LKQ Corp. has 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 income for the first quarter of 2023 was $270 million as compared to $269 million for the same period in 2022. Diluted earnings per share 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 income 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%.
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 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 CFO, 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%|
|Diluted EPS2||$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%|
|(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.|