LKQ Corporation Q4 FY2025 earnings call

• CEO Justin L. Jude noted 2025 tested the company but it showcased strength; committed to $825M free cash flow in 2025 which was delivered despite headwinds. - Board initiated comprehensive review to explore alternative structures. - North America saw organic revenue decline but gained market share; Europe faced challenges but team proactively making bold decisions; Specialty was a strong performer. - Completed sale of self-service business, delivered strong free cash flow, aggressively reduced costs through restructuring and productivity initiatives.

North America: Organic revenue decreased 1% per-day in Q4 and 1.9% for full year 2025; gained market share by deepening MSO and insurer relationships, maintained pricing discipline. Europe: Organic revenue declined 5.2% per-day in Q4 and 3.9% for full year 2025 due to weak consumer confidence, macroeconomic uncertainty, and competitive pricing pressures; implemented aggressive pricing strategy in select markets, expanded private label inventory. Specialty: Delivered 7.8% organic revenue growth per-day in Q4 and 2.7% for full year 2025; interest in its sale remains robust.

• Expect organic parts and services revenue growth between negative 0.5% and positive 1.5%; North America slightly positive, Europe slightly negative, Specialty mid-single digits growth. - Adjusted diluted EPS expected to be in range of $2.90 to $3.20. - Free cash flow expected to be between $708M and $750M. - Approved restructuring plan expected to result in $60M - $70M costs in 2026 and generate over $50M annualized cost savings.

• Headwinds in 2025 included continued decline in repairable claims, impact of tariffs, and persistent softness in European market. - Uncertainty in Europe's market demand and competitive pricing pressures. - Market conditions not yet reflected in guidance which is intentionally conservative.

Q: Follow-up on green shoots in North America and Europe performance.

A: In North America, insurance premiums reduced, used car values increased; in Europe, still pressure in demand, aggressive price cutting by competition, intentional push on private label.

Q: Comments on expanding relationships with MSOs.

A: Gained volume with MSOs, outperforming their overall volume growth, MSOs have more direct contracts with insurance carriers driving alternative parts utilization.

Q: Margin in North America and use of AI.

A: Competition from OEMs and aftermarket, use AI to react quicker to pricing; AI helps with real-time pricing at SKU and regional levels.

Q: Factors impacting Europe Q4 vs Q3, 2026 margin drivers.

A: Market continued to deteriorate, some headwinds self-inflicted; 2026 margin improvement from cost control, ERP migration, and some pricing.

Q: Repairable claims in North America 2026, Specialty growth.

A: Assuming trend improvement but not reflected in forecast; Specialty growth across automotive and RV, sale process ongoing with strong interest.