LKQ (LKQ) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue rose 7.6% year-over-year to $3.71 billion, driven by acquisitions, but organic parts and services revenue declined 2.1% and net income fell 34% to $185 million due to lower repairable claims and macroeconomic challenges.

• Adjusted diluted EPS for Q2 was $0.98, down $0.11 year-over-year; reported diluted EPS was $0.70, down 33.3%.

• Management prioritized operational excellence, cost controls, and shareholder value, pausing large acquisitions and focusing on divestitures and restructuring.

• Over $200 million was returned to shareholders in Q2 via $125 million in share repurchases and $80 million in dividends.

• CEO transition: Justin Jude succeeded Nick Zarcone; Board expanded with Andrew Clarke.

Financial highlights

• Q2 2024 revenue was $3.71 billion, up 7.6% year-over-year, with organic revenue down 2.1% and segment EBITDA margin at 13.0%.

• Net income for Q2 was $185 million ($0.70 per diluted share), down from $281 million in Q2 2023; operating income fell to $329 million.

• Free cash flow for Q2 was $133 million, with year-to-date free cash flow at $320 million.

• Gross margin declined to 38.8% from 41.0% in Q2 2023, impacted by product mix and inflation.

• Total debt as of June 30, 2024, was $4.3 billion, with leverage at 2.3x EBITDA.

Outlook and guidance

• 2024 organic parts and services revenue growth outlook revised to (1.25%) to 0.25%, down from prior 2.5%–4.5%.

• Adjusted diluted EPS guidance for 2024 lowered to $3.50–$3.70; reported diluted EPS to $2.71–$2.91.

• Free cash flow target for 2024 is $850 million, with operating cash flow outlook at $1.2 billion.

• Free cash flow conversion of adjusted EBITDA remains targeted at 50%–60%.

• Guidance assumes stable commodity prices, FX rates near Q2 averages, and no further geopolitical deterioration.