LKQ Corporation Announces Results for Third Quarter 2024
Revenue of $3.6 billion (a 0.5% increase compared to the same period in 2023)
Diluted EPS2 of $0.73; adjusted diluted EPS1,2 of $0.88
Third quarter operating cash flow of $420 million; free cash flow1 of $341 million
Repurchased $125 million of LKQ shares
$1 billion increase to stock repurchase program announced, raising the aggregate authorization to $4.5 billion through October 25, 2026
Dividend of $0.30 per share approved to be paid in the fourth quarter of 2024
ANTIOCH, Tenn., Oct. 24, 2024 (GLOBE NEWSWIRE) -- LKQ Corporation (NASDAQ:LKQ) today reported third quarter 2024 financial results. "Our third quarter results reflect softer overall volumes, which underscore the importance of executing on our strategic transformation discussed at our September investor day. Our focus on managing our operating expenses is critically important, especially in a period when the top line is facing uncontrollable market headwinds. The agility of the LKQ team was again validated by the growth witnessed in adjusted diluted earnings per share and overall Segment EBITDA margin relative to the prior year. We remain confident in the long-term earnings potential of our businesses as we navigate short-term industry dynamics and a difficult macro-economic environment that will continue to affect the business in the fourth quarter," noted Justin Jude, President and Chief Executive Officer.
Third Quarter 2024 Financial Results
Revenue for the third quarter of 2024 was $3.6 billion, an increase of 0.5% compared to $3.6 billion for the third quarter of 2023. Parts and services organic revenue decreased 2.8% (4.3% decrease on a per day basis), the net impact of acquisitions and divestitures increased revenue by 3.1%, and foreign exchange rates increased revenue by 0.4% year over year, for a total parts and services revenue increase of 0.6%. Other revenue fell 2.2% primarily due to lower commodities prices and volumes relative to the same period in 2023.
Net income2 was $191 million compared to $207 million for the same period of 2023. Diluted earnings per share2 was $0.73 compared to $0.77 for the same period of 2023, a decrease of 5.2%.
On an adjusted basis, net income1,2 was $230 million compared to $231 million for the same period of 2023, a decrease of 0.3%. Adjusted diluted earnings per share1,2 was $0.88 compared to $0.86 for the same period of 2023, an increase of 2.3%.
(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 attributable to LKQ stockholders.
Cash Flow and Balance Sheet
Cash flow from operations and free cash flow1 were $420 million and $341 million, respectively, for the third quarter of 2024. Cash flow from operations and free cash flow1 were $886 million and $661 million, respectively, for the nine months ended September 30, 2024. As of September 30, 2024, the balance sheet reflected total debt of $4.4 billion and total leverage, as defined in our credit facility, was 2.4x EBITDA.
Stock Repurchase and Dividend Programs
During the third quarter of 2024, the Company returned over $200 million to its shareholders by investing approximately $125 million to repurchase 3.0 million shares of its common stock and distributing $79 million in cash dividends. For the nine months ended September 30, 2024, the Company has repurchased 6.5 million shares of its common stock for $280 million, and since initiating the stock repurchase program in late October 2018, the Company has repurchased approximately 62 million shares of its common stock for a total of $2.7 billion through September 30, 2024. As of September 30, 2024, there was $796 million remaining on the authorization.
On October 22, 2024 the Board of Directors authorized a $1 billion increase to the stock repurchase program, raising the aggregate authorization to $4.5 billion and thus making available an aggregate balance of $1.8 billion for potential additional repurchases through October 25, 2026.
On October 22, 2024, the Board of Directors declared a quarterly cash dividend of $0.30 per share of common stock, payable on November 27, 2024, to stockholders of record at the close of business on November 14, 2024.
Other Events
In July 2024, we divested our operations in Poland to Mekonomen, and we closed on the divestiture of our Bosnia operations in September 2024. Terms of the transactions were not disclosed.
2024 Outlook
"The revenue headwinds we experienced across our global operations have been more impactful than projected in our prior guidance, and we currently do not expect these headwinds to abate in the fourth quarter. While our cost actions and synergy realization have boosted profitability, the benefits from these actions are not expected to offset the full impact of the lower revenue expectation in the fourth quarter," stated Rick Galloway, Senior Vice President and Chief Financial Officer. "We are holding our prior cash flow guidance despite the decrease in profitability as we expect to mitigate the impact through working capital and capital expenditure management."
For 2024, management updated the outlook as set forth below:
2024 Previous Full Year Outlook
2024 Updated Full Year Outlook
Organic revenue growth (decline) for parts and services
(1.25%) to 0.25%
(2.75%) to (1.75%)
Diluted EPS2
$2.71 to $2.91
$2.59 to $2.73
Adjusted diluted EPS1,2
$3.50 to $3.70
$3.38 to $3.52
Operating cash flow
$1.20 billion
$1.175 billion
Free cash flow1
$0.85 billion
$0.85 billion
Free cash flow conversion of Adjusted EBITDA1
50% to 60%
50% 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 attributable to LKQ stockholders.
Our outlook for the full year 2024 is based on current conditions, recent trends and our expectations, and assumes a global effective tax rate of 27.0% and the prices of scrap and precious metals hold near the September average. We have applied foreign currency exchange rates near third quarter average levels, including $1.10, $1.29 and $0.73 for the euro, pound sterling and Canadian dollar, respectively, for the balance of the year. Prior guidance issued on July 25, 2024 had foreign currency exchange rate levels of $1.09, $1.27 and $0.73 for the euro, pound sterling and Canadian dollar, respectively. 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 expenses; amortization expense related to acquired intangibles; excess tax benefits and deficiencies from stock-based payments; losses on debt extinguishment; impairment charges; and gains and losses related to acquisitions or divestitures (including changes in the fair value of contingent consideration liabilities).
Non-GAAP Financial Measures
This release contains (and management's presentation on the related investor 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.
Conference Call Details
LKQ will host a conference call and webcast on October 24, 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 conference call, please dial (833) 470-1428. International access to the call may be obtained by dialing (404) 975-4839. The conference call will require you to enter conference ID: 461776.
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: 256126. An online replay of the audio webcast will be available on the Company's website. Both formats of replay will be available through November 8, 2024. 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.
Forward-Looking Statements
Statements and information in this press release and on the related conference call, including our outlook for 2024, as well as remarks by the Chief Executive Officer and other members of management, that are not historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are made pursuant to the "safe harbor" provisions of such Act.
Forward-looking statements include, but are not limited to, statements regarding our outlook, guidance, expectations, beliefs, hopes, intentions and strategies. These statements are subject to a number of risks, uncertainties, assumptions and other factors including those identified below. All forward-looking statements are based on information available to us at the time the statements are made. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
You should not place undue reliance on our forward-looking statements. Actual events or results may differ materially from those expressed or implied in the forward-looking statements. The risks, uncertainties, assumptions and other factors that could cause actual events or results to differ from the events or results predicted or implied by our forward-looking statements include the factors set forth below, and other factors discussed in our filings with the SEC, including those disclosed under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2023 and in our subsequent Quarterly Reports on Form 10-Q. These reports are available at the Investor Relations section on our website (www.lkqcorp.com) and on the SEC's website (www.sec.gov).
These factors include the following (not necessarily in order of importance):
our operating results and financial condition have been and could continue to be adversely affected by the economic, political and social conditions in North America, Europe, Taiwan and other countries, as well as the economic health of vehicle owners and numbers and types of vehicles sold;
we face competition from local, national, international, and internet-based vehicle products providers, and this competition could negatively affect our business;
we rely upon insurance companies and our customers to promote the usage of alternative parts;
intellectual property claims relating to aftermarket products could adversely affect our business;
changes in the demand for our products and the supply of our inventory due to severity of weather and seasonality of weather patterns;
if the number of vehicles involved in accidents or being repaired declines, or the mix of the types of vehicles in the overall vehicle population changes, our business could suffer;
inaccuracies in the data relating to our industry published by independent sources upon which we rely;
fluctuations in the prices of commodities could adversely affect our financial results;
an adverse change in our relationships with our suppliers, disruption to our supply of inventory, or the misconduct, performance failures or negligence of our third party vendors or service providers could increase our expenses, impede our ability to serve our customers, or expose us to liability;
future public health emergencies could have a material adverse impact on our business, results of operation, financial condition and liquidity, the nature and extent of which is highly uncertain;
if we determine that our goodwill or other intangible assets have become impaired, we may incur significant charges to our pretax income;
we could be subject to product liability claims and involved in product recalls;
we may not be able to successfully acquire businesses or integrate acquisitions, and we may not be able to successfully divest certain businesses;
we have a substantial amount of indebtedness, which could have a material adverse effect on our financial condition and our ability to obtain financing in the future and to react to changes in our business;
our senior notes do not impose any limitations on our ability to incur additional debt or protect against certain other types of transactions, and we may incur additional indebtedness under our credit agreement;
our credit agreement imposes operating and financial restrictions on us and our subsidiaries, which may prevent us from capitalizing on business opportunities;
we may not be able to generate sufficient cash to service all of our indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful;
our future capital needs may require that we seek to refinance our debt or obtain additional debt or equity financing, events that could have a negative effect on our business;
our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase significantly;
repayment of our indebtedness is dependent on cash flow generated by our subsidiaries;
a downgrade in our credit rating would impact our cost of capital;
the amount and frequency of our share repurchases and dividend payments may fluctuate;
existing or new laws and regulations, or changes to enforcement or interpretation of existing laws or regulations, may prohibit, restrict or burden the sale of aftermarket, recycled, refurbished or remanufactured products;
we are subject to environmental regulations and incur costs relating to environmental matters;
if we fail to maintain proper and effective internal control over financial reporting in the future, our ability to produce accurate and timely financial statements could be negatively impacted, which could harm our operating results and investor perceptions of our company and as a result may have a material adverse effect on the value of our common stock;
we may be adversely affected by legal, regulatory or market responses to global climate change;
our amended and restated bylaws provide that the courts in the State of Delaware are the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees;
our effective tax rate could materially increase as a consequence of various factors, including U.S. and/or international tax legislation, applicable interpretations and administrative guidance, our mix of earnings by jurisdiction, and U.S. and foreign jurisdictional audits;
if significant tariffs or other restrictions are placed on products or materials we import or any related counter-measures are taken by countries to which we export products, our revenue and results of operations may be materially harmed;
governmental agencies may refuse to grant or renew our operating licenses and permits;
the costs of complying with the requirements of laws pertaining to data privacy and cybersecurity of personal information and the potential liability associated with the failure to comply with such laws could materially adversely affect our business and results of operations;
our employees are important to successfully manage our business and achieve our objectives;
we operate in foreign jurisdictions, which exposes us to foreign exchange and other risks;
our business may be adversely affected by union activities and labor and employment laws;
we rely on information technology and communication systems in critical areas of our operations and a disruption relating to such technology could harm our business;
business interruptions in our distribution centers or other facilities may affect our operations, the function of our computer systems, and/or the availability and distribution of merchandise, which may affect our business;
if we experience problems with our fleet of trucks and other vehicles, our business could be harmed;
we may lose the right to operate at key locations; and
activist investors could cause us to incur substantial costs, divert management's attention, and have an adverse effect on our business.
Contact:Joseph P. Boutross - Vice President, Investor RelationsLKQ Corporation(312)
LKQ CORPORATION AND SUBSIDIARIESUnaudited Condensed Consolidated Statements of Income, with Supplementary Data (In millions, except per share data)
Three Months Ended September 30,
2024
2023
% of Revenue (2)
% of Revenue (2)
$ Change
% Change
Revenue
$
3,584
100.0
%
$
3,568
100.0
%
$
16
0.5
%
Cost of goods sold
2,191
61.2
%
2,178
61.0
%
13
0.6
%
Gross margin
1,393
38.8
%
1,390
39.0
%
3
0.2
%
Selling, general and administrative expenses
971
27.1
%
979
27.5
%
(8
)
(0.8)%
Restructuring and transaction related expenses
20
0.6
%
27
0.8
%
(7
)
(25.9)%
Depreciation and amortization
92
2.5
%
76
2.1
%
16
21.1
%
Operating income
310
8.6
%
308
8.6
%
2
0.6
%
Other expense (income):
Interest expense
66
1.8
%
62
1.7
%
4
6.5
%
Gains on foreign exchange contracts - acquisition related (1)
—
—
%
(3
)
(0.1)%
3
n/m
Interest income and other income, net
(8
)
(0.2)%
(14
)
(0.4)%
6
(42.9)%
Total other expense, net
58
1.6
%
45
1.3
%
13
28.9
%
Income from continuing operations before provision for income taxes
252
7.0
%
263
7.4
%
(11
)
(4.2)%
Provision for income taxes
63
1.7
%
60
1.7
%
3
5.0
%
Equity in earnings of unconsolidated subsidiaries
3
0.1
%
4
0.1
%
(1
)
(25.0)%
Income from continuing operations
192
5.3
%
207
5.8
%
(15
)
(7.2)%
Net income from discontinued operations
—
—
%
1
—
%
(1
)
n/m
Net income
192
5.3
%
208
5.9
%
(16
)
(7.7)%
Less: net income attributable to continuing noncontrolling interest
1
—
%
—
—
%
1
n/m
Net income attributable to LKQ stockholders
$
191
5.3
%
$
208
5.8
%
$
(17
)
(8.2)%
Basic earnings per share:
Income from continuing operations
$
0.73
$
0.77
$
(0.04
)
(5.2)%
Net income from discontinued operations
—
0.01
(0.01
)
n/m
Net income
0.73
0.78
(0.05
)
(6.4)%
Less: net income attributable to continuing noncontrolling interest
—
—
—
—
%
Net income attributable to LKQ stockholders
$
0.73
$
0.78
$
(0.05
)
(6.4)%
Diluted earnings per share:
Income from continuing operations
$
0.73
$
0.77
$
(0.04
)
(5.2)%
Net income from discontinued operations
—
0.01
(0.01
)
n/m
Net income
0.73
0.78
(0.05
)
(6.4)%
Less: net income attributable to continuing noncontrolling interest
—
—
—
—
%
Net income attributable to LKQ stockholders
$
0.73
$
0.78
$
(0.05
)
(6.4)%
Weighted average common shares outstanding:
Basic
262.3
267.8
(5.5
)
(2.1)%
Diluted
262.6
268.4
(5.8
)
(2.2)%
(1) Related to the Uni-Select Inc. ("Uni-Select") acquisition.
(2) The sum of the individual percentage of revenue components may not equal the total due to rounding.
LKQ CORPORATION AND SUBSIDIARIESUnaudited Condensed Consolidated Statements of Income, with Supplementary Data (In millions, except per share data)
Nine Months Ended September 30,
2024
2023
% of Revenue (2)
% of Revenue (2)
$ Change
% Change
Revenue
$
10,998
100.0
%
$
10,365
100.0
%
$
633
6.1
%
Cost of goods sold
6,712
61.0
%
6,189
59.7
%
523
8.5
%
Gross margin
4,286
39.0
%
4,176
40.3
%
110
2.6
%
Selling, general and administrative expenses
2,991
27.2
%
2,848
27.5
%
143
5.0
%
Restructuring and transaction related expenses
99
0.9
%
53
0.5
%
46
86.8
%
Depreciation and amortization
268
2.4
%
195
1.9
%
73
37.4
%
Operating income
928
8.4
%
1,080
10.4
%
(152
)
(14.1)%
Other expense (income):
Interest expense
196
1.8
%
150
1.4
%
46
30.7
%
Gains on foreign exchange contracts - acquisition related (1)
—
—
%
(49
)
(0.5)%
49
n/m
Interest income and other income, net
(17
)
(0.2)%
(34
)
(0.3)%
17
(50.0)%
Total other expense, net
179
1.6
%
67
0.6
%
112
n/m
Income from continuing operations before provision for income taxes
749
6.8
%
1,013
9.8
%
(264
)
(26.1)%
Provision for income taxes
216
2.0
%
263
2.5
%
(47
)
(17.9)%
Equity in earnings of unconsolidated subsidiaries
3
—
%
9
0.1
%
(6
)
(66.7)%
Income from continuing operations
536
4.9
%
759
7.3
%
(223
)
(29.4)%
Net income from discontinued operations
—
—
%
1
—
%
(1
)
n/m
Net income
536
4.9
%
760
7.3
%
(224
)
(29.5)%
Less: net income attributable to continuing noncontrolling interest
2
—
%
1
—
%
1
n/m
Net income attributable to LKQ stockholders
$
534
4.9
%
$
759
7.3
%
$
(225
