LKQ Corporation reported a strong finish to the year in its fourth quarter and full year 2023 financial results, stating that the Uni-Select integration was running ahead of schedule.
“The fourth quarter was a strong finish to a successful year for LKQ. I am proud of how the entire team worked through challenging macroeconomic conditions, persistent inflation and declining commodity prices to deliver solid organic revenue growth, year over year improvement in Segment EBITDA, and strong cash flow generation. I look forward to collaborating with Justin Jude, my successor as Chief Executive Officer, over the coming months to continue enhancing LKQ’s industry leading business,” stated Dominick Zarcone, President and Chief Executive Officer. “Operational excellence will remain at the forefront in 2024 as we look to drive organic revenue growth, productivity, strong margins and excellent free cash flow,” said Justin Jude, Executive Vice President and Chief Operating Officer.
Fourth Quarter and Full Year 2023 Financial Results
Revenue for the fourth quarter of 2023 was $3.5 billion, an increase of 16.6% compared to $3.0 billion for the fourth quarter of 2022. For the fourth quarter of 2023, parts and services organic revenue increased 2.8% (3.4% on a per day basis), foreign exchange rates increased revenue by 2.7% and the net impact of acquisitions and divestitures increased revenue by 13.1% year over year, for a total parts and services revenue increase of 18.7%. Other revenue for the fourth quarter of 2023 fell 16.4% primarily due to weaker precious metals prices relative to the same period in 2022.
Figures in USD.
Net income2 for the fourth quarter of 2023 was $184 million compared to $193 million for the same period of 2022. Diluted earnings per share2 for the fourth quarter of 2023 was $0.69 compared to $0.72 for the same period of 2022, a decrease of 4.2%.
On an adjusted basis, net income1,2 in the fourth quarter of 2023 was $226 million compared to $209 million for the same period of 2022, an increase of 7.9%. Adjusted diluted earnings per share1,2 was $0.84 for the fourth quarter of 2023 compared to $0.78 for the same period of 2022, an increase of 8.0%.
Revenue for the full year of 2023 was $13.9 billion, an increase of 8.4% compared to $12.8 billion for the full year of 2022. For the full year of 2023, parts and services organic revenue increased 4.7% (5.1% on a per day basis), foreign exchange rates increased revenue by 0.9% and the net impact of acquisitions and divestitures increased revenue by 4.8% year over year, for a total parts and services revenue increase of 10.4%. Other revenue for the full year of 2023 fell 19.6% primarily due to weaker commodity prices relative to 2022.
Net income2 for the full year of 2023 was $0.94 billion compared to $1.14 billion for the same period of 2022. Diluted earnings per share2 for the full year of 2023 was $3.51 compared to $4.11 for the same period of 2022, a decrease of 14.6%.
On an adjusted basis, net income1,2 for the full year of 2023 was $1.03 billion compared to $1.07 billion for the same period of 2022, a decrease of 4.0%. Adjusted diluted earnings per share1,2 was $3.83 for the full year of 2023 compared to $3.85 for the same period of 2022, a decrease of 0.5%.
Cash Flow and Balance Sheet
Cash flow from operations and free cash flow1 were $1.4 billion and $1.0 billion, respectively, for the full year of 2023. As of December 31, 2023, the balance sheet reflected total debt of $4.3 billion and total leverage, as defined in our credit facility, was 2.3x EBITDA.
Stock Repurchase and Dividend Programs
During the fourth quarter of 2023, the Company invested $30 million to repurchase 0.7 million shares of its common stock. For the year ended December 31, 2023, the Company invested $35 million to repurchase 0.8 million shares of its common stock. Since initiating the stock repurchase program in late October 2018, the Company has repurchased approximately 56 million shares for a total of $2.4 billion through December 31, 2023.
On February 20, 2024, the Board of Directors declared a quarterly cash dividend of $0.30 per share of common stock, payable on March 28, 2024, to stockholders of record at the close of business on March 14, 2024.
Other Events
In October 2023, we entered into a definitive agreement to sell GSF Car Parts Limited. The sale was completed on October 25, 2023.
Uni-Select integration is ongoing with roughly half of the FinishMaster locations converted or consolidated into LKQ locations to date and the remainder scheduled for completion by the end of the first quarter. Mr. Jude commented, “Our Wholesale – North America team’s agility and integration experience has the Uni-Select plan ahead of schedule, and we are confident in our ability to exceed the $55 million of synergies previously disclosed.”
On November 27, 2023, the Company announced that the Board unanimously selected Justin Jude to succeed Dominick Zarcone as LKQ’s next President and CEO. In the interim, the Board has appointed Mr. Jude to serve as LKQ’s Executive Vice President and Chief Operating Officer from January 1, 2024 until he officially succeeds Mr. Zarcone on July 1, 2024.
2024 Outlook
Rick Galloway, Senior Vice President and Chief Financial Officer, commented, “Our annual guidance reflects our emphasis on profitable revenue growth and free cash flow generation. We expect organic revenue growth from each of our operating segments. We also believe that in 2024, our margin enhancement initiatives will boost profitability, including a return to double digit Europe Segment EBITDA margins.”
For 2024, management is anticipating the following outlook:
| 2024 Full Year Outlook | |
| Organic revenue growth for parts and services | 3.5% to 5.5% |
| Diluted EPS2 | $3.43 to $3.73 |
| Adjusted diluted EPS1,2 | $3.90 to $4.20 |
| Operating cash flow | $1.35 billion |
| Free cash flow1 | $1.0 billion |
| Free cash flow conversion of Adjusted EBITDA1 | 50% to 60% |
LKQ outlook for the full year 2024 is based on current conditions and recent trends, and assumes a global effective tax rate of 26.8%, the prices of scrap and precious metals hold near the December average, and no further deterioration due to the Ukraine/Russia conflict. LKQ have applied foreign currency exchange rates near recent average levels, including $1.09, $1.27 and $0.74 for the euro, pound sterling and Canadian dollar, respectively, for the year. Changes in these conditions may impact LKQ ability to achieve the estimates. 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, and gains and losses related to acquisitions or divestitures (including changes in the fair value of contingent consideration liabilities).
Conference Call Details
LKQ is hosting an investor conference call and webcast on February 22, 2024 at 8:00 a.m. Eastern Time (7:00 a.m. Central Time) with members of senior management to discuss the Company’s results. To access the investor conference call, please dial (833) 470-1428. International access to the call may be obtained by dialing (404) 975-4839. The investor conference call will require you to enter conference ID: 672153.
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 (866) 813-9403 or (929) 458-6194 for international calls. The telephone replay will require you to enter conference ID: 457147. An online replay of the audio webcast will be available on the Company’s website. Both formats of replay will be available through March 7, 2024. Please allow approximately two hours after the live presentation before attempting to access the replay.
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