LKQ Corporation Q1 FY2026 earnings call

• North America: Solid progress with operating discipline, relentless focus on taking market share, protecting margins, and improving productivity. Gradual recovery with positive indicators like used car prices climbing. - Europe: Focused on controlling service levels, execution, and costs, with private label initiative making progress and ERP migration in one key market completed. - Specialty: Solid quarter with organic revenue growth, but recent geopolitical tension affected credit markets. - Strategic review: Engaged banks and board to evaluate alternatives for maximizing shareholder value, teams remain focused on day-to-day execution

North America: Organic revenue declined 0.5% on a per-day basis, an improvement from prior quarters. Repairable claims are down approximately 2% to 4%. Aftermarket collision product line had strong growth with alternative parts utilization reaching a record high of nearly 40% in February. Elitech delivered strong organic growth and healthy EBITDA margins. Bumper-to-bumper hard parts business in Canada had positive growth. Used car prices climbing, non-comprehensive total loss rates declining, and auto insurance premiums easing are positive indicators. Europe: Early quarter softness followed by steady month-over-month improvement, March showing stronger demand. Eastern Europe and Germany had positive organic revenue growth, UK and Italy had sequential improvement. Private label initiative volume penetration at 25.3%. Specialty: Organic revenue was up 3.4%, RV revenue growth was nearly double digits, and marine had strong growth

Reaffirming full-year guidance for organic parts and services revenue in the range of negative 0.5% to positive 1.5%, adjusted earnings per share between $2.90 and $3.20, and free cash flow between $700 million and $850 million. Still too soon to reflect a meaningful market recovery but see green shoots like improving demand indicators

• Geopolitical tension led to uncertainty in credit markets affecting potential buyers of the specialty business. - Tariffs and inflationary pressures impacted margins in North America and Europe. - ERP conversion process was intensive with initial stress but employees are committed

Q: Focus on North America APU and MSO agreements, implications for penetration and margin profile.

A: MSOs are higher utilizers of alternative parts, relationships with MSOs are strong, integrations drive volume and increase in alternative parts usage.

Q: Repairable claims improvement structurally.

A: Used car prices climbing and insurance premiums easing are driving the improvement in repairable claims.

Q: ERP system in Europe, employee take-up and operational benefits.

A: ERP brings efficiencies and better capabilities, employees are committed to the conversion process.

Q: Europe improvement and private label initiative.

A: Europe saw sequential improvement, private label initiative with introductory pricing to support adoption.

Q: Cash flow guide and working capital, capital return.

A: Combination of factors affecting working capital, committed to normal capital allocation including share repurchases.

Q: Total loss frequency longer-term implications.

A: Due to technology advancements, total loss rates may not move much in the long term.

Q: North American organic revenue growth and weather impact, margin headwinds from diesel prices.

A: Weather had muted impact, diesel price impact was minimal.

Q: Specialty segment sale timing.

A: Credit market tightened, but the specialty business is operating well.

Q: Tariffs and Europe regions.

A: IEPA tariffs had minimal impact, some European regions showed growth