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    LKQ
    Earnings call· Mar 2026(Q1 FY26)

    LKQ Q1 FY26 earnings call LKQ

    Apr 30, 2026 Source

    Executive summary

    LKQ Q1 FY26 — Solid Progress and Strategic Review Update

    LKQ reported solid Q1 FY26 results, driven by operational discipline and market share gains, particularly in North America where improving demand trends are evident. Europe showed sequential improvement despite a mixed macro backdrop, while the specialty segment continued its positive organic growth trajectory. The company is also actively engaged in a comprehensive strategic review to explore alternatives for maximizing long-term shareholder value, treating the process with urgency and thoroughness.

    Highlights

    5

    • North America organic revenue decline improved to 0.5% (per day basis) in Q1 FY26, an improvement from 4.1% last year and 1% in Q4 FY25.

    • Aftermarket collision product line surpassed segment growth, with alternative parts utilization reaching a record high of nearly 40% through February.

    • Alitec (calibrations & diagnostics) delivered strong organic growth and healthy EBITDA margins in the quarter.

    • Specialty segment delivered its third consecutive quarter of positive organic growth, up 3.4% in Q1 FY26.

    • The company reaffirmed its full-year guidance for organic parts and services revenue, adjusted EPS, and free cash flow.

    Concerns

    6

    • Adjusted diluted EPS decreased to $0.67 in Q1 FY26, compared to $0.74 in the prior year.

    • Free cash flow was negative $96 million in Q1 FY26, compared to negative $57 million a year ago, reflecting normal Q1 working capital seasonality.

    • North America segment EBITDA declined 130 basis points year-over-year to 14.1% due to the dilutive effect of tariff pass-through and customer mix.

    • Europe segment EBITDA declined 150 basis points to 7.8% due to pressured organic volumes, competitive pricing, and higher input costs.

    • Specialty EBITDA decreased by $3 million, primarily due to $6 million in higher-than-normal credit losses related to a nontrade receivable.

    • Geopolitical tensions introduced uncertainty into credit markets, impacting the timing and financing terms for potential buyers in the specialty business sale process.

    Guidance & targets

    6
    CategoryTargetConfidence
    Organic parts and services revenue growth
    -0.5% to +1.5%
    high materiality
    High
    Adjusted EPS
    $2.90 to $3.20
    high materiality
    High
    Free cash flow
    $700 million to $850 million
    high materiality
    High
    Annual cost savings
    more than $50 million
    medium materiality
    High
    Europe private label volume penetration
    30%
    low materiality
    Medium
    Europe private label pricing
    ratcheting up prices
    low materiality
    Medium

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    North America
    Organic revenue decline improved from -4.1% last year and -1% in Q4. SG&A improved by 90 basis points as a percentage of revenue. Used car prices climbing (up 6.2% in March) and easing auto insurance premiums are positive indicators for recovery.
    Alternative parts utilization: nearly 40% (record high)Gross margin: 42.4%
    		—declined 0.5% (per day basis)improved from -1%EBITDA 14.1% (down 130 bps YoY)
    Europe
    Performance was in line with expectations, with Eastern Europe and Germany delivering positive organic revenue growth. UK and Italy were down year-over-year but showed sequential improvement. ERP migration completed in early April with anticipated temporary sales disruption.
    Gross margin: 38.3% (down 50 bps YoY)Private label volume penetration: 25.3% (up from 25.1% in Q4)SG&A costs: increased 80 bps to 30.9%
    		—pressured organic volumessequential improvementEBITDA 7.8% (down 150 bps YoY)
    Specialty
    Delivered its third consecutive quarter of positive organic growth. Gross margins increased in line with revenue, but higher SG&A, primarily related to $6 million in higher-than-normal credit losses related to a nontrade receivable, offset margin increases.
    RV revenue growth: nearly double digitsMarine revenue growth: strong
    		—up 3.4% (organic)—EBITDA decreased $3 million

    Operational metrics

    7
    Collision repair calibration requirement
    75%up from 62% 3 years ago
    Today

    Estimated requirement for collision repairs to undergo calibration and diagnostics.

    Used car value increase
    3.6%6.2% in March alone
    Q1 FY26

    Increase in used car values, impacting total loss frequency and repairable claims.

    Term loan balance
    $500 millioncame current at end of Q1
    Q1 FY26 end

    The $500 million term loan came current at the end of Q1, with intent to extend or refinance.

    Leverage ratio
    2.6x
    Q1 FY26 end

    Total debt of $3.9 billion.

    Effective interest rate
    5.0%
    Q1 FY26

    Company's effective interest rate for the quarter.

    Tuck-in acquisitions spending
    $5 million
    Q1 FY26

    Spent on two small tuck-in acquisitions in Europe.

    Days Payable Outstanding (DPO) improvement
    8%
    Q1 FY26

    Sequential improvement in DPO for European operations.

    Industry KPIs

    7
    MetricValueDetails
    EPS$0.30 (GAAP), $0.67 (Adjusted)USD
    Revenue$3.5 billionUSD
    Gross margin42.4% (North America), 38.3% (Europe)%
    Market sharetaking market share
    Sg a OPEX ratioimproved 90 bps (North America), increased 80 bps to 30.9% (Europe)bps/%
    Tariff impact mitigationalmost entirely made up of inflationary pressures
    Share buyback capital return$77 millionUSD

    Product announcements

    2
    ProductTypeDetails
    EV Battery Remanufacturing Serviceexpansion
    Electronic Components Remanufacturing Serviceexpansion

    Deals & partnerships

    3
    Bank of America, Goldman SachsEngaged as advisors for strategic review

    Engaged both Bank of America and Goldman Sachs alongside the Board and management to identify and evaluate a full range of alternatives with the objective of maximizing long-term shareholder value.

    UndisclosedAcquisition of EV battery remanufacturing businesspart of $5 million total

    Acquired a business in Europe capable of repairing and remanufacturing EV batteries, contributing to the $5 million spent on tuck-in acquisitions.

    UndisclosedAcquisition of electronic components remanufacturing businesspart of $5 million total

    Acquired a remanufacturing company specializing in electronic components in Europe, contributing to the $5 million spent on tuck-in acquisitions.

    Risks & headwinds

    5
    Specialty Business Sale Delay due to Geopolitical Tensions

    uncertainty into the credit markets

    Mitigation: Haven't shut down the process, but being transparent about timing and dynamics.

    European Macro Backdrop and Competitive PricingQ1 FY26

    softness early in the quarter

    Mitigation: Focused on controlling service levels, execution, and cost; executing operational initiatives to improve service and optimize cost structure.

    Temporary Sales Disruption from European ERP MigrationQ2 FY26

    temporary sales disruption

    Mitigation: Appropriately reflected in full year guidance; project progressing ahead of initial expectations; priority on maintaining customer service and seeing daily improvements in sales levels.

    Higher-than-normal credit losses in Specialty segmentQ1 FY26

    $6 million

    Fuel Cost VolatilityQ1 FY26 (late quarter) and Q2 FY26

    increased petroleum costs and diesel fuel

    Mitigation: Confident in passing on costs to consumers; teams are quick to push price through to avoid net impact.

    What to watch in Q2 FY26

    5

    North America Repairable Claims Recovery

    next quarter
    Currentdown 2% to 4%
    Targetcontinued improvement

    Why it matters

    Continued recovery in repairable claims is a key driver for North America segment growth and overall business performance.

    Comparable claims were down approximately 2% to 4% and demonstrating steady recovery from the levels we saw throughout 2025.

    Q&A highlights

    5

    What are the implications of MSO agreements for alternative parts penetration and margin profile, and how do integrations drive higher, stickier APU?

    Management explained that MSOs are higher utilizers of alternative parts, driving volume and efficiency. Renewed MSO agreements and integration of ordering capabilities increase share of wallet and improve efficiency. Automation in MSOs, driven by integration, leads to increased alternative parts volume and improved margin dollars.

    “The nice thing is they use way more alternative parts at a rooftop than any other non-MSO. So we gain margin dollars and we gained efficiencies from that.”

    asked by Craig Kennison · answered by Justin Jude

    2 min read5 chapters

    Detailed Narrative

    01

    North America Market Recovery Indicators

    The company observed promising signs of stabilization in North America, with used car prices climbing (up 6.2% in March alone), non-comprehensive total loss rates declining, and auto insurance premiums easing. These indicators are expected to drive a reduction in total loss frequency and boost the proportion of accidents that translate into repairable claims, supporting continued growth for LKQ. Management believes these trends reinforce optimism for the business, positioning them for growth and margin expansion as volumes improve.

    02

    European Operational Initiatives and ERP Migration

    In Europe, LKQ is focused on controlling service levels, execution, and costs amidst a mixed macro backdrop. The company completed a planned ERP migration in a key European market during the first week of April, which is progressing ahead of initial expectations. This achievement supports integration, process standardization, and cost reduction initiatives, enhancing the ability to become a seamless pan-European distributor, despite anticipated temporary sales disruption.

    03

    Strategic Review of Specialty Business

    The strategic review for the specialty segment is ongoing, with strong interest from both strategic buyers and financial sponsors. However, recent geopolitical tensions have introduced uncertainty into credit markets, causing some potential buyers to face tightened financing terms. While the process has not been shut down, management is transparent about potential timing delays due to the current environment.

    04

    Company-Wide Strategic Review

    LKQ is in the early stages of a comprehensive strategic review, engaging Bank of America and Goldman Sachs to evaluate a full range of alternatives. The objective is to maximize long-term shareholder value, with management and the Board aligned on a thoughtful and pragmatic approach. Investors should not expect immediate updates but can anticipate urgency and thoroughness in evaluating the path forward, without impacting day-to-day operations.

    05

    Alitec Business Growth and Market Trend

    Alitec, LKQ's calibrations and diagnostic business, delivered strong organic growth and healthy EBITDA margins. The requirement for calibration and diagnostics in collision repairs has significantly increased, rising from approximately 62% three years ago to about 75% today. This trend is viewed as a durable, long-term tailwind and a compelling opportunity to extend LKQ's service offerings.

    AI-generated summary of the company’s earnings call. Not investment advice.