LKQ ended 2023 with revenue increases, in part because of an uptick in alternative part usage (APU) driven by State Farm’s decision to end a suspension on non-OEM parts and a positive impact from the United Auto Workers’ strike, company officials say.

The company closed its 2023 Q4 with a $3.5 billing revenue or a 16% increase compared to the same time in 2022, a company press release states. 

Parts and services organic revenue increased by 2.8% for Q4. Its net income for Q4 was $184 million, down from $193 million in 2022. 

“Organic revenue for parts and services for our North America segment increased 5.3% compared to the fourth quarter of 2022,” Nick Zarcone, LKQ CEO, said during an earnings call. “We continue to perform well in North America, especially when you consider that according to CCC, collision and liability-related auto claims were down 7.9% year-over-year.” 

He said the outperformance in Q4 is partly due to state farm’s decision and the UAW strike.

Revenue for 2023 was $13.9 billion, an 8.4% increase from $12.8 billion in 2022. The company’s parts and service organic revenue also increased 4.7%, the release said. 

LKQ’s net income for the full year was $0.94 billion compared to $1.14 billion in 2022. 

“As the supply chain recovered and fill rates increased, APU trended in our favor, particularly when looking at vehicles in our sweet spot,” Zarcone said. “While total APU was about 36% in 2023, when looking at vehicles four to six old, it was approximately 40% and for vehicles more than seven years old, it was 51.6%.” 

He said total loss rates are being driven by vehicles 10 years and older. 

“For perspective, today, the average model year of a vehicle being repaired in a collision bay is a 2017 model, with the total loss rate for that cohort of vehicles being just 18.4% in 2023,” Zarcone said. “That further supports our thesis that total loss rates will not materially impact our growth. Industry experts believe the total loss rate will edge down a bit in 2024.” 

Zarcone said soft precious metal prices will likely continue to impact profit in 2024. The company expects minimal impact from the Red Sea crisis, which has delayed some shipping of goods globally. 

“In Europe, our procurement team is seeing some disruption with the shipping lines having to divert their vessels via the Cape of Good Hope around South Africa increasing lead times and freight costs,” Zarcone said. “The freight cost is expected to soften once the Chinese New Year four weeks from mid-January ends.”

In 2023, LKQ purchased all of Uni-Select’s outstanding shares and sold GSF Car Parts. 

“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,” LKQ’s press release says. 

“Importantly, I want to again emphasize that Uni-Select was a unique opportunity that will enable us to widen the moat around our North American business and capitalize on revenue synergies, both in the paint and the hard part side, that weren’t there prior to this acquisition,” Jude said during the earnings call. 

Justin Jude also was announced to succeed Dominick Zarcone as the company’s next president and CEO. He serves as executive vice president and chief operation officer until Zarcone officially retires from the position in July. 

Jude also said that in the long term, the company will continue to invest in recycled and remanufactured EV battery processes in North America. 

“We are a natural fit to become the market leader in this growing space,” Jude said. 

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