LKQ (LKQ) 28 Feb 192018 Q4 Earnings call transcript

Good morning. My name is Kim, and I will be your conference operator today. At this time, I would like to welcome everyone to the LKQ Corporation Fourth Quarter and Full-Year 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Investor Boutross, Joe Instructions] Relations. [Operator

your You may begin conference.

and and you, Earnings Fourth LKQ's Good LKQ's morning, Financial Please as LKQ's for Conference the Laroyia, and everyone, operator. slide the morning, and well refer our earnings the Chief lkqcorp.com welcome President Zarcone, presentation website Quarter as at Nick With today to for Executive us President Officer; call. Varun Thank release Executive Call. to are Chief Vice and Full-Year Officer. LKQ issued this accompanying XXXX

Now let harbor. me quickly cover the safe

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

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

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

segments, with fourth financial morning, related dig high into at this certainly few everybody I the in the back closing and guidance This come We attention discuss your before quarter will good then appreciate time to morning you, a Varun hour. some to and level and will then the provide and on XXXX our related Joe, Thank remarks. comments operations early I details, call. our the

various expectations forth set no call. have in the progress key implemented XXXX. changed the in operational related outlined some guidance, last our the our made We throughout to challenges with on our the these experienced four Taken did fourth we quarter operations. focus Make whole, good we previous achieving in not however initiatives primarily as themes our a we in European we challenges mistake,

Our of of continued optimization our revenue on profitable plans, cash progress margin conversion strategy. pursuit allocation improvement the growth, capital excellent and our

on quarter. Now to the

of in $XXX charges impairment to charges was on for parts items XX.X% from include $XX of acquisition XXXX fourth of stockholders quarter LKQ of the As $X.XX. LKQ's operations attributable $X.X fourth net fourth the noted adjusted Net over billion, XXXX quarter stockholders as the same of by the and XXXX per our net continuing revenue related period quarter Varun to last million, share operations address X, an basis, related on Slide his investment for an commentary. fourth from The stockholders same organic income XX% continuing Parts fourth of aviation period million of growth of year-over-year. XXXX, the XXXX. for million, was Diluted revenue the $X period in compared $XX services On $X.XX the compared quarter for $X.XX will increase the million a equity These of recorded Mekonomen year. for the increase billion per XXXX XXXX of the XX% decrease both was attributable these $XXX was of to share as diluted for of goodwill a fourth non-cash and recorded comparable to LKQ’s XX%. $XX income of XXXX X.X%. was XXXX recycler. to quarter to the attributable decrease an of to earnings results an quarter share of a impairment earnings million company's tax for in reduced

attributable XX.X% for With the per period to Slide quarter the an earnings on capital compared the shareholders. to price approximately LKQ allocation, respect common diluted $XX its of million $X.XX shares an share fourth stockholders return increase of as adjusted of XXXX. a per the same noted of XXXX during to reflecting of million fourth X, for As share XXXX, stock our the to Company repurchased of was quarter at $X.XX X.X average $XX.XX, capital of

a call, to strategy. affords utilizing As the and our stated position balance drivers cash healthy repurchase all strategic earnings opportunity growth us strong capital a continue program maintain in our during our flow allocation share to simultaneously last investing capital

turn the highlights. segment quarterly Let's to

know As our quarter for North Slide in American compared fourth services parts of X, to you comparable in revenue quarter X.X% was growth of and all the segment XXXX from the organic XXXX.

an X.X%. in that started battery and X.X% the claims growth Transportation, for Also XXXX, the only X.X% November. five achieved U.S. Excluding from American United basis of according was per FCA, X, according outperformance for impact miles January on of the in we and full-year the with nationwide the Still, to up well old in a to on XX performance the due relative to our CCC which that model all over continue North being collision collision- on in to consider in and auto the X.X% especially down North when years. in we parts for past just were contract increase did in fourth We you driven number claim in XXXX. X.X% liability-related alternative in was years Department vehicles basis the quarter perform segment, the rest sweet QX up the the our utilized continued increase a the XX% October data and to years of just CCC, this our is States were believe of the growth America, spot number organic down

We the teams’ recycling of analysis a input XXX,XXX that of platform and I loss predictive in which in X of which environmental the our we data converters, prices, oil responsible in value effort to During software more fourth gallons service pricing is service this of X.X QX, will turn at for million operate. calculating of the catalytic proud the determination early determine part salvage believe pillar effort launched provide of a X.X outpacing auctions. analytics the X.X million XXX,XXX of vehicles to to a true quarter Related our LKQ business, most accurate the business in XXXX. key XXXX, over being This of of in things, recycled uses tires, aftermarket played a in processed between in self of million fuel. growth parts efforts batteries, our resulting in multiple North the stages we XXXX, organic among for our and accurate in American the and in salvage key parts full of used communities and am be businesses, the refine to price recycling over optimization waste million first line mission that environment steward partner vehicles implementation the gallons with total in a in role other beats the the time the

aftermarket growing with number parts also parts XXXX. of We and offerings each and XX.X% our certified X.X% grow SKU in the collision available continue to offerings respectively total

and ongoing progress efforts Roadnet fuel respect inflation. despite North to with the pricing efforts pressures, and margin our Our cost American realizing recovery make to platforms. facing and in and from disciplined solid being team These wage, freight continued improvements terms primarily continued with of discounts, include telematics

miles North America manifests fourth in quarter XXX,XXX inefficient of were driven routing X.X%. better with were consumption by the and XX% the fuel reduced During Roadnet through created trucks,

the Stahlgruber. primarily by Organic was Moving to other was revenue revenue our segment acquisition our The of our pullback the parts and reflecting Atlantic, services achieved Benelux growth from side for European QX and of X.X%, markets, the key services growth of XX%, UK, driven parts the well of levels and soft Italy. and including demand across a European expectations. below many total

our growth. The for expectations. a economic have a negotiations growth have Parts but our Euro that, conditions tripped looking a market shaped the In for economic our closely shrank whole below Italian is full-year fourth we but QX. officially Italy's in negative well revenue signs struggle with to Italy. recession our Europe a line QX, STAHLGRUBER the a witnessed impact decline X.X% in in shown With negative with organic Rhiag XXXX, growth organic continue and full-year the monitoring are difficult into and most the create Brexit well. During UK for economy a as demand X.X% organic and soft as has were expectations following Car could appeared Germany our to uncertainty XXXX When QX reporting the contraction results slowdown. business sometime, and continues in with economy XXXX expected in guidance. economic by outlook at performs quarterly posted single-digit which quarter the low to which of overall market participants on expectations economic operations

of relative customer a could currencies Brexit the do outside of UK forward what expected of a discussions Indeed in by what of inventory countries. the any hedge terms demand. majority of consumed and country most in the of couldn't servicing issues FX EU changing that purchased both the between within to currencies respect UK waiting our create the trade of and originates ever a in into purchases inventory whole getting and automotive Regarding the the and the procurements sterling the the Andrew from comes the the couple of Page parts weakening is Accordingly using around place to the A fact cost of further world contracts. a few portion is comes including see With the UK months UK. de-risk the EU. other we revolve disruptions ECP inventory

of movers, based On create the to within working advanced ECP cash including of even building at holdings movers, facilities SKUs. their partners prior activities key certain a suppliers moving UK we to of which our increasing including have and with impact the at This slow number working the proactively UK coverage suppliers been extended stock the facilities all end front of directly a our to inventory of ECP inventories. months businesses and have several placing orders all these types them have have and of terms minimum March. with mid the have is we The variety to of involved of ensure fast payable and product been aligned working on stock offset interest are buffer

related UK meet we our broadest able deepest in customer's we that to the inventory While there be will to the will confident unknowns many have the impact our believe how market and we and are Brexit needs. in Europe

to maintain addressing some European Company strategy provided we believe and challenges we also While are opportunities our operating our market-leading has assure for our headwinds European continue and our weakness we've specific stockholders. market the to long-term we overall Company actively that positions can experienced the capture the presents

relate all closing Some cover of initiatives of will programs in changes in changes I to involve others leadership. our productivity the my a key new few remarks.

MAHLE X. for President XXXX, as currently unit. initiative President Officer for and X record Car for suppliers I of XXXX executive we which January across in he As front. in the a Officer. was will engineering, is automotive acquisition Andy on Tier Executive Manager From mentioned European responsible successful Arnd brings December Europe talent April of Aftermarket. aftermarket Chief Euro he their solid ECP was Executive will roles, LKQ announced the global key May company great Officer. Corporate this Management Europe. Company Operating Arnd with to last Arnd segment Europe held Vice Investor LKQ XX progress of integration year, appointed of is that Board XXXX, where this and our leadership Executive announced Andy General the LKQ to Specific to He ECP’s report X sales efforts. CEO in several Member a be the on and the Chief On to and Quinn, joined he business that the is XX Europe MAHLE Chief company’s has team. Hamilton Parts, was a directly where John including on strong and nearly Arnd years application Operating automotive Day the will addition of experience of Franz made join of been QX Group, XXXX, Vice

variety of network that to XXX to Andy for retailer During the over leading Halfords automotive branches. as group growth ECP ECP, from with and saw a roles leisure period, over UK's the Prior XXX XX held locations. unprecedented management Group,

Officer. Administrative primary the at worked recently human and overall Additionally responsibilities The both Supply their to a including position resources, are on CBRE ECP and governance task for key XXXX ECP, The this Varun from a with for Andy Chief excited and functions to finance, team, Officer XXXX Johnson actually TX together Chain Chief and legal, customer Chain Supply have ECP team. freeing times focus at to including Chief two respective supply Controls. this facing support ECP’s on on people to The Chief is during Administrative we operating logistics Officer for main facility. and and the him added at of back chain to we are focus and The leadership activities, and thereby worked leadership Officer role the the matters. responsibility

enter on branches XX we existing focused in we of Eastern Finally, new Europe. up branches just handful planned the for openings during we QX of a XXXX, we new are Since and branches with opened Europe, productivity Eastern Rhiag maximizing total XXXX, as year. in opened of acquiring now this have in five a our

Now to let's segment. move Specialty on our

to reported and strong full-year QX, including margins X.X% the of Specialty Specialty than XXXX revenue and parts X.X% growth quarter continues results since X%. levels deliver more During XXXX. segment organic entered their total EBITDA acquisition both with we growth growth achieving in this of fourth and services in highest of revenue for

instructions BXB scan search new including allow their and utilizes XXXX and camera products barcodes. This by to device of thereby launched industry power VIN mobile into device. to subscribers providing brand to and XXX,XXX Keystone’s device more. videos, system, team numbers includes SEMA or and users app a to eKeystone UPC mobile saying harnesses the system all the vehicle installation any eKeystone QR, of the business-to-business data simply that capable app images, XXX,XXX a Specialty for the capability is XX,XXX best putting VIN access cataloged The XX,XXX proprietary category approximately technology, SKUs, During mobile voice-to-text Show, and in app the

rates are This initiative Operations our and Automotive box I downloads Keystone far We thus pleased Specialty incremental the early to outside teams’ X,XXX to solutions have which effort with adoption that and the service our and tremendous drive app generated close of the sales. enhance a think deliver from credit customers. was customer

to two Moving $XX to our million. like compensation has our finally, development, a wholesale management during acquired structure of on three programs, in businesses I Board directly quarter, Europe for the incentives would to America the changes businesses net of wholesale we total whereby Company our fourth corporate North consideration approximately in and approved wide highlight with suggested are that the objectives. in lined And

key leaders in improvements incentivize as program and in will bonus dollars percentage free revenue, the our of globe, XXXX generation. a as both across annual the cash as For well flow EBITDA,

and the on plan, capital, For based three-year the a will incentive be over invested long-term cash period. revenue return organic growth incentives on growth EPS

I discussion through will over to a long-term And details results metrics. XXXX who the of you program target creating discuss segment guidance. the turn the are the now run of share our and we Varun, addition, In new achievement high same to performance the

accomplishments good realize. and take results to quarter, for consolidated Nick, back before through us remarks. on cover quarter morning Thanks, results featured solid our for the The some call. you for current will liquidity and everyone several the us our Nick opportunities it joining fourth to position, and closing provide segment further XXXX turning guidance to and I

had of line to through positive performing free capital to and On that $XXX and integrate for with am the carry am due and million we one, initiatives. proud is report beyond. was working the to so and operating which effective I $XXX XX into in an segment the we the I generated this And flow produce Company's improvement very XXXX stage. flow achieving year-over-year highest fourth to confident which $XXX management, points business which margin happy basis our three, largely EBITDA, lowest highlight. to management in this I that dedication its the quarter, expectations in finally, continue am team's are metric, cash flow Specialty at cash quarter side, total in at STAHLGRUBER three history key operating cash of the fourth Number segment, points the million, the historically in million. annual margin Two, projected synergies will

experienced other of in America Nick the we softness growth quarter On as side described, the in North both some the ledger, revenue and Europe. in

is relatively revenue GAAP this the previously created well, accustomed in basis under-performance was while $X.XX is softness color typically I segment the $XX are noted, segment we the There to than performance. withstand variance EBITDA As reporting. we impairment Europe provide on our quarter revenue charge spread the million fourth softness an in The quarter of discuss per North growth attribute this on on pressure between to two margin. will a investments, specific a further in segment adjusted which and about after-tax when figures America share. in larger totaling the resulted to an or able

And necessitating on is Unless the Mekonomen policy its quarter. and in XX, XXXX announced has We year December drop the to line, our we our part results report impairment charge in in related full-year which investment million yet is acquired was to of We the in $XX a $XX another its recorded our non-cash of worst We disappointed price further XXXX. write-down. The we is behind earnings there recycling dividend in us. are business that a in North price. end, and our price the fourth clearly million business, the Firstly, need changing in investment. as coming prompting our recorded we is recorded Mekonomen. stock its Mekonomen, dampened resulted in charge for first the unfortunately outlook of second, Mekonomen we for quarter early record annual this will the where a to $XX test the in that in that stock recognized our stock third million has in the and America share revised This equity quarter. another quarter hopeful through $XX a goodwill attributable million decline charge results the charge turnaround goodwill which conditions of charge, impairment. Since impairment loss market loss further aviation performance of in weeks, the and have impairment

turn on for the the and increase The to as percentage results. mix both points than consolidated XX gross points presentation segments a positive I’ll basis more XX Slide in Europe. to improvements and Specialty few XX of offset related to impact negative Now XX.X% consolidated margin quarter-over-quarter a Europe

lower now we Europe the this consolidated more again Specifically gross acquisition, larger segment the could of a I as margin the up but following percentage mentioned than STAHLGRUBER makes impact. results offset

the operating the due leverage basis to negative $XX or quarter-over-quarter Our XX to primarily increased fourth the related expense primarily in by expenses average that financing. to of higher revenue balances to I quarter mentioned STAHLGRUBER XXXX, earlier. million compared effect to attribute softness debt points Interest up due Europe XX% was

Diluted happy the a to continuing to the report down Adjusted to of rate quarter no were Moving amounts relative third quarter operations quarter attributable estimate. to roughly $X.XX The in was income rate million taxes, LKQ completed consistent EPS annual a reform discrete adjustments year-over-year. $X our tax higher year-ago. XX.X% XX% EPS quarter were tax with I'm roughly provisional there the quarter our the is a impact from reflecting effective to $X.XX stockholders and for net QX. rate the for was XX.X% for improvement negative comparable from We analysis U.S. $X.XX impact fourth base reflects which fourth items. was tax the that from the

XX, with to Moving America gross the flat margins Slide were segments the quarter during fourth the prior XX.X% to year. of on North compared

enhance salvage pricing pricing model newer at line gross on in in initiatives to in moved aftermarket we the our are for gross have implementing mix margin operations line in experience to products generated each costs higher decrease tools realizing we Our that salvage towards been car Similar the offsetting shifting have with year the benefits car. a successful purchases. margin aftermarket

XX with were steel with expenses declining Shifting Our non-recurring negative sequentially. on and self-service working to margins organization. costs rent freight opposite faced and expenses impact North of setting wage non-recurring recovery compared the year-over-year three gross noted operations basis and to controls XX the an Consistent scrap benefit as vehicle basis prior prices. America to year. first flat rising these costs we of drew these for higher charge. roughly a a initiatives increase quarter. headwinds and and through well and We XX actively year in the expenses last points we basis Facility operating over headwinds factors of margin working expenses a directions points saw inflation increase and address point cost to also There utilities to both quarters these to throughout as were increased due previously this basis related terminations the few insurance the

fourth interest And in quarter basis Going remaining a reduction strong expense other in bad emphasis asset we had impact. improvement to XX related XX the basis the to The related on sales on unfavorable collections. EBITDA line. reflecting movement the non-recurring non-controlling had segment finally, a that favorable points point gain XXXX basis we point of primarily receivable an debt XX a direction saw our in

for the XXXX in North roughly minority in but from reported was prior North million to of the these compared While thereby a loss XXXX and the quarter a of businesses gross businesses these comparison. in fourth our a the allocation In Last the of - $XXX income loss segment figures, America operating year non from unfavorable fall creating margin the flat subsidiaries we the wholly-owned wholly-owned profit to operating EBITDA subsidiaries non results allocated or operating year-over-year America total expense reported of shareholders, profit. below impact whole year. from the

XXXX but year-ago, XX, third by Slide at flat Looking prices X%. to quarter scrap down were the comparable of relative quarter the a versus

follow EBITDA $X scrap over little EPS. pricing scrap effect The team from in million will launched the mentioned margin segment in the over or higher intensely last on mitigation time. or management generally reflects adjusted Changes impact as focused remains a the prices of scrap cost steel car had sequential As lower a negative prices diluted realization costs initiatives approximately and year. we on $X.XX movement on previously

European Europe gross to quarter, Slide XX.X% the the margin segment our in over XXXX. in a was XX, point on Moving increase in period fourth basis comparable of XXX

Benelux point sales ongoing a a Our Sator expansion, in improvement X-step show basis to with business the the to continued that XX the a region segment to from model margin contributing private-label in specific strength market. and X-step in move

impact Our centralized improvement consolidated mentioned last a increase results, a were The operating experienced consistent a over procurement XX had negative XX% increase basis the quarter EBITDA million, growth programs. basis yielded expenses, point rebate on operating a year. $XXX I STAHLGRUBER we previously a disclosed totaled previously year. segment point versus sales projection a on with European leverage. lower the With XXX from ago. supplier the comparable to year as for from European basis respect

same and period reiterated The EBITDA headcount. controls shown to including expected Slide implemented XXXX. to quarter weakened X% about dollar the relative and geographies, pound EPS for for cost As three-year the the effect adjusted negative team period commitment the approvals both revenue its and has from XX stringent the quarter. European and team euro softness percentage due objective basis margins in from to both as quarter end double-digit the all over in previously points on stated EBITDA by a management that The fourth sterling a deliver United of of started the additional causing in the fourth XXXX, both of against revenue the of $X.XX reviews by XX, the was last year lower January of XXXX, Segment Kingdom than results segment discretionary down to on the Italy. translation has X.X% spending

focus the points to solid gross comparable over Specialty XXX on improved in continues relative XX. in Of Slide to expenses additional The by this non-recurring Turning percentage margin one the Operating XXXX business basis results. points fourth to increase to This quarter year. from points were and of purchase expense period causes the the flat relative FX and was million, previously on expenses up for mentioned up revenue on the $XX by bad to debt segment XX Segment in and reduction of Higher were of our mix. partially prior XX% quarter as to EBITDA attributable segment XXXX, as in basis a and Specialty from of related is percentage fourth vehicle Specialty a amount, a XXXX. to a falling points percentage was offset EBITDA impact collections. XXX basis basis fuel amortization XX accounting, to revenue deliver X.X%. related

move Let's sheet. balance and the allocation capital to on

presented pay and million for the quarter an or LKQ was stock $XX note $XXX while quarter, the increase XXXX repurchase of launched inventory As for full-year. collections, CapEx million, million $XX cash strong the flows following on fourth at receivables Slide for was our further the into will in momentum In we and last third you the growth. emphasis operating up million program XX, that cash $XXX quarter or moderate $XXX on flows Operating a credit XX% versus borrowings, the million downs was $XXX a facility October. million quarter repurchasing on for late under the made XXXX.

more For XXX revenue the strong of this defined a by a of inventory XXXX, borrowings efficiency down flows. am funded cash delivering XXXX in as by our change has a and paid the come broad-based capital scale credit cash payables strong and of commitments percentage heartened working by $XXX I has reflecting this as program was structural offset to improvement the operating improved flow. receivables million programs. on all of we facility full-year of the Trade we by points, basis incentive towards very as ahead could working compensation capital deliver

XX the facility tiers the the Moving by we increase margin January simplify our changes extended in quarter. to to the maturity facility amended and pricing capacity points. by billion, immediately to fourth $X.XX a of basis extended Slide reduced credit loan, revolving XX, our credit XXXX, and The term through offset lower a borrowing

cash, caused of $XXX lowers threshold credit fourth As is eliminate we as cost about had executed based of XX, part Breaking STAHLGRUBER in though the the impact net million quarter. further amend excluding as by metrics in the unrestricted we lesson short-term or note through last crucial Slide and XX track, billion to December, a on of key facility the the XX that in a movements the that debt of had months tiers we've $X benchmark Xx credit we revised EBITDA. the calculations please our extend, borings facility the X.Xx resulting pricing the On large of are we of investments.

we've STAHLGRUBER once We the transaction. add will analyzed the into calculations

I'd guidance prices assumes and to tax the the our rate guidance levels dialed and note like that for hold is at XXXX. current FX in Now annual scrap at detail XX%. rates Please annual that

the guidance Union. Kingdom's the no assumes associated with material Additionally, European exit United the disruptions potential from

organic and revenue set have parts growth X% at services to We X%.

economic XXXX. diluted to a our EPS in fourth are Europe $X.XX. Diluted basis is for and $X.XX revenue the $X.XX Given on the our emphasis while $X.XX growth growth, EPS, uncertainty range continuing of moderating a profitable to quarter growth, of is are GAAP revenue we on range adjusted assumptions

efforts growth a a We are projecting full-year improvement incremental from $X.XX business Stahlgruber. solid margin of and from an

the summary, the and a top and flow reduce On range to the profitability. work by drive from into on related year when increase in and to that realizing million. million, XXXX. encouraged range do flows still $XXX the of spending higher benefits set acknowledge our to remain notably to further slightly excess pressures believe the CapEx, most modest We we a businesses European continue a million a increase we improve U.S. STAHLGRUBER down both increase ERP initiatives strength of the of expectations OCF management of do million level, expect from will capital million by Capital leading Cash basis, a cash various in CapEx reflect normalize to and $XXX on and current $XXX scrap ends focus we market year-over-year prices to the $XXX full-year to at of in the dollar expected the lowest profitability of fully In ongoing or a cost a offset projects, $XXX XXXX. to working though to flat stronger cash free negative have our implementation. Taking we side, of year-over-year lower the generate $X.XX. and operations flows

back Now remarks. to for his closing I'll the call turn Nick

Varun you, steps for taking that that believe success. position overview. I long-term financial to are we Thank the Company the continued for necessary

XXXX, me With let milestones generating pricing. revenue STAHLGRUBER of, highest in up the the raise the capital Closing major XX% history including crossed tenure amending XXXX. proud Company's that of initiatives acquisition Company's be the for and of over operating largest credit with the we levels. cash interest largest that XXXX the figures the history, facility key better topline XX% low XXXX, in Looking the With acquisition over through at rates the and XX,XXX to more them our achieving cash notes globe up respectively a highest in flow free in Company's the flexibility across on over our the completing XX% annual flow fixed and team summarize history, in should annual history. employees cash few Company's back maturities a provide attractively flow

geographies. built leading First, have with in companies strong core our we businesses

shift now concentrate team leveraging focus the and will operating revenue simplification business The through operational strengths the conversion. our and growth, of model. profitable Our of towards units margin for integration excellence on cash improvement will management the

be market changing Second, heighten duplicative and over the discretionary all will spending monitoring of drive-out businesses cost our closely conditions. quicker to controls react expenses,

our future invest don't benefit often development are a implementation the they catalog an NDC multi-year All immediate we of produce projects these European for Netherlands. ERP a system, like centralized new through in positioning essential projects the for in business the Third, profitability. growth in Europe, future and will the long-term and

Europe. revamped doing the with Finally, priorities help and of the in closing, XXXX of employees midst management ensure of our compensation team the in of key the well am performed tighter alignment of Company America and North operating incentives in expectations programs stockholders. both are I over even In various proud our challenges how XX,XXX the the

unique team work continued tirelessly believe is ball took a off the what never and and we eye Our evolve to company. their all to create

operating the of to rates position Our and deliver our to all shareholders. And operator, for continued that our should into drive efficiencies excellence ready and long-term fulfillment as industry-leading open depth translate segments. extensive inventory of higher now growth on questions. our are value distribution levels breadth with operational well focus and for profitable consistent networks across This we call the

[Operator go Instructions] Your Imbro of first Stephens. question ahead. the comes Daniel from of Please line

open. Your line is

questions. good guys. Hey, taking Yes. morning, my for Thanks

Dan. morning, Good

Good morning, Daniel.

decline? outlook growth where deleverage you on I kind just lower it that and One and the year-over-year question. the hear one-time of clarifier a drove expenses. for was Varun, start sales the the any that business there to drove then that business did European the or wanted right, expenses of I

Yes.

come which So margins, a management ones, had was softness, the that that other with is the of nothing that But that. specifically smaller been leverage on Daniel, revenue European material. there look not operating departures the There associated weren't to if caused any some But you that. some that undertaken. than were, specific was would at really of one-time loss it that mind beyond

next of line Benjamin Please comes go the from You SunTrust. ahead. Stephanie of question

line open. is Your

I'm growth in expectations are guidance wondering, softer XXXX, as look to in the a growth reiteration for in continue quarter. the double-digit for of think the that My reiterated see expectations fourth really for margin Thanks the just improvement expectations with topline question question. I to I and similar Hi. that. of EBITDA to really I kind to Good know goes Europe morning. just

- puts in that we your So see I'm deleverage operating continued for kind the don't expectations so kind for fourth you takes you in for and wanting XXXX, margin of of in saw quarter. to improvement hear just Europe to

So Thanks. just there offsets the to be kind of great. wanting of would hear

Laroyia. Varun It’s morning. Good Great Stephanie. Absolutely, question. Yes.

into kind regards our I think, if segment. look you XXXX European of with to back

you'll QX, and there obviously the taking discounting a was some recover in out place. they're we was that to was cost some to then our challenges central also that, back recall facility. distribution capitalized that there Coming had Tamworth price center Going on, UK with of operations

to of was into So future about kind that expect one continue piece think the that as XXXX. we don't we really

the that the out think place deleverage clearly landscape. other piece then ended broader we up European was The there has taking elements, soft. through, in shutdown of some of benefit distribution Andrew the and Page the full-year we with coming thing other been get centers And as had there. we Tamworth know some a Italy, is, you that anticipation And same also. obviously, about of

kinds believe believe the as those XXXX, would think will we European despite economic believe stabilized landscape. and those activity the And segment. we we you do operating programs better cost So, in are certain results from of that containment some the there get about clearly have of active of operational and that lower place, elements that that impacted across as leverage we think elements that expected segment, we do European our XXXX puts that in the with takes, are

this Stephanie, is Nick.

the which through and the the assumption has the to an a well. impact across with exception much from it's As planning our and find to find Varun to our North margins. the detailed to prices, leverage deal good internally an the plans the by process operating relates is of actually important But not year with positive that to as operating the some to to that's every businesses pretty margins around and self-serve business they there's organic board in clearly negative Specialty understand our And operating have is in scrap Europe. margins. expectation on and It's businesses the and again, And that think business. basis really that that we their American all each is only process, annual you true can do consensus very it as globe improve of States, their also detailed plans our through improve but go growth, businesses so one of expectations is the walked will offset for only businesses true United here in generate underpinning budgeting in one to the I scrap

Your from ahead. comes Jordan of line next Jefferies. question go Please Bret the of

Your line is open.

morning, guys. Good Hey.

Hey. Good Bret. morning,

Bret. morning, Good

what an in capital a can or Varun, working Hey. where we update you do on U.S.? leveraging the Europe maybe could standpoint your are thoughts or with on you capital payables working us give from

Yes, absolutely.

also really programs cost of what's drove clearly the question the take confidence profitable higher currently pursuing XXXX to containment XXXX what to gives cash in terms place. I and profitability think realization the is initiatives as your Bret we and last the driving revenue, XXXX the from that – higher One, margin that for two launched free flow that the in through. what to guidance, cash pieces, I on key think, into focus are XXXX flow if free year, us going in

point for free that's starting flow. So the just kind of cash

momentum was into point quarter, working $XX our the Within in the has actually the it just elements this you if focus in some active simple sheet. third flat. and XXXX, continued the fourth very in flow the outflow balance statement, can was basically think million with focus And about been it on the saw second that quarter, which is The capital see we management. really you collections. cash XXXX a In come through, we

because business us. collecting the So in were really that much was going that and more receivables cash we didn't significantly. invest the that grew despite We to fact we invest, didn't actually due

also scale biggest but for us It was is then on larger right. the still outflow, is, inventory, was opportunity single a say the quite significant And is The out final basis you right. $XXX held point business, grow it kind million swing accounts million a go which get. what about to was year-over-year there a on lower payable. on if back of did that's I'd basis us The piece, there XXXX, it look second frankly $XX with than inventory the piece at was year-over-year of in

of these on, And simplistically so to what think there and elements, each we as continue as opportunity key case. to focus any is you about in further

flow incentive I will rapper call generate specifically to the substantial you, cash each with those XXXX. piece, measure. a which weightings across share the is of don't flow. free a compensation cash elements, out chunk token compensation it of It is not of have a these but people's is and the plans incentive aligned We with working been capital in free think goals the piece is the obviously actually final I entire and

Your comes Wolfe Chris next from from question Research. Bottiglieri

open. is line Your

Hey, Chris. good morning,

morning, Good Chris.

also I What's us for of saving that kind Can net you're of implementing the run morning. growth recognizing a impact to good inflation is OpEx next? wanted you're costs little about that versus cut to of year? SG&A going organically investments costs, how rate your for that help margins. – with through number next with a initiatives fixed growth like frame just Hey, slowing you bit, projects assumption about ask what's from from revenue thinking

Yes.

efforts through, also months or containment seen firstly again, its the analyzed. being And to flattening Chris, Laroyia. have coming North as four So the a not kind wage essentially get a cost or freight OpEx, our here of that America, in inflation trend, of are regards kind I've bunch of a over think out to a – elements things and With of seen Varun through. some of to five de-acceleration basically last what those we being a downward but expenses few

very costs cost is saw you flown is margin percentage our the the but incentive about of actually fuel the plans, growth from with dollars, pragmatic. going rather of the change efforts some in down, had, cost quarter, building half as if each more in that's specifically also frankly, you also far right. to with level the various which projections margin make the the number into for finally the mentioned And will kind fact not as And headcount containment perspective, the we was So of essentially expect. second business which offset into the again, revised this resilient operating as XXXX, wage And a what absolute businesses growth think clearly believe infrastructure, And given follow opening And have that pragmatism from structure such, trying Nick the level higher positive there we think in enough than also. on comments, leverage. also point I quite for growth pressures compensation then to that his a of one. elements expectation fourth a up it, come about across both secure the freight overall to geared we

OpEx one But that realize certain there only much margins. in benefits. to productivity terms year-over-year cost lever so is and do are able key again containment able the being clearly higher can So and deliver to margin a the of being

Kennison comes Your Baird. next from question from Craig

Your open. is line

morning, Craig. Good

morning, Good Craig.

what Good key are your that plan, to On order new my you need the morning. compensation thresholds for performance in Thanks generate the a for taking reach to question. indicators would incentive?

gave can Yes. just the exactly is Craig, thresholds, XXXX be into a but they we absolute step guidance which the are Varun assured tied exactly disclose that you don't the tied into bit budget, ago.

Your Butler next question from is Brian from Stifel.

Your line open. is

a part at Good question. color on Thank little and geographic for down EBITDA for business you provide in how the margins of – taking and Could about my parts U.S. bit margins should you thoughts that? maybe kind rates of morning. more Europe level service and on the each growth we think

think provide X% range. I to the you America annual probably towards overall, segment be think again upper to somewhere middle assume the but specialty on a officially that could lower basis will of an think in be that Europe the X% is America, basis, we towards North don't We going and Sure. end guidance end. We North on

three businesses. the spread So across we're really

recall that that range. recognize XXXX the QX the working growth to QX in nice important comps quarters this will you four was vary It's had monster North were of XXXX organic also X% roll of year. we in it's a QX as and think against, America I in through set around in growth the – not that if the

creating pretty is a big hurdle. that So

refresh against you battery we FCA annualize to contract to anticipate If added what memory organic in the a we we our run with QX reported things X% about growth will are just to organic that in there as growth that first, will everyone's XXXX. couple that

state FCA So We're of increment will you return parent become a there that come It really was activities is the if XXXX. shipments. will. that running program in a the up and FCA we getting if that boards kind positive the that at with us, will as off and now you steady one-time their with got was also some battery in that ramping will not benefits

expectations be the where the in in here we're charge the noted a North the assuming us prices we're each of anticipating anticipating year. upticks the on a scrap impairment pronounced be year-over-year being first the quarter, by in of not the the we so part expectation which From scrap the year-over-year first particularly basis. that deck hang a and I'm again, business little they down first better in be batteries clearly AeroVision in were our And down kind for hit QX, the for in And underperforming today. so of meeting our our margin prices, is on in $X.XX a a significant businesses with America it actually the also Also businesses will downdraft that's muted quarter. quarter perspective, will are share and bit where margins took has

Ryan [Operator comes from next Blair. from question Merkel Instructions] Your William

Your line is open.

Good morning, Ryan.

Hey, good morning, everyone.

morning, Good Ryan.

is flow how applies and importantly long it free conversion my So guidance improvement, But cash I'm XXXX long-term get target a more on in going there? wondering is your what right? to little XX% bit take of about then math to

Yes, Ryan.

we out for side sell of and an number investors of as from kind just I laid and perspective of I way rate our think key specifically a I kind in noise simple And keep three take of of the a and on and May conference, the working spoke use been as Investor view is chart capital. elements at obviously terms all So also try a possible what the as it trending. really out business had I focused last

accounts really, deck went progress see to there's months actually you'll So the Stahlgruber. and performer XXXX with transactions, includes the made of receivables the namely kind that is denominator a in highlight the where in revenue, XXXX. which offset we which regards by full-year versus inventory In I slide a the XX plus of payable you've trailing cannot XX

the step reported don't quite the that look think, count of at taking I back will works the Again, so generation. I cash businesses has with and the performer where continue peaceful, and am to So our us. history kind quietly being flow incentive confident the that's we taking of numbers, actually against you frankly, tied focus deliver. compensation, we can so numbers been. free all work actually But And Company, revenues north $XX XXXX. which very a has oriented at total is growth you billion take kind been company, growth not of of there's are embedded of at There our in so maturity kind this an is and as change. curve we if forecasting But before they for costs that elements what and management just that piece. of stage of culture time as and know into culture

flow time free So guidance and have plans I step guidance, deliver terms really us report for But We've say to in be to tracking. XXXX one I'm currently as those going improvement again, a step we able how I'd of want a cash on confident side. that think in in in XXXX, our we've what's terms place was the get at one is in clearly plans raising mouth I time, where to and ahead put to again, of XXXX. regards to its we out don't ourselves put at with above and to the our overall but happy to successive go is which it. on to where be. expecting quarters put of place market money are also I'm of XXXX,

Your from next Stephens. Daniel from comes Imbro question

Your open. is line

increasing on you Last in Thanks your more unlock cash opportunity think an [indiscernible], factoring attention from And in in about factoring at Yes. us on updated color you for or market guys queue your provide how back remind Varun guys. that can on some flow through European you to increased Can you Stahlgruber. specifically update? business the a quarter, us that hop the follow-up the market? longer-term

Yes.

So of the one factoring that the subsidiaries. Daniel through kind STAHLGRUBER I we had to referring unwind of program think you of

starting up in to back program, coming it a unwind receivables of program. actually result So wasn't a us. factoring factoring which off a case It would was those

from a number what that that's about it a It we as folks we've here. perspective, product provide into the where American an does factoring the same opportunity talked supplier don't We the was. of want European really down out have path. North really community is to don't So program go active

receivables. the extension that So and it'd in have are program well to to days of terms work piece, we financing unlock of through a the or are is match conversion regards right. goal through to perspective our the management would vendor on point they on tremendous that's European payables end opportunity the be expectations idea to a what again, obviously be able the and hand be a with have a to then And do an tuned inventory so able to peoples, same whether essentially how from active

right program actually you to an are off STAHLGRUBER program. subsidiaries being for it there tossed the again with So fourth our targets XXXX. reflects the of again is that also business about just for with together we've confirm, And factoring put for opportunity one of the no contemplated was there are factoring unwind quarter. But in the It the startup and in European plans that the it has was the fact business. been that

Bottiglieri of the comes Wolfe. line question next Your from Chris from

Your is line open.

question. second the taking for thanks Hi,

the you to about will and you're from that this are Caliber through and the discounting Thank you Just Abra merger? trying something How that guys a pricing, are to a tougher getting question guidance extent so North America, now articulated of thinking helpful? you. you've what what the on manage kind be do contain your CI’s lot and guys

X,XXX partner when great get no doubt it. of customers both to look to or got And of There On XXXX They've level they've of plans for they're to organizations. top that if we a Abra to provide operate. and excellent We are got of a of north so. the you customers organizations, shops both obviously they to number incredibly with them think surprise. I at total A are they about because can shops they going country, organizations. get the them posted forward customers, just our good they our why be as they're couple we next in a that They and years years basis, need, about already grow their We've amongst There's ours and we question, that three will, business to will. to relationship big already, Again these across customers. largest continued with discounts, due need excellent ours. our them. four of you three shops service plans. parts they great a believe great the an over or if move combined being largest No are forward Caliber the been years. That's

there. can discussions we their business our business don't on, anything And in extent we We're major market, the how in a It's a better business. they market And local doesn't with a ways So right? that with to overlap to to given local market, much be can to any combined find to say business. have do them Dallas, more we local have because up happens on, where changes in any and servicing have To anticipate extent to and Oregon, say see in overlap efficient or got better. organization. make Boston the going have very what absolutely is the you remember go to in goes Portland, they this

relationships have our in shifts as of So we not any both We're organizations. business at a levels result the senior the very anticipating again tremendous major of merger.

now turn over Zarcone. I to the back call Nick

about appreciate when completes to quarter XX our absolutely we given time look that this morning. first We attention days earnings with April everyone the at of end So our announced here in and the XXXX you've We forward chatting results. full-year call. us

look Thank couple forward year, key we XX we're particularly, some in the which And indicated capital carry the a cash of into we factors, on will flow, is think chatting days. a ended progress on the future. you. you working again, us Varun again with So strong to the real

This call. conference concludes today’s

disconnect. now may You