LKQ CORP (LKQ) Q1 2025 Earnings Summary

Executive Summary

Q1 results were mixed: adjusted EPS of $0.79 slightly beat consensus while revenue of $3.463B missed; margins held up due to cost control and mix improvements, and 2025 guidance was maintained pending tariff clarity . EPS/EBITDA beat vs Revenue miss: Adj EPS $0.79 vs $0.779*; EBITDA ~$398M vs $396M*; Revenue $3.463B vs $3.576B*.
North America continued to face lower repairable claims (nearly 10% decline), but LKQ outperformed claims trends by ~570 bps, signaling share gains; Europe improved profitability (segment EBITDA +60 bps YoY to 9.3%) despite soft demand .
Free cash flow was seasonally negative (-$57M) on working capital timing; leverage at 2.5x and total debt $4.4B remain manageable; $118M returned to shareholders via $40M buybacks and $78M dividends, and a $0.30 dividend was declared for Q2 .
Management formed a tariff task force; direct import exposure is <10% of global COGS (sub-$200M before mitigations) and indirect exposure ~20%; historically, tariffs have been passed through and can benefit recycled parts mix; guidance kept unchanged but CFO indicated organic growth likely toward low end (0–2%) absent tariff impacts .

Note: Consensus figures marked with an asterisk are from S&P Global.

What Went Well and What Went Wrong

What Went Well
- Margin resilience: gross margin expanded YoY to 39.8% and operating margin to 8.3% despite revenue decline; total Segment EBITDA margin essentially flat YoY (11.7% vs 11.6%) .
- Europe execution: segment EBITDA margin improved 60 bps YoY to 9.3% as SKU rationalization, leadership changes, and private label initiatives progressed; management remains confident in sustaining double-digit margins in 2025 .
- Share gains in North America: organic revenue fell less than claims, outperforming repairable claims growth by ~570 bps; diversified offerings (Elitek/diagnostics, Canada hard parts) supported performance .
- Quote: “Even with lower demand, the team's unwavering focus on optimizing the Company’s cost structure is reflected in our year-over-year EBITDA percentage growth” — CEO Justin Jude .
What Went Wrong
- Top-line softness: Parts and services organic revenue -4.3% (per-day -3.1%); total revenue -6.5% YoY; NA and Specialty remained pressured by claims declines and weak discretionary demand .
- Working capital drag: CFO/FCF negative (-$3M/-$57M) due to receivables/inventory timing and higher interest payments; leverage ticked up to 2.5x .
- Specialty still under pressure: organic per-day revenue -4.9% with macro/tariff uncertainty weighing on sentiment; segment EBITDA margin down to 5.4% vs 6.4% .
- Analyst concern: legal/pro fees tied to cooperation agreement created ~$0.01 headwind to adjusted EPS .

Financial Results

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($USD Billions)	$3.584	$3.357	$3.463
Diluted EPS (GAAP) ($)	$0.73	$0.60	$0.65
Adjusted Diluted EPS ($)	$0.88	$0.80	$0.79
Gross Margin %	38.8%	39.5%	39.8%
Operating Margin %	8.6%	8.1%	8.3%
Total Segment EBITDA Margin %	12.1%	12.1%	11.7%

YoY (Q1 2025 vs Q1 2024): Revenue -6.5%; GAAP EPS +10.2%; Adjusted EPS -3.7%; Gross margin +60 bps; Operating margin +50 bps .

Consensus vs Actual (Q1 2025)

Metric	Consensus	Actual	Result
Revenue ($USD Billions)	$3.576*	$3.463	Miss
Primary EPS ($)	$0.779*	$0.79	Beat
EBITDA ($USD Millions)	$396.2*	~$398	Beat

Values marked with an asterisk are from S&P Global.

Segment breakdown (Q1 2025 vs Q1 2024)

Segment	Revenue Q1’24 ($M)	Revenue Q1’25 ($M)	Segment EBITDA Q1’24 ($M, %)	Segment EBITDA Q1’25 ($M, %)
Wholesale – North America	1,500	1,412	244 (16.3%)	222 (15.7%)
Europe	1,644	1,522	143 (8.7%)	141 (9.3%)
Specialty	423	394	27 (6.4%)	21 (5.4%)
Self Service	137	136	16 (11.7%)	20 (14.6%)
Eliminations	(1)	(1)	—	—
Total	3,703	3,463	430 (11.6%)	404 (11.7%)

Key KPIs (Q1 2025)

KPI	Q1 2025
Parts & services organic growth	-4.3% (per-day -3.1%)
Cash from operations / Free cash flow	-$3M / -$57M
Total debt / Leverage	$4.4B; 2.5x EBITDA
Dividend declared	$0.30/share (payable May 29, 2025)
Share repurchases	$40M (1.0M shares)
Weighted avg diluted shares	259.6M
Adjusted EBITDA	$392M
NA organic per-day decline	-4.1% (market share gains vs claims)
Europe organic per-day	-1.8%; +60 bps EBITDA margin YoY
Specialty organic per-day	-4.9%

Guidance Changes

Metric	Period	Previous Guidance (Feb 20, 2025)	Current Guidance (Apr 24, 2025)	Change
Organic revenue growth (Parts & Services)	FY 2025	0% to 2%	0% to 2%	Maintained
Diluted EPS (GAAP)	FY 2025	$2.91 to $3.21	$2.91 to $3.21	Maintained
Adjusted Diluted EPS	FY 2025	$3.40 to $3.70	$3.40 to $3.70	Maintained
Operating Cash Flow	FY 2025	$1.075B to $1.275B	$1.075B to $1.275B	Maintained
Free Cash Flow	FY 2025	$0.75B to $0.90B	$0.75B to $0.90B	Maintained
Effective tax rate (assumption)	FY 2025	27.0%	27.0%	Maintained
FX rate assumptions	FY 2025	EUR 1.04, GBP 1.25, CAD 0.70	EUR 1.08, GBP 1.28, CAD 0.70	Updated inputs
NA EBITDA margin commentary	FY 2025	Low 16s (ex-nonrecurring)	Low 16s (ex tariffs)	Reiterated
Europe EBITDA margin commentary	FY 2025	Double digits	Double digits	Reiterated
Specialty EBITDA margin commentary	FY 2025	~7%–8%	Low end of 7%–8%	Tilted lower
Dividend (quarterly)	2025	$0.30 declared Feb for Mar 27	$0.30 declared for May 29	Maintained

CFO note: “We are likely headed toward the lower end of [0%–2%]” for organic P&S growth, excluding tariff impacts .

Earnings Call Themes & Trends

Topic	Q3 2024 (Prev-2)	Q4 2024 (Prev-1)	Q1 2025 (Current)	Trend
Tariffs/macro	Monitoring fluid situation; <5% exposure to MX/CA/CN in NA; minimal China in Wholesale NA	—	Tariff task force formed; direct <10% COGS (<$200M); indirect ~20%; history of pass-through	Rising focus; manageable with mitigations
Repairable claims & used car prices	Claims down 9.5%; NA revenue down 7.5% per-day	Claims down ~6%; expecting moderation in 2025	Nearly 10% decline; used car prices ticked up in April; state TLF change could help repairs	Headwinds easing later 2025
Europe integration & margins	EBITDA margin 10.2%; SKU rationalization accelerated	Record Q4 Europe margin 10.1%; target double-digit 2025; SKU review 50%	EBITDA margin +60 bps YoY to 9.3%; +20 bps PL penetration; 17k SKUs cut	Structural improvement continues
Private label penetration	Target 30% by 2030 (from ~22%)	~20% of revenue; 25% gross margin uplift vs brands	21%–22% current; +20 bps QoQ; 30% by 2030	Gradually increasing
Specialty segment	Per-day -10%; margin 7.3%	Soft demand; 2025 margin 7%–8%	Per-day -4.9%; margin 5.4%; macro/tariff uncertainty	Stabilizing slowly; still weak
Supply chain & operations	Hurricanes; port strike risk; contingency plans	Working capital actions; inventory build ahead of Q1	End-cap monitoring 95% NA; safety; inventory timing hit FCF	Operational discipline maintained
Capital allocation	$125M buybacks; dividend $0.30	$80M buybacks; exceeded 80% FCF returned	$40M buybacks; $0.30 dividend	Ongoing, disciplined

Management Commentary

Strategy and execution: “We are driven to sustain this momentum as we advance our operational excellence initiatives … reflected in our year-over-year EBITDA percentage growth” — CEO Justin Jude .
Tariff approach: “We have formed a dedicated tariff task force … to navigate the potential opportunities or disruptions” — CEO . CFO quantified exposure: direct imports <10% of global COGS (sub-$200M before mitigations); indirect ~20% uncertain; historically able to pass through tariffs .
Guidance stance: “Left our prior full year 2025 guidance unchanged” and excludes tariff impacts; will update as clarity improves — CFO Rick Galloway . “Likely headed toward the lower end” of 0%–2% organic growth .
North America: Claims headwinds but share gains: “Q1 was 570 bps better [than claims], indicating market share gains” — CEO .
Europe: “Ongoing efforts to simplify … productivity efforts to offset inflationary pressures” — CFO; EBITDA margin +60 bps YoY .

Q&A Highlights

Tariff pass-through and exposure: Management expects to pass through tariffs as in prior episodes; direct exposure <10% of COGS; indirect ~20% requires supplier dialogue and may be mitigated via sourcing/logistics .
NA trends and pricing: Focus on service levels and fill rates vs chasing price; market share gains despite claims declines .
Private label Europe: Currently ~21%–22% of revenue, with a path to ~30% by 2030; +20 bps QoQ in Q1; PL yields ~25% gross margin uplift vs national brands (Q4 context) .
Specialty outlook: Macro/tariff sentiment overhang; 2025 EBITDA margin expected at low end of 7%–8% range .
OEM vs aftermarket pricing under tariffs: Value gap to OE expected to remain; impact depends on OEM pricing response, but parity in tariffs keeps LKQ competitive .

Estimates Context

Q1 vs S&P Global consensus: Revenue missed ($3.463B vs $3.576B*), Primary EPS slightly beat ($0.79 vs $0.779*), EBITDA slightly beat (~$398M vs $396.2M*). Expect modest downward revisions to 2025 organic growth assumptions (toward low end of 0–2%) and cautious Specialty profitability, partially offset by resilient margins and share buybacks supporting EPS .
Values marked with an asterisk are from S&P Global.

Key Takeaways for Investors

Resilient margins with cost discipline mitigated volume pressure; Q1 gross and operating margins expanded YoY despite a top-line miss .
Tariff exposure looks manageable; LKQ has multiple levers (vendor concessions, sourcing optimization, selective pricing, recycled mix), and recycled parts could see demand tailwinds, particularly if used car prices continue rising .
Europe’s structural margin improvement remains a key thesis pillar (SKU rationalization, private label, leadership changes) with double-digit margin ambition intact .
North America headwinds should moderate into 2H25 as used car prices stabilize and insurance dynamics ease; LKQ continues to gain share even in soft markets .
Specialty likely remains a drag near-term; plan on low end of 7%–8% margin for 2025 as macro sentiment improves gradually .
Balance sheet and cash generation remain supportive of capital returns (dividend, opportunistic buybacks) while maintaining investment-grade metrics (2.5x leverage) .
Near-term stock drivers: tariff rule clarity and pass-through cadence, claims trajectory/used car prices, Europe margin prints, and capital return pace (especially in softer tapes) .