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 for the three months ended June 30, 2025, decreased by $69 million (1.9%) to $3,642 million compared to the prior year. This was primarily due to a $122 million (3.4%) organic parts and services revenue decrease, reflecting lower volumes and increased competition across segments like Wholesale - North America and Europe.
Despite the revenue decline, net income attributable to LKQ stockholders increased by $7 million (3.8%) to $192 million for the three months ended June 30, 2025, compared to $185 million in the prior year. Diluted earnings per share also rose to $0.75 from $0.70, benefiting from lower restructuring expenses and a favorable tax rate.
Net cash provided by operating activities for the six months ended June 30, 2025, was $293 million, a substantial decrease from $466 million in the same period of 2024. This reduction was primarily driven by unfavorable changes in working capital, including a $226 million increase in receivables.
The company experienced a significant organic parts and services revenue decrease of $122 million (3.4%) for Q2 2025 and $273 million (3.9%) for the six months ended June 30, 2025. This indicates ongoing difficulty in achieving organic growth, particularly in Europe and Wholesale - North America due to market conditions and competition.
As part of the 2024 Global Restructuring Plan, LKQ divested operations in Slovenia, Bosnia, and certain operations in Poland in 2024. These actions are aimed at exiting businesses and markets that do not align with strategic objectives, with the plan scheduled for substantial completion by the end of 2025.
Management reiterated its acquisition strategy focuses on 'highly accretive tuck-in acquisitions with significant synergies or critical capabilities,' with no large platform acquisitions expected. This indicates a disciplined approach to M&A, prioritizing strategic fit and integration benefits over large-scale expansion.
Restructuring and transaction-related expenses decreased substantially by $41 million for Q2 2025 and $60 million for the six months ended June 30, 2025, compared to the prior year periods. This reduction is primarily due to a $31 million decrease in expenses related to the 2024 Global Restructuring Plan and a $10 million decrease from Acquisition Integration plans.
Selling, general and administrative (SG&A) expenses increased as a percentage of revenue to 27.4% for Q2 2025 (from 26.3% in Q2 2024) and to 28.0% for the six months ended June 30, 2025 (from 27.2% in 6M 2024). This suggests challenges in maintaining cost efficiency relative to sales, partly due to increased vehicle costs and foreign exchange impacts.
The Europe segment experienced a significant organic revenue decrease of $81 million (4.9%) for Q2 2025, attributed to 'difficult economic conditions, heightened competition in certain markets, temporary operational challenges.' Management's ongoing '1 LKQ Europe Plan' aims for structural centralization and standardization to improve operational efficiency by 2027.
The company explicitly stated that 'there have been no material changes to our market risks from what was disclosed in Item 7A of Part II of our 2024 Form 10-K.' This indicates stability in the risk landscape as perceived by management, with no new significant threats identified in this quarter.
The 'One Big Beautiful Bill Act' (OBBBA) was signed into law on July 4, 2025, with provisions effective from 2025 through 2027. While the company is currently evaluating the impact, this new tax legislation could introduce changes to fixed asset depreciation, R&D capitalization, and interest deductibility, creating potential future financial implications.
Across multiple segments, the company cited 'increased competition,' 'lower repairable claims,' 'demand softness in the automotive and RV product lines,' and 'difficult economic conditions' as drivers for organic revenue declines. These ongoing market conditions pose a significant and escalating risk to top-line growth.
Wholesale - North America, Europe, and Specialty segments all reported organic parts and services revenue decreases, citing increased competition and demand softness. For instance, Wholesale - North America's organic revenue decreased by $36 million (2.6%) in Q2 2025 due to 'increased competition and lower repairable claims.'
In the Wholesale - North America segment, organic revenue decline was 'partially offset by pricing initiatives and targeted actions to increase market penetration.' This suggests some ability to leverage pricing, though not enough to fully counter the impact of lower volumes and competition.
The Self Service segment's gross margin increased by $4 million (3.1%) to $120 million for the six months ended June 30, 2025, despite a parts and services organic revenue decrease of $7 million (6.2%). This improvement was attributed to 'favorable movements in commodity prices and improvements in vehicle procurement costs,' indicating effective cost management in a challenging market.
Cost of goods sold as a percentage of revenue decreased to 60.7% for the six months ended June 30, 2025, from 61.0% in the prior year period. This indicates a slight improvement in the company's ability to manage its direct costs relative to sales over the longer term.
Selling, general and administrative expenses increased to 27.4% of revenue for Q2 2025 (from 26.3% in Q2 2024) and 28.0% for the six months ended June 30, 2025 (from 27.2% in 6M 2024). This indicates a less efficient cost structure relative to sales, partly due to increased vehicle costs and foreign exchange impacts.
The company utilizes voluntary supply chain finance programs to negotiate payment term extensions with suppliers, aiming to improve operating cash flows. Accounts payable outstanding under these arrangements increased to $450 million as of June 30, 2025, from $416 million at December 31, 2024, demonstrating continued use of this strategy.
The '1 LKQ Europe Plan,' scheduled for completion by the end of 2027, includes the 'implementation of a common Enterprise Resource Planning platform.' This initiative aims to create structural centralization and standardization of key functions, indicating a strategic investment in core technological infrastructure for operational efficiency.
SG&A expenses in the Europe segment were unfavorably impacted by a $7 million increase in professional fees related to 'several strategic central and regional information technology initiatives.' This suggests ongoing investment and focus on enhancing technological capabilities within the European operations.
The 10-Q does not provide specific details on company-wide R&D investments, new product development from an innovation perspective, or broader digital transformation efforts beyond the ERP implementation in Europe. This limits the ability to assess the company's overall innovation strategy from the current filing.
On May 2, 2025, LKQ entered into an amendment to its Senior Unsecured Credit Agreement, extending the maturity date of the unsecured term loan facility from January 5, 2026, to January 5, 2027. This proactive management of debt maturities improves the company's financial flexibility and liquidity profile.
Cash outflows for share repurchases for the six months ended June 30, 2025, totaled $79 million, a decrease from $155 million in the same period of 2024. While the company still has $1,636 million remaining under its authorization, the reduced activity suggests a more conservative approach or shifting capital priorities in the current period.
The company declared and paid two quarterly cash dividends of $0.30 per share during the six months ended June 30, 2025, totaling $156 million. The Board also declared an additional $0.30 per share dividend payable in August 2025, demonstrating a continued commitment to returning value to stockholders.
The provided 10-Q filing primarily focuses on financial performance, operations, and risks, and does not contain a dedicated section or specific disclosures regarding environmental, social, or governance (ESG) initiatives, commitments, or progress.
While not a full ESG disclosure, the filing confirms that the Chief Executive Officer and Chief Financial Officer concluded the company's 'disclosure controls and procedures' were effective as of June 30, 2025. This ensures timely and accurate financial reporting, which is a fundamental aspect of corporate governance.
The 10-Q's risk factors section (Item 1A) refers to the 2024 Form 10-K for a comprehensive discussion of risks and uncertainties, but this specific quarterly report does not introduce new or escalating sustainability-related risks or opportunities.
The Europe segment's organic revenue decline was attributed to 'difficult economic conditions' and 'heightened competition.' Similarly, the Specialty segment faced 'demand softness in the automotive and RV product lines resulting from declining consumer sentiment,' indicating broad macroeconomic pressures.
The Wholesale - North America segment experienced revenue decreases due to 'lower repairable claims,' while the Self Service segment saw 'lower parts volumes from a reduced number of customer admissions.' These trends suggest a challenging demand environment within the vehicle repair and parts industry.
Fluctuations in foreign exchange rates, particularly the pound sterling, Czech koruna, and euro strengthening against the U.S. dollar, had a 'net positive effect of $0.03 on diluted earnings per share' for the three months ended June 30, 2025. This indicates a favorable currency environment for the period.