenue by 6.1%, for a total parts and services revenue decrease of 4.8%. Other revenue fell 20.1% in the fourth quarter of 2022 primarily due to weaker commodity prices relative to the same period in 2021.
Net income2 for the fourth quarter of 2022 was $193 million as compared to $235 million for the same period in 2021. Diluted earnings per share2 for the quarter was $0.72 as compared to $0.81 for the same period of 2021, a decrease of 11.1%.
On an adjusted basis, net income1,2 in the fourth quarter of 2022 was $209 million as compared to $254 million for the same period of 2021, a decrease of 17.5%. Adjusted diluted earnings per share1,2 for the fourth quarter of 2022 was $0.78 as compared to $0.87 for the same period of 2021, a decrease of 10.3%.
The effective tax rate for the fourth quarter of 2022 was 29.7%, which reflected adjustments to true-up the calculated full year effective rate as well as discrete tax expenses.
Revenue for the full year of 2022 was $12.8 billion, a decrease of 2.3% as compared to $13.1 billion for the full year of 2021. On a constant currency basis1, full year 2022 revenue increased by 2.8% to $13.5 billion. For the full year of 2022, parts and services organic revenue increased 5.0% on a reported basis (5.2% on a per day basis), while the net impact of acquisitions and divestitures decreased revenue by 1.2% and foreign exchange rates decreased revenue by 5.5%, for a total parts and services revenue decrease of 1.7%. Other revenue for the full year of 2022 fell 9.2% primarily due to weaker commodity prices relative to 2021.
Net income2 for the full year of 2022 was $1.14 billion as compared to $1.09 billion for the same period in 2021. Diluted earnings per share2 for the full year of 2022 was $4.11 as compared to $3.66 for the same period of 2021, an increase of 12.3%.
On an adjusted basis, net income1,2 for the full year of 2022 was $1.07 billion as compared to $1.18 billion for the same period of 2021, a decrease of 9.4%. Adjusted diluted earnings per share1,2 for the full year of 2022 was $3.85 as compared to $3.96 for the same period of 2021, a decrease of 2.8%.
Cash Flow and Balance Sheet
Cash flow from operations and free cash flow1 were $1.25 billion and $1.0 billion, respectively, for the full year of 2022. As of December 31, 2022, the balance sheet reflected total debt of $2.7 billion, and total leverage, as defined in our credit facility, was 1.5x EBITDA.
Stock Repurchase and Dividend Programs
During the fourth quarter of 2022, the Company invested $152 million to repurchase 3.0 million shares of its common stock. For the year ended December 31, 2022, the Company invested $1.04 billion to repurchase 20.5 million shares. 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 December 31, 2022. On October 25, 2022, the Board of Directors authorized a $1 billion increase to the existing share repurchase program, which raised the aggregate authorization to $3.5 billion, and extended the duration of the program through October 25, 2025.
On February 21, 2023, the Board of Directors declared a quarterly cash dividend of $0.275 per share of common stock, payable on March 30, 2023, to stockholders of record at the close of business on March 16, 2023.
On January 5, 2023, the Company entered into a new credit agreement with several lenders, at which time the prior credit agreement was terminated. The new credit agreement includes an unsecured revolving credit facility of up to a U.S. Dollar equivalent of $2 billion and an unsecured term loan facility of up to $500 million. The revolving credit facility has a maturity date of January 5, 2028, and the term loan has a maturity date of January 5, 2026, each of which maturity dates may be extended for a one-year extension.
Rick Galloway, Senior Vice President and Chief Financial Officer, commented: “Our 2023 annual guidance reflects our ongoing commitment of creating long-term value for our stockholders through our operational excellence initiatives of driving profitable growth, implementing ongoing margin enhancement programs, and generating robust levels of free cash flow through disciplined capital spending and active working capital management. As we navigate this period of macro uncertainty and non-operational headwinds, we expect healthy demand for our products and services, solid organic growth and sustained operating momentum across our industry leading business segments.”
For 2023, management is anticipating the following outlook:
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 it assumes a global effective tax rate of 26.3%, the prices of scrap and precious metals hold near the December average, and no further deterioration due to the Ukraine/Russia conflict. We have applied foreign currency exchange rates near January average levels, including $1.08 and $1.22 for the euro and pound sterling, respectively. The outlook assumes a $45 million to $55 million increase in annual interest expense relative to 2022. Changes in these conditions may impact our ability to achieve the estimates. Adjusted figures exclude (to the extent applicable) the impact of restructuring and transaction related expense; 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) and gains and losses related to acquisitions or divestitures (including changes in the fair value of contingent consideration liabilities).
- 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.
- References in this release to Net income and Diluted earnings per share, and the corresponding adjusted figures, reflect amounts from continuing operations attributable to LKQ stockholders.
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. Included with this release are reconciliations of each non-GAAP financial measure with the most directly comparable financial measure calculated in accordance with GAAP.
Webcast and Presentation Details
The audio webcast and accompanying slide presentation can be accessed at the Investor Relations section on our website (www.lkqcorp.com).
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 March 10, 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, with its head office 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 STAHLGRUBER Group, 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]