Joe Boutross VP, IR
Nick Zarcone President & CEO
Varun Laroyia EVP & CFO
Craig Kennison Baird
Scott Stember CL King
Bret Jordan Jefferies
Stephanie Benjamin Truist
Gary Prestopino Barrington Research
Daniel Imbro Stephens
Brian Butler Stifel
Call transcript
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Good morning. My name is Chris and I'll be your conference operator today. At this time, I would like to welcome everyone to the LKQ Corporation's Fourth Quarter and Full-Year 2020 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. Instructions]. [Operator like of call Corporation. Investor now Boutross, to turn President Vice Relations to would over the Joe I for LKQ

may conference. begin You your

Joe Boutross

slide LKQ's and XXXX Operator. quarter Zarcone, us LKQ's you, Good Chief everyone, Nick welcome Thank Executive and Officer; morning release Vice presentation today are and Laroyia, as at website President the to LKQ well conference call. and earnings to full-year Executive this as President our call. Varun for Chief issued earnings refer the morning Financial With accompanying Officer. and Please fourth this for

me the let Harbor. Now quickly cover Safe

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

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

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

Nick Zarcone

considerations. back mentioned Coronavirus chain outlook underestimated like with in the life. we, to on our that related a frontline, nurses, condolences pandemic. call, comments teachers, I vastly themselves financial dive can have would COVID-XX remarks. couple I welcome related this personal few on year on details at we then, I say world, our suffered And you to Varun, the all of express year-ago will all enough. safely high-level have will all to that on impact this the some of This to loss hindsight, a to of my the supply want the the the mostly rest With those and of and call. cannot those community. doctors, thanks and everybody morning Thank Joe, discuss to quarter, a those before first who you, and to XXXX a our performance closing times, A of into provide We the thank come the sincere my risk responders, serve their unfortunate simply I way putting

chatted During our and we the related wave you quarter, when very mobility. ahead strong Yet, results, second of still materially third our pandemic faced the expectations we quarter call. of we produced on were the restrictions which on fourth with

me let fourth these for our continue be to all initiatives, and we say As were at to initiatives, entered objectives few again the quarter, we've of teams our central of in a embraced mentioned And and XXXX. our segment to restate reiterated not but proud our the many outset key we as pandemic, focused And the only I'm XXXX, key XXXX. of initiatives. executed throughout which and on on culture

to sustainable strategy; capital will fourth, future. maintain cash flow, turn in allocation we'll we'll to focus First, continue our profitable continue we'll model; on to third, our in balanced us the drive continue margin integrate expansion; continue a of to and invest second, high-levels we'll and and flexibility our simplify businesses operating give revenue to which

continued impacting some its significant helps of and during business. XXXX. of balance flows the and to of We've Alongside markets any Each our year. focus key be business and go-forward businesses customers second We quarter progress tremendous on market-leading for the of have organization the and Report diversity structure Sustainability I'm a progress these three comprehensive individual this on inaugural basis. build-out Corporate and the goal out a will a brightly that initiatives made benefit the the made releasing we in is program the pleased ESG of operating to ebbs shined announce

of While processed this vehicles. in founded XXXX. salvage the XXX,XXX first will be been cars of over passenger and global as and formal we report, leader Today, a have the we environmental largest day dispenser were XXXX, recycler our since vehicles recycler having an trucks we're in

a widely in thoughtful forward known the we're of practices, and months. long governance recycling, which and While our responsible for we stewardship, upcoming have social history also look highlighting we environmental and to

Now to the quarter. on

of As noted share per day a increase basis. decline Net for fourth diluted comparable an of year-over-year. services increase an on of $X for the organic year-over-year. XX% an on declined billion, quarter basis, the X.X% an fourth Slide X.X% million, XXXX. the X, per XX% from in $XXX Adjusted of during quarter, Parts was a income earnings $XXX Diluted XXXX. was year-over-year. million, was quarter over per of the share XX% revenue for fourth X.X% and and quarter adjusted $X.XX, total of the was increase the XX% period revenue was net increase earnings On an $X.XX, quarter income

But parts reverse about from uncertainty and fiscal some and X catalyst encouraged clear risk. revenue geopolitical on that of quite trends no the it's that of There the stimulus by We're Europe. simply turn ongoing October the mobility. resurgence or the Europe. sets same didn't January the were to any segment remains in the distribution, Slide either of and virus to initial still quarterly forth America upside highlights. to in rollout U.S. constraints in there change North meaningful certain vaccine the through we monthly So let's witness

of from We're year. a positive As half some we mobility. optimistic second this demand mandates, stay-at-home in the in towards we the come slight relief that should may we through further movement and cautiously see see recovery

American in the for XX.X% As services our Slide quarter. you'll know organic North declined X, revenue from for segment parts and

on having agility trends. structure of team EBITDA and protect and decisiveness to used to liability and American While year-over-year fourth highest we efficiency, in year-over-year services to still related especially consider Faced the declined North margins contributed business with well revenue XXXX, parts of auto on revenue be These perform in the North rightsizing its by each quarter declines the focusing basis, claims in cost the collision continue aligned KPIs America, the annual to North and various CCC, quarter. a that embracing XX% the the drive profitability, with organic in when you company. down actions history in America according its aggressively to

segment, of services and trends were fourth European as the declined with revenue quarter, provisions European declines our organic revenue impacts the second which in to Italy, wave softened quarter in parts for quarter a lockdown Moving enacted struggled. sequentially for fourth in Demand similar regions the and our of across November Most December. larger experienced operations in except of regional all our X.X%.

at the and Investor of last including other Italy, a Central our to Europe Controller, As continue new European new X the recruited September in we Strategy execute talent LKQ added during our we several leaders and year, team positions of and positions. VP We Europe. of program. in new added significant Head to CFO and Eastern on of Day HR, XXXX note articulated region, Benelux we Of operating

should operational and with new the of half also services a Our located become center Poland progressing our is in well in effort currently second Bangalore we're shared leveraging campus. that XXXX,

initial go Rhiag live ERP Italy completed pan-European and with Our we implementation was in Rhiag, mid-XXXX. at Switzerland successfully expect to

driving permanent focused actively is as government reductions on team available diminishes. support Our in SG&A

LKQ our financing Zurich, in program well Switzerland, XXXX. head vendor Our is along and occupied of Europe beginning really was coming January office

last our our Central and starting Benelux Center Fource I just that turned region. business in CDC I'm to have for operational that mentioned of or Lastly began the on Europe, construction logistical this and our been the is team time on over phases Today, happy Distribution build-out. year, keys report new we the

the layout and logistical At XXXX, the software. in system end which to completed will new expected will enter begin using LKQ after year, Fource shuttle So testing is this the quarter the second of phase. we the be of

During XXXX, activities new four migrate over to in distribution the the we'll the centers begin to CDC. existing

equipped new vehicles. building fully also making and of energy The is will of of part completely the panels, self-sufficient. As the provide electric is agenda, free, building gas this LKQ's plenty roof completely sustainability solar with for sufficient building infrastructure charging

number for large of light, natural building windows the in team. our provides Additionally, environment plenty of work the an attractive creating

Now let's the move Specialty segment. on to

No represents revenue replacement better strong result our positioned industry will LKQ. lifecycle. development products. and Automotive will anticipate growth that XXXX, performance organic work with demand RV part above of need opportunity worn that consistent During driving demand expectations XX.X%, the of RV organic advantage business will asset focusing a in the corporate our growth our in as take assets dropship base with acquisition. closing quarterly of performance factor is the all XXXX of In performance to of in vehicles Keystone driving Stahlgruber RV From QX, of sales with Also this rationalizing the our unit we divestiture that is Specialty primary our non-core than growth ongoing the A the four for one perspective, related and a tremendous along to in on XXXX, XXXX. operations highest efforts those we parts reported job came revenue completed Parts, fantastic European their in a back did a which acquisition divesting inevitably demand team of our well more transactions, continue the and new as larger through their trend since assets. for

we're services increase January, that fleets. our brand market under we VeTech have as more collision This automotive mobile exciting have provider Elitek the awareness be together times the at confident single for the Since in to continues space. to you strategic acquiring combined Automotive of to to the share surface technology on-site diagnostic the during acquisitions in passenger market. Electronics remain lead We within ahead the Elite forefront national complex these continue all the U.S. And this we repairs, known Services. vehicle vehicle on two to growing Electronics of we unique design. and yes, to trend, and services and mechanical scratching brand a largest repairs, XXXX, mobile this vehicle As rapidly repairs and we'll know, and automotive opportunities Vehicle made become and commercial positioned past just grown the

the to service product park As hybrids in offerings a the to increase have capture EVs. leverage growth evolves, car and to opportunity network our tremendous distribution our and we

to on strategy positioned identify to Our is Investor development take in one touched and some over the you pursue Varun, opinion markets better Day who my as the to No new And continue and the have segment people, which now our the those we September. the LKQ during back of we successful. to network, in capital of of scale teams be details opportunities results. discussion run I'll to advantage and the will than through products turn the

Varun Laroyia

good Thank morning joining and to you, everyone today. us Nick,

lot to XXXX, While more lot there as XXXX, share presentation. from detail there is I'll comments the earnings quarter our for a a prepared keep my in outlook accompanying results, fourth is brief, and full-year

While the the exceeded finally, quarter; was the North free times, beat high the X.X for following billion, highlights: flow an in since margin two, resilience EBITDA falling put for a results net year $X In adjusted shortfall over in to of in history, results cash challenging company our share, company's and billion row, at record fourth through our annual cash record mid-point highest several flow leverage the two and guidance in below XXXX reasons, as per organic of the record growth X.X%. extremely to over that's those tough it's perspective, we've dropped third guidance and time times well relative one, the for free in acquisitions. history; the before segment our first of Rhiag, been consider the dollar to being now high and a To PGW, well record of earnings LKQ's third cash by XXXX, at billion, three, revenue shone original and $X on $X other which proved we X.X% terms, well mid-point. two revenue to the XXXX; time America and times, the annual despite including the year be since first the Stahlgruber quarterly short EPS variety pre-COVID these flow company's range evidenced

and prioritized Our are cash profitability last onset we results ongoing that at accelerated and to cash margin the we testament the of and lockdown a flow the measures actions programs March.

all know by we outcomes Now such happen accident. don't

to on ongoing quarter deliver customers, several their highlights for you over the suppliers, stakeholders, LKQ persevering the cover last through the colleagues while thoughts And sharing outstanding for our truly company, so a outlook for before a the massive pandemic. I'll fourth all liquidity and thank our tireless my other to now and year efforts XXXX. financial outcome

in can over the in see the cost XX, to points was with tailwind the basis points prices EBITDA segment primary continued XX Permanent fourth North an million you and the improvement healthy As margins. gross for overhead savings basis the America quarter sequentially. on XXX remain $XX expenses and of Slide margin a benefit prior-year, on quarter, year-over-year deliver us metal precious estimated driver up gave and with

Slide relative operating a produced an with another reductions. over Europe Moving margin, largely XXX XX, to expense X.X% basis due points quarter to up EBITDA solid segment to year-ago,

in at transmission year-over-year fluctuation is we XX solidly XX.X% XX.X% higher of XX, impressive good our Investor provided from though expenses last and year negative organic have highlighted XX these incentive is projection basis would the XX Despite basis unfavorable points Nick Importantly, effects the towards compensation had positive we the of to progress favorable Europe quarter. segment on segment. expenses. about volume of on for EBITDA program. and the Specialty of the margin vendor timing, negative with represents Gross this down the to second X.X% some fourth negative XXXX comfortable true-ups movements With quarter X the margin in more growth been remain at And include range COVID, a for with fourth delivering and the LKQ X.X% without the points activity results basis margin to September's this Overhead which by Slide owing segment generated half, of rebates, wave EBITDA Day X.X% were of customer above X% as second time, and effects year-ago points increase. impact an the from was the the adjustments.

wasn't flows, liquidity. QX another successful onto for million expected quarter cash XXXX. further due flow Now we to a cash continued working from since inventory the as We we've $XXX anticipated, programs and capital offset driving as challenges. and payables cash rebuild as although generation. flow was supplier from in trade the to receivables operating yet growth inventory, Benefits added been high, benefit the in delivery previously

EBITDA million. CapEx free the almost on cash $X.X resulting cash outlays presented We're sustainable to of just flows cash the pay used as cash ratio with $XXX in billion very the flow as XX. reflects the for shown highlighted, year. Slide Slide by forecasts. as align on with pleased inventory operating As XX, hand were XX% was to and for previously levels free $X.X cash on trend debt year to and $XXX were over The XXXX million Though down conversion, demand isn't billion in I

in of has our funds leverage two in maintain this times levels, position. including to decreased availability with As net leverage though of the very in is we've our to the investment returns, the line the we're inventory ratio, On X.X with strengthen we our invest program year best times. the positioned and and from ensure fill rates. see can to our want cost plan Slide progress and at times our largely grade you which financing well end service vendor of specifically liquidity class comfortable made approximately XX, to liquidity believe in target highlight I XXXX, ongoing by of very net to growth we offset metrics. position, We're X.X levels and pursuit

earnings repurchase the last quarter third mentioned October, restarted we after call. share program As our

shares we had the $XX total for roughly $XXX for of We investment million as million year. million of a LKQ our the authorization $XXX on year-end. During available of repurchased quarter, the

I'll thoughts on So our close now XXXX. with

what rollout on full COVID providing in position We're the two, one, progresses on year the foreign clarity currently financial are revisit near recent As for of greater prices in and statements, assumption restrictions impact this markets; that metal pandemic. vaccine duration its based our and at this levels. are major beyond continue severity providing comfortable not uncertainties their scrapping and the time. extreme remain, not following place and we're have on We'll the of we the exchange mobility as precious guidance are the all year and which rates the re-implemented

few a So points highlight. to

will XXXX. First, services in as a we and recovery falloff. mobility believe We the restrictions that revenue XXXX, and parts be on revenue basis relative quarter are higher that in to more distributed will down full-year first vaccines the accelerate though anticipate broadly

note fewer until QX. return in North in the expect we second to Please in in that XXXX fewer figure our sometime annual days America two to we not So, QX XXXX. one in do XXXX, have selling and revenue

While Europe the one quarter. second is flat day though in that in catches-up QX with fewer

figure highlight and of XXXX. and this The operating an to be earnings adjusted GAAP comparable XXXX $X.XX. is adjusted benefits in mind, a point I'd range the projecting per second diluted with On that expense EPS be $X.XX like the above EPS of expect growth would revenue diluted of With we're share will to $X.XX the for ongoing mid-point programs, a our to $X.XX basis, with $X.XX. we margin

for Four, a the of of X.X% the exceeding of full-year be the for we're XXXX the the European cash the business upper EBITDA end free European provided $XXX half minimum XXXX Given project that range of segment in reaffirming to second million. last margin XXXX we momentum September, of the our XX.X%. outlook range will flow

the of than While clear strange this figure, been a generation pandemic. the for the result a was absolute throughout past XXXX we've year that year very XXXX number lower as is cash

to declined a turn well demand, inflow. we which by stock significant produced $XXX over million, aligned in levels As the inventory our cash forecast levels

we levels anticipated the inventory our in XXXX, of support some back as get to to going inflow replenish growth. revenue we're However, the

had program. X% plan Some yield in to get we of set on the significant And the offset out and payables back the to our in benefits we launched LKQ X.XX% we engaged from line be which when revenue. resulting normal investment in with more vendor finally, target inventory X capital XXXX, of program, expenditures, improvements of will we to XXXX, of by expect financing to September in level

XX% to lower for will Thank to your target All of cash a free distribution But cash produce our class for will of turn conversion factors XXXX. importantly, demand morning. be us his I'll XX% this in again range these time to in flow still put EBITDA, with free back companies. you closing considered call for best Nick comments. once the industrial widely for And that, within to

Nick Zarcone

results you're margins. of said that team determines clear ability it you the unknowns famous what nothing members globe. positive, capable dedication, that is across and it. team pay of financial pandemic, capabilities bring through In for Thank the We milestones. us financial achieve each are stop work in to predict reach XXXX, in an effectively members would a the XXXX, that the me the if that LKQ results solid almost sized and And down day. to overview. below a what attitude of generated half that generated company. our Day. our asked right our and cash and X the Investor certain simultaneously that projected onset the flow us we you key benefit you, generated coach you football will two of We closing, us our annual XXXX LKQ and we capital allowed of the testament rising flow, late is at face, March Varun uniqueness free working for in how Motivation outcome. reducing after I end-up $X.X debt, resiliency We to diversified the ratio cash us well Despite record have headwinds on I portfolio how not the XXXX September the guessing And the college we the at question excellent outcomes managed generated of favorable remarkable capabilities of times. billion the second my One Europe North to of But such for do But year, the demand pride, of that do. to record dedicated carried attitude come leverage businesses the would are allowed from it's even one These team. a program our close free allowed $X.X XX,XXX replacement likely RV margins thing The than us and our determines never the challenges American doing. made billion segment record higher parts. progress

health our pandemic service, We We sustainability continue continued diversified Talent Acquisition the to focusing progress key across the provide by in programs our safety we on our made team. importantly, global individuals adding good best-in-class and all of of portfolio and of our broad spite businesses. roles initiatives customer and to on while and the

we'll As And both out a position. leading better market with for externally, questions. ready organization, pandemic the period, and I've now call said this solidifying of we're internally further open come stronger, our to that operator,


Instructions]. you. Thank [Operator

question of first from Your comes Craig Kennison Baird.

is line open. Your

Craig Kennison

navigating good inflation whether here, and factors? your to My is question curious inflation taking see or is how important gas absorb most other on Congratulations question. your sensitivities, tough year. morning on metals you set-up for Hey, prices, and my it's just thanks where business a

Varun Laroyia

question. be couple seen U.S., here. difficult record freight, It's the for know a And up, inflation think I'd great high I Morning, is the whether Good it's delivery past in out of over drivers. Craig. it running find we wages, moment, here to move it's we've at which say we especially ocean Absolutely, know Varun months, the

any now terms get inflationary I in prices a kind and of oil the with case. the close in up building So higher also barrel pressures you up, are to in XXs, that of moving think $XX the message

our know, program, pressures programs, of darn navigated, those and with XXXX, kind in inflationary our continue we to on, in ability America I'd following OpEx pretty permanent cash also navigated put reductions a lead of business but to say that we proud conjunction do past cost starting drive obviously the believe but just place of North is margin taken this they the what as And, when have number we European that quarter, have program, a with. our well. I We teams not you our know the accelerated has our team do. have We're up

inflationary a It are Are short, to set depends story Yes, terms point. up next yes, long what the pressures? well such certain absolutely. kind So but call pressures, of number through really appropriate up to and those there up in a expect several inflationary we undertake a of notion things we it, weeks for ease-up along MTs inflationary these begin back do of to to as those your to the phrase, Asia, Nick, example, pressures comes the end? anything get back add positions, lines. to from in

Nick Zarcone

I that great, No, was think Varun.

Varun Laroyia

follow-up there's there back happy Craig, question, we take now. it queue, And, also. like any in Or get certainly the can to we're of if to it you'd take kind if


next Your Stember King. CL of from comes question Scott

Your line is open.

Scott Stember

Good Craig's year. morning, guys. job And great I comments the very tough echo to navigating a on

Nick Zarcone

Thank you.

Varun Laroyia

you. Thank

Scott Stember

the have trying think first that to And getting in business, American the I is that much about But I'm on mileage weather tail to and second weeks, window, then awful potential out be as quarter? maybe we out change the a North the if demand we from this last tail, go six this could of the figure has a people quite seen been based Let out whether and the to that, mobility. know any you driven talk me you look guys there. in

Nick Zarcone

in could see The for for total of not Austin, of iced-in very trends, the you sitting Scott. got in last right. left-off our actually reality as January where revenue picked-off nasty I'm where that And miles kind picked-up driven earnings you been quarter, chart, I saw because weeks. in particularly is September but And has driven. on also fourth going again deck, left-off, back by much the included is business the just the And of Great weather the the December January. question, kind couple or Sunday. we

the to fairly and their office. But a and efficient we've because a the the and So safety until clearly life. office. of everybody the in the there's and going movement all the We this back organizations. the back get going being We into activity. level of forever. will to will mobility people use productive we don't community gotten on we home. pandemic, issues happens, their getting of We and become virus time, all related this be biggest will questions meaningful in back to when in about in to from back returning to kids what's do get working of the be that we're XXX% into of getting is are to call increase of of that everyone public of remain past a to is home, just lives, think not there's may impact. hard think think this a transportation from drive believe lack folks mobility, And And think think number And in to school. depressed permanently through for we folks Ultimately, we number going the work-from-home of be longer get of a period an homes while that going be kind the clearly working out daily really in on don't we've

a into those to going in begin private as bus, So take workers or those may on opt head of a the train into of hop hopping means their took public transportation, to a some which office to or back car. instead who transportation workplaces, they're

demand take Houston, Dallas in buying like you will perspective ultimately Texas to normal lead business. those of the to pile-ups of salvages have in in that the we’re because cautiously hit of get hour. a here quarter of our from normal create when the they which demand. So, Clearly lot we'll business. help are miles and optimistic going storms going it’s the XXXX, weeks based miles to we ice cautiously I'll back the a on the miles we'll miles XX historical some But new levels our third levels create anticipated and think tell move and storm of ice throughout driven will with back perspective bigger pop be that in an or that that to just sent driven we're back of by going couple the north don't will should last optimistic again driven. stories time, is to United States level salvage for back that hopefully at Austin second more It's a probably more parts a but opportunity the and and an

Scott Stember

that about driven. RVs the Got on how Specialty probably talk road, will it. year about be program, RVs really just many more year guess the two last question warranty more, But your that's easily retail will And side, you opportunities through more more even next potentially you how that and just which you could that as on of expanded also leading like or talked I the built contribute and way side? we last then contributed move the on

Nick Zarcone

Yes, spending. I sporting noticed all there group spending, that enhancement, theaters, absolutely. lodging mean, beneficiary a absolutely outdoor we massive discretionary from air camping events, right. like I been And shift of think has and events an huge those discretionary shift restaurants in was and things in recreation away travel, a

parts be XXXX over the in tied a the units Our the XXXX, size will year; to And years Specialty the highly business of the in units half key on historically business, and about RV a that's that demand to been units expectation campground that the expanding. great come for to SAR which is for correlated year. all-time be has great the It RV The that part not part, produced the create is record the will sell. a for was million for those In RVs very has RV incremental as we all spending. number will a any years been particular high. OEMs is there XXX,XXX road of

So the even if settles still base larger next profitably parts for great the be are opportunity three or to sell to SAR over to units provide many years down is going to come. going for years, road, a the that the in ultimately us two on

fourth the base. we XX% we overall We like ultimately growth slow So But don't anticipate revenue in to grow quarter. may substantial at we're continue the going the in down. to declines year-over-year don't think did


Jefferies. next comes Jordan from of question Your Bret

Your line is open.

Bret Jordan

here around see on little bit big it; of that of lot talk you how could to obviously a parts And and combustion the down Sort did what Europe's EVs. business internal different picture jump about versus road long-term? you Norway. parts demand does in a you for a question got the But this demand

Nick Zarcone

a the one the believe of parts really the The now obviously, the question, part that's of pretty better look manufacturers same great ultimately alike chain, we engine. of it's floating supply around year. as for combustion reality that internal chain -- EV industry And been the will look kind the is much the for supply Sure. the

parts of overlap like we bigger anticipate or margins Continental while some suppliers, business. And vehicles. going focus, absolutely be their OEMs they for and Now, or the aftermarket in Bosch, better vendors is makes their a than OE there's Shutter we're will fully lot to parts what electric today the of know to their going that develop as profit business that current start with

start parts us to And as We'd very they those do We Europe have won't for so fit leading distribution be to and it's the all that and it the vendors. manufacturing aftermarket. strong relationships making for take capabilities OE a natural related business capacity got before together. with long

opportunity lot is so, And come motor. electric to going conversion a for years or Bret, is two-fold. internal as there hybrid, and combination of an the XX a combustion on is over the next through know, electrification Secondly, you engine LKQ of And hybrids. the

First, to hybrid that more set like can fans, then air what part would ultimately things products conditioning mean I expensive is And also new that just -- there's a coolant sell, new non-hybrid know similar parts coolant able a that driven we internal whole coolers, all Stanley electric compressors, related electric we motor types we engine distribute. inverter on sorts the side of train car. are [ph] parts of the power of to than combustion be

an or and for a vehicle, during talked AC we September, So expensive. this Investor pump be combustion be normal a Day a AC compressor as just about can our six in like expensive more back an three times hybrid times internal could five coolant engine as for compressor car,

internal think that the lot just is big a the a that and as forever, the higher on like than the longer going part as most valuable battery, to it opportunity to us going an be is we a those the batteries they're And there's battery. think most lastly, to And parts combustion an go opportunity good car's car distribute engine around for initial has have then, EVs is battery the parts. they're valuable to we of engine, value an EV. So ultimately the expiring life; well, on not part relates

we will it's of the just generally too couple whole battery goes to a remanufacture to be bad replace to EV opportunities, believe there And for batteries, battery. because it's But And going at the cells. not expensive it's so once. us be that whole

of think part. there relates it future, of we the a the bundle good in the So just for is us to car opportunities electrification as

Bret Jordan

Thanks. on question well. Thanks technology a And for that. the as

you expectations in standing talk just about that and diagnostics service-based Elitek? margin the of like talked the sort business you're a maybe revenue So you program about? more structure of Could

Nick Zarcone


nascent. this competitor services together between provide X is XX The the is industry So typical marketplace. small. to have that technicians pretty somewhere to banded It's and


and has The business it's just of than million parts Our EBITDA $XX it thing American mark our the shy services today, the great business. better about is North growing. margins business,

so to business And as grow. that should help continues that

to operators that like through these gain acquisition going most tiny, Now, we're able scale, of tiny. significant be grow to because are said, by necessarily I to business not they're

and educating and Greenfield really our by putting buy Elitek buy field of some basis to perhaps as technicians look offering. the the and larger they're even a out part rollout in on pretty them still then So we'll service of small, groups, though

the we're So about business. excited


comes Benjamin Your next question Truist. Stephanie with from

Your line is open.

Stephanie Benjamin

we really the a kind your remarks prepared on, really exceeded touch during beginning how year. in about quarter turned that direction you fourth color what to wanted moved in of brought to love out Thanks. things expectations, your again, outlined XXXX? nice in seeing how and the of your beginning the in hear you're I things, up last some even Congratulations We'd spoke. you the time of of kind quarter and of kind

Nick Zarcone

The the And we see laid were down Specialty when that out just to great in you the and revenue if the pretty didn't levels. us. rocked can Sure, help months, page, during back Group, go revenue both quarter, for question. that the last fourth consistently prior-year the you say which Europe four from North America

better Europe So focus our North is because here. America of collision doing than

business had on revenue our was margin. that it improvement gross it the Stephanie, wasn't to gross came the business shift, basis, margins a because a American north line. the North And looks and We've around business just mix operating of dropping outperformance, really XX%, margin has margins the business margin, of a margin lead in low and XX%. basis good falling on XX% has the That's Specialty So the high margins points. XX% gross kind while consolidated couple margin like

line We're of have the SG&A what we're keep going substantially the leverage what done. what need our cautious take permanent are reflect And until shouldn't attract add is just has the that's back to segments back very from The anything a from just business. rebound. And the our of demand. out right to those you current customer to be cost be. at very need the of to add size to employees to versus then all. Unfortunately, total down proud structure key So state that get And But a we today we were to they we'll revenue levels where we're people year-ago. some service to what to back expense see people and/or the labor. that. reductions, number on of lot that our come of a of Each folks worked that got the operating of we hard

the focus control our we where because environment don't an in we're our controlling on about necessarily think So costs, revenue. intense

Stephanie Benjamin

Absolutely, back Thank you. that's queue. in I'll really get helpful. the


Your comes Barrington Gary next Prestopino from Research. question of

Your line is open.

Gary Prestopino

Good morning, everyone.

Nick Zarcone

Garry. morning, Good

Gary Prestopino

what Couple year? for would debt flow? your free you here. of Varun, cash questions I down is be priority paying this your assume

Varun Laroyia

a back our you Yes, if put, great Simply I September. it's kind presentation Investor Day from think to question, of Gary. go

kind we expected clear a sustainable of terms We our basis kind So to very four, probably in generation on were six about cash months ago, the free of model. we continue. five, business overall reset of; flow

kind is option We've of our always starting priority said the have great that to investing off So is business. a own as that key in a business.

one. of expenditures capital be will priority kind number So

technicians, That we’re There they said as Nick about was to business Following a a very that set we've market-by-market high earlier synergy is basis. heavily on capabilities. up critical the a into. Again, question tuck-ins transactions, that, and diagnostics. small on building and investing call XX are X scanning

We the in us large either a we pay you've of certainly at specific free of as those $X.XX of at XXXX, leads kind capital the expenditures essentially billion also leverage this ability at service. we would not stage target tremendous seen, we our acquiring this go cash expand to time. a we've have see being transactions on horizon. down, but towards debt excess although, certainly flow wherever progress to point platform really with have of point where which made we're really amount do any within time, So that the We it not certainly need do supplementing those well

undervalued. believe are repurchase and able it still shares to really, stock. capital the And becomes on the authorization given from see reason we highest opportunities, no be that certainly we the have our So our board return we to

Gary Prestopino

get Okay, through every you biggest then in program year, just and wondered, basis? to bettering operations, thank get to I just, I as our do growth down. better you. future the for annual in what costs of just, with the of you to heads obviously, move going done the And structure every And terms in of, divisional costs come from out you're the lastly and your you and the you're where your on need future, assume year, cost would component you've line strategy a pushing in an do the costs really to assume more going integrating can acquisition I just we is an company, what

Varun Laroyia

the integration. through it's productivity really excellence Gary, of these to we've that, operational here. has you And front. American lead programs Two ago, since pointed see an we in driving essentially been that Varun rightly years our as mode. on terms pivoted business ever And Absolutely, out how you North taken out,

what at repairable how claims been collision VMT fourth the business, quarter performed had data think as certainly in, has our relative business expenses, the in challenges what of yes, terms come collision we're But CCC, about better to from much the performing we're we Just there. operating so in the out we have than look are has that rates down. getting

piece did it productivity an So leadership good. of kind our team the it that job. outstanding just But is American of really, has that's North

business, get any has our You for productivity sure European next also. our LKQ similar like we lot really certainly kind over ERP so It's program, largely, example, it's and the the of speak divisions, in the a nimbleness pandemic. progress, business they'll programs, need as of in from the to the setting program. response European productivity investments I begun and every has that team of some is business, to has then onset team there's question. and typically helped productivity kind the peers overall programs just in portfolio I but certain it's has American lot you're European that in that from, your make also North something out productivity of, really that our move right, our proud to inflationary team for example, they of longer-term hope the a our pressures that of that laser fourth Europe. that has ours, to And levers. the really focus making one time business. base between spades, and of follow to the our European pulling go pushing back know distribution within one make really and businesses component some Europe it's come that's Nick in a every large the and agility know say quarter, And leadership expenses offset kind But around spent And another, case, the to function ours overall with X that yes, tremendously the office setting overall practices business, with best thing shared We for example we with operating through the and certainly there. we're companies, more I come down of But also. is up as there, essentially the in came that be is that a our out

Gary Prestopino

Sure, it Thank does. you.


The [Operator Imbro from comes question Instructions]. Daniel next with Stephens.

is Your line open.

Daniel Imbro

Yes, good morning, guys. the taking Thanks for questions.

Nick Zarcone

morning. Good

Daniel Imbro

varying with mentioned supply point to a impacted broader that as America. has side, supply forward? start chain you overseas, the Or auction your North limited could in this be aftermarket America? a how wanted question. And can North look rates do your over that you and at problem that supply getting in time on year to disruptions from I the related a Obviously, return growth are you higher, things pinch potentially think support anticipated aftermarket to chain much supply there's here in

Varun Laroyia

you, Yes, here. to listen good Varun Daniel, out it's morning

just a it's question. vendor they but we of side have We've business. on got tremendous great ever the got the into business, been partners think supportive, now, aftermarket the tremendously not I since

Asia cans ocean kind getting to of back be matter, are of refilled Beach just the that's Long regards With to whether over. of LA, the and kind associated it come with kind So that freight of Port empty and for challenges one the example, get of number that it, for outside thing. more carriers of those or to

certain providers, long-term contracts with have with also but brokers. vessel We

being it, space then still has those always a had to as it to without probably able one, you get fill other inventory rates. being and And get -- pay for the know on for we're class-leading up we still carriers. having to So while able is LKQ space we're

example, we're within And certain having of kind making California. for that ship are we within there sure product. have the from region, fill that so the to we we're between something say But remain. so our always say we've shuttles to or England rates local New where want made the sure Yet, areas run to region,

the terms of time, be excessive that part. past kind remain. know fill the of right certainly inventory, the have time, learned making had of of do in rates our over few Over us associated ocean sure lot taking it not So the in cost coming But amount we we may But same Year at terms costs not years over. the a certain we're with in on of freight it. Chinese we kind was the that splurge always New

product is We clearly we that more weeks and to a had on the product, think level this expect of comps But case, the growth But coming I risk. kind as in in is a return mode the year. which of even we the way to that said itself out have getting we abate any previously, easy growth second starting in we to will but largely half as QX, really back months.

Daniel Imbro

helpful. that's -- then Okay, And

Nick Zarcone

into think just able time we're competitor we than work We'll and be depth positioned and breadth the we're typical scale, coming Daniel, size of competitive to inventory the our to inventory out an this. there, better given This a issue. be is the advantage. shipping

Daniel Imbro

cost Nick. tailwind on related And follow-up that return cost pressures amidst inflation. not, able now is like-for-like right if you inflation? we signs think do follow-up what broad? inflation it would of a to Are considering just then pretty any take pricing through to that feel be That's happening. revenue cost about see going seeing pass the helpful. on Obviously, the And talked an Thanks. to question on being is and you coming Thanks earlier

Nick Zarcone

a had answered kind Yes, But sure make dynamic side. we know while begin certain that, would the earlier on those threshold, least associated to call, we fantastic a the OEM do move, that a have pricing pricing help. in a of at if listen where ceiling model. Daniel, certainly And again kind of what certainly teams -- have doing we our are just add we or job to I are, that are we clearly parts to

sure is the the perspective, said business has making to And doing our have right parts customers product. salvage supply From help been really As previously, we well. the we time. our do and at there limited specifically We want right everybody, I market. get also to carriers in an aftermarket the the listen,

the and us is there. of take able second we're with to initially the we're return. of to clearly But product, for kind that of folks certainly sure for what as was kind That get enterprise. the now, happy having the It kind our working certainly takes well reductions. entire out But cost teams that more growth associated independent field. one can't in more the are is much been of in quarter, wait second the the switching we've then of productive we helps that that way out out the So are temporarily that making in puts various obviously, and back with navigating our cost


comes question Butler Stifel. from next Your of Brian

line Your open. is

Brian Butler

morning, for thanks taking Good my questions.

Nick Zarcone

No problem.

Brian Butler

little the the that from of the the from and Just about on bit DSOs is outlook a talked it, you $XXX that? $X.X offset that cash the $XXX XXXX, an first billion $X.X million could color of kind on of break bit is you to inventory billion in coming one million? can saw piece flow Obviously, you you in But give of more minimum maybe little go buckets out a a CapEx.

Varun Laroyia

and comments. it listen, was very my actually simple Yes, prepared it's in

with During our XXXX, inventory demand were. what base realigned essentially projections we

that million. we're Our and by is kind delta inventory about. it balances $XXX the $X.X came $XXX down over call between talking billion of that million And really minimum the the

Brian Butler

It's it's inventory. bit So CapEx? I'm little really, guessing all of

Varun Laroyia

$XXX CapEx million. is about

Nick Zarcone


Varun Laroyia

billion mean inventory I basically kind $XXX million. about right $XXX over basically million million. that about $XXX $XXX of It's from there to and CapEx the $X.X is million the

Brian Butler

kind on the -- Okay, I of growth into revenue that kind that's and we of half? second about you of through the going that we kind good. second of And how then weak, should the follow-up or first for remains pace quarter just think but based into XXXX, kind quarter showed, on expect the of of January then growth pace the

Nick Zarcone

great Yes, question.

down, indicated, XXXX is anticipating going you year-over-year, obviously, January numbers you be largely strong. comparison. February see easier down be March as down is started-off of because very to And and last can are the then an and So will January QX we February we're

again, basis. hard not will so fourth And in upward quarter stay revenue, quarter a of and away. to obviously of kinds QX they're because obviously those be dramatically these third predict then year, if just to movement fully further came up up. the revenue levels second will anticipating XXXX little We're be back the we But on Second off year-over-year are levels. of quarters, last even bit a at

Brian Butler

Great, thank you.

Varun Laroyia

across to one the just piece day we selling And do additional one have in QX highlight, kind entire less of enterprise.

North in quarter. QX, Europe, but fewer fewer And selling So for second fewer that have QX selling day the in we a there's we fourth day in America, day one in selling the in day European one make in business. QX up

So kind this and your about, something to previously about just sure that of just is models. had talked that you we've into wanted to make think


time. Mr. are now turn no questions There to this further I'll at call Zarcone. the

Nick Zarcone

when be expectations challenges our have on of, call as I of with can, of your that, story. Thank it's we'll to around drive work we're it's fair team going hope companies of be globe all through always cash. and be focus of have more going came with incredibly close I keeping you. forward any listening proud to time revenue call down, able challenges bring to and the greatly share going cost and to as for look we'll what our the your be going everybody appreciate April to We're -- control with We the could We The we well. they earnings and in day deliver a not that same, will quarter to our them. speak the our beyond deal Well, we busy out going at good could really we end all everybody to know and market our results we're is but been this generating to not much all on we attention. we've We the announce first XXXX, and season, and had on. in to appreciate more again be And more as head April. to alongside sharing that the the you keep of to proud had particularly given very more lot under a again proud


your and participation. today's you concludes gentlemen, this for Ladies call. Thank conference

may You now disconnect.