Consumer Discretionary
Auto Parts
$9.56B
49K
LKQ Corporation engages in the distribution of replacement parts, components, and systems used in the repair and maintenance of vehicles and specialty vehicle aftermarket products and accessories. It operates through four segments: Wholesale-North America, Europe, Specialty, and Self Service. The company distributes bumper covers, automotive body panels, and lights, as well as mechanical automotive parts and accessories; salvage products, including mechanical and collision parts comprising engines; transmissions; door assemblies; sheet metal products, such as trunk lids, fenders, and hoods; lights and bumper assemblies; scrap metal and other materials to metals recyclers; and brake pads, discs and sensors, clutches, steering and suspension products, filters, and oil and automotive fluids, as well as electrical products, including spark plugs and batteries. In addition, the company distributes recreational vehicle appliances and air conditioners, towing hitches, truck bed covers, vehicle protection products, marine electronics, cargo management products, wheels, tires, and suspension products. It serves collision and mechanical repair shops, and new and used car dealerships, as well as retail customers. The company operates in the United States, Canada, the United Kingdom, Germany, Belgium, the Netherlands, Luxembourg, Italy, the Czech Republic, Austria, Poland, Slovakia, Taiwan, and other European countries. LKQ Corporation was incorporated in 1998 and is headquartered in Chicago, Illinois.
Key insights and themes extracted from this filing
Total revenue reached $14.355 billion, a 4.1% increase from $13.866 billion in the prior year. This growth was largely due to the net impact of acquisitions and divestitures, particularly the Uni-Select acquisition, offsetting an organic parts and services revenue decline.
Gross margin decreased to 39.1% of revenue, compared to 40.2% in the prior year. This decline is attributed to the dilutive nature of the Uni-Select acquisition, which shifted the product mix towards lower-margin paint, body, and equipment lines, as well as inflationary pressures.
Net income attributable to LKQ stockholders decreased to $690 million from $936 million in the prior year. This decrease was primarily due to a significant increase in restructuring and transaction-related expenses.
The acquisition of Uni-Select for approximately $2.1 billion complemented existing North American paint distribution operations and provided a scaled position in the Canadian replacement and maintenance parts market.
The company divested certain operations in Slovenia, Poland, and Bosnia in 2024, as these operations did not align with the company's strategic objectives. This demonstrates a focus on portfolio simplification.
The company's acquisition strategy focuses on accretive tuck-in acquisitions with high synergies that align with core businesses. This indicates a disciplined approach to capital allocation and growth.
Management initiated a global restructuring plan in 2024 aimed at enhancing profitability by exiting non-strategic businesses, reducing costs, and streamlining operations, with estimated costs between $130 million and $150 million.
The company is executing a multi-year plan to develop and implement a European-wide ERP system, which has reduced and will continue to reduce the number of IT systems operated through its projected completion date in 2027.
The company is committed to generating sustainable returns on invested capital by driving operational excellence and lean management across its businesses, continuously evaluating opportunities to improve efficiency, margins and returns on invested capital.
The company's operating results and financial condition have been and could continue to be adversely affected by the economic, political and social conditions in North America, Europe, Taiwan and other countries, as well as the economic health of vehicle owners and numbers and types of vehicles sold.
The vehicle replacement products industry and vehicle accessory parts industry are highly competitive and are served by numerous suppliers of OEM, recycled, aftermarket, refurbished and remanufactured products. This competition could negatively affect the company's business.
The company relies on business relationships with insurance companies and customers, and its success depends, in part, on the acceptance and promotion of alternative parts usage by automotive insurance companies and vehicle repair facilities.
The company competes with the OEMs primarily on price and, to a lesser extent, on service and quality. The OEMs are able to exert pricing pressure in the marketplace.
From time to time, the OEMs have engaged in efforts seeking to increase OEM market share and to restrict consumers' choice to use recycled or aftermarket parts to repair consumers' vehicles.
The company faces competition from local, national, international, and internet-based vehicle products providers, and this competition could negatively affect the company's business.
The company believes its Wholesale - North America segment has the largest distribution network of alternative vehicle parts and accessories for the vehicle collision and mechanical repair market in North America.
Within the company's wholesale operations, they focus their procurement on products that are in the most demand, based on a number of factors such as historical sales records of vehicles by model and year, customer requests, and projections of future supply and demand trends.
The company currently have operations in approximately 20 different European countries, which they believe represents the broadest and largest footprint in the aftermarket industry in Europe.
As the profile and complexity of vehicles being repaired evolves, the company has expanded and continues to expand its offerings to customers. In recent years, they have begun to offer on-site mobile and remote diagnostics services through their brand known as Elitek Vehicle Services.
As part of the company's efforts to integrate the operations, they are executing a multi-year plan to develop and implement a European wide ERP system, which has reduced and will continue to reduce the number of IT systems they operate through its projected completion date in 2027.
The company's wholesale recycled product locations in North America operate an internally-developed, proprietary enterprise management system called LKQX. They believe that the use of a single system across a majority of their wholesale recycled product operations helps facilitate the sales process.
On October 22, 2024, the company's Board authorized a $1,000 million increase to its existing stock repurchase program, raising the aggregate program authorization to $4,500 million, and extended the duration through October 25, 2026.
On February 18, 2025, the company's Board declared a quarterly cash dividend of $0.30 per share of common stock, payable on March 27, 2025, to stockholders of record at the close of business on March 13, 2025.
The company's capital allocation strategy includes spending to support growth driven capital projects, return stockholder value through the payment of dividends and repurchasing shares of common stock, completing highly synergistic tuck-in acquisitions and debt repayment.
The company's recycling expertise and efforts are a key pillar of their mission statement of being a leading global value-added and sustainable distributor of vehicle parts and accessories.
The company's Board of Directors refreshment process has resulted in over half of their current Board being added since August 2018, and currently, 38% of their Board is comprised of persons from underrepresented groups.
The company's Board adopted a revised Code of Ethics in 2024, which covers a variety of topics, including the use of company assets, bribery and corruption, conflicts of interest, discrimination, harassment, health and safety, privacy and data protection, and the safeguarding of confidential information, and reporting Code of Ethics violations.
The company's operating results are subject to quarterly variations based on a variety of factors, including, but not limited to, seasonal weather patterns and events.
The company has a presence in the Ukraine and are monitoring the situation there carefully. In addition, a number of their suppliers are based in China and Taiwan and so increasing strains and any political repercussions may have implications upon their supply chain.
Although the company does not have significant customers or suppliers in the Middle East region, they do have customers and suppliers in regions that may be affected by the Further escalation of the Israel and Hamas conflict and related geopolitical tensions.