With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

Industries included in the sector are diversified, electronics, and food and grocery.

Fortune Sector Leaders: Wholesalers

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

This year’s Fortune 500 marks the 68th running of the list.

This year’s Fortune 500 marks the 67th running of the list.

LKQ provides alternative and specialty parts to repair and accessorize cars, trucks, and other vehicles.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-257-LKQ

Chicago's LKQ distributes auto parts to collision and mechanical repair shops in North America, Europe, and India.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune 500 marks the 62nd running of the list.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

Shale rules! That’s the lesson of the latest edition of our annual list of public companies with the most stellar three-year profit, revenue, and stock growth. 

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LKQ Corporation is a leading provider of replacement parts and systems for automobiles in the United States, Canada, and Europe. Its products include bumper covers, body panels, hoods, fenders, lights, and paint. LKQ Corporation mainly serves auto body shops, retail customers, and new and used car dealerships.

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LKQ (LKQ): Company Profile, Stock Price, News, Rankings

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I'll now hand you over to Joe Beatrice to begin. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to LKQ's fourth quarter and full year twenty twenty four earnings conference call. With us today are Justin Jude, LKQ's President and Chief Executive Officer and Rick Galloway, our Senior Vice President and Chief Financial Officer. Please refer to the LKQ website at lkqcorp.com for our earnings release issued this morning as well as the accompanying slide presentation for this call. Now let me quickly cover the safe harbor.

Some of the statements that we make today may be considered forward looking. These include statements regarding our expectations, beliefs, hopes, intentions or strategies. Actual events or results may differ materially from those expressed or implied in the forward looking statements as a result of various factors. We assume no obligation to update any forward looking statements. For more information, please refer to the risk factors discussed in our Form 10 K and subsequent reports filed with the SEC.

During this call, we will present both GAAP and non GAAP financial measures. A reconciliation of GAAP to non GAAP measures is included in today's earnings press release and slide presentation. Hopefully, everyone has had a chance to look at our eight K, which we filed with the SEC earlier today. And as normal, we're planning to file our 10 K in the coming days. And with that, I'm happy to turn the call over to our CEO, Justin Jue.

Thank you, Joe, and good morning to everyone joining us on the call. As many of you know, I took the CEO position after Nick's retirement in July of last year, and it has been and continues to be an honor to lead the LKQ team and to maintain a culture rooted in humility. Our team leads by influence, not authority and ego. We take action, embrace change, confront failure head on and always strive to make the right decisions for the company, our employees, our communities and our shareholders. In 2024, we faced tough challenges.

Despite financial setbacks, our team surpassed expectations in navigating the most difficult market dynamics I've seen in thirty years in the automotive industry. For that, I couldn't be prouder of our team members and the incredible culture we've built. Before I address the fourth quarter, I would like to reflect on what LKQ accomplished in 2024. With our commitment to operational excellence and a sound balance sheet, we focused on the things we could control. And in those areas, we were very pleased with our performance.

With our goal of returning cash to shareholders, we delivered $678,000,000 of capital with $360,000,000 in share repurchase and $318,000,000 coming from dividends. And our ongoing strategy to simplify the portfolio led to divesting five businesses, primarily in Europe, which represented $153,000,000 of trailing twelve month revenue with little to no margin. Moody's and Fitch reiterated our stable and positive outlook in 2024. Our Board of Directors continued their active and ongoing Board refreshment to ensure we have the right mix of skills and experiences to provide effective oversight and guidance of the company's strategy. Our new Board members have extensive experience in business strategy and operations further enhancing the depth, knowledge and skill sets necessary to drive long term value for our shareholders.

The integration muscle of North America team was again validated in 2024 with the consolidation of FinishMaster into the LKQ network by closing 129 of their 151 locations. Not only did the North American Team deliver the integration faster than expected, but with a higher level of synergies than originally planned. We finalized our megayard expansion project in Crystal River, Florida. And in December, we began operating on this expanded acreage. We also purchased land and began the construction of two megayards, one in Illinois and one in Washington.

We expect these new yards to open in 2026. These megayard expansions will allow us to further our growth on recycled parts while driving more productivity. Our European segment made several key leadership changes to support a more agile focus on change management. We developed a more consistent culture across our global footprint and combining the intellectual capital of our two nondiscretionary segments, North America and Europe. This shared expertise will give us many benefits such as our overall procurement, remanufacturing product development, hard parts growth in North America, opportunities that will come from electrification and a multitude of financial benefits, including vendor financing and a lower cost of capital.

I will now shift to the quarter. Let's start with capital allocation. At recent trading levels, we believe repurchasing our shares is a good use of our capital. We were active in the quarter, repurchasing roughly 2,000,000 shares for about $80,000,000 At the end of the quarter, we had approximately $1,700,000,000 remaining on our repurchase authorization. The Board declared a quarterly cash dividend of $0.3 per share in October that was paid in November, totaling $78,000,000 On February 18, the Board declared a quarterly cash dividend of $0.3 per share payable in March of twenty twenty five.

Moving to our segments. The North American revenue decline of 8.5% per day was larger than what we reported in the first three quarters of twenty twenty four. But when you back out the non recurring benefit of the UAW strikes in 2023 and the storm impacts across The U. S. In Q4, the North American decline in collision parts revenue was roughly 4% compared to a repairable claims decreasing almost 6% in the quarter.

Though revenue decline, it was another period of outperformance for our North American operations on a relative basis. That said, we are seeing some positive trends as we enter 2025, including favorable inclement weather and ongoing dynamics in the auto insurance market that combined could benefit our North American collision business. The average cost of auto insurance in The U. S. Increased over 20% in 2024, more than any other category of household expenses.

We expect insurance costs to moderate in 2025 and historically this will lead to insurance carriers looking to take costs out of their network and the value proposition of our alternative parts offering is one area they can quickly flex, which would be a favorable trend for APU. Moving on to Europe. Our organic revenue declined 20 bps on a per day basis for the quarter, which was essentially flat to Q3. Certain markets showed single digit growth, while others declined in a similar range. I am particularly pleased with the organic growth in Germany, which has moved past the labor issues from 2023 and early twenty twenty four and reported healthy sequential and year over year growth.

Competition is again contributing to the challenging conditions in certain markets consistent with the last quarter as some of the smaller players aggressively push price. Rick will cover the majority of margin related details, but I wanted to highlight Europe's segment EBITDA at 10.1% in the quarter. This performance is the highest Q4 segment EBITDA margin achieved in Europe. The third straight quarter was a double digit margin and the full year was the highest level of segment EBITDA dollars on record. With leadership aligned with our margin objectives, we are confident in our ability to deliver sustainable annual double digit EBITDA margins in Europe.

Tremendous performance and progress by the Europe team despite a challenging operating environment. Related to our SKU rationalization initiative in Europe, I am pleased to report that we hit our expectations of reviewing 50% of our product brands by year end 2024. And we plan to complete the review of an additional 30% by year end of twenty twenty five with completion by the end of twenty twenty six. We started with roughly 750,000 stocking SKUs across Europe in scope for this project. By the end of twenty twenty four, we had decreased our stocking of over 30,000 SKUs and we expect to decrease another 40,000 more in 2025, ultimately hitting our goal of stocking 600,000 SKUs by the end of twenty twenty seven.

This project will bring benefits on the procurement side, payables and more importantly, simplify our operations to allow for a more pan European distribution network. As we will keep pushing for additional private label penetration, as we recognize that the European vehicle park will continue to age and this has been further accelerated post the pandemic with a combination of supply chain constraints and the transition of EV being slower than anticipated. We currently have 22% penetration of private label parts with a long term initiative to grow that number to 30% given the gross margin benefits that come from private label. With this in mind, we do believe there are growth and margin enhancement opportunities in our category management portfolio and the increase in our private label offering is already included in our targeted 600,000 stocking SKU number. We plan to update you on our progress with these SKU targets on a quarterly basis.

Specialty posted organic revenue down 7.3% on a per day basis, but was a sequential improvement from Q3. The RV Industry Association believes the RV market is poised for growth in 2025 with dealer inventories at higher levels, ongoing strong consumer interest in RV ownership and interest rates that are expected to ease. Additionally, total U. S. Light vehicle sales increased 7.1% in Q4 with pickups in SUVs, the most important category for us, up 14.84.9% respectively.

Though not out of the woods, we are starting to see some positive signs in our Specialty segment as we enter 2025. Lastly, on tariffs. The tariff news is extremely fluid with the current administration validated by the quick shift of halting New Mexico and Canada tariffs less than forty eight hours after they were implemented. Our team is actively monitoring the various announcements and a potential impact on our business. As the tariff situation stabilizes and things unfold, we will keep the investment community apprised accordingly.

As mentioned in the past, wholesale North America procures virtually zero inventory from China with most coming from Taiwan. And as you know, our salvage product is all domestic. Specialty is the only segment with exposure to China, approximately 15%, and their spend is highly diversified with some products being procured here in The U. S. I'll now turn the call over to Rick for a review of the financials and our 2025 guidance.

Thank you, Justin, and welcome to everyone joining us today. Before I dive into specifics on the fourth quarter, I would also like to cover some of our accomplishments throughout 2024. Despite the macroeconomic challenges, as Justin mentioned, we continued to focus on those things within our control. We accelerated the integration of FinishMaster, completing that exercise in the first quarter and helping us to increase annualized Uniselect synergies by the end of twenty twenty six to $65,000,000 We initiated the 2024 restructuring plan with the objectives of exiting businesses and markets that do not align with our strategic objectives and executing on opportunities to streamline operations and our logistics models. In Europe, that resulted in exiting certain operations and increasing the efficiency of our logistics footprint, resulting in a reduction in facilities and overhead costs.

In North America, we focused on aligning our cost structure with demand by rationalizing overhead costs to most efficiently serve our customer base. While these actions were challenging, they were necessary to tackle and align with the strategic imperatives we discussed at Investor Day, including simplification of the business portfolio, improving our lean operating model globally and increasing our margins in order to maximize total shareholder returns. We are confident the actions we have taken will drive our success in 2025 and beyond. Now on to the fourth quarter. Overall, Q4 results exceeded our expectations and guidance.

Europe's performance was a highlight as the segment delivered a record fourth quarter EBITDA dollars and percentage despite challenging macroeconomic conditions. Self-service performed in line with expectations with another quarter of year over year improvement in EBITDA dollars and percentage. North America improved its EBITDA margin by 50 basis points due to a one time legal settlement despite revenue losses from a brief cyber incident in Canada. Specialty's results remained under pressure with soft demand. Turning now to the fourth quarter consolidated results.

Despite challenges in North American Specialty and the stronger U. S. Dollar affecting Europe, our fourth quarter performance exceeded expectations due to strong European results and some favorable non recurring items. For the full year, we reported diluted earnings per share of 2.62 and adjusted diluted earnings per share of $3.48 the latter of which was toward the higher end of the guidance range we discussed back in October, but a decrease of $0.35 per share compared to 2023. The $0.35 per share decline in adjusted EPS was primarily influenced by a combined $0.3 per share impact from interest and taxes with an additional $0.13 decrease attributed to commodity prices and foreign exchange rates.

Despite the macroeconomic challenges and significant inflationary pressures on overhead and cost of goods sold, our efforts in simplification and strategic capital allocation have resulted in a positive contribution of $0.08 for the full year. For the fourth quarter, we reported diluted EPS of $0.6 and adjusted diluted EPS of $0.8 a $0.04 decrease from the prior year figure. As you may recall, our Q4 twenty twenty three results included some favorable one time discrete tax items, which were not repeated in Q4 this year, resulting in a $0.09 year over year decrease from taxes. In addition, lower FX rates and unfavorable metals price movements contributed to a further $0.02 decline. On the positive side, lower share counts due to our ongoing share repurchase program improved adjusted EPS by approximately $0.03 The remaining $0.04 year over year improvement reflected the strong performance by Europe and net favorable non recurring items in North America.

Now for segment results. Going to slide seven. North America posted a segment EBITDA margin of 16.8, a 50 basis point increase relative to last year. For the full year, we reported a segment EBITDA margin of 16.6%, slightly above the expectations we discussed last quarter due to a favorable non recurring legal settlement that was partially offset by our Canadian cyber incident. The decline in organic revenue, especially within our aftermarket business due to reduced repairable claim counts, adversely impacted margins during the quarter.

This also included a related mix effect on gross margins as aftermarket collision revenue typically yields higher margins compared to our other wholesale lines. Salvage margins were also down in the quarter reflecting unfavorable movement in revenue, vehicle cost trends and commodity prices in 2024. On the other hand, overhead expenses improved two seventy basis points in North America, reflecting favorability from the one time legal settlement and lower personnel costs, primarily related to lower incentive compensation. The Uniselect synergies and productivity initiatives largely offset significant inflationary pressures and the leverage effect of the organic revenue decline. While we expect headwinds on repairable claims and salvage margins to continue in 2025 due to the factors I mentioned, particularly in the first half of the year, we estimate that the North America's EBITDA margins will be in the low 16% s, consistent with 2024% after adjusting for the non recurring items.

Looking at Slide eight. Europe reported a segment EBITDA margin of 10.1%, a 180 basis point improvement over last year and its third quarter in a row with double digit EBITDA margins. The year over year improvement consists of 110 basis points related to non recurring charges in the prior year, while the remaining 70 basis points relates to the ongoing efforts to simplify the operations and portfolio as well as productivity efforts that more than offset inflationary pressures. As I stated on our last call, we expected EBITDA margins in Europe for the full year to be in the mid to high 9s, which is where we landed. From where we stand today and the actions we've taken to address productivity, we believe we can build upon our recent gains and expect to deliver improvements, with EBITDA margins expected to be double digits in 2025.

Moving to Slide nine. Specialty's EBITDA margin of 4.1%, one hundred and sixty basis points below the prior year, primarily driven by a decline in organic revenue and resulting leverage effect on overhead costs. Demand softness in the light vehicle and RV product lines and competitive pricing pressures remain challenges for the business. For the full year, segment EBITDA margins were 6.8%, below our expectations, but largely related to the revenue softness. Early signs indicate some of our markets have stabilized.

However, a rapid rebound in 2025 is unlikely due to inconsistent recovery. Thus, we expect segment EBITDA margins to improve to around 7% to 8% for the full year 2025. Self-service generated an 8.3% segment EBITDA margin in Q4, which is a two thirty basis point improvement from last year. In dollar terms, segment EBITDA increased by $4,000,000 Disciplined vehicle procurement combined with overhead cost controls overcame unfavorable movements in scrap steel prices and helped to drive the third consecutive quarterly improvement in year over year profitability. Shifting to cash flows on the balance sheet.

in free cash flow during the quarter, bringing our year to date total to $810,000,000 Though slightly below our expectations, we invested in North American inventory anticipating possible Q1 port strikes and tariffs. We remain dedicated to delivering value to our shareholders, allocating over $150,000,000 through $80,000,000 in share repurchases and $78,000,000 in dividends. As presented during our Investor Day, we committed to allocating at least 50% of our free cash flow towards returning value to our shareholders. We are pleased to announce that we exceeded this commitment in 2024. As you can see on slide 10, for the full year, we deployed $678,000,000 for share repurchases and dividends, representing over 80% of our free cash flow.

We also invested approximately $3,000,000 in two tuck in acquisitions in the fourth quarter, both in North America, including one in Canada and one in The U. S. For the year, we spent approximately $50,000,000 on acquiring 10 highly accretive tuck in businesses. We paid down approximately $62,000,000 in outstanding debt in the quarter. As of December 31, we had total debt of 4,200,000,000 with a total leverage ratio of 2.3 times EBITDA, an improvement from the prior quarter.

We remain committed to maintaining a manageable debt level in our investment grade rating. As of 12/31/2024, our current maturities were $38,000,000 but we have a $500,000,000 term loan coming due in Q1 twenty twenty six. As normal practice, we actively manage our capital structure and we are currently evaluating our options to determine the optimal solution to address our pending 2026 term loan maturity. Our effective interest rate was 5.3% at the end of Q4, slightly down from Q3 as a result of recently lowered benchmark rates. We have $1,700,000,000 in variable rate debt, of which $700,000,000 has been fixed with variable interest rate swaps, which effectively provides a fixed rate on over 75% of our debt.

I will close with our thoughts on 2025 guidance as shown on slide 11. Our guidance is based on current market conditions, recent trends and assumes scrap and precious metal prices hold near fourth quarter prices and no material impact from tariffs. On foreign exchange, our guidance includes recent rates including the euro at $1.04 the pound sterling at $1.25 and the Canadian dollar at $0.7 The global tax rate is at 27, which is comparable to our 2024 rate. We expect organic parts and services revenue growth between 02%. Please note, we have one less selling day in 2025.

In North America, we expect revenue to be roughly flat on a per day basis given we don't expect an immediate rebound in repairable claims and won't realize the full benefit of some of the favorable trends Justin mentioned until later in the year. We believe Europe is poised to perform a bit better than they did from a revenue perspective in 2025 despite the ongoing challenging macroeconomic backdrop across the continent. For Specialty, we expect low single digits for organic revenue growth given the macroeconomic indicators we are seeing. As a result of our revenue growth expectations, we are estimating adjusted diluted EPS to be in the range of $3.4 to $3.7 As you can see on slide 12, our EPS guidance anticipates headwinds from lower foreign exchange rates, depreciation and amortization as well as the one time items discussed earlier, partially offset by benefits from metals prices, interest and taxes. We are focusing our efforts on those items we can't control and anticipate more than offsetting the net negative impact of those items through improved operating results, which reflect the carryover benefit from the simplification and productivity measures we took in 2024 and the continued benefits from our disciplined focus on capital allocation.

Free cash flow is expected to be in the range of $750,000,000 to $900,000,000 We will continue to balance our trade working capital and capital expenditure needs to fund our strategic growth objectives for 2025 and beyond. Thanks for your time. I will now turn the call back to Justin for his closing comments.

Thanks, Rick, for the financial commentary. As we enter 2025, I want to reaffirm my strategic priorities for our global enterprise as we drive sustained long term total shareholder returns. First, make sure we are growing above the market. Next, simplify. Simplify our operations by ensuring lean thinking is in everything we do to enhance our margins and simplify our portfolio across our markets and businesses to ensure we're the best owners.

Improve free cash flow by growing profitably and strengthening our balance sheet invest in growth organically and via small highly synergistic tuck ins and with a continued moratorium on any large platform acquisitions and focus our capital allocation strategy around returning capital to our shareholders through a combination of share repurchases and dividends. With these priorities in place, coupled with our industry leading teams, we are well positioned to navigate the challenges ahead and deliver strong operating results for all of our stakeholders. As always, I want to thank the 47,000 plus dedicated team members of LTIQ for their commitment to advancing our business each day and driving our mission forward no matter the obstacles. Time and time again, our team has shown these challenges are opportunities for growth for both themselves and the overall organization. With that, operator, we are ready to open the call for questions.

Thank you. Our first question today comes from Craig Kennison with Baird. Please go ahead. Your line is open.

Hey, good morning. Thanks for taking my question. It really goes to the SKU rationalization project in Europe. I think the concern had been that by reducing brands, you might miss on some revenue opportunities, but you'd benefit from better vendor terms. Looks like you had a better comp in the quarter than most of your peers.

So maybe you're actually not losing revenue. Just curious if you can comment on any revenue impact from that decision. And then on a related note, if you could comment on, I guess the beneficial terms that you earned by consolidating your business with the remaining vendors? Thank you.

Good morning, sir. Thanks for the question. On the SKU rationalization, we're taking a very cautious approach. We're not trying to fast track this in the next six months. It's really a two to three year project because our biggest concern to your point is making sure that we don't that we have a revenue concern and so far we've not.

A couple of the reasons why when we do the SKU rationalization, although we're reducing the number of actual stock numbers in our warehouses, we're increasing the actual ability to say yes by applications. Meaning when a customer has a specific year, make and model and a part type, our goal isn't just to have a brand. Our goal is to have be able to say yes regardless

the brand. Additionally, we're adding more private label as I mentioned in my, in the script. And that's allowing us to compete into a different market where price is a little bit more customers are a little bit more conscious on price. So, so far we haven't seen any revenue concerns. The group that we have working on this, I mean it has operations, salespeople, supply chain to make sure that we don't impact the business and impact the revenue.

On the term side, we haven't gone through everything. We do expect to see a slight improvement in terms, better cost of goods, but we haven't quantified that yet.

Our next question comes from Josh Patna with JPMorgan. Please go ahead.

Hi, good morning. Thanks for taking my question. Just one bigger picture question. We're now starting to cycle the impacts of lower than normalized new SAAR levels in 2022 and 2023 that are expected to reduce the population of vehicles in the younger age cohort of the vehicle of the company sweet spot of three to 10 year old vehicles. I'm curious if this is likely to have a meaningful impact on market trends over the next couple of years.

Any color you could share around the distribution of repairable claims across vehicle aged buckets which would be meaningful to gauge the impact here?

Yes, good question. We obviously monitor new car production sales into the market. So far, there hasn't been a huge impact on in our model on repairable claims. Obviously, the vehicle car park is aging. That's always good for LKQ whether it's on the collision side, the product lines we sell or on the mechanical piece.

Obviously, we sell a lot of engines and transmissions and that aging fleet uses those items a lot more obviously than the newer ones. So we haven't seen any meaningful impact currently and we're monitoring it on a go forward basis. It really is going to depend on to your point on the SAR sales over the next couple of years to see if there's a longer term impact.

And, Josh, our sweet spot is a little bit closer to three to twelve years. So it's a little bit further than the 10 that you talked about. The good news is we have started to see recently some Manheim information that indicates used car prices have been going up last few months. So that's a good thing for us.

Understood. That's super helpful. Just as a follow-up, I was curious if LKQ's North American and European supply chain are meaningfully differentiated from some of your local peers. In that potential tariffs could provide the company a transitory competitive advantage. Any historical precedence you could share around LKQ's organic revenue growth trajectory in comparison to the industry amidst economic shocks would be super helpful?

Yes. Obviously, your question on tariffs, the headlines all about Mexico, Canada and China, obviously, there's maybe more to come. Just from a risk standpoint, do you see guys understand if we quantify what we import into The U. S. From those three countries, it's less than 5% of our total purchases, so not real meaningful.

Historically, we've always been able to pass it on to our consumers on to the customers. Overall, the devil is in the details. If there are tariffs that impact our competition whether that's OEM or if it impacts something else that doesn't necessarily impact LKQ as much of that is a competitive advantage from a cost savings standpoint. But obviously there's a lot more details to work through and a lot more unknowns for us to figure out whether it's an opportunity or not.

The next question comes from Scott Stember with Roth Capital. Please go ahead.

Good morning and thanks for taking my questions as well.

Could you guys talk about the mega yards, some early returns and some KPIs that we could be looking for in the future to really gauge how things are progressing on that front?

Yes. From a high level, just the explanation and definition of megayards. Obviously, we've got 100 plus yards across North America. Some of those are landlocked where we can expand. When we move into a megayard, it gives us the ability to consolidate potentially two or three local yards into that megayard.

But it also gives us capacity to produce more cars or to dismantle more cars. We've had a couple over the last several years. It's a new initiative for us. So we see great returns on those long term baked into our model for a couple of reasons. One, we can produce more cars with the same management.

We don't necessarily have to have multiple general managers. If we consolidate three yards into one big one, we can hold those vehicles longer giving the opportunity to sell more parts off of that vehicle. Scott, if you think about we buy a car for $2,000 our cost of goods is $2,000 no matter what. So the longer we can hold that vehicle, creates more opportunity to sell off of those sell off of that vehicle. So we see great returns on it in the future, but most of these we've only created acuity in the last several years.

Got it. And then there was some commentary about North America, some positive things going on. I guess weather was one of them. Can you talk about that? And then just following up on that just for a cadence of for guidance, if we were looking at the midpoint, how should we look at the recovery throughout the year?

Yes. I'll take the first part of that, Scott, and then turn it over to Rick. On the repairable claims side, some of the positives we've seen obviously are the inclement weather. Also we're kind of anniversarying some of the issues that we've had. Rick just mentioned that we've had a couple of months of used car pricing kind of flattening off and starting to increase.

So with the large increases from an insurance premiums, but with the used car prices dropping that was impacting consumer's choice to fix their vehicle and impacting repairable claims. Now that we're starting to see used car pricing level off, there are still some states that haven't necessarily passed the larger increases, but for the most part, the majority of states increased those premiums are allowed the premiums to increase. And so we're kind of going to be anniversarying that throughout 2025. And Rick can kind of talk about how we have that baked into the guidance.

Yes, Scott. So same kind of works for the corporate side consolidated numbers. But if you're talking specifically about North America, if you look at last year in 2024, the per day numbers were around just using round numbers around 3% down, 5% down, then it went to 7.58.5%. We're expecting the exact opposite of that to happen through the year this year. We'll be down a little bit in the first half of the year and then we'll be positive year over year in the back half to where we're roughly flat for the year.

So think of that starting off in a low point in Q1 and then growing throughout the year when you look at the organic numbers.

Our next question comes from Brian Butler with Stifel. Your line is open.

Good morning. Thanks for taking my questions.

Just first one, just maybe some additional color on the portfolio review from a strategic perspective. I know this was kind of started back in September. Maybe just where we are on that and the timeline you think going forward from here when there may be some decision opportunities to be made?

Hey, Brian, thanks for the question. Just to be clear, it started before September. Our review of the portfolio, it is not done. It is still ongoing. Obviously, in 2024, I mentioned we did divest five businesses, primarily in Europe, totaling $153,000,000 of revenue with really little to no profit.

But once again, we're not done. There's any time you want to exit a business, a market, a product line, there's always variables that can occur. And I'll just, I guess, stated that I would I'm the kind of guy that's going to not tell you what we're doing, but show you once we're done. So it is ongoing. I can expect more.

Okay. And then a follow-up on the margin opportunity in Europe. When you think longer term, you're kind of in that double digit, which has been great success. How should this improve, I guess, beyond 2025? Is there an opportunity where you continue to geek out some margin improvements?

Or do you really reach a level somewhere down the road here that is it 10.5% or 11%?

So Brian, I'll take that one. The numbers we haven't quoted exactly where we think we are. But I can tell you, Justin and I are very, very bullish about where we think that the market can go and that the business can go in our European business. We're clearly several hundred basis points above many of our competitors, but we think that number can continue to grow for the next several years. What we talked about is about 30 to 40 basis points each year for the next several years.

I wouldn't put a cap on that at eleven, eleven point five. I think that number can continue to grow over the next at least three years and probably three to 5% as we start thinking about the work that's being done on the category management as well as the overall portfolio management that we're doing in our European business. So I think double digits is solid for 25% and it continues to grow pretty nicely for the next several years.

Great. Thank you very much for taking the question.

Our next question comes from Gary Prestopino with Barrington Research. Your line is open.

Good morning, all. I just want to get some clarification here. There was on the margins in North America and Europe. You said there was a one time legal gain non recurring in the quarter. How much of that contributed to what the 50 basis point increase in adjusted EBITDA margin?

Yes. So Gary, we're not going to talk specifically about the legal settlement, but what I'll give you is directionally, combined between the legal settlement and we did have a brief cyber outage, if you look at North America's margins for the year, there's about 50 basis points for the year. So we ended up coming around 16.6% for the full year, about 50 basis points of that we would consider non recurring, bring us down to a full year number around 16.1

Okay. And then you did outline there was a 101 basis point impact on Europe in Q4. Was that the tax last year, was that the tax issue in Italy?

No. There was a couple of items in 2023 that we had some severance costs and some other non recurring items that showed up. The VAT issue that we had, that some of those is pretty much the 110 basis points. It was about 110 basis points of non recurring. And then I talked about in the prepared remarks, there's about 70 basis points of mix fifty-fifty between the portfolio actions and the good work the team is doing on simplifying the operations.

I realize it's very early stages, but anything you're doing on the EV side, is it mostly collision repair for body parts? Or are you seeing other areas where you can take salvage off EVVs and put them into the recycled channel in terms of parts?

Yes. On the EV side, there are a couple of different initiatives that are underway. First, if you remember, we got into the recycling or remanufacturing of hybrid batteries. So think of nickel metal hydrate and then obviously the technology migrated over to lithium ion. We are also investing in the remanufacturing of full battery electric vehicles.

We've had a couple that have been completed and we're in the process of testing right now. In addition to your question around a salvage vehicle that's electric and we bring it in, obviously there's collision parts that we can sell off of that. Most of the batteries today are getting recycled and shredded and getting fed back into a new battery production. I mean obviously there's not that many electric vehicles on the road as a percentage. And in addition those batteries are typically lasting seven to eight years.

So there's not a lot of demand and there won't be for several years. But there are things that once again were that's that we're placing to make sure that when the opportunity comes out, it's not it is an opportunity and not a headwind for us.

Okay. And then lastly, if I could just sneak one more in. You mentioned something about the collision claims being CCC's collision claims were down a certain amount in Q4, but there was a couple of puts and takes around that. Could you just go over that? Yes, 6% repair of claims.

You mentioned there were some puts and takes as it regarded your business.

Specific to claims, yes, they were down roughly 6% for Q4. Well, I guess we were kind of talking about on some of the puts and takes, some of the things that we're seeing softening, some of the slowdown of the headwinds that we were facing in 2024. They haven't all of a sudden January 1 hasn't rolled around and those headwinds are gone. We just anticipate that those things those are slowing down and those were the used car pricing that was on a continued decline in 2024. We're starting to see that flatten out and go positive.

LKQ Q4 2024 Earnings Call Transcript | Fortune

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LKQ (LKQ) Q4 2024 Earnings Call Transcript

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