LKQ - Earnings call transcript Q3 2024

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Operator

Good morning, everyone, and welcome to the LKQ Corporation's Third Quarter 2024 Earnings Call. My name is Lydia, and I will be your operator today. [Operator Instructions]

I'll now hand you over to Joe Boutross, Vice President, Investor Relations, to begin. Please go ahead.

Joseph Boutross

operator. you, Thank and Conference everyone, LKQ's Quarter Third Good welcome Earnings Call. XXXX morning, to today LKQ's and With Executive Justin are us Jude, Rick Senior Officer. Officer; President Galloway, Vice Financial President Chief and Chief and

refer issued morning presentation release for the our accompanying call. as this website lkqcorp.com as at Please for to earnings this the well slide LKQ

let me quickly Now cover the safe harbor.

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

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

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

the turn Justin over And I'm happy with that, to to CEO, our call Jude.

Justin Jude

and the our regions, relationships dedicated Milton. long-standing The region. by I is are employees Helene morning with affected of Thank want and particular, in you, to one all our LKQ's that been Joe, us thoughts call. the joining in many customers prayers with which hurricanes and is of good a that to to saying on the everyone testament Southeast, our start by those strongest have and

property report disruption team members, grateful damage daily have no LKQ life our fatalities among to many. affected and are to We but

corporate partnering financial that Fund into recommendations to to reached In could use relief pride have and out LKQ, help. to the being Employee hurricanes, local which in for Assistance operate. for our the our our on funds causes cover citizen with requests response communities we employees a good we At we ourselves earmarked and of

made have with organizations involved disaster also We charitable response donations efforts. to the

thank I members jumped aid communities. LKQ the like would into also action and colleagues to who their to team

to inspired efforts there and in am need are name, supplies by assist I cleanup. their individuals to to deliver truly many too and gather in the While those

to As begins provide support. ready the period, stands continue region LKQ recovery its to

out now quarter. Shifting to month, my style Day we the priorities. and an laid where held Last Investor I management

total third stated by and priorities to to focus value As maximizing quarter, that return. In a returning and evidenced reminder, my the this we would while the business I simplify, shareholder operational stakeholders. focus rationalize integrate excellence on our action taking

returns. start with the and capital Let's allocation shareholder

share repurchase in approval robust our by October generate authorization billion recent our announce thereof extend Directors and in our in through an We approved million our with free left levels, quarter, program of active to the extension and shares remain X of Board's trading active plans our recommendation market best coming under is future to the approximately cash million for the to Management's we am use our authorization additional repurchasing increase repurchasing were I a evidence is an on At to authorization shares. in capital of believe increase years, amount million. Board ability our the the confidence and the $XXX resolution pleased $X the XXXX. LKQ's to With flow. $XXX and

totaling our be $XX million, dividend a in we cash of August, and paid Board a dividend quarterly paid approved to $X.XX per In quarterly share November.

key portfolio and simplification pillar The is better operations initiatives. excellence drive operational returns. our to to our a Moving of

Bosnia and recently business. completed operation to of As our Mekonomen we our of the sale part review, July the of our in Poland sale portfolio finalized

transaction have coming completion we the another Additionally, nearing small weeks. in

this business American North management's a freeing operation, while sale the time. a up very will loss-making transaction eliminate our Now while of component small is

On existing the integration into front, we continue to work recent our on operations. LKQ merging acquisitions

is teams have heavy selected of are Uni-Select's on lifting efficiencies most locations rationalization, and additional the done identifying footprint X closure. for the While more

Andy are restructuring Hamilton SKU product over SKUs talked pleased reduce I'm and effort the and team Also project of the Europe, in Europe, or about scope. costs representing to and our quarter increase forward activities XX% efficiencies now pushed in to XXX,XXX than working reviewed to this on network. project in more logistics rationalization we XX our report the related groups,

XXXX. details efforts on more these have will in We

Specialty a the our new, combining as near lastly, a XXXX part into more transaction efficient warehouses X and of a location. completed a facility we acquired business And single Dallas, recently facility legacy of

to critically a Our culture in when top period line is the facing commitment important, operating is lean especially headwinds.

of this cost addition the our In structures part have of to all year, substantial we our process. already budget cost annual undertaking actions another as review taken of the are businesses

on benchmark conducting to where we productive Additionally, be opportunities effective. we study overhead a our are have cost cost more to determine and

and We half XXXX successful continued operational results. in to regard during this faced we revenue our not grow negative and the third were and industry have headwinds a of Growth we organic in of on strive the increase as economic impact wholly excellence pillar to our the quarter is final first many operating margins.

on While per roughly X% parts basis, to a was away. some revenue organically and down there positives services take day were

in on X% extended quarter. a a QX North greater falling aftermarket following than year-over-year but the decreases extent basis, X.X% repairable down salvage. per-day second claims trend to of claims with the a declined drop America X.X%

we and quarter tied Our discussed the in claims used in and car decrease collision drop not decrease in despite the that did to lose are rising share. X% pricing. insurance the down claims, factors economic the still only believe such we We showing premiums as were the volumes last

of projected anticipated and it we decrease we in contributed the than not QX guidance. second the higher volumes underperformance claims While to would quickly to relative an rebound half, was revenue

of operations of part previously suggest than this The longer our possibility we through XXXX QX a the budget And as period our claims thought. are process. teams we recovery strategy working with evaluation figures and

on pushing Europe's reported revenue second in growth, an the we Certain declined similar in the remained Economic the challenging a across of showed most Germany conditions is in was and in players markets challenging from contributing while improvement Competition quarter. others was Europe, range. day quarter, are with the per a U.K. single-digit last as but basis, markets the to notably X.X% consistent flat some also decrease aggressively price. smaller condition

the QX. down left calculation The first were mark of a incremental QX their result, part acquisition and was revenue repairable Uni-Select day the calculation. direct decline change percentage per in softness revenue in sales. of revenue post than of loss reported a X became X, Organic the what attributable to X-year from in join sequential paint as And to the is was organic for some than resulting There situation mix sales revenue on FinishMaster's paint American acquisition quarters. reps North the impact supplier We FinishMaster larger as XXXX. we greater the reevaluated and segment claims by revenue X.X% competitors. as part a whole, customers organic since August in The the the passed of

of working believe aligned service. our with stabilized business to LKQ's As back combination availability has we situation superior business we sales team the win and teams, integrated and and is the the

contributed headwind the having step backward low basis third the relatively Specialty XX% compared half. took including to with and vehicle RV organic sales. thus a a to a for rates on in quarter, significant confidence consumer Economic per and down conditions, sales, parts interest in revenue creating X% day first our higher lower

continue We expect challenging quarter. the the through conditions fourth to

compared year, segment EBITDA basis Shifting and Adjusted his points. margin to our earnings further will in on per to last QX improved these diluted by the profitability remarks. increased Rick by provide measures. numbers details share X% XX

to X X related of many and and forced call shut for any locations want nearly noteworthy for some have Rick, Milton we the as days. of locations Southeast didn't I Helene and between operations, XX% damage, quarter our closures our days. our and our X the and incur LKQ's of affected the in significant quarter. X were of XX% Before locations of a in after operations few the so customers nearly the Helene turning give locations North as revenue. these result of To items mostly closures to America Thankfully, idea on of forced be between down storms property will to Milton of X lost the down a mention impact effects. and Hurricanes our impact an were the

to strike continue month, work went this for on dock negotiations Coast Gulf the as them agreement final X East and a contract. on got Earlier back to days. A tentative workers

We to And inventory our on our our require rates believe impact into an current off impacts while adequate levels were be the over we have to Coast. delays to inventory estimated there support week coming business, minor shipments each days for strike the up. to is the fill already a brought to the some could months. East are expect experiencing We as day catch

contingency case isn't contract We in to agreed are planning also final by of January.

union with the reported to XX%. and a employees an the are nearly availability number Last with and performance that branch pleased the our normal quarter, trade of progress improved restoring we in agreement representing we in Germany, quarter, reached we operating in rising

a for the financials the turn guidance. call now review I'll and Rick of to

Rick Galloway

to joining welcome today. us and Thank you, everyone Justin,

Third reflect performance, with quarter some results solid but variability business. across overall the

factors North of lower due Europe revenue to conditions while challenging our came mentioned performed Specialty America the well in in Justin. by than macroeconomic in expected segments face and

year-over-year Investor repairable in and into revenue during This softer-than-anticipated Day, preliminary August a data indicating claims QX we in numbers. September were decrease claims. experiencing America softness total in larger-than-expected discussed the As continued North July repairable with

Additionally, but week negative on quarter. final Hurricane the the small impact Helene a of had

our QX solid employees conditions, further of claims proud we overcome, economic to were operating challenging are collision in remain QX focused all operating delivering lean difficult performance on model. of to These including who XX,XXX from our but through declines

third the now Turning results. to consolidated quarter

margins to Lower adjusted second $X.XX structures contributed simplify prior points the taxes diluted environment. macroeconomic earnings favorable EPS approximately steel Self-service segment with prices movements counts scrap of year figure. in year-over-year. saw share focus due to Self-service These higher improvement improved additional demand and share $X.XX. to Europe $X.XX lower net help margins for segments. the challenging roughly double-digit We both in in by posted a significant benefited EBITDA productivity share year-over-year in despite offset of Europe $X.XX than align the operating during a vehicle and EBITDA the ongoing improvement actions were some Adjusted and XX on repurchase procurement contributed costs of their program was quarter. decline to our improvements basis business from from a Our in to quarter per more our in levels our cost EBITDA straight and results. by

revenue North decrease organic However, a segment. aftermarket in and and contributed North the lower declines largely for by ultimately mix paint America America EBITDA to volumes, driven

Difficult auto earnings economic RV conditions in also segment. Specialty decline the to led in a in organic our revenue and markets and

implemented on rationalization we restructuring global plan As to program the footprint XXXX we with the noted logistics demand, a in and focused our restructuring align In expanded to profitability. additional QX, and business streamlining models. QX, enhancing current including simplify

Europe persistent and on market we America locations. plans underperforming execute and our are reduce continuing demand exit headcount to the and in Given to challenges, macroeconomic pressures North restructuring

costs As and are expected in periods future $XX for charges quarter. the Further charges termination expenses. severance, a for we in incurred other related million lease result,

Now for segment results.

with including from lower below mix as were wholesale our margin cost the of effect taken, to point The year X. the decrease third around reported we other was related actions the collision for product XX aftermarket EBITDA restructuring Uni-Select XX%, Slide relative on the a Last revenue with segment not enough expectations the quarter full America has Going integration lines. margin than a and XX.X%, quarter, to would last revenue as offset North Uni-Select gross basis projected full year. to margin higher be impact efforts a margins synergies of margin other aftermarket dilution. our year the posted

reflecting margins cost were more also costs the decreased lower commodity and trends related to XX personnel prior compensation. year period. in points year, the down, basis in expenses primarily Relative vehicle prior Overhead America, favorable revenue, to North salvage reflecting incentive prices

and largely effect decline. inflationary the With and significant pressures initiatives productivity leverage the organic the Uni-Select synergies revenue of offsetting

estimate North headwinds the salvage the impact the margins margins will low and repairable to as With as from mid-XXs full the we EBITDA well for year. in the on hurricanes, claims America's be

the last markets. to XX improvement Looking to economic offset year. difficult XX favorable some prior Overhead input expenses Gross over slightly were were at period. year of increases reported able pass cost a compared EBITDA help point margin Slide rose in to pricing points X. certain by along segment despite margin XX.X%, the we conditions Europe basis a basis as

pressures, in expenses on restructuring Italy. While related productivity productivity year basis and included pressures to have measures ongoing largely offset support nonrecurring value-added our a SG&A a audit offset matter expanded cost inflationary sold XX point expenses and We overhead these to to prior Europe measures the tax goods on XXXX remain the focused in of efforts. charge plan inflationary

will taken margins XX to Many mid- fall the of we line benefits high and will productivity, and EBITDA Xs. notable in these volume with the and are more With heading talked actions believe initiated ago, range. we've XXXX. the When this quarter the in in have but we expectations current to be in be been EBITDA actions into address expected fourth to Europe process, we in days margins

On double-digit expect a to margins in basis, EBITDA we long-term deliver Europe.

effect Moving product overhead lines of X.X% in XXX auto in pressures resulting to revenue EBITDA and the prior driven competitive XX. RV Specialty's for challenges leverage costs. and on organic business. pricing Slide declined a softness basis the Demand compared decline remain margin and by year, the primarily points to

EBITDA We and quarters. margin in in improvement dollar pricing organic margin leverage flat were to of to implementing saw but believe revenue be percentage higher continued quarterly have organic our X primarily will full given X%, segment lower terms, as changes sequential due last the gross Overhead the the roughly net closer a year revenue were expenses the revenue declines. We in operating been improve decline. to on

manage XXX in and QX, Self-service controls which improvement cost in segment improvement generated an an to favorable procurement a basis is in steel X.X% EBITDA movements profitability. vehicle million. year. Efforts $XX almost terms, from with segment by prices combined drive costs, margin increased last In point EBITDA scrap dollar helped overhead

sheet. to We million $XXX tuck-in to in X bringing total free Shifting in cash acquisitions, one the in and including quarter, the cash million one flows balance Europe. produced year-to-date in $XX $XXX flow during We and approximately Canada our small million. invested

quarterly third approximately million quarter, to totaling dividend $XX outstanding million continued our $XX In to down share addition, our we with paid we and the shareholders million. return in $XXX debt. In for value repurchases

dividend XXXX. with quarterly policy continue to aligns capital this allocation also allows our At $X.XX stated will per our We with capital us and share flexibility dividend retain into the level, payout for strategic allocation.

and least We us commitment. are towards quarter of XX% this on repurchases, free share kept committed our dividends pace to deliver flow our activity allocating to at and third cash on

have cash and invested cash $XXX dividends of million a almost and On free or million we repurchases $XXX free year-to-date basis, our of flow for flow. share XX% generated

to remain from a ratio maintaining we expectations. had billion range the increase investment-grade EBITDA, $X.X As debt total of a XX, prior September level and committed of rating. but a We our slight our debt within of total of leverage with quarter, X.Xx manageable

QX at rates. was of a down QX, the effective borrowing lowered from recently slightly result of benchmark as end cost Our X.X%

has fixed a interest $X.X have of billion rate variable rate We rate which million in which on fixed over of debt, provide been XX% effectively with our swaps, debt. $XXX

I will guidance. XXXX update full on close an our year with

year-over-year of the half same We volumes remain expected would the repairable in prior claims of drop decline in level America North at back the guidance, the in our into year.

we third business the the our full weighing in are headwinds quarter, lower-than-expected year of in hurricanes combined guidance. in volumes southeastern drop portion greater-than-anticipated from the Given the adjusting revenue, our organic and down with Specialty U.S.,

eventually impact will level expect view to the them we in in quarter market-driven off volume previously, XXXX. fourth but mentioned us declines abate the and As

actions, enough have through to of mitigate taken expectations. cost not will the margin impact controls effects offset year these we action While those full and be to the revenue lower

rates our based is recent edged and with prices tax shifts of precious guidance earnings. foreign The near global our assumes in scrap line geographical rate On third in mix September market guidance slightly Our conditions up and quarter. exchange, that trends due XX.X% includes to prices. current metal on the to hold and roughly

metrics call. year on full XX QX Our guidance have updated earnings been from Slide

We full in to organic guidance. the prior negative QX decrease The and along negative is the revenue continued to the softness Specialty, services of points basis this in of year organic the impact XXX XXX hurricanes revenue X.XX% a the North basis the parts the and midpoint, points expect in XXX points. in At the reported range from lower drove of decision negative America with range. U.S., basis

linger in the expect North headwinds XXXX. into line America will We top

on QX and budgeting the year, are our expectations in we'll you through next February. We working update for our release process earnings during

In to is growth originally slower top line the similar in the and than economic anticipated, saw we recovery difficult environment be in organic Europe, we from what QX. several to QX expect markets

expect of lower of slightly result from Specialty. As adjusted includes America a of demand these we the of midpoint. decrease driver be primary $X.XX the previous $X.XX our The a North $X.XX, headwinds, to market-driven decrease the to and and in diluted in range dynamics EPS

us in on expect these to cost addressing focusing and we'll revenue control to and the our heading volatility continue we structure, will these productivity While in partially revenue restructuring QX those trends, team items including will see and offset which into trends initiatives, is within execute on XXXX. further our benefit

approximately sheet help year free remain annual and million heading The XX% continuing EBITDA from needs into trade while capital balance full the targets balance expenditure to guidance. capital working the deliver $XXX profitability unchanged management flow prior to will lower expected conversion cash despite of and Diligent XX% target XXXX.

comments. call the back to turn time. Thanks I his now Justin closing for your will for

Justin Jude

Thanks, commentary. Rick, the financial for

immediately CEO, they LKQ an for do work all Things but we stronger make conditions go to threw addressing day every emerge even us on close As help these don't as facing us to and ethic of issues. thank each Their are will colleagues exceptional company. to challenging the second to resilience curve team I quarter balls, the what industry. work LKQ want and plan, to QX and a none, from went few my book and according always the I knowledge, our first my LKQ

excited I team, I proud am work future. LKQ's and this very to am with about

the open now ask for the to operator line I'd up questions.

Operator

Baird. with first Craig Instructions] today question Our [Operator Kennison from comes

Craig Kennison

light that there. you I just more seeing just going the in it's that could tactical move paint wondered you're in competitive a respect What's on category? competition or shed if and you landscape to with the change on a think issue Do by competitors? your the

Justin Jude

I'd both, Craig. say of maybe a is This mixture Justin.

creates year, a announced and to We you time, to quiet accounts talk into in talk last Uni-Select, And folks, the some pre-acquisition unsureness, couldn't we FinishMaster months, post-acquisition. then couldn't went we kind and quiet were X and to If period of some lost had or remember, acquire at the pre-closing intent we FinishMaster it that that leading customers. period.

As worked you on advance. in months get those contracts X know, some of

there a that larger was after business migrated acquired we being and Additionally, been lost had that by and away was FinishMaster, on MSO closed FinishMaster.

rapidly we, sales obviously, teams. we talked So integrating the footprint, about the integrating

that the grow but collectively. of to the at we we And share. And now, so have aligned that there's started that loss we've moderated anybody And think compete really, can with groups to expected loss and be, started kind a on we us where the don't of we the think showing our and we're refocused availability. sales, right off service teams position

Craig Kennison

as persuasive you of having with Maybe your part whether on proposition and LKQ portfolio that's could value light if overall just, customers? the respect your paint to has to Justin, shed

Justin Jude

lower you than mean guys on Yes. on may the as know, is margin typically parts. I paint

prior once they that LKQ of competitors week maintain cut delivering even or service we costs lot FinishMaster a their deal their as can so the that acquiring paint profits, would them, make from twice delivering the to level And to a with, sure week. such a

warehouses, markets body some our the we're into day in the FinishMaster integrated day, a footprint, delivering of the day, we've when every LKQ shops now same times week. X So

vehicle. put so on And to able paint that we're

hard a for to distribution paint service once with day, increase we the businesses to because or both again warehouse same any day once aftermarket, from us with there inventory in of a have the cost. like-for-like, going from a add then used on marginal other twice a our already and us of level, standpoint paint an just these is and in truck depth availability, So a for cost it's compete out parts, structure, just

my So competition opinion, from cost for service and a to that. level to hard very it's, in serve, it's with compete our

Operator

question Scott comes ROTH next from Stember Our MKM. with

Scott Stember

aftermarket. this the coming I'm remember shifting caught something the for out lightning where of in aftermarket? last year, aftermarket in America, market back what to going parse increased. to parts back Is Farm North on is happened trying tough and function bottle availability of I you more their because the and into guys Within State salvage? of there customers focus a Or comparisons preference are a

Justin Jude

fees. I'm I by going our XXX% like line, look lightning a the claims the really mean Yes, collision. it's aftermarket I to Scott. that, say you repairable business, in at tied bottle. that if to tied use I way, to it's would

see market it's drops, necessarily the OEM so -- some our aftermarket don't about know our when get the drop, a time lot competitors share. talked or piece. share, whether competitors any they're or if that's if And price, trying necessarily of the call, time, pressure the more distributors, market they to aggressive the don't a last it's that on other get we've losing any -- so downward in whether puts Like claims on the that's aftermarket if bit little you

in aftermarket does the but claims don't down, pressure with the create the to be but it we So would tied margin piece. some line but on bit, chase a repairable little issue the drop aftermarket, price

Rick Galloway

just add that to minute. on just Scott, to a Yes.

revenue and up look year was that the last to Farm repairable compared happened at there the claims, versus strike help State at you back in year [ thing repairable revenue. last to did our last our plus and the overall the the the with ] where OEs downgrade other between that The is that a significant year of think claims coming about was, difference half

you're tougher on at when aftermarket you're the industry well. as piece. looking the comps the correct So happened what within last year comps, There are

Scott Stember

and it. things, way storms of strikes. which quarter fourth of how there from of the last There year? question. and any impacted And quarter down because Or transitory well the strike? a coming as Got then lot the was the from items, just lot this a probably quantify of storms to Is impact for and the your that the guidance much full was

Rick Galloway

Yes.

So let me take Scott. that one,

there far at There and as on very storms. quarter the third the little a As of the hit on quarter. was the impact, minimal -- that last just impact a I it of was bit end, about an Helene impact week the briefly a there's talked

into are property And Southeast but revenue. the of cleanup about, there that receive QX, we're as talked did very there's well. obviously, still didn't still impacts as we significant significant hit cleanup we much, damage, see, on to Milton Helene seeing still was Justin quantify. and Going We the trying

of doing Investor EPS within Investor I our what So if guidance, overall midpoint. our you us at about our Day; about being previous Day, we think part about we're talked talked what below revenue and

is it the we where was to where back consensus $X.XX, year. the think I think below $X.XX, look I was is when for

of about then little now what we since repairable than a which thing claims had that's decline further around about in a So in X%, north bit the it's really X%. QX, were expected. saw only think little if expecting and what was We happened you is we

hurricanes So that that we're and And there's framing happened. out. additionally, a X strike then

we $X.XX essentially So $X.XX that's down to consensus get dropping the from that roughly $X.XX. how that

Operator

Our Stifel. next with question comes from Brian Butler

Brian Butler

is And into about a second of what that? I you sense point, is looking a first that Just trying macro and some you're on -- thinking to that 'XX of issue kind talk or of see XXXX that at what from will a gives the some what claims this half? of you a get timing abating confidence? of pressures is When perspective about abatement -- that you kind you're at mean half XXXX? of

Justin Jude

consumers, it's or I that's Yes, if I premiums then raised, claims insurance Brian, -- affecting talked what that of car to whether their as on really the output the mean, they you about, used may fixed. value vehicle repairable is is the relative how that in that that's an have cost deductible a piece, after is whether

couple there I of might declining seen think used months -- here we've X with have we've of but a car there, almost been years couple and a seen increases pricing. of

And back kind so hopefully and car in in of and and industry we -- the moderate, improvement. talk some to some used to of of of we outside pricing, kind should point, that as we at the industry, half forecast XXXX people start show the

those As from makes it to their it's it repair increase, consumers or for start values car to used whether even a collision economical vehicles, more general maintenance.

the some car half year. mid-XXXX the pricing overall, of So we next I show to and improvements back subsiding, headwind say, in used start should start think would the -- some of of that in

Brian Butler

And XXXX? is we think foregone $XXX And back do million coming you What on $XXX again either helpful. how hit being capital about maintained That's that of or online in to flow, that the that then spending number? for million Okay. XXXX. out free cash pushed kind

Rick Galloway

to you in capital of how the the about, decline we're the our cash has working with a about able usage is on overall Yes, trade talked if to our extension going all the bulk financing items pushing going look of terms. impact this chain let's we job CapEx a $XXX start year team is a important So of capital. up, Trade of nothing's which earnings, that. I make focus saying, we're our our managing that off, can Brian, is trade nothing it. think to that going free the and some we at even always long look, supply What -- take capital, need for sure it's been is impact has working tremendous that's off large it flow, But I because look working A what growth. at king, we're and million, EBITDA I cash right? there's achieve there's had dollars. When talking overall done

X that looking when months, returns. And mind some divestitures, that X about he acquisitions as came just so And he's of at for or Justin on, at we're keep you the wasn't at hurdle overall in like things well, rates. hurdle And something rates. can delay the overall talking that, there's months, he looked the looking

that hurdle some So honestly quite we've are the there that in there. just pass items got don't rate

there's And pass to it's bit -- going of the little so if look, a rate, been a a of change our hurdle there's cash. of better not use

way that. the of to that's think so And

delaying repairs anything would It's more that we've going this delayed because or of it's pass to the It's and doesn't a just year. in that not hurdle the do. number it of, project rate, it like just sort probably we're come year not that, next increase

Operator

[Operator Instructions] Barrington Gary question Research. with Prestopino comes next from Our

Gary Prestopino

SKUs, and XX% XXXX? mentioned want that you to into by going you XXX,XXX XX be we Europe, reviewed what would that then changes benefit Will do. then Justin, product this completed the XXXX you in end -- implementing categories, start about of of you will can

Justin Jude

of not Yes, to forecast going we're end by that be XXXX. completed We do Gary. the

analysis an -- or be by they're market hundreds dynamics SKUs, projecting Our year, end back relevant have make although on be show our be early to mean But to of We're QX be XXXX. early of coverage of improvements, those the more by changes the small level so done our by half SKUs the making we -- needing start SKU, and done done early complete in brands of in thousands markets of we'll by not, start you're understand XXXX, to sorry. will of sure the should that what those brand. some I of those that and it may, XXXX, coverage expectation whether stocking but this able is won't certain talking, than it obviously, a application the to in

Gary Prestopino

or smaller various Okay. these you lastly, and with with small and operations And that these in then exit you mean done I that that basically in of operations? Europe, all dog Poland Bosnia. just closing with countries have considering cats operations other you're -- the are any in do

Justin Jude

Yes.

Any North America and divestitures my tell is smaller ongoing. that more analyzing. other Our show in don't that, we it. be horizon There the operations, you, review on we're in some Europe the about just you fund. portfolio or like always constant is of something There time are do preference may both a

to So once continue at that. constant review and again, we'll ongoing, portfolio is our look

Operator

from Ryan JPMorgan. next Brinkman comes with Our question

Jash Patwa

This for Brinkman. is on Patwa Ryan Jash

in expect Justin, sophisticated especially headwinds provide face on both line growth now opportunities in incrementally in I headwinds, weighing incremental if low do less discipline? with you to profitability of quick the start of front timeline lack recovery top as acquisition visibility to lean and current broader Europe, to see whether market a and industry into have would industry relatively the be these North opportunity seemingly term environment the accelerated America the as pricing if near And peers could gauge the and M&A arises? trying a LKQ conducive willing given Just for of follow-up. consolidation the environment around

Justin Jude

Yes. I guess, I piece. mainly mean acquisition the around

with heavily acquisitions large is share that over that looking in to but we're a We're upper the are definitely company, teens price not came short We towards time. any and highly are said into bring smaller after these out tuck-in synergistic we'll of repurchase. the synergistic, our acquisitions acquisitions the mid- period returns There stock way weighted now. bring right publicly have

X acquisitions where that distribution. of a may we Think market have has step

we that that may X-step be One distributor, wholesale and and acquire wholesale X-step. to from our of our distributor customer market that a can convert customers is

they're and are be continue there we've opportunities, but highly done So to going some. those, small are that some We'll at and to look synergistic.

Rick Galloway

you think the overall to add within to -- talking one things I heard was consolidation on marketplace. about I the just of

we're were anything that able to things LKQ And of And talking, and overall little be the we're many the can thing, we that a there's we're we when pretty discussions. on concerned or you conditions XX anything seeing there's to about with over just so a combat with something the and respond involved the line years, we something with won't was that know, not of us bit change overly having that footprint have missed let lot that. acquisitions we're major if we is that last there, confident one shaky a in on. the the One market that

Jash Patwa

diagnostics just color. around calibration you to color business. very and wanted -- on helpful are Elitek could with if go-forward get the I scope that's And business the an No, us that update give Any And how and the years? ongoing anticipating past the implications here? couple think should has How you lawsuit of growth scaled how about of we over potential Repairify?

Justin Jude

Yes.

some can augmenting the make growing strong internally The shops to body and still coming But sure we down have, there That MSOs strong, the to figure it's but work of of have right was claims they repairs. while. as calibrate cases, do kind actually slowed for mobile in the with given do growing. of it's it business repairable down, margins good to business body growth business for shops. our some where out now. us still us. vehicle time On majority Elitek free a is we In technicians technical extra pretty the piece, the That and some how for has is going to

our Repairify again, is side, have concerns not the piece. don't is case. the that sorry, the business -- mobile once with of remote On we on on much I'm the -- IP on But any any

Operator

question next from Jordan our Bret comes Jefferies. with And

Bret Jordan

sort of capital inning generate capital On you see working talk flow how what Could and year? working at still you you're cash there that cash available you'll seeing. after you're the from much about this

Rick Galloway

financing. those. in. the it working financing particularly payables at another seeing what's I expect have to really Bret. this supply as go working as able with probably to to If our capital, far then a especially XX% our the And we're operations, overall going year, We're improvement starts we weigh that And making obviously at with European big push year look goes, capital Yes, and the up or almost on versus at on of would program. again drive commitment when the beginning the to I make been the supply trade we the about seeing be made our cash X this overall look flow that free as We've that market year. we're we chain cash free a flow sure on as chain in XX% year-end deliver well and we dynamics year.

And of a team doing doing job tremendous the is so that.

probably bit be to the then able it to enhance have think end and off time XXXX. little XXXX, I going that more a starts back into of we tapering

Bret Jordan

could I Or then in markets? the Okay. other prepared competition in of in talked think relatively in was of You sort and And European or sort competition the parse as about U.K.? all Germany primarily And you there GSF out is out U.K. weaker, in bucket? called Italy remarks, your Benelux maybe Europe. regional you in of stronger and Is dispersion Europe, sort same that other

Justin Jude

in and I economic U.K. the economic area. Germany, would say slowdown the were the Benelux worst ones

market, competitors GSF Going we your I every market comment U.K. have competition. but in in. we back operate which for to is obviously, mean, on the in

So or that the dynamics, I market, smaller any time day react differently. we every competitors different would competitors and market several day have with there's compete we some sometimes of But headwinds those say, out. in

Rick Galloway

-- I getting of to thing overall One the the close end we're think questions.

put simplification we to also analysts, the our of press and presentation, through pull did in want effort for the couple I One we came out a of make simplifying gross we're segment. doing the that there. out things and earnings the release for document our new In then just the that by margin of sure

it the overall That's have give document. giving. we you. problem to a I just that of me Let that don't something out had pulled

that Craig, there's I know couple as know a well. I questions. had So of you mentioned

in And In XX.X%. in XX.X%. had we North we and Self-service, XX.X% Europe, in XX.X% In had we had Specialty, QX. had then America, we

helps on if to you want call. sure guys with I your So that make you had data the the models, just

Justin Jude

not one and our the we're we And But day. employees did going I It's be they for XX,XXX they shout every on up sure every industry has structure, grew they and first the what know not on wrap cost time. the now. or challenges to I'm won't I last huge our give faced that, how out extremely employees of reacted to share. time. a to like over share our call, making with lose a the right looks each do want huge reacted how proud It that of on thanks

honestly, quite there's scale, our in culture, that and company, size the future. Our with and winning beat is, our can LKQ nobody us

thanks for you to the do. that huge guys employees So everything

And on talk that it, also all and appreciate next. to huge We today. we for guys the participated call the on thanks will you those

Operator

concludes call Thank our today. Thank you. you This participation. for your

lines. disconnect now may You your

LKQ (LKQ) 24 Oct 242024 Q3 Earnings call transcript