LKQ (LKQ) 27 Oct 222022 Q3 Earnings call transcript

Good morning. My name is Dennis and I will be your conference operator today. At this time, I would like to welcome everyone to the LKQ Corporation's Third Quarter 2022 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. now Vice turn for President would to conference LKQ I Boutross, Joe of Instructions] by my the over Corporation. [Operator Investor Relations ahead. go Please

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

me harbor. cover let Now quickly the safe

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

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

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

details utilized Since before announced the team the chair provide Varun. call to the and call finally, Once moving with and just around results. early very succeeding financial softness market. is happened third thank including strong important the joining morning will on by Varun economies the in remains And high some The starting that on quarter, tag I environment. tight operations; is our you labor show Last level a The difficult a CEO and foreign the still then macro results improvement. CFO the Joe. from some few recorded guidance created leadership governments of your continues provide operating signs quarter curb notwithstanding Good headwind I many questions. for European tried creating to Laroyia changes, after the pandemic Europe weeks opening monetary and showing you, than to LKQ chain as stimulus comments to XXXX. less Thank in inflation become our economies current couple Rick are closing Varun supply for to pandemic. support the left of war in The exchange and again, though optimal during move challenges. will to signs of to the of their the the biggest runaway month market we But the Galloway is the everybody. discuss updated comments, of globe a Rick some us days

in seen over years. U.S. XX reaching haven't dollar the we With levels

and year-over-year impact pound material The our about While on local put focus To volatility is we our a quarter. I since agree in basis extremely share a results, the a performing XX% by that when believe company during had million transactional on our on $XXX X% the will translation much our results and adjusted currency EPS well by reported you about you the are exchange quarter, third into from QX quite with revenue segment, $X.XX light and in rates a the of the hedge have of the the XX% goals things announced dollar relative start depth European we pleased environment. fallen perspective, of manner reducing demonstrate about our sourced to forward the in exposure. seamless and cannot can moving during of euro our during and achieve hedge exposure fell we in clearly leadership of our challenging breadth our revenue and mid-September and approximately XXXX. ongoing EPS changes talent. being are The sterling to

benefits we be three in it through events, about discussed focus priority of this. the investor optimistic Overall, times result future. LKQ As each talent has and shine was key strong the for quarterly been at continue past management day to like a and that the a of

Our that dividend decision have business. to the reflects confidence the increase we in our

compared diluted XXXX, results. earnings as for XXXX. $XXX same of share a was decrease the PGW compared XX.X%. was an was Net billion, total $XXX XXXX. X.X%. the reminder, of the of the third of the $X.X constant X.X% X.X% was and a third in to XXXX decrease period million X% $X.XX $X.XX XXXX. quarter revenue by Other parts quarter $X.XX period Diluted over revenue Now X%. to quarter the of about the for quarter earnings to X%. by to decreased services services quarter adjusted decreased foreign as decrease revenue for a of XX.X% in third a $XXX X.X% for to for and XXXX, to little of And Parts commodity rates $X.X increased quarter and due of onto revenue X.X%, currency about the a same compared third On the for the On included $X.X compared grew revenue decrease of the divestitures million income basis basis, to share million as prices quarter. that's $XXX while same billion. of was our for net to for a of as period same same up the $X.XX changes revenue million the Revenue in per by net for a was in billion organic impact and compared XXXX fell acquisitions per decrease period period income in Adjusted quarter XXXX, exchange for the a quarter relative

Importantly, compared results. quarter when to FX $X.XX collectively in lower note XXXX and that please metals XXXX headwind the a of the share created volatility prices per third

of Now let's According North increased expectations. and reduced year-over-year primarily our North Department segment of decreasing In divestitures due quarter. turn collision for to services very fuel July largely exceeded up related driven in to were the Also, seven favorable. of the miles XX.X% America industry when claims long The delivered driven, in revenue X%. was auto organic American to to which on for you U.S. America, the results miles only is increase to the data in prices. America that to basis, of by midst quarterly only which parts in performance impact these outstanding and be the revenue said, PTW a growth segment August. X.X% XX.X% Transportation, That our liability up is North in quarter highlights. organic trends North suggests tenths decreased that the consider X% This continue in the the term

ultimately parts filling increase quarter will more diagnostics diagnostic Total congestion to of to XX a parts shops XXXX frequency. office into shortages outsource occupancy nearly over loss teens, from claim, look our technician rates as repairs. their business which per the lead reaching vehicle, in Continued benefit third down three-year XX% per high, the a claims and trending high

in aftermarket During our volumes. the quarter, we upward the were trend encouraged by

first talking of half control. supply in out laser-focused has which softened into truckers, our relief the some active we experts, market exists the rate in of chain increase generally In from aftermarket which challenge challenges an with contracted quarter, pricing supply biggest XXXX. rates. domestic they fill all into of spot team relative to The QX, on are translated reductions domestic expect on rail side the During measurably, our our used for ocean containers chain, continue and including several our these the the the of experienced and The in carriers. third-party will is freight carriers

revenue Service basis. prices margins parts other on second had was third Self lag a onto year-over-year Varun on given services in in XX.X%. decline Service anticipated metal of segment significant call. impact a a resulted commodity effect our and also Now our for our The during on Self segment for prices soft This touched a quarter EBITDA increased that for the revenue The softness Organic X.X% in quarter. segment.

albeit exchange driven mostly I to hurdles organic on while the pleased and supply basis. rates in and added growth, an day parts growth the on X.X% for half price Europe. Acquisitions in a inflation, energy a increased resulted the by European quarter services revenue year-over-year a on decline the reported continued in a X% environment crisis high third with per organic of in facing quarter, Moving our X.X% on am segment, chain an basis. one and basis XX.X% in quite

a only to based revenue the organic currency double All European being year-over-year of to February strong the The sale some we commenced. in local back Russian the which regional on war in mentioned, basis digits. product of low when recorded platforms completely previously related stopped as with our gains jobbers, decline

Specialty Now and let's the quarter, and our still Specialty X.X% but segment. below for QX, on declined from move Organic sequential revenue expectations. to services in parts a our improvement down

year, The impact the had impact U.S. while You may a a recall the rates predominantly still revenue two-year organic annual positive so on Specialty, exchange positive. growth reported a QX on negligible in of of growth had impact. in growth XX% stack, last this revenue segment a is X.X% as acquisitions business,

groups such as towing have unit have through to RV volume, the in sales by over some unit product During new XX% new the that the certain again year-to-date as quarter quarter, exposure underperformed August. decreased

vehicle not SEMA-related some SUV our new is size in unit RV decrease our a reminder, light flat to sales the truck part, Also, U.S. in are are majority that the RV the running of record at vehicle still parts to offerings. vehicle As quarter sales replacement of United related the to a which States, volume tied for softness the of an light year-over-year. category year-over-year levels. parts the and that but important Total were based was are specialty the products in due largely

Distributor Specialty RV This a Importantly, second people that year the is to for our team truly in congratulate Association the I the receiving the further for Year. like validation Industry as this row Award greatest would our recognition, asset. XXXX our of are

fill year. driven revenue operations movements lap we we to rates. don't high aftermarket wholesale Let's our gone pricing to a the levels, will for on very North Though improvement Revenue anticipate, America run these QX last trends. continue has we the particularly largely at initiated initial move in solid start, by to as off

Florida our comps Our this of also year. European similar continuing revenue the with the we Specialty From it rest performance segment trending start is also levels. the will a fourth in have quarter easier is to at [indiscernible] perspective, development quarter good my and shredder. divested QX witnessing in growth QX to the compared rates corporate

part this offer self-service As our into to Florida supply vehicles crust which the acquirer. we yards entered of agreement its sell transaction, will a new to sell or to

our divested subsidiary material. a are also of equity Neither divestitures small Stahlgruber. of these We interest in

Our of our And surveying completed employees sit at employees the survey. all engagement our our the our American we are process process just efforts. in in second in of of North employee working and We through center Europe. ESG

We have of rate. but data American had the analyze, a team to North participation lot XX% a

has to once will for Rick. is look this turn showing mentioned workforce. to advisor types of And topic complete. engagement forward a these high of independent and the indicative now activities discussion Our is Varun process of on across over high I and extremely the is level more generally the this I

everyone of company Thank LKQ, to you, of strategic look am good the today. joining to our to morning success. forward greater to to honored driving I initiatives lead the us and Nick. and CFO position even on And take financial I

heavily years. spurred flows operational leadership was the I last North executing that few and the the significant American improvement profitability of rolling over initiatives and part involved have As in team, out in excellence cash

to continue drive and will Now profitable to the organization's face delivering to productivity to free on efficiency. the as this I this CFO, in point. teams with be macroeconomic Especially critical new lean Nick the revenue look on mentioned, vantage headwinds, forward drive growth, and I strong focus segment And will forward. partnering generation margins from to cash flow it continue we as

Turning share now reduction earnings reported to share which diluted last a the $X.XX, $X.XX of year. we per $X.XX to per was QX consolidated diluting relative earnings and of results, adjusted

in improvement Our with our operational performance was year-over-year and showed expectations. line

currency exchange by this $X.XX volatility prices $X.XX by However, offset from the and than unfavorable more operational and effects performance foreign caused solid dollar. metals of from was effects stronger

XX.X%. in negative about segment point our operational program. Additionally, of rate from We came increase in PGW and American effects we Much one, from of $X.XX lower quarter the QX; share total improvement in divesting basis wholesale the XX the North mitigated in $X.XX had higher two, three, a interest of decline performance. with to repurchase the tax business from to the effective count rates the resulting Shifting segment. the share

year. by presented XX Slide points improvement quarters while of will remainder wholesale primarily generate margin the is initiatives strong is half long-term XX.X% EBITDA margins, the we to very We're a wholesale the segment performing for margin and Day expenses sale basis QX XXX strong favored be points earlier expenses the over business. Investor way and this we Overhead the from non-recurring as a to there PGW the we related from of moderation Going towards with with with pricing move expectation growth quarter. and little low from at We third of to upcoming mix the in XX, will the XXXX. record margin were likely productivity saw believe pleased basis continue

QX On falling scrap at metals that call were in effect prices quarter margin. segment we a prices. a turn and cars experienced scrap purchased lower expected self-service noted with break quarter we second would With difficult even metals higher the in we as EBITDA in and self-service when lag July, negative prices X.X% tough a conditions QX the roughly as face had

in slide have the this depict We effect. a to presentation

the purchased purchased. metals which the the XX, the of amount $XXX, can to the depiction reduction $XXX, on with negative the the we correlation the QX this cars. along costs. we effect, costs prices in and on Slide produce cars at of processed steel a in drove other scrapping average wanted lower QX the provide Looking in gross average you clarity quarter prices we conditions decrease market there the the current We influenced scrap delta leverage QX when of The paid between help impact car effect see perfect price and lag purchase for between more cars scrap but caution amount which will the received in to isn't volume price as and margin overhead provide

I'll cost as to improved sheet. cycle QX of sequential Varun expect flows most We the as in call segments of September. turn the the purchases end well cover through QX by we profitability and the as higher cash other balance to the

North that Appreciate self-service America the and and performance. of segments introduction Thank overview you, wholesale the Rick.

fuller expenses costs. our segments increased personnel, general on we third and macroeconomic inflation weighing the conflict. margin an improved double-digit quarter XX initiatives offset XX EBITDA points inflation and down reinforces to for basis that year Let's earning the with of for Overhead headwinds move a Russia/Ukraine will the delivered and points and to prior performance basis quarter, deliver as Gross points Slide freight we costs primarily The deck. XX margin energy basis from by the Europe solid fuel the despite XX.X% with inflation, expectation procurement pricing. period. margin worked other by the XX around

by While and even we And CEO despite I gotten businesses operational over the am the the the our clouds of get and judicious as our can darkening with and am team. I macroeconomic more strength segment financial have on I European little have opportunity that long-term impressed the decisive view a of prioritization, confident been in achieve and management operations target. month, I an frontline of to my for a an our new ground role

largely revenue specialties coming pressures pushed operating year-to-date a of increases and personnel, expense a XX% an the including EBITDA X.X% tough XX year year as of a from expenses a the $XXX decline expense and anniversary a margin compared benefit were offset $XXX benefits in by the freight balance from the delivered as overhead synergies to in basis Moving generated fuel million. flows We to leverage revenue by of lower overhead on driven to sheet. decrease Slide total compensation XX expense a the they of from XX quarter. expenses. produced in free prior SeaWide healthy point bringing prior higher basis of to declined from during XX partially growth XX.X% Shifting cash organic also points percentage the year third basis points revenue incentive the overhead the rate Inflationary when comp cash The nearly acquisition quarter, a flow ago. million from and organic business

We have made wholesale in levels progress and good rebuilding in North Europe. in our inventory America

to optimize the please going in winter higher equate terms we is some expect increase As free a of We example balance over an note shown conversion EBITDA the to unit levels that hand inventory close that range to our still year. busier cash doesn't elements costs. over work on to segments, QX at quantity the our course conversion further ratio Slide do XX% of higher down these dollar Through do especially balance to North increased just costs XX, inventory dollar by of while directly on values to hand, XX% to above flow the reverse available cash change into quantity as input the is XX%. of with Using September aftermarket the is fine given per of XXXX, approximately total season, the America the in inventory have the inventory will of There be timing year. tuning continues so XX%. target we

higher inventory in sustainable our quarter confident third will the outflows result payables flow the cash ability for are our free quarter, we to fourth example, in expectations. generate in with in build For and line

of range being $X.X XXth, with debt net X.X our comfortably ratio which EBITDA of net of times. below had As times we a target of leverage September inside billion is X

billion rose XXX a basis heights in U.S. increase the so point quarter variable by rate with million. the Europe debt, $XX $X.X rate in rate and X% would interest effective the for rise we and interest rates are effective in Our approximately annual expense borrowing to

our borrowing rate part approximately to our operating transactions European as As we expect months and you are for can are locations and of versus evaluating conducted dollars local inventory home XX currency facility, which assessment of credit in a Most functional example, in mix the capital create imagine, in shortly. buying this natural entities our entities structure larger in we U.S. matures or floating complete U.S. fixed in of our review hedge. for to currency, funds

exposure is currency As currency losses through of contracts. gains we dollars we a our to U.S. hedge than transaction forward transaction and rather where results result, into weighted denominated foreign translation have exposures,

We are managing comfortable if exchange we proceeds from Glass is and though free are earlier a have required. through conditions flow to year, a with our the PGW foreign to strategy in approach million change current our determine of million almost capital in shareholders strong XX monitoring able we the significant With over a to risk, million this September, sale for been return the cash quarter. $XXX We third XXXX. million for shares X shares amount $XXX including repurchased to market in

billion our last Earlier increase million board purchase repurchase the $XXX year-to-date. $XXX we available of $XXX total board a active through on term share program the repurchase this billion October further for XXth, extended the with our and authorization through a million paid We we X.X totaling in Additionally, market to dividends share XXXX. Friday. approximately and of remained previous had October quarterly week, of authorization million in a as have $X September authorized

expansion have balanced to of repurchases be this as continue use to pleased to allocation to our strategy. program able are We capital part share

cash in stockholders will XXth. to approved indicated release board this a the November increase record on our per which of Xst of paged of as quarterly of share, morning earnings dividend. also dividend be This quarterly As reflects XX% a $X.XXX the December

I like over organization, last the back LKQ's It the turn Rick, your to thank like achieved has a been would rock robust the reach this these truly sheet this been to as CFO pivotal take dedicated five with I and free and employees appreciate and everyone's generating to to things of to a serve honored balance all finance team, I time, our company have Over to building profitability our truly leadership and team organization. solid and Before growth efforts great a I call during tremendous point moment fortress flow, a the that period. significant feel returns. shareholder privilege part years. across has cash global

to With I leverage you. more to Now I our finance working look Rick, and leave role. him organization to that, the Rick's in back capable we become even need my in successful. strengths with forward hands to new

looking projected this also you working I with thoughts shown updated I'm conclude Slide on XXXX X. in will results to our Varun. new Thanks forward on with capacity.

at this the and in X.X% versus X.XX% one guidance note service $X.XX based hold range impact is Ukraine/Russia escalation narrowed QX X.XX% the guidance and conditions on precious selling up includes rate recent the and the We growth fewer that near on the sterling scrap to or economy and we the balance year-to-date rates guidance continues X.X%. and in year. growth On Our decline. $X.XX $X.XX and the and $X.XX of X% major midpoint from current for prices without effectively recent miles have prices metals our exchange our European parts trends at a Euro of organic and Please pound that driven. foreign day the European September additional the assumes conflict slightly rates to further with year with previous and

We to $X.XX full are range diluted the in year $X.XX EPS a of with projecting adjusted of $X.XX. midpoint

prior That's through solid benefit guidance, represents to through week the narrowed and prior negatives, relative negative lowered of their and good there repurchase to prices XXst contribute our a trend a year the news primarily factors. relative The under continue is our the prior the reverses $X.XX. conditions. of effect. we businesses rates will October and mentioned have in interests the frontline X presentation assume changes the $X.XX midpoint we Taxes why our areas that the in generally Note the resilience prices quarters to XXXX. related refer effect, reduced another volume. upside our as guidance earlier difficult in to repurchases have which in upside primarily over unless guidance by control. We $X.XX midpoint, a a are allocation guidance. metal may significantly factor We Headwinds to prior tied out to negative higher previously drive share please $X.XX external understand reduction from the weakening rates ended including range Capital relative $X.XX projected of guidance. to also be downside actual including are and the the the or To rate Slide bridges are $X.XX move figures. prior our play performance FX are Operating three are we our which current can and our remains have the Then figures in negative and if metals time. FX noted. further Declining we differently than guidance. guidance

estimates. we your turn cash line We expectations with billion have PGW comments. cash closing business. will time expect conversion the still I'll Thanks to for conversion flow morning. sterling a currency to the his gain. With euro adjusted free to effect XX% the for rates deliver for flow of anticipating year given approximately our latest are Translation in for in free the this and lower pound used XX% our to Nick flow cash for of denominated call EBITDA that, But achieving $X the flows cash free foreign negative

for overview. Varun that and Rick financial you Thank

our our initiatives culture central Let to which our and restate are objectives. key me

model. our and integrate operating to our businesses First, simplify

on to revenue growth sustainable expansion. profitable focus and margin Second,

levels continue flow, capital in high Third, give in to maintain allocation to the our as us of to invest future. which drive turn forth, balanced strategy; our always cash and to flexibility

metrics we the are forward from see our to can operating environment. committed of you driving As regardless these results,

you across respect all the and they during times. such operational targets teams the we and segments can't of unique our FX done Why? these items and that, have XXXX. offer itself we any control, and we in it are track a three last the thank industry segments rates, to and to be means proud. are the unpredictable will the a challenge. They I day. most teams supply executing efforts a globe our call manage as tremendous items their With for best happen for operator years these define on Our job their chain enter crystal I we market it am operational of tremendous excellence with we stated, it have open effectively uncontrollable LKQ now our be we confronting our team that navigate Simply and for ball, can that as appears record the ready That make And labor each members confident across each what said, constraints and don't speaks to and but questions. every have over to

first with the from line Instructions] The Inc. [Operator go questions Please Daniel Imbro ahead. of Stephens

Thanks guys. Yes. questions morning taking on good Hey, for congrats our and the quarter.

Good morning, Daniel.

North to wanted I of American Rick, kind start on something around said you margins.

moderate maybe maybe of was more other detail made year. in going around cost going underlying it what XQ just moderation driving what, next forward? you is? to comment to outlook the you wage or was or core the drivers what of to comment that margin into on Is them forward Can pressure expected think you kind provide a change I that due

Daniel margins Thanks we The done. a in your had Good very question. what and had for very good the with it's question. Yes. favorable pleased QX – so we record obviously team's that

XX early call over is it pass some effectively it on. One ability do and or market so of months through things last seen pretty be and we've to the pricing able us to the competitive of the that the

is QX would that us the that And we you be. is in that guys we of of a to that is expect. going happening, the view overall things there's So cost we'll expect told back what we are inflation and would is low-to-mid-XX one we've the see things in where probably seen that, couple increase for product in our what somewhere to the long-term

little that that we've long be come slow it increases slower bit piece I though. our seeing, as more think we into that keep a pass the on little cost move XXXX. customers we on that would With a the said a challenged the numbers be – ability those to term to that inflationary would moves to will

that. if add know don't you want I on anything to

No, that's good.

Your Stifel. of with next question is Michael from the Please line go Hoffman ahead.

you. thank Hi,

do I have two. So

continuity, So of one's the on bit. at it on capacity full about out the as a energy China then a that of that? supplies. related natural XXXX what's but it's We're The forward, views relief, Taiwan about looking the question. that? B and little to crisis gas Plan I'm and so of decides EU curious not if left what's Maybe same there's field, I question part I'm out other the little Plan then peaked this leadership And after curious it's embargo China appears a geopolitical, have about shipping to a that so changes, B your going

this Okay. for Thanks Nick. question. your is Michael,

As doesn't in no everyone right? parts Taiwanese you ago. moved shutdown, Taiwan. get entire India Taiwan aftermarket exist. or There There industry machine exist. collision plants the idle to are It just Mexico know, It of knows, doesn't decades capacity material to the and or for waiting as sitting are no production outside sitting Vietnam

because out would scenario you out and pay down chip production XX% concerned all all auto of shut out is very is, and attention, production down pick we're the of Taiwan. specifically overly to auto semiconductor were if effectively not and shipments laid reality the out of parts to of the comes events least that where and we everyone's that close down advanced of shut concern. Taiwan, they XX% China the obviously economy kind of Taiwanese economy Now parts they shut wouldn't geopolitical about the

metal or don't goose So export if cook that or we they very Chinese a the has to be would leadership China that buy not able iPhones think And chip in certainly form shipments, or strong they're want new Taiwan anything really the to it. to is a you were equipment that represents in cars smart, economy. embargo golden of

influence seek sense would advisors kind totally outside not is likely Our in it'd Hong a – the move but to territory, just have they would just Kong down that and where to shut talking first of economy. their model significant be shut over with more China

or what new And waterfall, clearly view XXXX, net but there's positive you in the a I sitting of to relative those have where minus still realize some rates freight, pieces Okay. then about And still. budget is follow taxes, here structural for the to the move knowns FX, what their up today, the then question, of those are your you're interest plus process growth second midpoint?

I'm trying understand to headwinds? So just

Yes.

Day So have XXXX correct. any of on outlook to see view middle we We and budget Investor don't you yet time. at process Day tell the June this absolutely presented you however, what Nashville. a the field. that has changed back I What maturely is consolidated the in from are the Analyst submissions nothing and the We're from have Xst in this past can we our at

should share a per the probably on shake get growth XXXX. just, at day post mid-single a prepared that too are comments what boost will it's anticipate the similar of every gain, low-single each XXXX which year of revenue is rate growth we anticipate the high. from sustain likely America prices growth, that services trying this sustainable. organic self-service to not So to talked likely to similar doing to market we Europe in next in out and inflation. different and on well growth stay our indicated return achieve scrap year, businesses positive will do obviously digit being will recent based as where there business. what in growth digits we revenue they double-digit in digits, parts wholesale as and assuming some in that are that growth But about similar for each All we're up as which We their with bit in specialty digits. always we'd consolidated mid-single Nashville be is the is we do and mix low- or a the to in front, year and organic low- to slightly can my It's business mid-single North

points Rick to XXXX pure exact. basis points clips indicated XXXX few be will one As day of XX basis have for than a which selling growth, you

hopefully this where you over going trends, that that gives are a year. year so currency dollars of we've And local rates but had to assuming sense stay carry the next they strong that's revenue about

your about of is you rates and like the exchange in Euro million in taking everyone the kind just weeks, so should few are the probably which when call $X.XX else the you perspective, And over Michael, the bake models on translation U.S. for and last $X.XX that's to it those account to a for at impact the after put the perspective $XXX sterling from a because dollar headwind levels, into building currencies.

absolutely would of about as September million floating about as significant rate self-service is We Varun margins, kind flow, $X.X in a $XX our margins cash see in year. the rates, our to to range. low- get line year Europe can Daniel's of to of a share. from mid-teens. improvements we if are right back long-term, program questions we costs more gradual that interest be committed sustain balances mid-XX% indicated to double-digit underway. margin we EBITDA Interest be margins. the On particularly just believe some down get XX% we North target. specialty, to At free minor margins will terms on We is of business In again, that changes was would higher think XX% about should credit headwind, still modest higher with is assuming the revenue no where current The one go growth wholesale billion American rates it's XXth. today achieving EBITDA LKQ in to that that don't some next and believe to be the expect indicated We scrap are to a expect of which in consistent to Now, can going impact answering as of due $X.XX we prices decline. we XX%

shares XX share XXXX. thus earnings obviously from Now million per far the that benefit in repurchased we will

So the that lot gives for us right when hopefully work front. ahead we've got But of the your budgeting to year. next building a on of into get models zip code enough you

with next line questions Guggenheim Ali go ahead. from Please the Faghri Partners. of Your

congrats thanks on roles. question Rick new and morning Varun the taking for again and my Good and

you Thank Ali.

on is used question car prices my the Maybe now. lower can So on impact time car right car us come used pricing, real used your business? you what prices obviously is down we're remind of seeing

down, prices what going margins. they rebuilders car their to generally come the they're at the vehicles if lower down pay total as the into will used auctions can come stock includes has auctions and their the vehicles translate at down cost salvage car of prices you if to loss prices the lower well, used of because vehicle competition for Simply feed – Yes. there's come as maintain that total loss if

but reduction that down auction it's at to expect settled also the And if come so will you car dollar-for-dollar as that bit, that cars used we would will, a bet. not we a price in a have for little prices the pay

Great, thank you.

go Craig next from of Please ahead. with the Your Kennison line questions Baird.

for Europe order the as what taking LKQ as you dial ask Thank Varun, whole on for to down an well start Hey, see of congratulations opportunity might the priority? where morning. and the good the to priorities X with focus of and strategy. see you and in on questions in Where your them about you you back frame to these double do initiatives you maybe to highest some your team. I my context and priorities wanted

in Super from a Craig for of I development kind now month internal but up excited any all and to prices. as on management fulfilled I another Think little the from elevated the internal testament you about limited excited opportunities that yet through think ground for carpark. a been morning, all to I talent. have used the a and that the inventory, time, external, a that the of car you with These new team in Rick about that think supportive both internal regards it it you were aftermarket. if kind the there, about we wishes. perspective car at went not. of good the talent aging a market this and we out case, dominoes so point thank think done I all European am a have myself, both I've and the are demand healthy the is work really that kind about perspective business over kid With of Well, frame

VMT that the given So Europe, despite are pressure doing energy that's and just listen people of piece fact working. under the still over kind is prices framing the hybrid in

once of specifically you run office think more regards about a I Ukraine/Russia as to point little bullish recover bit days crises future. day from towards a a moving people on down trying companies geopolitical am there to ongoing. more and time now three for with into to So also a week from days, then the VMT the will at hopefully coming push about some the two that's tend rate conflict calm the the week and go-forward to

it have the that Organic entire faster in accretive framing that's will though to acquisitions. business simple, the selective the look we my one opportunity highly piece. very market. So focus we With into key priorities will the and regards always terms of specific to we than growth and grow grow the business is first the be

So grow business. one, number the

just then one be prioritization second decisive flawlessly about The and is execute.

side have is too that the have it We much so flip of opportunity. on much opportunity across we Europe arguably

of have and back at has at private for internal I is get no part to is piece an right through such logistics essentially excited. a to the else do. flawlessly, of that that is fundamentals invest we as right There building the making the the with the deliver business label. ability what before place super like this fundamentals, Those some then And distribution one with programs really is that as we – shared distribution really in here mobility so right? aging my team to remain affordable I promote and the price, the Berkel, is us. key scale, right and And cycles, will We management our the continue and into carpark, office the the in which footprint, Tamworth, advanced centers kind are distribution opportunities coupled

grow number market. than faster So, the business the one,

the about and developing And talent. decisive execute. be Second, flawlessly is final prioritization one

building be as to super We there. actually pull team the opportunities To out out that second and absolutely One the say blocks. and just are, distracted label, of third you down a that if and Those on I've have but anybody. was tremendous program, we had Super, management various Euro presented the get September the out develop various, a opportunities we them doing. myself are really committed by LKQ ERP, essentially key then about done XXXX, private is were super peripheral was optimization, I'd four the one was to and fourth the presentation there one clearly where to we more we are and what of where I Nick had feel continue is again, XXth procurement, about was okay. making ability revenue work question excited one But the kind to fundamental down. there we execute the double up your the on against don't talent sure there. really our that put further priorities on doubling

tailwinds, very, as really is very but execute I those, where are clouds through yes terms the in macroeconomic that excited. to are and darkening, we ability said, the of sectoral So given our

Thank you.

with Please Stember ahead. Your next line questions go Scott from the of Partners. MKM

and my for I Good everybody as management. echo compliments Thanks morning, question. well taking my to in

Thank Scott. you

the just growing in of did some Europe starting which in? low now, about maybe I are mechanical out areas kick to, to the seeing you guys in Could with what And that seeing parse regards right doubles. guess, better? Europe you're any benefits that seeing aftermarket are you areas are You talked countercyclical signs

Varun. Scott, Hi, it's

your are here the States, Listen, be I it same kind something consumption, that we give fuel those in We are along result, lines. prices, other be KPIs elevated petrol, diesel, answer it there the of get but Let indices, metrics, those essentially tracking. something whether you the don't congestion other whether things question. VMT data that certainly we me that's in gas United regular of terms get like

that's team. kind entire and is being coming cost priced is from pressures moving mid-to-high something And the my that through I yes, through. perspective. that's certain And the said that through is along are single that that with higher that keenly call watching input coming having there it, right. of digits, across But So into, market, am pricing,

that the things also. side through of see can margin You gross

we you're example. not service So once and taking get and regards there point to, the really if that oil deferral other fact need haven't you driving is time, this your of even oil changed, for year, need driving to than a mechanicals you place if any seen to you're – with at any filter deferral

in larger this countercyclical nature I over service we of is perspective, is very excited businesses, operate So actually and from point that what we do sticking And given very, reliability, through really about. time, at what the of we our are is resilient. Europe that Pricing know balance market. sheet that having access how continue will way we supports the seeing taking a in be to more pristine my fairly across place But market. the ones broader having will because to rational the inventory, are their us, behavior through some is stress sense there power

think I inflation. to on a is basis, for something out watch go-forward

through kind that be that in while of my the of is through side. labor sense certainly will stuck, coming certainly it has Okay. cog side that gone on it's And the

rise that to things the team we've essentially really productivity for of that tremendous But as certainly thoughtful European a and but again, for I futureproof of myself, when really up lots on opportunity that again, really already more this focus out we driving three leaders, CPI is top. centers and area distribution out do seeing be our to side logistics the markets, And advanced everybody, numbers leadership set business. won't sailing my where, plain to it a there. is market teams various we're the the with have key think again, based

right. follow-up. just Any And State update Farm? All one on

answer yes no. is The and

the Oklahoma during be still State after pilot using prefer in State and Farm would active State national it Farm State reviewing mean, opposed can it State start take nothing from for taking the it's program XX-week close, said, the from any the geographic Farm than as a place program Look, Farm from is as come that come of headlights, summer a more of their in month all no supposed that XX-week keep assurances an aftermarket that And being parts program, product continued indication. period assuming and a to is per we bumpers. and that has the and data we there and positive Texas the be Oklahoma, so change, pilot, alive to perspective. recall, I That or aftermarket has a while a program We're in Well, is of bumpers. we to taillights take today. that Texas the and to awesome. fact to ongoing there that certainly of the the and on to a to decided end. all they State taillights you where initiated expand would perspective, both as So Scott, headlights, was State just

their dialogue continuous the let have Farm We constant major aftermarket utilization State a if communication. to And sure in we will know. companies. everybody decides We're all broaden be insurance to with obviously

So pilot negative. officially, there they're to opposed as going, which no the is keeping we unofficially take news, positive a a but as

Got it. Thanks.

ahead. Your next questions from the line of Bret Jordan Jefferies. with Please go

Hey, good morning guys.

Good, good morning, Bret.

Bret. morning, good Good,

seems now guess X handicap you've you that big as and a about sort like you been an How Varun, is lived that chain what over opportunity it month, talking Hey, LKQ it for if plan. the of complicated of over do as with time, supply And such I initially? that you consolidation? systems there? a mix Having thought were period Europe about we maybe of talk could in ERP

everyone LKQ from essentially was about of of business. underpinnings broader processes Europe in to are to remind think, listen, integrate just a of I certain Yes, the you one the backend kind X program talking terms the essentially of key perspective, of,

that best-in-class and unlocking where from of business from, runs with payables one doesn't this mile change entrepreneurial, serve enablers also making in last the to nauseam frankly, perspective. X case a But of terms equity regards out system I to pieces. having really back our it the horizon effectively. there, is is our customer to all we private office to a very and about of limited care has, thinking key as the of you efficiently go changed unlocks about ERP have maintaining which Nothing us any But to So, where back typically nature time if intimacy, how through of from, ad no has have on and the that. sure local that and frontend, much the of as all talked as the And done up companies. these I largely about delivery, overall the we it's bought as have front. get done built that, regards And in think, payroll European business, [ph] with cost of Nick we rate certain investments. know, long of

at change of So ERP, the making all. the in on terms investment no

In an fact, I'm are it team quicker of working opportunity that's up that the my opens done double get management even very, down it very because that and to still with pools attractive. area

change that its sure the on has entire project. front behind rather shoulder got a it no making and being really So technology that it than organization

are but So that front change few some due of difference in overall, going. out on first terms in there the no where we weeks,

the RV you think SEMA about When the specialty. sort cyclicality? you relative And on about think I question of sort XXXX. impact of versus a expected then And in type great. business positive that could Okay, of you'd categories, digit of like, as low SEMA as at you side look sort the maybe business? recession, of growth it a single be would talk the What

to to on RV RV tied campground that much not as we utilization. unit new as SAR, have tied take our What seen one sales, necessarily it's is the I'll Bret. side revenue is

I comes of well of to product that's overall which again, things correlation because But RV of to first sales kind most gear things park, towing and record like utilization, is running their be levels. need the that and revenue the there replaced. And size so related on direct are And to currently installed usually unlike directly indicated to RV unit hitches the get towing, the a as as a – is buyers lines there couple new consumables vehicle. that the from time need at RV related campground

to also really on of for bit recessionary there times a ying we kind tend and to effective a so their a more folks hit. does and World and from doing way and be is dollars Disney would recession of to applying What little of getting reallocate vacation during camping applying look to and that families shy a cost vacation is ways effective know cost going if their with that. away yang And

business particularly The pretty recessionary On there to a tends sales, the pickup to new enthusiast jeeps the and hold of tied are through SEMA environments. of side marketplace products number trucks, vehicle other the steady SUVs.

feel Bret, deep the so our We that it wherever revenue at end day, goes. hard And as will the the work market continue to to how the recession And market, good depends we and predict about of drive position long being we on can't profitable leader can. how and that. in growth we

go from of questions next the Research. Your Gary line Please ahead. with Prestopino Barrington

Hey the would the does as concurrently do you do on in looking do you're question down that Quick of prices question – I the prices? prices down for used the side. recycled I car we or come good two. come guess the cars see what at unprecedented impact How the at in other parts mean, decline I morning there then they side, with next an recycled is the could have all. be auction? And car buying year decline the on

invite what I'll that The demand. come have Rick to to buy take inventory need that fulfill pay tends is the for customer required any that the down, may dollar as buy to Again, indicated, is he dollar, to have make vehicles not believe that correlation cost we come doesn't The then I a or the of commentary have. but will is it's as there. down I us as reality more auction prices provide at not. vehicles we is to and there well. that we reality We

comes the and that Okay? to we parts demand the based bid we auction on on car need We the to the bid that don't the and have every inventory. see vehicles on

drive need to going buy best not stay to utilizing the and that's our models, very going on AI, we our change. like to that so We're focused vehicles to the And the margin.

their is for or Just next those us going vehicle two doing the because buying year are [indiscernible] If no a total loss shelf there that. warehouse utility it's to on for sit sale.

of to continue price have parts. great. OEs have alternative to their focus prices, we cost We prices the on push relative do come utilization insurance proposition the so if And is to what the car on we buying the pricing of again, because to where adjust for them that need. we need parts car based maintain companies we that the not of down, And value the the

so parts mean in And up our the price doing, price of down just but ability lower doesn't that the on anything what parts But we because to else? we’ll sell. based some OEs the the comes automatically are Rick, price

spot I No, was it think on.

your somebody what's you. or a the impact basis increase expense? interest point of XXX rates Thank then Okay. And you in did, something mentioned Varun, lastly, on about, interest

on Yes, the that debt no, the of one end had about I'm who we Gary. mentioned revolver. Essentially at September, the $X.X of rate billion variable

That of expense. basis was a So every will higher essentially interest $XX math. be XXX simple million points

about cash $X.X billion $XXX million million, we've and bonds about and two fifty net and was two know, debt for debt as euro for of a half million. We $X.X got had total handed So billion. which and you

So, change really on debt. the on variable the would only rate that be

Okay. Thank you.

from Your next Hoffman the line questions of Please Michael Stifel. with ahead. go

of you U.S., follow-up. the margins a benefit plus. on maybe me for inventory is by the through to letting margin decline gradual Thanks When would freight the it we answered a there or do back do normal in that see, saying coming be

appreciate so the Yes, I question.

we earlier this year, year, year. So, seeing obviously this saw earlier that last the we've late spike the been in

there the cost with increases keeping items. And a normalizes increases of we're QX is with as into of inventory sort that lot well. so keen inflationary other Right? decline along QX over somewhat that going that flowing a the it start are product So, on you eye relative offsetting level seeing would through as

contracted So, due mind spot lot going rates. scale, as the get other able is that keep market the we to to up a thing in was of our to size rapidly and were

that mitigated against we And would so saw the some have been of increase competition.

Yes.

volume hurt as market thinking and So, then and for back than in came of from the Because going back escalated comes XX-foot spot of $XX,XXX and were as cost through what container the our soared our contracted XXXX as rates That in. spot to another as we of less the will the less $X,XXX a spot of Michael, smaller XXXX so goods competitors when benefit roll on is was in way inventory pricing we're all XXXX. markets much that about our to high parts ultimately into sold. early

this back now any the Q&A does conclude remarks. portion the Nick to call I of for call. today's And will over turn closing

We in there of time attention. full to point your and We the forward as on really we things is thank providing look report fourth year for late today lot that Well, February you obviously guidance. time, XXXX update always, of in a certainly and our understand our results. markets. we And when we'll XXXX full establish in another at year quarter obviously XXXX going

attention your in always. appreciate LKQ. for So as your time again, thanks And and interest we

LKQ thank This XXXX you conference We quarter call. earnings your participation. Corporation’s for third conclude does

disconnect. You now may