Formatted Report

20-Feb-2025

LKQ Corp. (LKQ) Q4 2024 Earnings Call

1-877-FACTSET www.callstreet.com

LKQ Corp. ( LKQ) Q4 2024 Earnings Call

Formatted Report 20-Feb-2025

CORPORATE PARTICIPANTS

Joseph P. Boutross

Rick Galloway

Justin L. Jude .....................................................................................................................................................................................................................................................................

OTHER PARTICIPANTS

Craig R. Kennison

Craig R. Kennison Brian Joseph Butler Jash Patwa Gary Frank Prestopino Scott L. Stember Bret Jordan

Jash Patwa Gary Frank Prestopino Scott L. Stember Bret Jordan .....................................................................................................................................................................................................................................................................

MANAGEMENT DISCUSSION SECTION

Joseph P. Boutross

GAAP AND NON-GAAP FINANCIAL MEASURES...........................................................................................................................

During this call, we will present both GAAP and non-GAAP financial measures A reconciliation of GAAP to nonpresentation

.....................................................................................................................................................................................................................................................................

Justin L. Jude

BUSINESS HIGHLIGHTS ..............................................................................................................................................................................................

Opening Remarks

As many of you know, I took the CEO positi and continues to be an honor to lead the LKQ team, and to maintain a culture rooted in humility Our team leads by influence, not authority and ego
We take action, embrace change, confront failure head on, and always strive to make the right decisions for the company, our employees, our communities, and our shareholders In 2024, we faced tough challenges

1-877-FACTSET www.callstreet.com

LKQ Corp. ( LKQ) Q4 2024 Earnings Call

Formatted Report 20-Feb-2025

Despite financial setbacks, our team surpassed expectations in navigating the most difficult market

Operational Excellence

Before I address Q4, I would like to reflect on what LKQ accomplished in 2024
With our commitment to operational excellence and a sound balance sheet, we focused on the things we could control, and in those areas we were very pleased with our performance
With our goal of returning cash to shareholders, we delivered $678mm of capital with $360mm in share repurchase, and $318mm coming from dividends
And our ongoing strategy to simplify the portfolio, led to divesting five businesses, primarily in Europe, which represented $153mm of trailing 12-months revenue with little to no margin

OUTLOOK ......................................................................................................................................................................................................................................

Our board of directors continued their active and ongoing board refreshment to ensure we had the right mix of skills and experiences to provide effective oversight and g
Our new board members have extensive experience in business strategy and operations further enhancing the depth, knowledge, and skillsets necessary to drive long-term value for our shareholders The integration muscle of North America team was again validated in 2024, with the consolidation of FinishMaster into the LKQ network by closing 129 of their 151 locations
Not only did the North American team deliver the integrations faster than expected, but with a higher level of synergies than originally planned

Mega Yard Expansion Project

We finalized our mega yard expansion project in Crystal River, Florida and in December we began operating on this expanded acreage
We also purchased land and began the construction of two mega yards, one in Illinois and one in Washington
We expect these new yards to open in 2026
These mega yard expansions will allow us to further our growth on recycled parts while driving more productivity

Key Leadership Changes

Our European segment made several key leadership changes to support a more agile focus on change management
We developed a more consistent culture across our global footprint and combining the intellectual capital of our two non-discretionary segments, North America and Europe
This shared expertise will give us many benefits, such as our overall procurement, remanufacturing product development, hard parts growth in North America, opportunities that will come from electrification and a multitude of financial benefits, including better financing and a lower cost of capital

1-877-FACTSET www.callstreet.com

LKQ Corp. ( LKQ) Q4 2024 Earnings Call

Formatted Report 20-Feb-2025

Capital Allocation

I will now shift to the quarter

At recent trading levels, we believe repurchasing our shares is a good use of our capital We were active in the quarter, repurchasing roughly 2mm shares for about $80mm
At the end of the quarter, we have approximately $1.7B remaining on our repurchase authorization
The board declared a quarterly cash dividend of $0.30 per share in October that was paid in November totaling $78mm
On February 18, the board declared a quarterly cash dividend of $0.30 per share, payable in March of 2025

North America

REVENUE

Moving to our segments, the North American revenue decline of 8.5% per day was larger than what we reported in the first three quarters of 2024
But when you back out the non-recurring benefit of the UAW strikes in 2023, and the storm impacts across the US in Q4, the North American decline in collision parts revenue was roughly 4% compared to repairable claims decreasing almost 6% in the quarter
The revenue decline was another period of outperformance for North American operations on a relative basis
That said, we are seeing some positive trends as we enter 2025, including favorable, inclement weather and ongoing dynamics in the auto insurance market that combined could benefit our North American collision business

INSURANCE COST

The average cost of auto insurance in the US increased over 20% in 2024, more than any other category of household expenses
We expect insurance cost to moderate in 2025, and historically, this will lead to insurance carriers looking to take cost out of their network, and the value proposition of our alternative parts offering is one area they can quickly flex, which would be a favorable trend for APU.

Europe

ORGANIC REVENUE

Moving on to Europe

Our organic revenue declined 20BPS on a per day basis for the quarter, which was essentially flat to Q3 Certain markets showed single-digit growth, while others declined in a similar range
I am particularly pleased with the organic growth in Germany, which has moved past the labor issues from 2023 and early 2024 and reported healthy sequential and y-over-y growth
Competition is again contributing to the challenging conditions in certain markets consistent with the last quarter, as some of the smaller players aggressively push price

1-877-FACTSET www.callstreet.com

LKQ Corp. ( LKQ) Q4 2024 Earnings Call

Formatted Report 20-Feb-2025

EBITDA MARGIN

Rick will cover the majority of margin related details, but I wanted to highlight Europe segment EBITDA at 10.1% in the quarter
This performance is the highest Q4 segment EBITDA margin achieved in Europe, the third straight quarter with a double-digit margin and a full year with the highest level of segment EBITDA dollars on record
With leadership aligned with our margin objectives, we are confident in our ability to deliver sustainable annual double-digit EBITDA margins in Europe
A tremendous performance in progress by the Europe team despite a challenging operating environment

SKU RATIONALIZATION INITIATIVE

Related to our SKU rationalization initiative in Europe, I am pleased to report that we hit our expectations of reviewing 50% of our product brands by year-end 2024
And we plan to complete the review of an additional 30% by year-end of 2025, with completion by the end of 2026
We started with roughly 750,000 stocking SKUs across Europe in scope for this project
By the end of 2024, we had decreased our stocking of over 30,000 SKUs, and we expect to decrease another 40,000 more in 2025, ultimately hitting our goal of stocking 600,000 SKUs by the end of 2027 This project will bring benefits on the procurement side, payables, and more importantly, simplify our operations to allow for a more pan-European distribution network

PRIVATE LABEL PENETRATION

As we will keep pushing for additional private label penetration, as we recognize that the European vehicle park will continue to age, and this has been further accelerated post the pandemic, with a combination of supply chain constraints and the transition of EV being slower than anticipated We currently have 22% penetration of private label parts, with the long-term initiative to grow that number to 30% given the gross margin benefits that come from private label

Category Management Portfolio

With this in mind, we do believe there are growth and margin enhancement opportunities in our category management portfolio
And the increase in our private label offering is already included in our targeted 600,000 stocking SKU number

We plan to update you on our progress with these SKU targets on a quarterly basis

ORGANIC REVENUE AND VEHICLE SALES

Specialty posted organic revenue down 7.3% on a per day basis, but was a sequential improvement from Q3
The RV Industry Association believes the RV market is poised for growth in 2025, with dealer inventories at higher levels, ongoing strong consumer interest in RV ownership, and interest rates that are expected to ease
Additionally, total US light vehicle sales increased 7.1% in Q4 with pickups and SUVs, the most important category for us, up 14.8% and 4.9% respectively

1-877-FACTSET www.callstreet.com

LKQ Corp. ( LKQ) Q4 2024 Earnings Call

Formatted Report 20-Feb-2025

So not out of the woods, we are starting to see some positive signs in our Specialty segment as we entered 2025

Tariffs

Lastly on tariffs

The tariff news is extremely fluid with the current administration, validated by the quick shift of halting the Mexico and Canada tariffs less than 48 hours after they were implemented
Our team is actively monitoring the various announcements and the potential impact on our business As the tariff situation stabilizes and things unfold, we will keep the investment community apprised accordingly
As mentioned in the past, wholesale North America procures virtually zero inventory from China, with most coming from Taiwan
And as you know, our salvage product is all domestic
Specialty is the only segment with exposure to China, approximately 15%, and their spend is highly diversified with some products being procured here in the US.

Rick Galloway

FINANCIAL HIGHLIGHTS .........................................................................................................................................................................................

Accomplishments

Before I dive into specifics on Q4, I would also like to cover some of our accomplishments throughout 2024
Despite the macroeconomic challenges, as Justin mentioned, we continued to focus on those things within our control
We accelerated the integration of FinishMaster, completing that exercise in Q1 and helping us to increase annualized Uni-Select synergies by the end of 2026 to $65mm

Restructuring Plan and Cost Structure

We initiated the 2024 restructuring plan with the objectives of exiting businesses and markets that do not align with our strategic objectives, and executing on opportunities to streamline operations and our logistics models
In Europe, that resulted in exiting certain operations and increasing the efficiency of our logistics footprint, resulting in a reduction in facilities and overhead costs
In North America, we focused on aligning our cost structure with demand by rationalizing overhead costs to most efficiently serve our customer base
While these actions were challenging, they were necessary to tackle and align with the strategic imperatives we discussed at Investor Day, including simplification of the business portfolio, improving our lean operating model globally, and increasing our margins in order to maximize total shareholder returns We are confident the actions we have taken will drive our success in 2025 and beyond

1-877-FACTSET www.callstreet.com

LKQ Corp. ( LKQ) Q4 2024 Earnings Call

Formatted Report 20-Feb-2025

Q4 Results

EBITDA

Now on to Q4

Overall, Q4 results exceeded our expectations and guidance
and percentage, despite challenging macroeconomic conditions
Self Service performed in line with expectations with another quarter of y-over-y improvement in EBITDA dollars and percentage
North America improved its EBITDA margin by 50BPS due to a one-time legal settlement, despite revenue losses from a brief cyber incident in Canada

DILUTED EPS

Turning now to Q4 consolidated results

Despite challenges in North America and Specialty and the stronger US dollar affecting Europe, our fourth quarter performance exceeded expectations due to strong European results and some favorable non-recurring items
For the full year, we reported diluted EPS of $2.62 and adjusted diluted EPS of $3.48, the latter of which was toward the higher end of the guidance range we discussed back in October, but a decrease of $0.35 per share compared to 2023
The $0.35 per share decline in adjusted EPS was primarily influenced by a combined $0.30 per share impact from interest and taxes, with an additional $0.13 decrease attributed to commodity prices and foreign exchange rates, despite the macroeconomic challenges and significant inflationary pressures on overhead and cost of goods sold
Our efforts in simplification and strategic capital allocation have resulted in a positive contribution of $0.08 for the full year
For Q4, we reported diluted EPS of $0.60 and adjusted diluted EPS of $0.80, $0.04 decrease from the prior year figure

FAVORABLE ONE-TIME DISCRETE TAX ITEMS

As you may recall, our Q4 2023 results included some favorable one-time discrete tax items which were not repeated in Q4 of this year, resulting in $0.09 y-over-y decrease from taxes
In addition, lower FX rates and unfavorable metals price movements contributed to a further $0.02 decline On the positive side, lower share counts due to our ongoing share repurchase program improved adjusted EPS by approximately $0.03
The remaining $0.04 y-over-y improvement reflected the strong performance by Europe and net favorable non-recurring items in North America

North America

EBITDA MARGIN AND ORGANIC REVENUE

Now for segment results

Going to slide 7
North America posted a segment EBITDA margin of 16.8%, a 50 basis point increase relative to last year

1-877-FACTSET www.callstreet.com

LKQ Corp. ( LKQ) Q4 2024 Earnings Call

Formatted Report 20-Feb-2025

For the full year, we reported a segment EBITDA margin of 16.6%, slightly above the expectations we discussed last quarter, due to a favorable non-recurring legal settlement that was partially offset by our Canadian cyber incident
The decline in organic revenue, especially within our aftermarket business due to reduced repairable claim counts, adversely impacted margins during the quarter

GROSS MARGINS AND OVERHEAD EXPENSES

This also included a related mix effect on gross margins, as aftermarket collision revenue typically yields higher margins compared to our other wholesale lines
Salvage margins were also down in the quarter, reflecting unfavorable movement in revenue, vehicle cost trends, and commodity prices in 2024
On the other hand, overhead expenses improved 270BPS in North America, reflecting favorability from the onetime legal settlement and lower personnel cost primarily related to lower incentive compensation The Uni-Select synergies and productivity initiatives largely offset significant inflationary pressures and the leverage effect of the organic revenue decline
While we expect headwinds on repairable claims and salvage margins to continue in 2025 due to the
the low-16s consistent with 2024 after adjusting for the non-recurring items

Europe

Looking at slide 8

Europe reported a segment EBITDA margin of 10.1%, a 180 basis point improvement over last year and its third quarter in a row with double-digit EBITDA margins
The y-over-y improvement consists of 110BPS related to non-recurring charges in the prior year, while the remaining 70BPS relates to the ongoing efforts to simplify the operations and portfolio, as well as productivity efforts that more than offset inflationary pressures
As I stated on our last call, we expected EBITDA margins in Europe for the full year to be in the mid to high-9s, which is where we landed
upon our recent gains and expect to deliver improvements with EBITDA margins expected to be doubledigits in 2025
decline in organic revenue and resulting leverage effect on overhead costs
Demand softness in the light vehicle and RV product lines and competitive pricing pressures remain challenges for the business
For the full year segment EBITDA margins were 6.8% below our expectations, but largely related to the revenue softness
Early signs indicate some of our markets have stabilized
However, a rapid rebound in 2025 is unlikely due to inconsistent recovery
Thus, we expect segment EBITDA margins to improve to around 7% to 8% for the full year 2025
Self Service generated an 8.3% segment EBITDA margin in Q4, which is a 230 basis point improvement from last year
In dollar terms, segment EBITDA increased by $4mm

1-877-FACTSET www.callstreet.com

LKQ Corp. ( LKQ) Q4 2024 Earnings Call

Formatted Report 20-Feb-2025

Disciplined vehicle procurement, combined with overhead cost controls, overcame unfavorable movements in scrap steel prices, and helped to drive the third consecutive quarterly improvement and y- over-y profitability
BALANCE SHEET..................................................................................................................................................................................................................

Cash Flows, Share Repurchases and Dividends

Shifting to cash flows on the balance sheet
We produced $149mm in FCF during the quarter, bringing our YTD total to $810mm
Though slightly below our expectations, we invested in North American inventory, anticipating possible Q1 port strikes and tariffs
We remain dedicated to delivering value to our shareholders, allocating over $150mm through $80mm in share repurchases and $78mm in dividends
As presented during our Investor Day, we committed to allocating at least 50% of our FCF towards returning value to our shareholders
We are pleased to announce that we exceeded this commitment in 2024
As you can see on slide 10, for the full year, we deployed $678mm for share repurchases and dividends, representing over 80% of our FCF
We also invested approximately $3mm in two tuck-in acquisitions in Q4, both in North America, including one in Canada and one in the US.
For the year, we spent approximately $50mm on acquiring 10 highly accretive tuck-in businesses

Debt, EBITDA and Leverage Ratio

We paid down approximately $62mm in outstanding debt in the quarter
As of December 31, we had total debt of $4.2B with a total leverage ratio of 2.3 times EBITDA, an improvement from the prior quarter
We remain committed to maintaining a manageable debt level in our investment grade rating
As of December 31, 2024, our current maturities were $38mm, but we have $500mm term loan coming due in Q1 2026

Capital Structure

As normal practice, we actively manage our capital structure and we are currently evaluating our options to determine the optimal solution to address our pending 2026 term loan maturity
Our effective interest rate was 5.3% at the end of Q4, slightly down from Q3 as a result of recently lowered benchmark rates
We have $1.7B in variable rate debt of which $700mm has been fixed with variable interest rate swaps, which effectively provides a fixed rate on over 75% of our debt
GUIDANCE....................................................................................................................................................................................................................................
I will close with our thoughts on 2025 guidance as shown on slide 11
Our guidance is based on current market conditions, recent trends and assumes scrap and precious metal prices hold near fourth quarter prices and no material impact from tariffs

1-877-FACTSET www.callstreet.com

LKQ Corp. ( LKQ) Q4 2024 Earnings Call

Formatted Report 20-Feb-2025

Foreign Exchange, Tax Rate and Revenue

On foreign exchange, our guidance includes recent rates, including the euro at $1.04, the pound sterling at $1.25, and the Canadian dollar at $0.70
The global tax rate is at 27.0% which is comparable to our 2024 rate
We expect organic parts and services revenue growth between 0% and 2%
Please note we have one less selling day in 2025
ze the full benefit of some of the favorable trends
Justin mentioned until later in the year
We believe Europe is poised to perform a bit better than they did from a revenue perspective in 2025, despite the ongoing challenging macroeconomic backdrop across the continent
For Specialty, we expect low single-digits for organic revenue growth given the macroeconomic indicators we are seeing
As a result of our revenue growth expectations, we are estimating adjusted diluted EPS to be in the range of $3.40 to $3.70

EPS, FCF, Working Capital and CapEx

As you can see on slide 12, our EPS guidance anticipates headwinds from lower foreign exchange rates, depreciation and amortization, as well as the one-time items discussed earlier, partially offset by benefits from metals prices, interest and taxes
We are focusing our efforts on those items we can control and anticipate more than offsetting the net negative impact of those items through improved operating results, which reflect the carryover benefit from the simplification and productivity measures we took in 2024 and the continued benefits from our disciplined focus on capital allocation
FCF is expected to be in the range of $750mm to $900mm
We will continue to balance our trade working capital and CapEx needs to fund our strategic growth objectives for 2025 and beyond
..................................................................................................................................................................................................................................................................... Justin L. Jude CLOSING REMARKS ..........................................................................................................................................................................................................
As we enter 2025, I want to reaffirm my strategic priorities for our global enterprise as we drive sustained, long-term total shareholder returns
First, make sure we are growing above the market
Next, simplify
Simplify our operations by ensuring lean thinking is in everything we do to enhance our margins, and simplify our portfolio across our markets and businesses to
Improve FCF by growing profitably and strengthening our balance sheet
Invest in growth organically and via small, highly synergistic tuck-ins and with a continued moratorium on any large platform acquisitions
And focus our capital allocation strategy around returning capital to our shareholders through a combination of share repurchases and dividends

1-877-FACTSET www.callstreet.com

LKQ Corp. ( LKQ) Q4 2024 Earnings Call

Formatted Report 20-Feb-2025

With these priorities in place, coupled with our industry leading teams, we are well-positioned to navigate the challenges ahead and deliver strong operating results for all of our stakeholders
As always, I want to thank the 47,000-plus dedicated team members of LKQ for their commitment to advancing our business each day and driving our mission forward no matter the obstacles Time and time again, our team has shown these challenges are opportunities for growth, for both themselves and the overall organization

QUESTION AND ANSWER SECTION

Craig R. Kennison

Q

It really goes to the SKU rationalization project in Europe. I think the concern had been that by reducing brands, ctually not losing revenue. Just curious if you can comment on any revenue impact from that decision. And then on a related note, if you could comment on, I guess, the beneficial terms that you earned by consolidating your business with the remaining vendors. Thank you.

Justin L. Jude

to three-year project. Because what our biggest concern to your point is making sure that increasing the actual ability to say yes by applications. Meaning, when a customer has a specific year, make and to be able to say yes, regardless of the brand.

different market where prices are a little bit more, customers are a little bit more conscious on price. So, so far, we n any revenue concerns. The group that we have working on this, I mean, it has operations, sales

to see a slight improvement in terms, better

Jash Patwa

levels in 2022 and 2023 that are expected to reduce the population of vehicles in the younger age cohort of the vehicle of the company sweet spot of 3- to 10-yearimpact on market trends over the next couple years? Any color you could share around the distribution of repairable claims across vehicle age buckets, which would be meaningful to gauge the impact here? .....................................................................................................................................................................................................................................................................

1-877-FACTSET www.callstreet.com

LKQ Corp. ( LKQ) Q4 2024 Earnings Call

Formatted Report 20-Feb-2025

Justin L. Jude

We obviously monitor ne

collision side, the product lines we sell or on the mechanical piece. Obviously, we sell a lot of engines and

ly is going to depend on

Rick Galloway

And Jash, our sweet spot is a little bit closer to 3 to 12 ye about. The good news is we have started to see recently some Mannheim information that indicates used car .....................................................................................................................................................................................................................................................................

Jash Patwa

differentiated from some of your local peers. In that potential tariff, could provide the company a transitory competitiv trajectory in comparison to the industry and its economic shocks would be super helpful. Thank you.

Justin L. Jude

Yeah. Obviously, your question on tariffs, the headline is all about Mexico, Canada and China. Obviously, there may be more to come. Just from a risk standpoint, to make sure you guys understand, if we quantify what we import into the US from those three

And overall, the devil is in the details. If there are tariffs that impact our compe

Scott L. Stember

Can you guys talk about the mega yards, some early returns and some KPIs that we could be looking for in the future to really gauge how things are progressing on that front? .....................................................................................................................................................................................................................................................................

Justin L. Jude

across North America. Some of those are landlocked where we c gives us the ability to consolidate potentially two or three local yards into that mega yard. But it also gives us new initiative for us. So, we see great returns on those long-term baked into our model for a couple reasons. One,

1-877-FACTSET www.callstreet.com

LKQ Corp. ( LKQ) Q4 2024 Earnings Call

Formatted Report 20-Feb-2025

onsolidating three yards into one big one, we can hold those vehicles longer, giving the opportunity to sell more parts off of that vehicle.

Scott, if you think about, we buy a car for $2,000, our cost of goods is $2,000 no matter what. So, the longer we can hold that vehicle, creates more opportunities to sell off of those, sell off that vehicle. So, we see great returns .....................................................................................................................................................................................................................................................................

Scott L. Stember

And then there was some commentary about North America, some positive things going on. I guess weather was one of them. Can you talk about that? And then just following up on that, just for a cadence of, for guidance, if we were looking at the midpoint, how should we look at the recovery throughout the year? .....................................................................................................................................................................................................................................................................

Justin L. Jude

starting to increase. So, with the large increases from insurance premiums with the used car prices dropping, that

passed the larger increases, but for the most part, majority of states increased, those premiums are allowed the

And Rick, can kind of talk about how we have that baked into the guidance.

Rick Galloway

about North Americ

of that to happen through the year. This year it will be down a little bit in H1, and then it will be positive y-over-y in

organic numbers.

Brian Joseph Butler

Just first one first one, just, maybe some additional color on the portfolio review from a strategic perspective. I know this was kind of started back in September. Maybe just where we are on that, and the timeline you think going forward from here when there may be some decision opportunities to be made. .....................................................................................................................................................................................................................................................................

Justin L. Jude

1-877-FACTSET www.callstreet.com

Formatted Report 20-Feb-2025

LKQ Corp. ( LKQ) Q4 2024 Earnings Call

Just to be clear, it started before September, our review of the portfolio. It is not done. It is still ongoing. Obviously, in 2024, I mentioned we did divest five businesses primarily in Europe, totaling $153mm of revenue any time you want to exit a business, a mar expect more.

Brian Joseph Butler

Okay. And then a follow-up on the margin opportunity in Europe. When you think longerdouble-digit which has been great success. How should this improve, I guess, beyond 2025? Is there an opportunity where you continue to eke out some margin improvements or do you really reach a level somewhere down the road here that is it 10.5% or 11%? ..................................................................................................................................................................................................................................................................... Rick Galloway A

Justin and I are very, very bullish about where we think that the market can go and the business can go in our ny of our competitors. But we think that number can continue to grow for the next several years. What we talked about is about 30 to 40BPS each year for grow over So, I think double-digits is solid for 2025 and it continues to grow pretty nicely for the next several years.

Gary Frank Prestopino

I just want to get some clarification here. There was in on the margins in North America and Europe. You said there was a onetime legal gain nonrecurring in the quarter. How much of that contributed to the 50-basis-point increase in adjusted EBITDA margin? ..................................................................................................................................................................................................................................................................... Rick Galloway A

ended up coming around 16.6% for the full year, about 50BPS of that we would consider non-recurring. Bring us down to full year number around 16.1%. .....................................................................................................................................................................................................................................................................

50BPS of that we would consider non-recurring. Bring us down to full year number around 16.1%.

Gary Frank Prestopino

Okay. And then you did outline, there was a 101-basis-point impact on Europe in Q4 of last year? Was that the tax issue in Italy? .....................................................................................................................................................................................................................................................................

Rick Galloway

1-877-FACTSET www.callstreet.com

LKQ Corp. ( LKQ) Q4 2024 Earnings Call

Formatted Report 20-Feb-2025

No. There was a couple of items in 2023 that we had some severance costs and some other non-recurring items that showed up, the VAT issue that we had, that some of those is pretty much 110BPS, it was about 110BPS of non-50 between the portfolio actions and the good work the team is doing on simplifying the operations.

Gary Frank Prestopino

on the EV side, is it mostly collision repair for body parts? Or are you seeing other areas where you can take salvage off these EVs and put them into the recycled channel in terms of parts? .....................................................................................................................................................................................................................................................................

Justin L. Jude

Yeah. On the EV side, there are a couple different initiatives that are underway. First, if you remember, we got into the recycling or remanufacturing of hybrid batteries. So, think of nickel metal hydride and then obviously the technology migrated over to lithium-ion. We are also investing in the remanufacturing of full battery electric

parts that we can sell off of that. Most of the batteries today are getting recycled and shredded and getting fed percentage.

the opportunity comes out, it is an opportunity and not a headwind for us.

Gary Frank Prestopino

Okay. And then lastly, if I can just sneak one more in. You mentioned something about the collision claims, seeing claims were down a certain amount in Q4, but there was a couple of puts and takes around that. Could you just go over that, 6% were repairable claims? You mentioned there were some puts and takes regarding your business? .....................................................................................................................................................................................................................................................................

Justin L. Jude

Specific to claims, yes, they were down roughly 6% for Q4. Well, I guess, we were kind of talking about on some tha are gone. We just anticipate that those are slowing down. And those were the used car pricing that was on a ing to see that flatten out and go positive. In addition, the large increase in insurance rates that were done in 2024 are kind of anniversarying out. So, that should moderate and hopefully as Rick mentioned in this. .....................................................................................................................................................................................................................................................................

Rick Galloway

1-877-FACTSET www.callstreet.com

LKQ Corp. ( LKQ) Q4 2024 Earnings Call

Formatted Report 20-Feb-2025

he was talking about for volumes y-overt forget the UAW strike. We got a benefit in 2023 on the volumes. So, when he was talking about some of the puts and takes, he was saying, look, that the y-over-y, we would have a down hit related to the UAW strike and then we also had the hurricanes that a couple of items that impacted revenues y-over-y as well.

Bret Jordan

I had a follow-up on the CCC questions.

Rick Galloway

Hey, good morning.

Bret Jordan

Could you give us the total loss rate in Q4? Is that y-over-y change moderating?

Justin L. Jude

slightly did go up in 2024 as once again, primarily in our opinion driven by the used car pricing. But with the used car pricing starting to moderate and increase that should alter the total loss rates going forward. In our long-term model, Bret, we have a moderate -term thesis that the collision business is still good for us long-term.

Bret Jordan

Okay. And I had a question on the private label program in Europe. I think you talked about percentage of SKUs. What is it as a percent of revenues? And could you maybe give us some color as to what the gross margin difference is in private label vs. your national brand product?

Justin L. Jude

Yeah. The percentage of revenue is circa 20%. We see the opportunity to grow that to 30%, we have some markets today that are in that 30%, if not a little bit more than that, Bret. Historically, we think I mean, historically seen a 25% increase in the margin. So, apply 25% factor to the actual gross margin percentage, meaning if increase in the actual percentage rate.

Bret Jordan

Okay. And this is like a housekeeping number, I guess, if tariffs, and who knows what happens with tariffs. But when you look at the OE product sold in North America collision, what percentage, you said less than 5% of your product is coming out of Canada, Mexico, China, what percentage of the OE parts are coming out of Mexico or Canada?

1-877-FACTSET www.callstreet.com

LKQ Corp. ( LKQ) Q4 2024 Earnings Call

Formatted Report 20-Feb-2025

Justin L. Jude

A

they produce a vehicle, they mark on there or fenders. There is definitely they produce more parts in Mexico or Canada or China than what we do percentagebenefit

Disclaimer

The information herein is based on sources we believe to be reliable but is not guaranteed by us and does not purport to be a complete or error-free statement or summary of the available data. As such, we do not warrant, endorse or guarantee the completeness, accuracy, integrity, or timeliness of the information. You must evaluate, and bear all risks associated with, the use of any information provided hereunder, including any reliance on the accuracy, completeness, safety or usefulness of such information. This information is not intended to be used as the primary basis of investment decisions. It should not be construed as advice designed to meet the particular investment needs of any investor. This report is published solely for information purposes, and is not to be construed as financial or other advice or as an offer to sell or the solicitation of an offer to buy any security in any state where such an offer or solicitation would be illegal. Any information expressed herein on this date is subject to change without notice. Any opinions or assertions contained in this information do not represent the opinions or beliefs of FactSet CallStreet, LLC. FactSet CallStreet, LLC, or one or more of its employees, including the writer of this report, may have a position in any of the securities discussed herein.

THE INFORMATION PROVIDED TO YOU HEREUNDER IS PROVIDED "AS IS," AND TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, FactSet CallStreet, LLC AND ITS LICENSORS, BUSINESS ASSOCIATES AND SUPPLIERS DISCLAIM ALL WARRANTIES WITH RESPECT TO THE SAME, EXPRESS, IMPLIED AND STATUTORY, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, ACCURACY, COMPLETENESS, AND NON-INFRINGEMENT. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, NEITHER FACTSET CALLSTREET, LLC NOR ITS OFFICERS, MEMBERS, DIRECTORS, PARTNERS, AFFILIATES, BUSINESS ASSOCIATES, LICENSORS OR SUPPLIERS WILL BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, INCLUDING WITHOUT LIMITATION DAMAGES FOR LOST PROFITS OR REVENUES, GOODWILL, WORK STOPPAGE, SECURITY BREACHES, VIRUSES, COMPUTER FAILURE OR MALFUNCTION, USE, DATA OR OTHER INTANGIBLE LOSSES OR COMMERCIAL DAMAGES, EVEN IF ANY OF SUCH PARTIES IS ADVISED OF THE POSSIBILITY OF SUCH LOSSES, ARISING UNDER OR IN CONNECTION WITH THE INFORMATION PROVIDED HEREIN OR ANY OTHER SUBJECT MATTER HEREOF.

The contents and appearance of this report are Copyrighted FactSet CallStreet, LLC 2025 CallStreet and FactSet CallStreet, LLC are trademarks and service marks of FactSet CallStreet, LLC. All other trademarks mentioned are trademarks of their respective companies. All rights reserved.

1-877-FACTSET www.callstreet.com

AI assistant

LKQ CORP — Call Transcript 2025

30750_rns_2025-05-27_2a5b9047-98bc-413a-bd49-acb2ad66a801.pdf

20-Feb-2025

CORPORATE PARTICIPANTS

OTHER PARTICIPANTS

MANAGEMENT DISCUSSION SECTION

Joseph P. Boutross

Justin L. Jude

Operational Excellence

Mega Yard Expansion Project

Key Leadership Changes

Capital Allocation

North America

REVENUE

INSURANCE COST

Europe

ORGANIC REVENUE

Moving on to Europe

EBITDA MARGIN

SKU RATIONALIZATION INITIATIVE

PRIVATE LABEL PENETRATION

Category Management Portfolio

ORGANIC REVENUE AND VEHICLE SALES

Tariffs

Rick Galloway

Accomplishments

Restructuring Plan and Cost Structure

Q4 Results

EBITDA

DILUTED EPS

FAVORABLE ONE-TIME DISCRETE TAX ITEMS

North America

EBITDA MARGIN AND ORGANIC REVENUE

GROSS MARGINS AND OVERHEAD EXPENSES

Europe

Debt, EBITDA and Leverage Ratio

Capital Structure

QUESTION AND ANSWER SECTION

Craig R. Kennison

Q

Justin L. Jude

Jash Patwa

Justin L. Jude

Rick Galloway

Jash Patwa

Justin L. Jude

Scott L. Stember

Justin L. Jude

Scott L. Stember

Justin L. Jude

Rick Galloway

Brian Joseph Butler

Justin L. Jude

Brian Joseph Butler

Gary Frank Prestopino

Gary Frank Prestopino

Rick Galloway

Gary Frank Prestopino

Justin L. Jude

Gary Frank Prestopino

Justin L. Jude

Rick Galloway

Bret Jordan

Rick Galloway

Bret Jordan

Justin L. Jude

Bret Jordan

Justin L. Jude

Bret Jordan

Justin L. Jude

A

Disclaimer

More from LKQ CORP

LKQ CORP Call Transcript 2025