LKQ Corporation

Hello, everyone, and thank you for joining the LKQ Corporation's fourth quarter and full year 2025 earnings conference call. My name is Lucy, and I'll be coordinating your call today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. It is now my pleasure to hand over to your host, Joe Butrus, Vice President of Investor Relations, to begin. Please go ahead.

Good morning, everyone, and welcome to LKQ's fourth quarter and full year 2025 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 8K, which we filed with the SEC earlier today. And as normal, we are planning to file our 10K in the coming days. And with that, I'm happy to turn the call over to our CEO, Justin Jude.

Thanks, Joe. And good morning to everyone joining us on the call today. Before we get into the quarter, I want to start with an important message to our LKQ team. This past year tested us in meaningful ways, and yet it also showcased the strength, discipline, and resilience of LKQ. We accomplished a lot in 2025 and are focused on keeping this momentum going in 2026. In February of last year, I committed to delivering $825 million in free cash flow in 2025, and despite multiple headwinds, our colleagues around the world executed, adapted, and delivered on that commitment. Importantly, we also made meaningful progress simplifying our portfolio. The divestiture of our self-service segment was a key element of the simplification strategy we outlined at our 2024 Investor Day, and we delivered on that commitment in 2025. Transactions of this scale and complexity require significant leadership focus and discipline. Executing successfully in the midst of a challenging year across our global enterprise reflects the strength of our teams and our ability to deliver against our strategy. I am proud of the outcome and our continued focus on creating long-term value for shareholders. The headwinds of 2025 were real and significant. A continued decline in repairable claims, the impact of tariffs, and persistent softness in the European market. Any one of those would have been a challenge on its own. Taken together, they created a difficult environment. And yet our people found ways to serve customers, maintain discipline, and deliver on our free cash flow commitment. That is an exceptional achievement and a testament to the grit of our employees. As many of you are aware, in late January of 2026, LKQ's Board of Directors formally initiated a comprehensive review. Given the strength of our underlying performance, even in the year defined by significant headwinds, it has become increasingly clear that our current stock price does not reflect the true value or long-term potential of our businesses. The Board and I, along with our entire management team, are aligned in our confidence that LKQ's future and that confidence compels us to explore whether alternative structures could unlock value more effectively than the market is recognizing today. This review will run in parallel with our relentless focus on operational execution. Please note that we will not be answering any questions or commenting further on our strategic review process until further disclosure is appropriate or required. Let me focus for a few moments on the operating highlights in the fourth quarter and a full year across our business. In North America, organic revenue decreased 1% on a per-day basis in the fourth quarter and decreased 1.9% for the full year 2025, reflecting a continued environment of weak repairable claims. Even so, we gained market share by deepening relationships with MSOs and insurers, maintained pricing discipline, and leveraged the scale and breadth of our branch and distribution networks to outperform repairable claims. Throughout 2025, each quarter we saw improving comparables. Repairable claims were down approximately 10% in Q1 and improved sequentially each quarter. In Q4, repairable claims were down in the range of negative 4% to 6%, demonstrating steady recovery from the early year low point. Our bumper-to-bumper hard parts business continued to grow in Canada, and we plan to expand this business further given the still fragmented do-it-for-me hard parts market across North America. Now I would like to provide you with an update on our performance in Europe. In 2025, our organic revenue experienced a decline of 5.2% on a per-day basis in the fourth quarter and a 3.9% decrease for the full year. This was primarily due to continued weak consumer confidence, macroeconomic uncertainty, and competitive pricing pressures. In response, we implemented a more aggressive pricing strategy in select markets to protect share and accelerated our focus on private label growth. We expanded private label inventory in the fourth quarter with introductory pricing to drive adoption. While these actions have pressured revenue and margins in the near term, we believe they will deliver meaningful long-term benefits. We also completed a review of more than 85% of our Europe SKUs portfolio, bringing the total delisted SKUs to 71,000, or roughly half of our overall target. While we anticipate eventual market recovery, we're not being passive. Our team is proactively making bold decisions. This year, we're streamlining key business areas to improve cost efficiencies through targeted productivity initiatives. Our efforts include fast-tracking our integration plan throughout Europe, streamlining our product lineup, sharpening our go-to-market approach, and applying successful tactics from our North American strategy. And we are on track to go live with a key system integration in early Q2 of 2026, which will serve as a significant catalyst for cost reduction opportunities. As CEO, I want to express my disappointment in Europe's results. While we never promised that progress would be linear and understand the risks involved in our three-year strategy, I remain fully competent in our team and the decisive actions we've taken. We are committed to overcoming these setbacks and delivering sustainable value for our shareholders. We remain confident in our leading position across our core markets, and I remain committed to delivering the margin expansion we have previously communicated as we execute through near-term challenges. Now turning to specialty, this segment remains a strong performer, delivering 7.8% organic revenue growth on a per-day basis in Q4 and 2.7% growth for the full year 2025. We've seen improving results from targeted initiatives to sharpen focus, improve pricing execution, and strengthen channel relationships. As discussed last quarter, we returned to positive organic growth for the first time in 14 quarters and sustained that momentum again this quarter. We continue to move forward with the previously announced process to explore the potential sale of our specialty segment. Interest in our specialty segment remains robust, and we expect to provide updates in the first half of 2026 as appropriate. In 2025, our teams gained share in North America while maintaining pricing discipline. We grew our bumper-to-bumper business, made progress on our European initiatives, simplified the portfolio through the sale of our former self-service segment, and grew free cash flow. We enter 2026 with stronger management teams, pricing and cost measures supporting margins, ongoing efficiency improvements, and productivity initiatives supported by a recently approved restructuring plan and early signs of demand improvement across our businesses. With that, I'll turn the call over to Rick to walk through the financial results for the quarter in more detail.