Acquisitions and Growth Strategy - In 2023, LKQ Corporation acquired Uni-Select Inc., enhancing its position in the North American automotive maintenance parts market and expanding its paint distribution operations[19] - LKQ's operational strategy emphasizes driving profitable growth, increasing free cash flow, and maintaining a strong balance sheet through organic investments and strategic acquisitions[21] - The Specialty segment was formed in 2014 and has expanded through acquisitions, reaching most major markets in the U.S. and Canada[49] Revenue Generation and Market Segments - The Wholesale - North America segment generated significant revenue through the sale of alternative vehicle collision replacement products, with a focus on aftermarket and recycled parts[24] - The company operates in approximately 20 European countries, boasting the largest distribution network in the aftermarket industry in Europe[46] - The company operates in four segments: Wholesale - North America, Europe, Specialty, and Self Service, each presented as a reportable segment[213] - The Wholesale - North America segment is a leading provider of alternative vehicle collision replacement products, with extensive sales and distribution facilities across the U.S. and Canada[214] - The Europe segment provides alternative vehicle replacement and maintenance products in multiple countries, including Germany, the U.K., and Italy[214] - The Specialty segment distributes aftermarket equipment and accessories for specialty vehicles, reaching major markets in the U.S. and Canada[214] - The Self Service segment operates retail facilities selling recycled automotive products from end-of-life vehicles across the U.S.[214] Inventory and Supply Chain Management - Approximately 49% of LKQ's aftermarket purchases in 2024 were made from its top six vendors, with the largest vendor accounting for about 19% of annual inventory purchases[28] - LKQ's inventory includes over 900,000 SKUs, with a focus on mechanical aftermarket parts for vehicles aged 3 to 15 years, including brake pads and electrical products[42] - The company aims to achieve 80% completion of its product mix evaluation by the end of 2025, targeting efficiency in inventory management[42] - LKQ's distribution network in North America is considered the largest for alternative vehicle parts, enhancing service levels and fulfillment rates for local repair shops[36] Financial Performance and Capital Management - The company maintains a disciplined capital allocation strategy, focusing on accretive acquisitions and divesting non-core operations, as demonstrated by the divestment of certain operations in Poland in 2024[23] - The company had approximately $1,651 million in unsecured, variable-rate debt outstanding, with $987 million maturing in 2026 and $664 million in 2028[122] - The company had approximately $2,436 million in unsecured, fixed-rate debt outstanding, including $800 million of 5.75% senior notes due 2028[122] - The company could incur an additional $1,222 million of indebtedness under its credit agreement as of December 31, 2024[126] - The amount and frequency of the company's share repurchases and dividend payments may fluctuate based on cash flow and operational priorities[135] Risks and Challenges - The company is monitoring economic, political, and social conditions in North America, Europe, and Taiwan, which could adversely affect its business[80] - The company faces competition from various suppliers in the vehicle replacement products industry, which is highly competitive[86] - An increase in electric vehicles could negatively impact sales of engines and transmissions, which are significant revenue sources[103] - Fluctuations in commodity prices, particularly for metals, could adversely affect financial results and inventory values[104] - Disruptions in the supply chain, particularly from suppliers in Taiwan, could increase expenses and impede customer service[106] - The company is subject to risks related to intellectual property claims from OEMs, which could restrict the sale of aftermarket products[96] - Future public health emergencies could materially adversely impact the company's business and financial condition[114] - The company faces risks related to the limited supply of salvage vehicles in North America, which could increase costs over time[110] - The complexity of vehicle parts due to technological advancements may hinder the company's ability to compete with OEMs[112] Cybersecurity and IT Management - The Company maintains a risk-based approach to cybersecurity, integrating policies and practices into operations based on recognized frameworks[178] - The Chief Information Security Officer (CISO) has over 27 years of experience in IT and information security, holding multiple professional certifications[188] - The Company has established comprehensive incident response and recovery plans that are regularly tested and evaluated[182] - The Board and Risk Management Committee receive regular updates on cybersecurity risks and incidents, ensuring timely management responses[186] - The Company does not believe that any cybersecurity threats have materially affected its business strategy or financial condition to date[190] Corporate Governance and Compliance - The Board refreshment process has resulted in over half of the current Board being added since August 2018, with 38% from underrepresented groups[75] - The company has adopted "proxy access," allowing eligible stockholders to nominate director nominees in proxy materials[76] - A revised Code of Ethics was adopted in 2024, covering various topics including bribery, conflicts of interest, and data protection[77] - The company is subject to ongoing audits of its income tax returns in various jurisdictions, which could result in additional taxes impacting cash flows and financial results[157] - The effective tax rate may materially increase due to changes in U.S. and international tax legislation, affecting cash flows[154] Environmental and Regulatory Considerations - The company is subject to various environmental regulations, which could incur costs and impact its operations if compliance is not maintained[141] - The company may face liabilities related to contamination from its facilities, which could exceed established financial reserves[145] - The company is affected by evolving climate change regulations, which could require additional expenditures and impact demand for its products[150] Employee and Labor Relations - The company employs around 47,000 people globally, with approximately 19,000 in North America, 26,000 in Europe, and 2,000 in Asia[64] - Labor union activities and changes in labor laws may increase costs and reduce operational flexibility, impacting overall business performance[165] Operational Efficiency and Future Plans - The company is executing a multi-year plan to develop a European-wide ERP system, projected to reduce the number of IT systems by 2027[48] - The company is undergoing a systems conversion project for its European businesses, which carries risks of delays and increased costs[172] - The company may face challenges in renewing leases for key operational locations, potentially losing the right to operate at those sites[175] Stock Performance and Shareholder Returns - The Company has declared a quarterly cash dividend of $0.30 per share, with a total of four dividends declared in 2024[201] - The Board has authorized a stock repurchase program totaling $4,500 million, with $1,000 million added on October 22, 2024[206] - In the three months ended December 31, 2024, the Company repurchased 2.1 million shares at an average price of $38.63[207] - The cumulative total return on the Company's stock from December 31, 2019, to December 31, 2024, was $111, compared to $197 for the S&P 500 Index[203]

Core Insights - LKQ Corporation reported adjusted earnings of 80 cents per share for Q4 2024, exceeding the Zacks Consensus Estimate of 75 cents but down from 84 cents in the same quarter last year. Quarterly revenues were $3.36 billion, missing the estimate of $3.42 billion and declining from $3.5 billion year-over-year. Organic revenues from parts and services decreased by 3.6% year-over-year [1]. Segment Highlights - The Wholesale North American segment generated revenues of $1.37 billion, a decrease of 6.9% year-over-year, and fell short of the estimate of $1.44 billion. EBITDA for this segment was $231 million, surpassing the forecast of $216.1 million but lower than $239 million from Q4 2023 [3]. - Revenues from the European segment were $1.51 billion, down 2.3% year-over-year, and missed the estimate of $1.56 billion. The segment's EBITDA increased to $152 million from $129 million year-over-year, exceeding the forecast of $132 million [4]. - The Specialty segment reported revenues of $349 million, a decline of 5.9% year-over-year, but exceeded the projection of $337.2 million. EBITDA for this segment was $14 million, down from $21 million year-over-year and below the forecast of $17.1 million [5]. - The Self-Service segment achieved revenues of $131 million, an increase of 11% year-over-year, surpassing the estimate of $100.3 million. The segment's EBITDA was $11 million, exceeding the estimate of $5.7 million and up from $7 million in the previous year [6]. Financial Position & Dividend - As of December 31, 2024, LKQ had cash and cash equivalents of $234 million, down from $299 million a year earlier. Long-term obligations rose to $4.13 billion from $3.66 billion year-over-year, with total debt at $4.2 billion [7]. - In 2024, cash flow from operating activities totaled $1.12 billion, with positive free cash flow of $810 million. During Q4 2024, the company repurchased 2.1 million shares for $80 million, totaling approximately 65 million shares repurchased for $2.8 billion since the buyback program began in late October 2018 [8]. - LKQ announced a quarterly cash dividend of 30 cents per share, payable on March 27, 2025, to stockholders of record as of March 13, 2025 [9]. 2025 Guidance - For 2025, LKQ anticipates organic revenue growth in parts and services to be between 0-2% year-over-year. The company expects adjusted EPS in the range of $3.40-$3.70 compared to $3.48 in 2024, with operating cash flow projected between $1.075 billion and $1.275 billion, and free cash flow expected to be between $750 million and $900 million [10].

Financial Data and Key Metrics Changes - For the full year 2024, diluted earnings per share (EPS) was reported at $2.62, with adjusted diluted EPS at $3.48, a decrease of $0.35 compared to 2023 [35][36] - The fourth quarter reported diluted EPS of $0.60 and adjusted diluted EPS of $0.80, a $0.04 decrease from the prior year [36] - The decline in adjusted EPS was primarily influenced by a combined $0.30 impact from interest and taxes, and an additional $0.13 decrease attributed to commodity prices and foreign exchange rates [36][37] Business Line Data and Key Metrics Changes - North American revenue declined by 8.5% per day, with collision parts revenue down approximately 4% when adjusted for non-recurring benefits from UAW strikes in 2023 [18][19] - The European segment reported an organic revenue decline of 20 basis points on a per day basis, remaining flat compared to Q3 [20] - Specialty segment posted organic revenue down 7.3% on a per day basis, but showed sequential improvement from Q3 [26] Market Data and Key Metrics Changes - The average cost of auto insurance in the U.S. increased over 20% in 2024, which is expected to moderate in 2025 [19] - Total U.S. light vehicle sales increased by 7.1% in Q4, with pickups and SUVs at 14.8% and 4.9% respectively [27] - The RV market is anticipated to grow in 2025, supported by higher dealer inventories and strong consumer interest [27] Company Strategy and Development Direction - The company aims to simplify operations and enhance margins while focusing on organic growth and small, synergistic acquisitions [58][59] - The integration of FinishMaster was completed, leading to increased annualized synergies [31] - The company plans to continue its SKU rationalization initiative in Europe, targeting a reduction from 750,000 to 600,000 SKUs by the end of 2027 [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating challenges and delivering strong operating results, emphasizing the importance of operational excellence and a sound balance sheet [11][12] - The company expects organic parts and services revenue growth between 0% and 2% for 2025, with North America revenue expected to be roughly flat [52][53] - Management highlighted the potential for improved EBITDA margins in Europe, aiming for double-digit margins in 2025 [41][42] Other Important Information - The company returned $678 million to shareholders through share repurchases and dividends in 2024, exceeding its commitment to allocate at least 50% of free cash flow [47][48] - The company has a total debt of $4.2 billion with a leverage ratio of 2.3 times EBITDA, showing improvement from the prior quarter [49][50] Q&A Session Summary Question: SKU rationalization project in Europe - Management confirmed that the SKU rationalization is a cautious, long-term project aimed at maintaining revenue while improving vendor terms [62][64] Question: Impact of lower new SAR levels on vehicle population - Management noted that the aging vehicle fleet is beneficial for LKQ, and they are monitoring the impact of new car production on repairable claims [72][73] Question: Mega-yards initiative - Management explained that mega-yards allow for consolidation and increased capacity, leading to better long-term returns [85][88] Question: North American and European supply chain differentiation - Management indicated that less than 5% of total purchases come from Mexico, Canada, and China, suggesting a potential competitive advantage amidst tariffs [78][79] Question: Margin opportunities in Europe - Management expressed optimism about continued margin improvements in Europe, projecting growth beyond 2025 [105][106] Question: EV initiatives - Management highlighted ongoing efforts in recycling and remanufacturing EV batteries, with a focus on future opportunities as the market develops [116][117]

FEBRUARY 20, 2025 Fourth Quarter and Full Year 2024 Earnings Call Presentation Forward Looking Statements and Non-GAAP Financial Measures Statements and information in this presentation 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, ho ...

Core Insights - LKQ reported revenue of $3.36 billion for the quarter ended December 2024, a decrease of 4.1% year-over-year, with EPS at $0.80 compared to $0.84 in the same quarter last year [1] - The revenue fell short of the Zacks Consensus Estimate of $3.42 billion by 1.73%, while the EPS exceeded the consensus estimate of $0.75 by 6.67% [1] Revenue Performance - Organic revenue change year-over-year was -3.2%, slightly better than the average estimate of -3.5% from five analysts [4] - Revenue from Parts and Services totaled $3.20 billion, below the average estimate of $3.26 billion, reflecting a year-over-year decline of 4.5% [4] - Revenue from Parts and Services in Europe was $1.51 billion, compared to the average estimate of $1.55 billion, marking a year-over-year decrease of 2.2% [4] - Revenue from Parts and Services - Wholesale in North America was $1.30 billion, slightly below the estimated $1.32 billion, representing a 7% decline year-over-year [4] - Revenue from Parts and Services - Specialty was $349 million, exceeding the average estimate of $343.02 million, but still showing a year-over-year decline of 5.9% [4] Market Performance - LKQ shares returned +1% over the past month, while the Zacks S&P 500 composite increased by +2.6% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Core Insights - LKQ reported quarterly earnings of $0.80 per share, exceeding the Zacks Consensus Estimate of $0.75 per share, but down from $0.84 per share a year ago, indicating a 4.76% year-over-year decline [1] - The company posted revenues of $3.36 billion for the quarter ended December 2024, missing the Zacks Consensus Estimate by 1.73% and down from $3.5 billion year-over-year [2] - LKQ has surpassed consensus EPS estimates two times over the last four quarters, while it has not beaten consensus revenue estimates during the same period [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.86 on revenues of $3.64 billion, and for the current fiscal year, it is $3.65 on revenues of $14.47 billion [7] - The estimate revisions trend for LKQ is mixed, resulting in a Zacks Rank 3 (Hold), suggesting the stock is expected to perform in line with the market in the near future [6] Industry Context - The Automotive - Replacement Parts industry, to which LKQ belongs, is currently in the top 36% of over 250 Zacks industries, indicating a favorable position compared to the bottom 50% [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact LKQ's stock performance [5]

Revenue Performance - Fourth quarter revenue was $3.4 billion, a decrease of 4.1% compared to $3.5 billion in Q4 2023[3] - Full year revenue for 2024 was $14.4 billion, an increase of 3.5% compared to $13.9 billion in 2023[5] - Revenue for Q4 2024 was $3,357 million, a decrease of 4.1% from $3,501 million in Q4 2023[24] - For the full year 2024, revenue increased to $14,355 million, up 3.5% from $13,866 million in 2023[26] - Total revenue for the year ended December 31, 2024, increased to $14,355 million, a growth of 3.5% compared to $13,866 million in 2023[33] - Wholesale revenue in North America for the year increased by 9.9% to $5,465 million from $4,974 million in 2023[33] - Revenue growth at constant currency for parts & services was reported at (4.2)% for the three months ended December 31, 2024[34] - Revenue growth at constant currency for the year ended December 31, 2024, was 4.0% for parts & services[34] - The company reported a currency impact of $(9) million on total revenue for the three months ended December 31, 2024[34] Net Income and Earnings Per Share - Fourth quarter net income was $156 million, down from $184 million in Q4 2023, with diluted EPS of $0.60 compared to $0.69[4] - Full year net income for 2024 was $690 million, a decrease of 25.4% from $942 million in 2023, with diluted EPS of $2.62 compared to $3.51[5] - Net income attributable to LKQ stockholders for Q4 2024 was $156 million, a decline of 11.9% from $177 million in Q4 2023[24] - Net income attributable to LKQ stockholders for the full year 2024 was $690 million, a decrease of 26.3% from $936 million in 2023[26] - Basic earnings per share for Q4 2024 was $0.60, down 9.1% from $0.66 in Q4 2023[24] - Net income for 2024 was $693 million, down from $938 million in 2023, representing a decrease of 26.1%[31] - The net income attributable to LKQ stockholders for the year ended December 31, 2024, was $690 million, down from $936 million in 2023[36] - Adjusted net income for Q4 2024 was $207 million, a decrease from $226 million in Q4 2023, with full-year adjusted net income at $918 million versus $1,027 million in 2023[38] - Diluted earnings per share for Q4 2024 were $0.60, down from $0.69 in Q4 2023, while full-year diluted earnings per share were $2.62 compared to $3.51 in 2023[38] Cash Flow and Capital Management - Operating cash flow for 2024 was $1.1 billion, with free cash flow of $0.8 billion[6] - The company returned over $150 million to shareholders in Q4 2024, including $80 million in share repurchases and $78 million in cash dividends[8] - Free cash flow for fiscal year 2025 is forecasted to be between $750 million and $900 million, based on net cash provided by operating activities of $1,075 million to $1,275 million[41] - Free cash flow for 2024 was $810 million, down from $998 million in 2023, with net cash provided by operating activities at $1,121 million compared to $1,356 million in 2023[42] Expenses and Financial Metrics - The company incurred restructuring and transaction-related expenses of $36 million in Q4 2024, compared to $12 million in Q4 2023[24] - Interest expense for the full year 2024 was $262 million, an increase of 22.4% from $214 million in 2023[26] - The company incurred $149 million in amortization of acquired intangibles and $135 million in restructuring and transaction-related expenses for the year ended December 31, 2024[38] - Adjusted EBITDA for 2024 was $1,612 million, a decrease from $1,705 million in 2023, with net income from continuing operations at $690 million compared to $942 million in 2023[42] Shareholder Returns and Dividends - The Board of Directors declared a quarterly cash dividend of $0.30 per share, payable on March 27, 2025[8] - The company repurchased approximately 65 million shares for a total of $2.8 billion since initiating the stock repurchase program in late October 2018[8] Future Outlook - For 2025, the company anticipates organic revenue growth for parts and services of 0% to 2% and diluted EPS between $2.91 and $3.21[12] - Forecasted net income for fiscal year 2025 ranges from $755 million to $833 million, with adjusted net income expected between $883 million and $961 million[40] - Forecasted diluted earnings per share for fiscal year 2025 are projected to be between $2.91 and $3.21 for reported figures, and between $3.40 and $3.70 for adjusted figures[40]

Fourth quarter revenue of $3.4 billion; annual revenue of $14.4 billionFourth quarter organic revenue for parts and services decreased 3.6%; annual decreased 2.2%Fourth quarter diluted EPS2 of $0.60; fourth quarter adjusted diluted EPS1,2 of $0.80Annual diluted EPS2 of $2.62; annual adjusted diluted EPS1,2 of $3.48Annual operating cash flow of $1.1 billion; free cash flow1 of $0.8 billionRepurchased $80 million of LKQ shares in the fourth quarter of 2024Exceeded commitment of returning 50% FCF to shareholde ...

Wall Street analysts expect LKQ (LKQ) to post quarterly earnings of $0.75 per share in its upcoming report, which indicates a year-over-year decline of 10.7%. Revenues are expected to be $3.42 billion, down 2.4% from the year-ago quarter.Over the last 30 days, there has been a downward revision of 0.2% in the consensus EPS estimate for the quarter, leading to its current level. This signifies the covering analysts' collective reconsideration of their initial forecasts over the course of this timeframe.Prior ...

LKQ Corporation (NASDAQ: LKQ ) is a relatively larger player in the automotive parts and services industry, known for its wide range of product offerings and robust operational network. In this note, we’ll take a deep dive into LKQ's businessAs a value investor with over a decade of market experience, I've discovered that success in equity markets comes not from supernatural trading abilities, but from finding an investment approach that aligns with one's personality and analytical strengths. My Investment ...