LKQ Corporation

Second quarter revenue was approximately $3.4 billion versus $3.5 billion a year ago. Diluted EPS was $0.52, and adjusted diluted EPS was $0.67 versus adjusted diluted EPS of $0.84 in the prior-year period. North America segment EBITDA was $207 million with a 14.1% margin; Europe segment EBITDA was $109 million with a 7.5% margin; Specialty segment EBITDA was $33 million with a 6.7% margin. Operating cash flow was $111 million and free cash flow was $60 million in the quarter; for the first six months, operating cash flow was $55 million and free cash flow was negative $36 million. Ended the quarter with total liquidity of $1.9 billion and net leverage of 2.8x EBITDA. For 2026, LKQ expects organic parts and services revenue of negative 1% to negative 3%, adjusted diluted EPS of $2.60 to $2.90, and full-year free cash flow of $625 million to $775 million. In July, the company prepaid the outstanding $500 million U.S. term loan using revolver proceeds.

Justin Jude emphasized that confidence should come from evidence, pointing to North America’s return to growth, improving collision trends, and Specialty’s resilience. He was candid that the quarter fell short, but argued the company is stronger than the reported results suggest and that the investments in ERP and operating initiatives are meant to raise earnings power over time. His tone was accountable but constructive, especially on Europe, where he said the company identified the issues, took recovery actions, and remains confident in the long-term benefits of the platform change.

Rick Galloway tied the year-over-year decline to lower revenue and profitability in Europe. He quantified the Germany ERP disruption at about $140 million of quarterly revenue impact and about $50 million of EBITDA impact, while U.K. and Benelux volume pressure reduced EBITDA by roughly $30 million; North America had a $10 million legal reserve that cut EBITDA margin by about 70 basis points. He also noted $129 million returned to shareholders in the quarter, $1.9 billion of liquidity, and said the company expects to use free cash flow for revolver paydown after prepaying the $500 million term loan.

Analysts focused heavily on North American repairable claims, Europe’s ERP recovery, tariff exposure, and Specialty margins. Management said North American claims were down negative 1% to 3% in the quarter, that MSOs are taking more share in a depressed market, and that July volumes in North America looked broadly consistent with June. On Europe, they said the system is now stable, Germany recovered to above 85% of normal revenue run rate, future ERP conversions are not planned for this year, and the low end of guidance assumes a slower recovery while the high end assumes continued improvement toward 100% by year-end. On tariffs, management said the Taiwan 232 rate moved from 25% to 15%, but they are not assuming much margin benefit from pricing.