Company Performance - LKQ Corporation reported solid numbers in the last quarter, benefiting from its size and market positioning in North America [1] Investment Philosophy - The investment approach focuses on finding value opportunities, particularly in small and mid-cap sectors where market inefficiencies are prevalent [1] - The strategy includes identifying industry leaders in out-of-favor sectors, quality companies facing temporary setbacks, and businesses with strong balance sheets and robust cash generation [1] Analytical Approach - The analysis emphasizes balance sheet strength from a credit perspective, near-term cash flow generation, next twelve-month earnings forecasts, and book value analysis, especially for financial sector investments [1] Professional Background - The investment philosophy is supported by over 10 years of experience in financial sector consulting, which aids in identifying overlooked opportunities [1]

Financial Data and Key Metrics Changes - The meeting confirmed that holders of approximately 94.7% of shares entitled to vote were present, indicating strong shareholder engagement [5][6] - Preliminary voting results showed that all proposals, including the election of directors and the appointment of Deloitte and Touche as the independent auditor, were approved [12] Business Line Data and Key Metrics Changes - No specific financial data or business line performance metrics were disclosed during the meeting, as it was primarily focused on governance matters and shareholder proposals [4][11] Market Data and Key Metrics Changes - No specific market data or metrics were discussed in the meeting, as the focus was on the annual meeting procedures and voting outcomes [4][11] Company Strategy and Development Direction and Industry Competition - The company did not provide detailed insights into its strategic direction or competitive landscape during this meeting, as it was primarily focused on governance and shareholder proposals [4][11] Management's Comments on Operating Environment and Future Outlook - Management did not provide comments on the operating environment or future outlook during this meeting, as it was primarily a procedural gathering [4][11] Other Important Information - A shareholder proposal was presented regarding the ability for shareholders owning 10% of stock to call a special meeting, which was discussed but not recommended by the board [9][11] - The meeting was conducted virtually, and rules were established to ensure orderly participation and question submission [3][4] Q&A Session Summary Question: Why will LKQ not allow the proponent to present his rule 14a-8 proposal at today's meeting? - LKQ determined that the most efficient way to conduct the meeting was to read the proposal and supporting statement exactly as received and printed in the proxy statement [14][15] - There were no further questions addressed during the Q&A session [16]

Group 1 - The previous investment outlook for LKQ Corporation (NASDAQ: LKQ) was downgraded to a hold rating due to uncertainty about a turnaround in the second half of 2025 [1] - The investment strategy focuses on long-term investments while also incorporating short-term shorts to identify alpha opportunities [1] - The analysis is based on a bottom-up approach, examining the fundamental strengths and weaknesses of individual companies [1] Group 2 - The investment duration is medium to long-term, aiming to identify companies with solid fundamentals, sustainable competitive advantages, and growth potential [1]

Investment Rating - The report assigns an "Overweight" (OW) rating to General Motors (GM) and Ford, while Tesla and Rivian are rated "Underweight" (UW) [6][7]. Core Insights - The automotive industry is experiencing varied performance metrics across different companies, with GM and Ford showing potential upside in their stock prices, while Tesla and Rivian face significant downside risks [6][7]. - The report highlights the importance of valuation metrics such as EV/EBITDA, P/E ratios, and sales growth projections for assessing investment opportunities within the automotive sector [6][22]. Global Auto OEMs Investment Comparables - General Motors (GM) has a current price of $44.57 with a market cap of $43.067 billion and a target price of $53.00, indicating a 19% upside potential [6]. - Ford (F) is priced at $9.63 with a market cap of $38.294 billion and a target price of $11.00, representing a 14% upside [6]. - Ferrari (RACE) is valued at $439.97 with a target price of $460.00, showing a 5% upside [6]. - Tesla (TSLA) is currently priced at $241.37 with a target price of $120.00, indicating a -50% downside [6]. - Rivian (RIVN) has a price of $11.60 with a target price of $11.00, reflecting a -5% downside [6]. Global Auto Parts Suppliers Valuation Metrics - The average EV/EBITDA for US auto parts suppliers is projected at 1.8x for 2024, with a corresponding EBITDA margin of 12% [22]. - Aptiv (APTV) is rated "Overweight" with a current price of $51.71 and a target price of $102, indicating a 97% upside [22]. - Borg Warner (BWA) is rated "Overweight" with a price of $26.45 and a target price of $46, representing a 74% upside [22]. - Lear Corp (LEA) is rated "Overweight" with a price of $79.42 and a target price of $140, indicating a 76% upside [22]. Performance Metrics - The report indicates that the average revenue CAGR for US auto parts suppliers is projected to be 2% from 2023 to 2025 [74]. - The EBITDA margin for US auto parts suppliers is expected to be around 12% in 2025, with some companies showing higher margins [74][83]. - The report also highlights the financial returns of various suppliers, with some companies achieving significant returns on invested capital (ROIC) [54][56].

Financial Data and Key Metrics Changes - The company reported diluted earnings per share of $0.65, a 6¢ increase compared to Q1 2024, while adjusted diluted earnings per share decreased by $0.03 to $0.79 [28][29] - North America's organic revenue fell by 4.1% per day, which is less than the decline seen in the last three quarters of 2024 [13] - The overall EBITDA margin for North America was 15.7%, a 60 basis point decrease year-over-year, while Europe reported a segment EBITDA margin of 9.3%, a 60 basis point improvement [31][33] Business Line Data and Key Metrics Changes - North America experienced a decline in repairable claims, impacting organic revenue, but managed to generate positive growth in lead tech calibration and diagnostics [13][14] - Specialty's organic revenue declined by 4.9% on a per-day basis, although there was sequential improvement compared to Q4 of 2024 [19] - Self-service operations delivered a year-over-year improvement in both EBITDA dollars and percentage, generating $20 million in segment EBITDA for Q1 [36] Market Data and Key Metrics Changes - In Europe, organic revenue declined by 1.8% per day compared to a growth of 4.4% in Q1 of 2024, with noticeable softness in many markets due to consumer confidence [14][15] - The company noted that competitive pricing in some countries contributed to challenging conditions, but they expect stabilization in the long term [16] - The SKU rationalization project in Europe has led to a reduction of 17,000 SKUs, with private label penetration increasing by 20 basis points [17] Company Strategy and Development Direction - The company remains committed to a balanced capital allocation strategy, incorporating dividends, share repurchases, and maintaining an investment-grade rating [12] - The ongoing strategy to simplify the portfolio included divesting two operations, demonstrating a commitment to streamlining [11] - The focus is on people, process, and performance, with an emphasis on talent development and leadership competencies [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for repairable claims to improve due to rising used car prices and stabilizing insurance premiums [56][58] - The company established a global tariff task force to navigate the complexities of the current tariff situation, with less than 15% of U.S. business costs directly imported from outside the U.S. [22][21] - Management expects headwinds on repairable claims to continue in 2025 but anticipates some easing in the latter half of the year [33] Other Important Information - The company plans to publish its 2024 sustainability report in May, emphasizing sustainability in its operations [24] - Free cash flow during the quarter was a net outflow of $57 million, but positive free cash flow is anticipated in the next three quarters [37][38] - The company borrowed approximately $170 million in the quarter, with total debt at $4.4 billion and a leverage ratio of 2.5 times EBITDA [40][41] Q&A Session Summary Question: Trends from insurance companies regarding used car pricing - Management noted a shift in market share with insurance carriers and indicated that used car pricing has plateaued and started to improve [55][56] Question: Impact of tariffs on business - Management discussed the complexities of tariffs, indicating that they have historically been beneficial for the industry and that they are working with suppliers to mitigate impacts [60][67] Question: Impact of SKU reduction program in Europe - Management confirmed that there has been no negative impact on revenue from the SKU reduction program, as they have been able to offset sales through private labels [80][81] Question: Percentage of revenue from private label and future targets - Current private label revenue is in the 21-22% range, with a target of reaching around 30% by 2030 [86] Question: Link between pricing initiatives and competitive landscape - Management clarified that improvements in market share were not driven by pricing actions but by enhanced service levels and inventory management [96][97] Question: Clarification on aftermarket part imports and tariffs - Management explained the complexity of tariffs and confirmed that most aftermarket collision parts are already branded under private labels [101][102]

APRIL 24, 2025 First Quarter 2025 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, hopes, intentions an ...

Revenue Performance - Total revenue for the three months ended March 31, 2025, was $3,463 million, a decrease of $240 million or 6.5% compared to $3,703 million in the same period of 2024[84] - Parts and services revenue decreased by $240 million, or 6.8%, driven by a decline in segment revenue across Europe (down 7.4%), Wholesale - North America (down 6.0%), Specialty (down 6.8%), and Self Service (down 5.7%)[84] - Total third-party revenue decreased by $240 million, or 6.5%, to $3,463 million for the three months ended March 31, 2025, compared to $3,703 million in 2024[91] - Organic parts and services revenue decreased by $151 million, or 4.3%, with a 3.1% decrease on a per day basis[84] Cost and Expenses - Cost of goods sold decreased by $165 million, or 7.3%, to $2,086 million, with a reduction in cost of goods sold as a percentage of revenue from 60.8% to 60.2%[86] - Selling, general and administrative expenses decreased by $55 million, or 5.3%, to $989 million, with SG&A as a percentage of revenue increasing from 28.2% to 28.6%[87] Net Income and Tax - Net income for the three months ended March 31, 2025, was $170 million, representing 4.9% of total revenue, compared to 4.3% in the same period of 2024[83] - The effective income tax rate decreased to 27.7% for the three months ended March 31, 2025, from 30.7% in the same period of 2024, primarily due to a decrease in the unfavorable impact of discrete items[89] Segment Performance - In the Wholesale - North America segment, parts and services revenue decreased by $86 million, or 6.0%, to $1,336 million, primarily due to a reduction in repairable claims and one fewer selling day[93] - Europe segment revenue decreased by $122 million, or 7.4%, to $1,515 million, driven by difficult economic conditions and heightened competition[94] - Specialty segment revenue decreased by $29 million, or 6.8%, to $393 million, attributed to demand softness in automotive and RV product lines[95] - Self Service segment revenue remained relatively stable, decreasing by $1 million to $136 million, with gross margin increasing by $4 million, or 6.4%, to $64 million[96] - Segment EBITDA for Wholesale - North America decreased by $22 million, or 9.0%, to $222 million, with a margin of 15.7%[93] - Segment EBITDA for Europe decreased by $2 million, or 1.4%, to $141 million, with a margin of 9.3%[94] - Segment EBITDA for Specialty decreased by $6 million, or 22.2%, to $21 million, with a margin of 5.4%[95] - Segment EBITDA for Self Service increased by $4 million, or 25.0%, to $20 million, with a margin of 14.6%[96] Cash Flow and Liquidity - For the three months ended March 31, 2025, net cash used in operating activities was $3 million, compared to net cash provided of $253 million for the same period in 2024[113] - Free cash flow for the three months ended March 31, 2025, was $(57) million, compared to $187 million for the same period in 2024[115] - Total liquidity as of March 31, 2025, was $1,289 million, a decrease of $167 million from December 31, 2024, primarily due to increased borrowings of $160 million[98] Capital and Financing - The company believes it has sufficient access to capital markets to support future growth objectives, utilizing cash flows from operations and various forms of debt financing for acquisitions[97] - The company had outstanding borrowings of $1,811 million under revolving credit facilities and term loans as of March 31, 2025[108] - The maximum total leverage ratio covenant was 4.00:1.00, with an achieved ratio of 2.5 as of March 31, 2025[105] - The overall weighted average interest rate on borrowings was 5.2% as of March 31, 2025[107] Dividend and Growth Strategy - The company declared a quarterly cash dividend of $0.30 per share on April 22, 2025, payable on May 29, 2025[101] - The company intends to continue evaluating markets for potential growth through internal development and selected business acquisitions[116] - The company’s acquisition strategy focuses on highly accretive tuck-in acquisitions with significant synergies, with no large platform acquisitions expected[76] Current Assets - Current assets increased to $2,497 million as of March 31, 2025, from $2,321 million as of December 31, 2024[119]

Core Insights - LKQ Corporation reported adjusted earnings of 79 cents per share for Q1 2025, matching the Zacks Consensus Estimate but down from 82 cents in the same period last year [1] - Quarterly revenues were $3.46 billion, missing the Zacks Consensus Estimate of $3.57 billion and declining from $3.7 billion year-over-year [1] - Organic revenues from Parts and Services decreased by 4.3% year-over-year [1] Segment Highlights - Wholesale North American segment revenues were $1.41 billion, down 5.8% year-over-year and below the estimate of $1.51 billion; EBITDA was $222 million, below the forecast of $246 million and last year's $244 million [3] - European segment revenues totaled $1.52 billion, a decline of 7.4% year-over-year, missing the estimate of $1.55 billion; EBITDA was $141 million, slightly above the forecast of $140 million but down from $143 million year-over-year [4] - Specialty segment revenues were $394 million, down 7% year-over-year but exceeding the projection of $365 million; EBITDA was $21 million, down from $27 million year-over-year and matching the forecast [5] - Self-Service segment revenues were $136 million, slightly down from $137 million in Q1 2024 but exceeding the estimate of $124 million; EBITDA was $20 million, surpassing the estimate of $10.2 million and up from $16 million year-over-year [6] Financial Position & Dividend - As of March 31, 2025, LKQ had cash and cash equivalents of $227 million, down from $234 million at the end of 2024; long-term obligations were $3.84 billion, down from $4.13 billion [6] - Total debt stood at $4.4 billion as of March 31, 2025 [6] - The company announced a quarterly cash dividend of 30 cents per share, payable on May 29, 2025, to stockholders of record by May 15, 2025 [8] 2025 Guidance - LKQ anticipates organic revenue growth for parts and services in the range of 0-2% year-over-year; adjusted EPS is expected to be between $3.40 and $3.70 compared to $3.48 in 2024 [9] - The company projects operating cash flow between $1.075 billion and $1.275 billion and free cash flow in the range of $750 million to $900 million for 2025 [9]

Financial Data and Key Metrics Changes - The company reported diluted earnings per share of $0.65, a $0.06 increase compared to Q1 2024, while adjusted diluted earnings per share was $0.79, a decrease of $0.03 per share versus the prior year [18] - North America's organic revenue fell by 4.1% per day, which is less than the decline seen in the last three quarters of 2024 [8] - The overall segment EBITDA margin for North America was 15.7%, a 60 basis point decrease relative to last year [19] - Europe reported a segment EBITDA margin of 9.3%, a 60 basis point improvement over last year [21] Business Line Data and Key Metrics Changes - Specialty's organic revenue declined by 4.9% on a per day basis, showing sequential improvement compared to Q4 2024 [12] - Self-service generated $20 million in segment EBITDA in Q1, an increase of $4 million and a 290 basis point improvement as a percentage of revenue [23] - North America benefited from a diversified portfolio, generating positive growth in lead tech calibration and diagnostics business [9] Market Data and Key Metrics Changes - In Europe, organic revenue declined by 1.8% per day compared to a growth of 4.4% in Q1 2024, with noticeable softness in many markets impacted by consumer confidence [10] - The company experienced a relatively mild winter in Europe, affecting demand for certain products [10] Company Strategy and Development Direction - The company is committed to a balanced capital allocation strategy, incorporating dividends, share repurchases, and maintaining an investment-grade rating [8] - The ongoing strategy to simplify the portfolio included divesting two operations, demonstrating a commitment to streamlining [7] - The company aims to grow above the market, simplify operations, and improve free cash flow while investing in growth organically and through small acquisitions [30][31] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential stabilization of repairable claims as market conditions improve [8] - The company established a global tariff task force to navigate the complexities of the current tariff situation [12] - Management believes that the current tariff environment could lead to increased demand for recycled products due to competitive pricing [14] Other Important Information - The company plans to publish its 2024 sustainability report in May, emphasizing its commitment to sustainability in operations [16] - Free cash flow during the quarter was a net outflow of $57 million, in line with expectations due to timing of payables [24] Q&A Session Summary Question: Trends from insurance companies regarding used car pricing - Management noted a shift in market share with insurance carriers and indicated that used car pricing has plateaued and started to improve [36][38] Question: Impact of tariffs on business - Management stated that historically, tariffs have been beneficial for the industry and LKQ, and they are working with suppliers to mitigate impacts [39][40] Question: Impact of SKU reduction program in Europe - Management confirmed that there has been no negative impact on revenue from the SKU reduction program, and they are confident in maintaining market share [54][56] Question: Private label program percentage and future targets - The current private label revenue is in the 21% to 22% range, with a target of reaching around 30% by 2030 [57][68] Question: Clarification on aftermarket parts imports and tariffs - Management clarified that the tariff situation is complex, with some products subject to different tariff rates based on their origin [66][70]

分组1 - LKQ reported quarterly earnings of $0.79 per share, matching the Zacks Consensus Estimate, but down from $0.82 per share a year ago [1] - The company posted revenues of $3.46 billion for the quarter, missing the Zacks Consensus Estimate by 2.95% and down from $3.7 billion year-over-year [2] - LKQ shares have increased by approximately 14.6% since the beginning of the year, contrasting with the S&P 500's decline of -8.6% [3] 分组2 - The earnings outlook for LKQ is uncertain, with current consensus EPS estimates at $0.98 for the coming quarter and $3.61 for the current fiscal year [7] - The Zacks Rank for LKQ is currently 4 (Sell), indicating expectations of underperformance in the near future [6] - The Automotive - Replacement Parts industry is ranked in the top 38% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]