LKQ Revenue Up Slightly, Net Income Dips Amid Self Service Sale

Ticker: LKQ · Form: 10-Q · Filed: Oct 30, 2025 · CIK: 1065696

Sentiment: mixed

Topics: Automotive Parts, Divestiture, Debt Reduction, Q3 Earnings, Strategic Shift, Financial Performance, Asset Sales

Related Tickers: LKQ

TL;DR

LKQ is shedding its Self Service segment to pay down debt and focus on core operations, a smart move to boost long-term profitability despite a short-term earnings dip.

AI Summary

LKQ Corporation reported a slight revenue increase for the three months ended September 30, 2025, reaching $3,499 million, up from $3,453 million in the prior year, a 1.3% increase. However, net income attributable to LKQ stockholders decreased to $180 million, or $0.70 per diluted share, compared to $191 million, or $0.73 per diluted share, in the same period of 2024. For the nine months, revenue declined to $10,339 million from $10,597 million, a 2.4% decrease, while net income attributable to LKQ stockholders saw a modest increase to $541 million, or $2.10 per diluted share, from $534 million, or $2.01 per diluted share. A significant business change was the sale of the Self Service segment to Pacific Avenue Capital Partners, LLC for an enterprise value of $410 million, completed on September 30, 2025, with proceeds used to repay approximately $390 million in revolving credit facility borrowings. This divestiture aims to simplify LKQ's portfolio by exiting an asset-intensive business. Risks include a $12 million impairment on assets held for sale in the discontinued Self Service segment during the three and nine months ended September 30, 2025. The strategic outlook focuses on portfolio simplification and debt reduction.

Why It Matters

This filing reveals LKQ's strategic pivot away from asset-intensive businesses like Self Service, a move that could streamline operations and improve capital efficiency. For investors, the slight revenue increase in Q3 2025, despite a year-to-date decline, coupled with the Self Service divestiture, suggests a focus on core profitability and debt reduction, as evidenced by the $390 million debt repayment. Employees in the divested Self Service segment will transition to Pacific Avenue Capital Partners, LLC, while remaining LKQ employees may see a more focused company. Customers of the Self Service segment will now be served by a new entity. In a competitive landscape, this divestiture allows LKQ to concentrate resources on higher-margin segments, potentially strengthening its market position against rivals in the automotive parts industry.

Risk Assessment

Risk Level: medium — The risk level is medium due to the $12 million impairment on assets held for sale in the Self Service segment during the three and nine months ended September 30, 2025, indicating potential write-downs associated with divestitures. Additionally, while the sale of Self Service simplifies the portfolio, it removes a revenue stream, and the company's overall nine-month revenue decreased by 2.4% from $10,597 million in 2024 to $10,339 million in 2025, suggesting ongoing top-line challenges.

Analyst Insight

Investors should monitor LKQ's performance in its continuing operations closely, particularly how the $390 million debt repayment impacts interest expenses and overall financial leverage. The divestiture of the Self Service segment, while causing a short-term earnings dip, could lead to improved margins and a more focused business model in the long run, making LKQ a potential long-term hold if core segments show sustained growth.

Financial Highlights

revenue
$3,499 million
operating Margin
7.8%
net Income
$180 million
eps
$0.70
gross Margin
38.3%
revenue Growth
+1.3%

Revenue Breakdown

SegmentRevenueGrowth
Total Revenue$3,499 million+1.3%
Nine-Month Revenue$10,339 million-2.4%

Key Numbers

Key Players & Entities

FAQ

What were LKQ Corporation's revenues for the three and nine months ended September 30, 2025?

LKQ Corporation's revenue for the three months ended September 30, 2025, was $3,499 million, a slight increase from $3,453 million in the prior year. For the nine months ended September 30, 2025, revenue was $10,339 million, down from $10,597 million in the same period of 2024.

How did LKQ Corporation's net income attributable to stockholders change in Q3 2025?

Net income attributable to LKQ stockholders for the three months ended September 30, 2025, was $180 million, a decrease from $191 million in the comparable period of 2024. Diluted earnings per share also decreased to $0.70 from $0.73.

What significant business change did LKQ Corporation undertake in Q3 2025?

LKQ Corporation completed the sale of its Self Service segment to an affiliate of Pacific Avenue Capital Partners, LLC on September 30, 2025, for an enterprise value of $410 million. This divestiture is part of LKQ's strategy to simplify its business portfolio.

How did LKQ Corporation utilize the proceeds from the Self Service segment sale?

On October 1, 2025, LKQ Corporation received the pretax net proceeds from the sale of the Self Service segment and used approximately $390 million of these proceeds to repay revolving credit facility borrowings.

What was the impact of discontinued operations on LKQ Corporation's financial statements?

The Self Service segment, now classified as discontinued operations, reported net income of $2 million for the three months ended September 30, 2025, and $20 million for the nine months ended September 30, 2025. An impairment of $12 million on assets held for sale was also recorded for this segment.

What are the key risks highlighted in LKQ Corporation's Q3 2025 filing?

A key risk noted is the $12 million impairment on assets held for sale within the discontinued Self Service segment, indicating potential valuation challenges during divestitures. The overall decline in nine-month revenue also suggests ongoing market pressures.

What is LKQ Corporation's strategic outlook following the Self Service segment sale?

The sale of the Self Service segment reflects LKQ Corporation's continued efforts to simplify its portfolio of businesses by exiting an asset-intensive business heavily affected by changes in commodity prices, aiming for a more focused and potentially more profitable core business.

How did LKQ Corporation's cash flows from operating activities change for the nine months ended September 30, 2025?

Net cash provided by operating activities for the nine months ended September 30, 2025, was $733 million, a decrease from $886 million in the same period of 2024. This change was influenced by adjustments including receivables and inventories.

What new accounting pronouncements is LKQ Corporation evaluating?

LKQ Corporation is evaluating ASU 2024-03, "Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures," effective for fiscal years beginning after December 15, 2026, and ASU 2025-06, "Intangibles—Goodwill and Other—Internal-Use Software," effective for annual periods beginning after December 15, 2027.

What was LKQ Corporation's total stockholders' equity as of September 30, 2025?

As of September 30, 2025, LKQ Corporation's total stockholders' equity was $6,579 million, an increase from $6,032 million as of December 31, 2024. This increase was driven by net income and other comprehensive income.

Risk Factors

Industry Context

The automotive aftermarket industry is characterized by a fragmented landscape with numerous players competing on price, product availability, and service. Trends include increasing vehicle parc age, which drives demand for replacement parts, and a growing emphasis on digital sales channels and supply chain efficiency. Consolidation remains a theme as larger players seek economies of scale.

Regulatory Implications

LKQ operates under various regulations related to environmental standards for parts, consumer protection, and financial reporting. The divestiture of a segment may involve regulatory filings and compliance checks. Changes in trade policies or tariffs could also impact the cost of goods sold.

What Investors Should Do

  1. Monitor the impact of the Self Service segment divestiture on LKQ's future revenue and profitability.
  2. Analyze the trend in operating margins and gross margins following the divestiture.
  3. Evaluate LKQ's debt levels and its ability to generate free cash flow to service debt.

Key Dates

Glossary

Discontinued operations
A component of a business that has been disposed of or is classified as held for sale, and whose operations and cash flows can be separately identified from the rest of the entity. (The Self Service segment is classified as discontinued operations, and its financial results and asset impairments are reported separately.)
Impairment
A reduction in the carrying value of an asset when its recoverable amount is less than its book value. (LKQ recorded an impairment of $12 million on assets held for sale in the Self Service segment, indicating a loss in value.)
Enterprise Value
A measure of a company's total value, often used in acquisitions, calculated as market capitalization plus debt, minus cash and cash equivalents. (The Self Service segment was sold for an enterprise value of $410 million.)
Revolving Credit Facility
A type of credit facility that allows a borrower to draw down, repay, and redraw funds up to a certain limit during a specified period. (LKQ used proceeds from the Self Service segment sale to repay approximately $390 million of borrowings under its revolving credit facility.)

Year-Over-Year Comparison

Compared to the prior year, LKQ reported a modest 1.3% revenue increase for the third quarter of 2025, reaching $3,499 million. However, net income attributable to LKQ stockholders saw a decrease to $180 million from $191 million, and diluted EPS fell to $0.70 from $0.73. For the nine-month period, revenue declined by 2.4% to $10,339 million, though net income and EPS saw slight increases, reflecting the impact of the Self Service segment divestiture and associated impairment charges.

Filing Stats: 4,757 words · 19 min read · ~16 pages · Grade level 15.9 · Accepted 2025-10-30 15:14:21

Key Financial Figures

Filing Documents

FINANCIAL INFORMATION

PART I FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements: Unaudited Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2025 and 2024 3 Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2025 and 2024 4 Unaudited Condensed Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 5 Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 6 Unaudited Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2025 and 2024 7 Notes to Unaudited Condensed Consolidated Financial Statements 9

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 25

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 39

Controls and Procedures

Item 4. Controls and Procedures 39

OTHER INFORMATION

PART II OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 40

Risk Factors

Item 1A. Risk Factors 40

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 40

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 40

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 40

Other Information

Item 5. Other Information 40

Exhibits

Item 6. Exhibits 41 SIGNATURES 42 2 PART I FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Income (In millions, except per share data) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Revenue $ 3,499 $ 3,453 $ 10,339 $ 10,597 Cost of goods sold 2,158 2,115 6,329 6,482 Gross margin 1,341 1,338 4,010 4,115 Selling, general and administrative expenses 958 931 2,865 2,873 Restructuring and transaction related expenses 14 20 33 99 Depreciation and amortization 95 88 272 257 Operating income 274 299 840 886 Other expense (income): Interest expense 55 60 170 178 Interest income and other income, net ( 4 ) ( 7 ) ( 25 ) ( 16 ) Total other expense, net 51 53 145 162 Income from continuing operations before provision for income taxes 223 246 695 724 Provision for income taxes 45 61 173 210 Equity in earnings of unconsolidated subsidiaries — ( 3 ) — ( 3 ) Income from continuing operations 178 188 522 517 Net income from discontinued operations 2 4 20 19 Net income 180 192 542 536 Less: net income attributable to continuing noncontrolling interest — 1 1 2 Net income attributable to LKQ stockholders $ 180 $ 191 $ 541 $ 534 Basic earnings per share: Income from continuing operations $ 0.69 $ 0.71 $ 2.02 $ 1.95 Net income from discontinued operations 0.01 0.02 0.08 0.07 Net income 0.70 0.73 2.10 2.02 Less: net income attributable to continuing noncontrolling interest — — — — Net income attributable to LKQ stockholders $ 0.70 $ 0.73 $ 2.10 $ 2.02 Diluted earnings per share: Income from continuing operations $ 0.69 $ 0.71 $ 2.02 $ 1.95 Net income from discontinued operations 0.01 0.02 0.08 0.07 Net income 0.70 0.73 2.10 2.02 Less: net income attributable to continuing noncontrolling interest — — — 0.01 Net income attributable to LKQ stockholders $ 0.70 $ 0.73 $ 2.10 $ 2.01 The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements. 3

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