Core Insights - LKQ reported a decline in adjusted earnings per share and revenue for Q2 2025, with adjusted diluted EPS at $0.87, missing the consensus estimate of $0.92, and revenue at $3.64 billion, down 1.9% year-over-year [1][2] - Management described the quarter as challenging due to persistent demand softness and shrinking margins, leading to a downward revision of full-year 2025 earnings and revenue guidance [1][10] Financial Performance - Adjusted EPS decreased by 11.2% from $0.98 in Q2 2024 to $0.87 in Q2 2025 [2] - Revenue fell from $3.71 billion in Q2 2024 to $3.64 billion in Q2 2025, a decline of 1.9% [2] - Net income increased by 3.8% year-over-year to $192 million [2] - Free cash flow surged by 82.7% to $243 million compared to $133 million in Q2 2024 [2] - Segment EBITDA declined by 11.2% to $430 million from $484 million in Q2 2024 [2] Business Overview and Strategy - LKQ specializes in alternative and specialty automotive parts, including recycled, aftermarket, and remanufactured parts, operating across North America and Europe [3] - The company is focusing on capturing market share, driving operational efficiency, simplifying its business portfolio, and strengthening its balance sheet [4] Market Conditions and Operational Developments - Organic parts and services revenue declined by 3.4% in Q2 2025, attributed to a reduced number of repairable insurance claims in North America, which were down 9% [5] - Sales in Europe fell by 1.9% year-over-year, with organic revenue declining by 4.9% [5] - Segment EBITDA margins contracted across most segments, with North America at 15.8%, Europe at 9.4%, and Specialty at 8.5% [6] Cost Management and Shareholder Returns - Selling, general, and administrative expenses rose by 2.3%, now representing 27.4% of sales [6] - The company has implemented cost reduction actions totaling over $125 million in the past 12 months, with an additional $75 million targeted for 2025 [6] - Shareholder returns included $39 million in share repurchases and $78 million in dividends during Q2 2025 [7] Future Outlook - Management revised FY2025 guidance downward, projecting organic revenue growth in parts and services to be between -3.5% and -1.5% [10] - New GAAP diluted EPS guidance is set at $2.47–$2.77, down from $2.91–$3.21 [10] - Expected free cash flow for FY2025 is now projected to be between $600 million and $750 million [10]