LKQ - Earnings call transcript Q3 2020

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Operator

Abrupt start…

Joe Boutross

Thank you, Operator. Good morning, everyone, and welcome to LKQ's third quarter 2020 earnings conference call. With us today are Nick Zarcone, LKQ's President and Chief Executive Officer; and Varun Laroyia, Executive Vice President and Chief Financial Officer. Please refer to the LKQ website at lkqcorp.com for our earnings release issued this morning as well as the accompanying slide presentation for this call.

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results Some be assume obligation regarding considered statements implied statements. that in events our expressed forward-looking statements to from today of may we make various or Actual update forward-looking. strategies. a beliefs, the intentions any of differ or no hopes, materially those the expectations, or may as These result forward-looking include statements We factors.

XX-K and For discussed Form more information, in SEC. the the refer reports Factors Risk subsequent please to with filed our

During this and non-GAAP included of non-GAAP call, everyone look we both release GAAP our a is presentation. slide will GAAP financial and present had in measures press to has earlier SEC today our reconciliation measures. to that, earnings Hopefully, call the with our today's A and chance to to normal, I'm the Nick are days. filed we in happy Zarcone. which XX-Q And we file over CEO, next planning the few with turn as to X-K, at

Dominick Zarcone

team April, believe our facing six will sheet, discuss organization It's back ago, Thank size and balance over will went each good the XX% revenue morning to that have this the cost operating the months on demand, $X generated the of in come a just light flow nine are in our will of the morning, segments, also maximize are everybody you, Today, free some measures metrics Joe, confronted and year. of This with of improvements of third year-over-year a entire in focus were margin Varun challenging the dollars flow. our early into the economies a that around of we In right lockdown. cash months to each effort XX% we across provide we closing high-level to the performance throughout business, morale material with our in in was declines as year, to in the important He related March mission-critical into first key environment, world enjoying improvement impact trends having key highlights just the the remarks. segments. I on the billion in to of impacting initiated of This late clearly structure the and before the the highlight then of I the terrific team people. and the hard LKQ. could discussing I third be delivered outcome we decisions the some strength dive revenue to call. quarter. LKQ. most midst results maintaining prouder achieved true quarter before cash few our while These of in financials of of our asset, liquidity to the our make of not the simultaneously protect strength

collectively As organic X.X% of quarter, quarter level reflecting $X and on in parts a revenue services X, period Global X.X% the XXXX. comparable billion, noted Slide accounted acquisitions of a in was the earnings team the monumental quarterly revenue our delivering the while soft for by environment, and level currencies a company's highest increase. impact net from in the revenue total for recorded milestone and the X.X% third the the divestitures history. declined decrease of Notwithstanding third reached

an was EPS last GAAP increase. year, On was a adjusted During diluted basis basis, $X.XX diluted compared $X.XX to a XX% XX% per year-over-year $X.XX to on the quarter, compared a increase. third share or earnings $X.XX

Now on to the segments.

organic third declining XX.X%. services The North and and from Slide quarter X, liability is by note of in According and third parts to growth declined reflective related for during will driven miles revenue in XX.X% demand XX%. vehicle America down with fuel and declines meaningful organic levels you year-over-year CCC, the were as lower quarter the parts reduced both collision As revenue services of mobility consumption. evidenced repairable in claims

materially looking largely data, transmissions. better mechanical statistics remanufactured data. many predominantly in that repairable was for claims, experience we component demand ability to by than claims outperforming to suggesting at market products Still the the of supplier's line trends collision specific share outperformed the There particularly disrupted revenue the collision aftermarket strength due So provide and as while were parts, clearly we our the gains our in engines both are our to based performed participants CCC our continue marketplace. again, product. product When aftermarket salvage were revenue down,

past permanent the been efficiency over quarters. takes quarter. the dig will of million numbers XX% $XX that were fourth to of scheduled the have highlight of with cost those that efforts remanufactured direct company's and in America in deeper inventory, our discussed Also achieved demand have our reductions continued decline, [ph] shortly. quarter, balance we I the despite believe actions with be history. segment pace reman quarterly share Varun end Given the puts to level the parts capture we quarter. cost third also gained our revenue competitors annualized margin the able North in completed, to EBITDA dollars in the the breadth At the keep into and these few in would XX.X%, the over highest was and the operational of finalized North third we America depth from

true reliability, we our market coverage parts are Taiwanese a as its and we the many importantly, LKQ's announced have parts of of competitive for fulfillment nationwide winter From perspective, parts business. is AutoNation the issues unrivaled as headline our well it business partners growing of a crash for prepare you depth difficulty both on breadth testament supply closing commentary be the This that on Regarding of parts service to the and aftermarket call operations know, aftermarket August a collision inventory. positioned product supply and profitable with the strength rates, more aftermarket will leading and landscape, season. collision aftermarket sourcing minimal a in business our

our and product, adequate delay we in getting product week for tightness heading Depending an in said some XX delays on supplier shape ships the uptick expense. some containers one overall Taiwan right the freight inventory seen days. have on from witnessed to in on good coming is in our anywhere from and that, direction. Having causing and space have We

the a salvage job the still per exporters our at at volumes to are during auctions. quarter combating have fantastic the pricing optimization increased precious car auction team executing prices, parts our On by more past front, and in and used harvesting seen our the portion efforts surged in depressed, uptick at us as we've We a a increase vehicle done the the significant resurfaced experience metals But strategy. prices though the price pricing over activity price slight did has a months. these recapture allowed combined with rise increases of auction. rapid When

but that we as As few this over reverse trend are return pricing, have volumes quarters optimistic enter in will the to QX, change we seen little we next level. historical

these pressure some settle levels. in taken over pricing when well productivity While salvage near-term, put XXXX together above will we America gains, out our on may dynamics EBITDA the with the believe term margins margins North longer

X.X% services the the Total let's the very compared revenue quarter our X% and witnessed prior regions the and a quarter in quarter currencies X.X% a third to while third for of X.X%. negative acquisitions Now parts trend. most anticipated during decreased X/XX Europe. added turn [ph] and year. impacts European to segment the encouraging volumes, Throughout stronger than revenue Organic divestitures negative for rose was

our or not businesses the As continued pandemic to I stated when the businesses. in disparate European in the as to at regions same were profile the not of our in profile by same growth the but all time QX. the a in call, growth creating COVID third quarter second quarter, different difference were variability growth each This impacted across for degree, compared

completed day revenue by collectively key the year-over-year also posted a a UK, declines best markets region European basis largest generally certain on Central IT the such ECP which to posting we us All were branch Italy Page followed the revenue time XX on the last of growth reflecting Importantly, the Germany with remaining terms restructuring the double-digit down month of UK, operations, bit all and a cost the the the EBITDA continued margins likely in as will of with quarter. year-over-year restructuring September organic Netherlands In XX proposed the nearly softest the closed infrastructure. growth enabled and basis. and in branches this have single-digit the quarters. ECP's be Eastern on per and first unprofitable branches branches Andrew running for

of job parts profitable in advantages our result ECP mechanical done efficiency a margins. believe best UK, investments. margins the distributor the of the enhanced leading the the on scale operational market the of we has key initiatives a terrific as given operational aftermarket in delivering has growth management and and Local As the

to despite contingency the being Additionally, the in stock manage the negotiations. place is team risk and executed significant around in uncertainty plan continues any effectively Brexit safety UK. our Brexit thoughtfully The

Our lower team in right size of their to European the the demand. levels midst inventory continues

of report those customer our I our and largely stock. product levels of has happy be to chain to safety daily been by we at softness levels across line of supply because of we time As inventory actively late, rates our neither seen fulfillment in our assure continue industry-leading. have am broadly this sourcing line review, impacted, service to and

program remains the Lastly execution LKQ on X Europe, Europe of our on track.

set the and the been we talent the Day, cadence remain original and both and we forward platform services some and two. quarter have our innovation that and have delays total product at management other procurement [ph] shared improvements last seen of and by relative September magnitude digital mentioned, provided month projects, Arnd or our of review our in the Yanik have with rationalization, in margin plan the we’ve and during build harmonization acquisition Investor event. strategy, As efforts In areas. ERP Day the a activities yield the comprehensive activities comfortable forth to out delayed while Investor slight pulled accelerated our Again, XXXX development,

on Moving Specialty. to

revenue During services had of X.X% parts and total of the Specialty growth and for balance. making the third composed quarter X.X% organic growth up of revenue our currencies acquisitions and segment

organic we industry-wide our suppliers product in clearly That are product you expect significant with on can constant our the and due market-leading growth rates demand out the the challenges, allowed better lost revenue to road. of work in we to supply said, chain. by believe robust communication more gaps and were to meet help the and inventory we our that Given we wherever our low availability position to to with get hindered some as the us them than fare would competitors believe

XX% to and in corporate product businesses an we to increasing represent waste are levels The and our result. In a perspective, processed transactions of with we things, this customer third RV weeks extended opportunities These we sales oil, of new a have few of into agreement other provides vehicles entry by quarter we located these that entered XXX,XXX as XXX,XXX From divest particular, well. From batteries. Stahlgruber quarter, gallons and have diagnostics seen in grow to quarter Specialty tires rates fuel, serve our rationalize businesses Virginia small diagnostics noncore recycling its an mobile businesses among Poland. ongoing perform started effort in our finally existing season offerings. a development perspective, consideration to business our of asset during to the recycling Carolina. ownership that markets some with also past divesture increase particular to the base technicians an in, lower transactions the was margin increase finding XXX,XXX the during market during stake product related continuing and Over group net key inventory receipts resulting Also, growth throughout our the two the the encouraged North acquired through XXX,XXX business will negligible. our add XXX,XXX the into gallons ESP

XXX,XXX During QX tons we scrap steel. approximately processed also of

see reduce helps preserve that of financial the significant businesses [ph] all help which [ph] environment. scarce space protect our natural demand air levels and the resources, can You pollution, reduce of and for water

as a in demand COVID go our cases positive we across been clearly impact rates globe reaching may react. here? resurgence from with we on as It QX. how a the to depends publicized, business But solid in the from the can has recent there it impossible widely is to how during all-time globe around test predict where rebound benefited the quarter second Similar highs. So governments the surge have

curbing headed be are which utilizing mobility. certain other countries most lockdowns, such attending functions, and appeared sporting virtual but of to continue dampen to as schooling, more back group on Some will in-restaurant strict events focused to dining limiting and all activities

no the that a expect conditions overall industry we are not mobility the remains of the early horizon market as in the the second improvement foggy, in market With in any will apparent that Varun. generating miles are the not the flow. in to we backdrop, industry this significant material extreme business, quarter. hopeful to there as While evident overall do demand costs demand and return or drive experienced will to we quarter over catalysts at our focused improvement Until point intensely fourth remain I levels our call And in meaningful is cash of increases on turn driven. controlling

Varun Laroyia

Nick October a of Thank with management with an business LKQ a from successful in offices to am evolution, I you on an on quarter flow. and to shifted our everyone Chicago we opportunity the a speak rigorous in you, cash pursuing following good even principles. us very excellence I phase morning company’s consolidation joined stronger today. and the this become to the in results. generating very market-leading joining growth with third high morning in LKQ saw When by operational emphasis then, more excited becoming or quality I very profitable revenue XXXX, free disciplined application sustainable Since and key to focus

and of flow remarks cash with results per business $X last a all about a quarter XXXX the and flow and acknowledge producing while multi-year the margin of over the efforts. want I which the start we’ve earnings especially years. pandemic. quarter. of performance. share cash record the brief That the through and these are a billion I expansion is success consolidated the fourth cover to results I’ll truly thoughts X, three an quarter of months In free recap across the Our in with our generation in the outstanding made segment of work margins nine will indication over navigating teams our my and achieved progress shows third Slide

continue XXXX in Listen, adversely have are prioritizing in impacted from Taking shown growth charges. how except from has seven precious quarter away streak there would perhaps that has such years. quarters profitable improvement, quarter it metal year-over-year You that year-over-year we of played XXXX, revenue and margin of shots will uninterrupted, can’t that and this positive can was see of Each consecutive the can restructuring in XX I guarantee been impact, prices. fluctuations couple out in which as as pop gross point improvement. by up, last third basis negative effect know the the XXXX

I position we initiatives more However, our world believe we class to and help the that a goals. of fundamentally going [indiscernible] years in segments few achieve recognize their and each actions are implemented productivity that them provide ago rightsizing and stronger resilient value today than service to that margin across and customers a our through

our asset of and of the non-core profile of margin that with leverage. dive we program, Additionally, line rationalize being sustainable with increasing fully to initiated improvement a Shifting divesture deep benefits in were efforts improving expense the is portfolio development. margin EBITDA, returns our expense integral gross the an part in we or operational recognize and is lower businesses base, ongoing on changes our of overhead by that initiatives which margin invested to segment our offset capital, partially all the

two struck and operations critical bypass As actions had we that revenue the over relentless the in efficiencies, took such made in furloughs, Europe basis up pandemic program. program restructuring of discretionary through success with expenses to global critical that in changes XXXX reductions through you Further, salary during the been we cost years non-mission the inefficient overhead quarter. with seen third have restructuring operating reductions importantly, We tough improvement immediately permanent the points ongoing early will last along XXX including growth. the we've pandemic, align built program cost to When targeted actions savings and implemented another and more These the other we as actions to revenue spending. margin a to in recall, X year-over-year quarters the XXXX, decisive LKQ and acted initiatives. global drive accelerate

the effects of activity actions recovered. QX cuts increase operational Looking structure at coming revenue by X, some owing with in the cost our QX, in to followed see can you Slide largest as

at lower revenue the third quarter grew in Importantly, only we've than increase. overhead by XX%, a by expenses Sequential the back XX%. rate laid revenue expenses while increased

We consolidated the quarter by results you'll time increases impressive are encouraged of EPS profitability summary level these On the and across by of highlighted achieved results being the savings the a EBITDA business. and XX, and cost lines. on see the segment for slide

the the we XX. in margin and remained in first coming current long with praise impacts performance, metals quarter, It's and margin lower for into a The The steel pleased slide history precious fourth to a from by is and actions, benefit than of precious segment adjust company traditionally The although as how rightsizing very EBITDA prices. we've prices the on at scrap at to segment diminished and the will runs difficult the Moving benefit shown merits strong due to quarter, forecast enhanced was North as seen increase. favorable gross for the which continuing results level of metal pricing further the America the costs car are margin the highest supported last. third additional XX.X% two.

limited delivered travel an leverage, the revenue expansion a performance, expense North increase. operating medical the job expect improved expenses. costs result. America and are is North America of biggest margin by those exemplary team claims, some downward expenses evidenced incredible fourth salvage working care Personnel With quarter operating sequential as driver lower and gross We pressure and leveraging from done OpEx reflecting X% improvement effects. QX lower mitigate increase in gross to on has reduced headcount, margin costs the higher of in deliver to in safety overtime an XX%

As American its Investor you've in is coming outstanding strong at our X.X%, highest month and Day heard delivering performance. the XXXX. is North in operational in segment see mindset the excellence the the management produced quarter, figure team results, at of which third last and Virtual a second also embraced has EBITDA these margin Europe since quarter

local in work more or Europe. there the on initiatives We realize last right gross year meet improvement pursue full know segment of and XX, revenue have during EBITDA shown LKQ margin remained objective. largely is expenses, margin programs generated that of headcount benefits at positioned team Slide currency segment of we result to of they the EBITDA the to Day. we temporary limited travel are our for profitable permanent the program, expenses aid solid enhancement As and growth Europe half second Investor the now are down do to year-over-year most presented margin reductions, in was the versus implemented and in from place, XX.X% due that a and to Europe are as that Overhead to in the confident target but in XXXX X exceed government

to made able some producing is offsetting XXXX, leaving segment productivity. Slide XX to through and improvement opportunities was Specialty mix directions, year-over-year the XX driver EBITDA. continues There additional well significant efficiency perform pandemic, gross reductions of in personnel identify Specialty in improvement. point to a but freight to basis margin as drive and Turning in the primary expenses shift expenses impacting

in have operating benefits leverage. the seen come through these expense We

produced excellent made this decrease when increase million to us on all despite $XXX quarter quarter, lot difficult a Reflecting Each contrast the for vividly LKQ, in revenue XXXX a our LKQ of conditions QX upon my position. and few massive the EBITDA, that to hard of revenue. generated with segment and of and we've the million EBITDA million newbie QX segments. segment year-over-year to million of in year-over-year this work years, summary, happen. $XX an a challenging $XXX against three a $X journey recall who colleagues There's taken was yet A decisions over increase that have business this incremental thank as helped improvements. in you of got I last all So faced

generation. and cash as operating working We flows, benefit flow added quarter cash $XXX was QX in especially from for to to liquidity. another million successful on cash improved inventory. continue we Now reductions, flow capital,

program the this deferrals in in call, stated an offset As the tax, up to Europe quarter financing expected, continues the [ph] participation, that increase with reversed caught first partially benefit half we earnings on which XXXX. trade payment vendor as capital ramp quarter, payments, The working of second boosted the benefit. to some tax we expect VAT in which on cash in and flow up and supply income yield

the trade working quarter, on businesses, the fill normal back some support including the and requirements inventory XXXX, the benefits our this we During approach to expectations service, for to trends as we we capital of of plan rate gave year-to-date increase fourth our seasonality as revenue related winter. levels and based

previously balance run rates. mentioned, be exited XXXX, class while best able to operate we expect at we continue than fill isn't the for sustainable us in inventory a to in to effectively As lower figure September long the our

of We're though the XXX% flows cash As outlays were with EBITDA free ratio XX, were cash operating very that debt. on was down free just The presented Slide $X.X billion XXXX billion resulting flow flow million. cash Slide used cash conversion $X through sustainable. we XX, isn't to trend in over know pay in as to $XXX September, and the shown CapEx pleased on

stated I investment year you we've want end allocation However, to continuing the the level X during decisions, periods strong ratio, this made last at the X.X significant of our metrics. the Slide our net grade of the the to volatility. liquidity generate this times to reaching to progress to position. the month, leverage around to times times leverage net and level creates can flexibility XXXX. X extreme of Day We've Investor decreased ability demonstrates business I see in conversion at the which maintain XX, pursue from strengthen year while cash this targeted as our capital has On highlight

the target with gives combined net opportunistically program. position the appropriate, to confidence share solid and repurchase still total will a leverage debt when pay us restart We liquidity ratio down

we recall, different halted the remaining our to you As understand cash, our authorization. we conditions No pandemic's before, are shares repurchase worked program on under we we as when to the feel in voluntarily market than business. March favorable preserve will effect

a will couple of thoughts I on Finally, fourth close the with quarter.

are for As providing full XXXX. not guidance financial we COVID uncertainties remain,

the obtained presumes experiences us operating markets. despite from the on diluted are with quarter our months, reported One, not figure our million, statements, XXXX. mobility for that I in to which year-over-year, sometime pandemic the fourth the minimum be above is restrictions. cash figure. comfort seven adjusted lower that a earnings term, recovery the XXXX of margin over However, finally, $XXX last free efforts, gives we our making and restrictions costs our and the organic re-implemented extreme will the mobility which following repeat, than year we the quarter in in flow full per we double-digit fourth believe lower Though And major comparable revenue. come will up that full focus near XXXX. our parts project and services will through revenue improvement ongoing for revenue benefit be in of the expect actions share productivity Two, XXXX be extreme

time attention turn this thank with his and morning. closing again, back the comments. once you call And So Nick, to that, for for your I'll

Dominick Zarcone

team Regardless create of and market a three team each organization tremendous of positions The maintaining on laser on of quarter. update. the the to each culture how key putting granted diversity, customer, operating flow. all levels and segments hard every financial leading is and are has and Varun environment, a enhanced supported of of at free in on of day. focused LKQ one that center is confronted, In growing geographic, that of focused the strength one margins, rates driven reporting inventory performance again, by based cash for of which delivered these of our by No takes and levels driving unmatched in profitable our our initiatives our and our the the illustrates positions the and quarter once fulfillment strength our growth, revenue customer the product these work we you, at our hurdles clearly all initiatives do. detailed business, which closing, for proud our is across everything on all segments, high we of levels, the Thank

With and drive in long-term we open the our operating the are call shareholders. questions. that value Operator, in place, to will these are we best key now confident initiatives for continue to we ready industry, to teams the

Operator

Thank you. from of Instructions] [Operator Our Daniel is first question Stephens. Imbro

Daniel Imbro

there, on the congrats Hi quarter.

Dominick Zarcone

Daniel. thanks Hey,

Varun Laroyia

Hey, thanks Daniel.

Daniel Imbro

the to wanted I ask OpEx, on specifically one on personnel.

think America or the I that segment, but color any costs, that us kind portion of more in you think, I is expect concentrated slide, permanent Europe, to portion which down like should based what some personnel you by but of normalize? mentioned what based be come included of kind timeframe was some North merit of XX%, of in increases, or you Can lack do like eventually helpful? help also there think merit expenses about would that would it looks XX% back

Varun Laroyia

morning, to fact, back. at the the came the far that also. one everyone that's you you regards expenses. pretty look largest significant which those when key to a our temporary some element and third much second of morning we personnel really quarter is Yes by the in portion, this of I we good else mentioned, in as Daniel, terms cost of Absolutely. costs, With the the think savings quarter, joining area had in operating implemented us in

salary or those normal running had that on level of your if now. bypassed place, basis what in question of taken the a merit terms the are currently So trends is as of

out to North September. are front. America of regards with reductions back. more importantly, of cost and the on what both that's we the segment permanent is program driving I Day So that Investor that But the from Europe, ago think the going by that through. execution Virtual XXth about come of should is certainly weeks our seven we're and America perspective, hard exactly on at that North to come we've them seeing ahead think called benefit

cost our structure, happy So with are the there market. there all out in in given is the volatility extreme all we managing the way

Operator

Our is King. Stember of CL next Scott from question

Dominick Zarcone

Scott. Good morning,

Varun Laroyia

morning, Good Scott.

Scott Stember

taking my questions a and quarter. congrats great Again, thanks for on

Dominick Zarcone

Thank you for that.

Scott Stember

You the to a October, world, some the trajectory talked certain far increased just get recovery regarding Netherlands and of the any in particularly Europe, infection but trying UK, material sense have rates difference seen the about, obviously in you in what caution Germany? we've throughout seen from so of

Dominick Zarcone

think like. we driven what had with the enterprise, given we a obviously, we pretty are across quarter third miles good So the where was and

a up generally percent we while were organic the that markets particularly the Europe, in kind Germany quarter, key best the of were X/XX of the of September encouraging. was the was single UK, and so down the Importantly, and month, Netherlands of some digits, for quarter,

a haven't clarity around is, the down, positive quite in are to to now. much and going a of about France won't weeks severe just, a much key the going any far in since the cases lockdown we're just how We this saw business the okay. of But the in on have that as we The thus in move don’t impact are plans the we've don’t We react or Actually, to to are seen October, been an have how frankly. current just they've have going spike their what governments governments pretty significant so is just be. cases globe Scott But, into France, note that's us. of action the spikes and couple started think up to be. going that either on of beginning I call, first to

Operator

Stifel. is Our Brian of next Butler from question

Dominick Zarcone

Hello. morning, Good Brian.

Brian Butler

a said color. going, more to provide on working I in back go to bit going you I give little that or inventory comes maybe little fourth it a quarter just could that, hundred capital. color couple million little the of you get And anything wanted if right? bit bit that where is on that in of but was that us could dollars quarter help a you're maybe more a that fourth number know, some

Varun Laroyia

Yes, absolutely.

do LKQ quarter, been on. And in And One, that best it'll point also month, now than been operates, service know, key significantly are maintain quarter, be to a again. balance issues. conversion clearly revenue. levels as fill morning, then we generate is leading the running our of we you fill ourselves it's as build I With great and revenue at capital on point also essentially Investor again, rate priority a largely fourth of really is our And reasons, it's I investing has business revenue certain flowing based, this is to think out a outs, we the few We trending. amounts are. with the pretty the have little the regards to in essentially the one But this higher, are has We sheet lower It has are We called constrained do and but as to time, and the coming significant a that certainly that not levels. do currently working hard specialty to is segments, where revenue cash have then expect at last certainly bit Brian. how up and than for the proving to yet ability inventory broad based of in second regards within rates Day flex inventory question. want specifically. through, availability. is model inventory we any as trends pushing do which better class see that the proven the but given but significantly class free where any not to stock earlier inventory

we So willing are to that compromise is something that on. not

be we morning ago, also, that this free about least as from it $XXX for was a a full year, really, at roughly the perspective, year flow of million. XXX million So of called delivering out cash minimum I will

is that the you is, issue really certainly second key as our And think regards first conversion. then season, selling the sense to final double-digit about a makes So it the quarter. with and

so, inventory levels for And the when head into uptick is the the we now need that seasonal winter. as to we time rebuild

we yes, inventory get it will side. working see be capital some and will trade really So within back the

Operator

is Craig Baird. question next Our R.W. from Kennison,

Craig Kennison

taking question. my for Thanks Hey, good morning.

Dominick Zarcone

Craig. Good morning,

Craig Kennison

-- wondering particularly normalize? who good just mean, wanted things your just curious in to morning. small also hard then hopefully hey ask got I you've Nick, are businesses. it's small some I'm customers who how struggling, businesses as you I'm wanted I here change in competitors position to some the but competitive what struggling of also be got been see and that small sure pandemic here? I also are you've out may XXXX plays on here. as maybe about that all dynamic

Dominick Zarcone

an some was a that on soon relates Yes, demand it our ourselves, distributors protection competitors and quarter pandemic I perspective, is second kind wish up, controlling line mobility repair is I is, the are as mobility negative like the and And almost a doors put that much those the we if quarter you there in to there obviously is restrictions down the big along able will If risk. across services at how you know What going businesses a the like out being is we've tells Well really such smaller the only is our to do, of money the in what all to from a we got significant what restrictions overall to the in third but weeks had and as of hits as they have back early reality the and a keep that fact governments going distributed. impact. smaller shut their globe saw of on not for couple do the a business, we open. no another the demand with our vis-à-vis not crystal but industry the afloat on parts payroll people for ball depend obviously Craig. are also globe funding mitigate. hits and in government but the The pandemic stay in of seen which for the down. of plan The that's economic saw support. stimulus businesses UK, as demand customers. only going governments reality some and doors come to around will, it of market They related third opened also If on help not rash business

revenue organic up. was the in Our UK

going capitalized and struggle. taking larger, and we believe to So smaller continue this environment, we're are that are to doing in businesses the the well businesses undercapitalized okay share

deep for to to are the programs on smaller answer question on how going. your governments of are them the the restrictions kind all keep mobility in businesses and depends particularly it So what place, Craig, by

Operator

Bret Our Jordan next question Jefferies. is of from

Bret Jordan

Hey, good morning guys.

Dominick Zarcone

Good morning, Bret.

Varun Laroyia

Good morning.

Bret Jordan

AP forward? could Hey, obviously in I I with us program another do sort think quarter like of companywide belt ratio you where accounts guess as payable payables your experience guess to you you your what but get Europe feeling XX%, might a your run total and give be could ratio able think you is aggregate payables your Varun, under this be of

Varun Laroyia

segment. what basically but happy vendor Yes question still Europe. any actually is again, improved way in listen, in program very with And and we're our payable coming is great formal community. the our supplier the with supplier ongoing discussions to have Both a program the along financing is the within vendor direction. financing our tremendous looking case. All the We opportunity from some to of it us current in perspective we Over a going are physical there keep ramping in but number time in really lot for event see XXXX. we not come negotiations expect giving year, benefit extended those of moving all be that formal will fruition piece I'll the up. everything in where Bret things say seen We've cases European the right is an to also

working teams are that Our hard front. on

suppliers have is in There top actually through. large the Europe remainder prioritized to of still portion have the calls really those come forty come of though discussions a and strongly. We

it first continent despite at in one terms front has the is that should I absolute many be know also clamoring the account with that across am number, industry our pushing step are the find In to two an is in fact that continent. European get we time a time done protagonist European a number have a target is partner of we you now I the who this been multiyear this and in program the across giving to a and largest Listen, ways it is on glad chasing.

we up. program where expect we on Great being that So we the progress end bar not this are keep front. to know to with regards we alone and resetting made

Operator

next Our Stephanie of Truist. from question is Benjamin

Stephanie Benjamin

say, walk Hi, of again at top of improvement a a some sense environment? be you less by even but you that strategy this but these ERP some to today initiatives kind how the case trying Europe accelerated margin first okay down, guys line initiatives updated top can get tougher line you worst in reliant and on others. have delayed of thing reshuffled improvement? I'm just noted, meaningful Thanks. analysts Is you scenario, -- know, your are realized still

Dominick Zarcone

forward there like support procurement our goes on up, items a the our overall higher as up goes means little being connection the across because That's go that flow them that's trying both, of less items duplicative need XX, like clearly towards that back revenue, and a just is question. mean some September right. be level and Stephanie to good morning, Good are mentioned doing and that we things of of in dependent not revenue is currently in Other plan. pulling we all is, buying to revenue the those revenue, suppliers are benefits, relatively any which on spot. center, up. given platform in all go of shared inventories rid a again together going direct And it that supplier from the combination one our revenue The costs we're we're get that about of reality rebates single quarter. in down. service If moving that's a incurred our pull I go to really we're down, bit the some rebates to and a procurement really to

to And Other to things forward. so impacted it revenues. control and revenue connection not we're trying totally of is that's move the some that -- a things so by under our have are

is a a bag. it bit of little So mixed

Analyst of both and the the now XX magnitude provided we As cadence margin like of forecast comfortable are that during about the days ago. Day with developments we I the and indicated,

Operator

And Instructions] next of is Daniel [Operator Stephens. from Imbro question our

Daniel Imbro

all side followup discussion mentioned on A are guys. the of the in increasing. your I cost segment touch call Varun equation, wanted you to

you a headwind versus maybe it exposure. you in situations? cycle today freight what said in your compare Thanks. potential you and that where to third when pretty really slide increased the you party just the can were you we for in think at where big about the talk margins are was maybe have compare two I to mitigate freight you offsets Can last guys, at XXXX, you risk

Dominick Zarcone

absolutely. an Yes, are is freight. seeing our yes, Freight And increase both actually in calls. we impacting

the America, spot about aftermarket spike from have supplies for North coming rates think we Taiwan, If ocean a in you seen in Daniel, freight.

have So product issues inventory spot in service it but no on getting we We're that spike a that through, availability. our and yes, rates has still We're from front. seen spiked. actually to get able

States, online seeing this I point of and The world one other you piece they doing uptick incredibly is, also final have is, how in they toward in in purchases. Europe, the think forwarders the see well I'll are that the probably, freight FedEx UPS same United e-commerce the an up. and you are but can also the and big and carriers charges essentially taken we are really folks their

drivers, The no to within that the for So challenge there. matter, there it's others per different se. tightness or industry demand within ongoing finding distribution is else our of perspective, in anyone some space, delivery from out that

up learning’s of saw this kind those we EBITDA. was around. like And that incremental do fill of and The country are when so $X yes, there up. where We've example, we of did obviously piece put into was of our for where charges to kind 'XX, gave obviously being from necessitated. that it And $XXX was us I million shuttled those segment example was more efficient what with really are And certain have million it become all as about regards from the under first that the revenue a from perspective, rates on basis, where QX initially, product being done XXXX, just it place. we got keep call and apply we amount quarter transported to was, cross

the regards that So of up route of clearly, that into proliferation number teams our the couple with net an that the years. equation. uptick learning’s all is road is optimization, certainly matter, of it the worked of past being mitigating that lot across on or through a of there deliveries to end front, network But taking the we're place, and for our

all So with three dealing in fact, our teams, inflated the in really are teams this segment costs. segment happy with way spike delivery

Operator

questions. we Zarcone Instructions] remarks. have And the any Nick to I'd closing no turn further for [Operator call like back to

Dominick Zarcone

for call. Well, the here terrific us third thank this you, results just in believe on everyone, joining Again, XXXX. we quarter of we've reported

make sure the obviously to to control pandemic, for globe that of hard what's lie both working going the ever far impact the are can We may ahead we with everything do our occurred deal under what thus forward. and

on You going right get was we to to us are effort Boutross, birthday today. we can thank than a birthday to Joe you team give none absolutely for team a our continuing because huge lastly, On generate trust cake the want where be it are call focused that on of a huge is piece everybody other that I today. cost before been extremely off has to and started structure to LKQ we this whose And cash. at

most on sure know send I'm know call folks you. I to Happy the well, wishes. and Birthday of you Joe, the So they best their

we Take So we talk and appreciate care. fourth your attention. will the quarter after again results,

Operator

disconnect. concludes participating Ladies for and now gentlemen, you this and today's Thank conference you call. may

LKQ (LKQ) 29 Oct 202020 Q3 Earnings call transcript