LKQ (NasdaqGS:LKQ) Q3 2025 Earnings Call October 30, 2025 08:00 AM ET Speaker3Hello everyone. Thank you for attending today's LKQ Corporation third quarter 2025 earnings conference call. My name is Ken and I'll be your moderator today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I would now like to pass the conference over to our host, Joe Bou ...

Financial Performance - Q2 2025 - Total revenue decreased by 1.9% year-over-year to $3642 million[12, 16] - Organic parts and services revenue declined by 3.4%[12, 16] - Segment EBITDA decreased by 10.9% year-over-year to $430 million, with a margin of 11.8%, a decrease of 120 bps[12, 16] - Diluted EPS increased by 7.1% to $0.75, while adjusted diluted EPS decreased by 11.2% to $0.87[12, 16] - Operating cash flow was $293 million year-to-date, and free cash flow was $186 million year-to-date[12, 16] Segment Performance - Q2 2025 - North America wholesale revenue decreased to $1442 million from $1474 million, with segment EBITDA decreasing to $227 million from $256 million[18, 50] - Europe revenue decreased to $1607 million from $1639 million, with segment EBITDA decreasing to $151 million from $174 million[21, 50] - Specialty revenue slightly decreased to $465 million from $466 million, with segment EBITDA decreasing to $39 million from $41 million[25, 50] - Self Service revenue decreased to $129 million from $133 million, with segment EBITDA remaining at $13 million[29, 50] Capital Allocation and Liquidity - The company invested $39 million to repurchase 1 million shares of common stock in Q2 2025[10] - The company distributed $78 million in cash dividends to common stockholders in Q2 2025[10] - Year-to-date, the company returned $235 million to shareholders, including $79 million in share repurchases and $156 million in dividends[10, 33] - $1636 million remains authorized for share repurchases through October 25, 2026[10, 34] Outlook 2025 - The company revised its full-year organic parts and services revenue growth outlook to a decline of 3.5% to 1.5%, compared to the prior outlook of 0% to 2%[37] - The company revised its full-year GAAP diluted EPS outlook to $2.47 to $2.77, compared to the prior outlook of $2.91 to $3.21[37] - The company revised its full-year adjusted diluted EPS outlook to $3.00 to $3.30, compared to the prior outlook of $3.40 to $3.70[37] - The company revised its full-year operating cash flow outlook to $0.875 billion to $1.075 billion, compared to the prior outlook of $1.075 billion to $1.275 billion[37] - The company revised its full-year free cash flow outlook to $0.60 billion to $0.75 billion, compared to the prior outlook of $0.75 billion to $0.90 billion[37]

Core Insights - LKQ Corporation reported a revenue of $3.6 billion for Q2 2025, a decrease of 1.9% compared to $3.7 billion in Q2 2024, with organic revenue for parts and services down 3.4% [2][13] - The company achieved a net income of $192 million, up from $185 million in the same period last year, with diluted earnings per share increasing by 7.1% to $0.75 [3][25] - LKQ is focused on cost reduction, having eliminated over $125 million in costs over the past year, with an additional $75 million targeted for 2025 [4][10] Financial Performance - Revenue for the first half of 2025 was $7.1 billion, down 4.2% from $7.4 billion in the same period of 2024 [27] - The gross margin for Q2 2025 was 38.8%, slightly down from 39.0% in Q2 2024 [25] - Operating income for Q2 2025 was $312 million, a decrease of 5.2% compared to $329 million in Q2 2024 [25] Strategic Initiatives - The company is executing a three-year plan aimed at simplifying its business portfolio and enhancing return on invested capital [1][7] - LKQ is expanding its lean operating model globally to drive productivity and improve execution [10] - The company is pursuing a disciplined capital allocation strategy focused on maximizing shareholder value [10][12] Market Outlook - LKQ has lowered its full-year outlook for 2025, projecting organic revenue growth for parts and services to be between -3.5% and -1.5%, down from a previous estimate of 0% to 2% [13] - The updated diluted EPS forecast for 2025 is between $2.47 and $2.77, a reduction from the previous range of $2.91 to $3.21 [13] - The company is navigating macroeconomic challenges in both North America and Europe, including declining repairable claims and geopolitical unrest [13] Shareholder Returns - In Q2 2025, LKQ repurchased approximately 1.0 million shares for $39 million and distributed $78 million in cash dividends [11] - Since the initiation of the stock repurchase program in late October 2018, the company has repurchased approximately 66.5 million shares for a total of $2.9 billion [11] - The Board of Directors declared a quarterly cash dividend of $0.30 per share, payable on August 28, 2025 [11] Cash Flow and Balance Sheet - Cash flow from operations for Q2 2025 was $296 million, with free cash flow at $243 million [8] - As of June 30, 2025, total debt stood at $4.5 billion, with a leverage ratio of 2.6x EBITDA [8][29] - The company reported total assets of $15.9 billion and total stockholders' equity of $6.5 billion as of June 30, 2025 [29][30]