LKQ posts revenue decrease in Q3

Auto parts recycler LKQ Corp., headquartered in Chicago, has reported third-quarter 2022 financial results, which reveal revenue of $3.1 billion, a decrease of 5.9 percent compared with $3.3 billion in the third quarter of 2021. Parts and services organic revenue increased 4.8 percent (5.3 percent on a per-day basis), while the net impact of acquisitions and divestitures decreased revenue by 2.3 percent, and foreign exchange rates decreased revenue by 7.4 percent, for a total parts and services revenue decrease of 5 percent, the company says. Other revenue fell 17.4 percent primarily because of weaker commodity prices relative to the same period in 2021.

“We are pleased with our third-quarter results as they once again highlight our ongoing ability to combine best-in-class customer service with operational excellence,” says Dominick Zarcone, president and chief executive officer at LKQ. “Our strong same-day organic revenue growth and segment EBITDA [earnings before interest, taxes, depreciation and amortization] margins in Wholesale - North America and Europe demonstrate our ability to serve our stakeholders in any environment.”

He adds, “I want to thank our global teams for delivering another quarter of strong performance in a challenging macro environment, including commodities and foreign exchange volatility as well as other inflationary pressures that impacted our reported earnings. Additionally, we remain committed to returning capital to our stockholders, as evidenced by the 10% increase of the quarterly dividend and the expansion of our stock repurchase program.”

Net income for the quarter was $261 million compared with $284 million for the same period in 2021. Diluted earnings per share for the quarter were 95 cents versus 96 cents for the same period of 2021, a decrease of 1 percent.

On an adjusted basis, net income in the quarter was $266 million compared with $300 million for the same period of 2021, a decrease of 11.4 percent. Adjusted diluted earnings per share for the quarter were 97 cents compared with $1.02 for the same period of 2021, a decrease of 4.9 percent.

For the third quarter, cash flow from operations and free cash flow totaled $273 million and $224 million, respectively, while for the nine months ended Sept. 30, cash flow from operations and free cash flow were $1.01 billion and $862 million, respectively. As of the close of the third quarter, LKQ says its balance sheet reflects total debt of $2.4 billion and net debt of $2.2 billion. Net leverage, as defined in the credit facility, was 1.3 times EBITDA.

LKQ also invested $343 million to repurchase 6.8 million shares of its common stock in the third quarter. For the nine months ended Sept. 30, the company has deployed $891 million to repurchase 17.6 million shares. Since initiating the stock repurchase program in late October 2018, LKQ says it has repurchased approximately 52 million shares for a total of $2.2 billion through the third quarter. Its board of directors recently authorized a $1 billion increase to the existing share repurchase program and extended the duration through Oct. 25, 2025.

The company’s board Oct. 25 declared a quarterly cash dividend of 27.5 cents per share of common stock, payable Dec. 1  to stockholders of record at the close of business Nov. 17, reflecting a 10 percent increase over the prior quarterly dividend of 25 cents per share.

LKQ recently announced that Varun Laroyia, formerly executive vice president and chief financial officer, was appointed as chief executive officer and managing director of LKQ Europe, and Rick Galloway, formerly chief financial officer of LKQ’s Wholesale - North America and Self Service segments, was appointed LKQ’s senior vice president and chief financial officer.

Regarding the outlook for the remainder of 2022, Galloway says, “The business continues to produce strong financial results in a difficult macroeconomic environment. We anticipate the benefits associated with our operational excellence programs and capital allocation activities will be more than offset by the weak foreign exchange rates relative to the U.S. dollar along with soft metals prices. Therefore, we have updated our guidance metrics to reflect these current market conditions and also narrowed our guidance range for the balance of the year.”

LKQ is now expecting organic revenue growth for parts and services to range from 4.75 percent to 5.75 percent for 2022 compared with its previous guidance of 4.5 percent to 6.5 percent. The company is forecasting diluted earnings per share of $4.14 to $4.22 compared with $4.09 to $4.29, while operating cash flow is forecast to be $1.25 billion rather than $1.3 billion.  

LKQ says its revised outlook is based on current conditions and recent trends and assumes current U.S. federal tax legislation remains unchanged, the prices of scrap and precious metals hold near the September average and no further deterioration related to the Ukraine/Russia conflict occurs.