# LKQ CORP (LKQ) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from LKQ CORP's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1065696/000106569625000015/lkq-20241231.htm
Accession: 0001065696-25-000015
Filing date: 2025-02-20
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/LKQ/
All MD&A years: /company/LKQ/mda/
Previous year: /company/LKQ/mda/fy2023/ (FY 2023)
Next year: /company/LKQ/mda/fy2025/ (FY 2025)

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with our audited Consolidated Financial Statements and notes thereto included in Part II, Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K. Discussion of 2022 items and the year-over-year comparison of changes in our financial condition and the results of operations as of and for the years ended December 31, 2023 and December 31, 2022 for our Consolidated Results of Operations can be found in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 22, 2024. Unless otherwise indicated or the context otherwise requires, as used in this "Management's Discussion and Analysis of Financial Condition and Results of Operations," the terms "we," "us," "the Company," "our," "LKQ" and similar terms refer to LKQ Corporation and its subsidiaries.

Overview

We are a global distributor of vehicle products, including replacement parts, components and systems used in the repair and maintenance of vehicles, and specialty aftermarket products and accessories to improve the performance, functionality and appearance of vehicles.

Buyers of vehicle replacement products have the option to purchase from primarily five sources: new products produced by OEMs; new products produced by companies other than the OEMs, which are referred to as aftermarket products; recycled products obtained from salvage and total loss vehicles; recycled products that have been refurbished; and recycled products that have been remanufactured. We distribute a variety of products to collision and mechanical repair shops, including aftermarket collision and mechanical products; recycled collision and mechanical products; refurbished collision products such as wheels, bumper covers and lights; and remanufactured engines and transmissions. Collectively, we refer to the four sources that are not new OEM products as alternative parts.

We are organized into four operating segments: Wholesale - North America; Europe; Specialty; and Self Service, each of which is presented as a reportable segment.

Our Wholesale - North America segment is a leading provider of alternative vehicle collision replacement products, paint and body repair related products, and alternative vehicle mechanical replacement products, with our sales, processing, and distribution facilities reaching most major markets in the United States and Canada. Our Europe segment is a leading provider of alternative vehicle replacement and maintenance products in Germany, the U.K., the Benelux region, Italy, Czech Republic, Austria, Slovakia, France and various other European countries. Our Specialty segment is a leading distributor of specialty vehicle aftermarket equipment and accessories reaching most major markets in the U.S. and Canada. Our Self Service segment operates self service retail facilities across the U.S. that sell recycled automotive products from end-of-life-vehicles.

Our operating results have fluctuated on a quarterly and annual basis in the past and can be expected to continue to fluctuate in the future as a result of a number of factors, some of which are beyond our control. Please refer to the factors referred to in Special Note on Forward-Looking Statements and Risk Factors above. Due to these factors and others, which may be unknown to us at this time, our operating results in future periods can be expected to fluctuate. Accordingly, our historical results of operations may not be indicative of future performance.

Acquisitions and Investments

Since our inception in 1998, we have pursued a growth strategy through both organic growth and acquisitions. Our current acquisition strategy focuses on highly accretive tuck-in acquisitions with significant synergies or critical capabilities and no large platform acquisitions are expected. Additionally, from time to time, we make investments in various businesses to advance our strategic objectives. See Note 3, "Business Combinations" and Note 10, "Equity Method Investments" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to our acquisitions and investments.

Sources of Revenue

We report our revenue in two categories: (i) parts and services and (ii) other. Our parts revenue is generated from the sale of vehicle products, including replacement parts, components and systems used in the repair and maintenance of vehicles, and specialty products and accessories used to improve the performance, functionality and appearance of vehicles. Our service revenue is generated primarily from the sale of service-type warranties, fees for admission to our self service yards, and

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diagnostic and repair services. During the year ended December 31, 2024, parts and services revenue represented 95.6% of our consolidated revenue. Revenue from other sources includes sales of scrap and other metals (including precious metals - platinum, palladium and rhodium - contained in recycled parts such as catalytic converters), bulk sales to mechanical manufacturers (including cores) and sales of aluminum ingots and sows from our furnace operations. Other revenue will vary from period to period based on fluctuations in commodity prices and the volume of materials sold. See Note 12, "Revenue Recognition" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to our sources of revenue.

Critical Accounting Estimates

The preparation of the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") requires management to make use of certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as related disclosure of contingent assets and liabilities in the Consolidated Financial Statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Historically, we have not made significant changes to the methods for determining these estimates as our actual results have not differed materially from our estimates. We do not believe it is reasonably likely that the estimates and related assumptions will change materially in the foreseeable future; however, actual results could differ from those estimates under different assumptions, judgments or conditions.

Critical accounting estimates are those that are most important to the portrayal of our financial condition and results of operations, and which require us to make our most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting estimates addressed below. For additional information related to significant accounting policies used in the preparation of our Consolidated Financial Statements, see Note 2, "Summary of Significant Accounting Policies" to the accompanying Consolidated Financial Statements.

Goodwill Impairment

Description

Goodwill is obtained through business acquisitions and recorded at the estimated fair value at the date of acquisition. Goodwill is not amortized but instead tested for impairment annually or sooner if events indicate that an impairment may exist. In performing this test, we compare the carrying value of the asset to its fair value. To derive the fair value for our reporting units which carry goodwill, we consider the use of various valuation techniques, with the primary technique being an income approach via a discounted cash flow method and another being a market approach via a guideline public company method. If the carrying value of these assets exceeds the estimated fair value, the asset is considered impaired and an impairment charge is recognized. In performing the test for impairment of goodwill, goodwill is allocated to the reporting units expected to benefit from the business combination.

Judgments and Uncertainties

Determining whether impairment indicators exist and estimating fair values as part of impairment testing require significant judgment. Estimating the fair values of our reporting units which have goodwill requires the use of significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. As part of applying the discounted cash flow method and guideline public company method, we use significant assumptions which include sales growth, operating margins, discount rates, perpetual growth rates and valuation multiples which consider our budgets, business plans, economic projections and marketplace data.

Sensitivity of Estimate to Change

The balance of our goodwill was $5,448 million and $5,600 million as of December 31, 2024 and December 31, 2023, respectively. We have not made material changes in the accounting methodology used to evaluate impairment of goodwill during the last three years. The assumptions used to assess impairment consider historical trends, macroeconomic conditions, and projections consistent with the Company’s operating strategy. Changes in these estimates can have a significant impact on the assessment of fair value which could result in material impairment losses. During fiscal year 2024, we elected to perform a quantitative impairment test for our goodwill. No impairment charges were recorded as a result of the testing as the fair value of each goodwill reporting unit exceeded the calculated carrying value. A 10% decline in projected cash flows or a 10% increase in the discount rate would not have resulted in an impairment to goodwill.

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Business Combinations

Description

We account for business combinations using the acquisition method of accounting, under which the acquisition purchase price is allocated to the assets acquired, including purchased intangible assets, and liabilities assumed based upon their respective fair values. The excess of the fair value of the purchase price over the fair values of these assets acquired and liabilities assumed is recorded as goodwill.

Judgments and Uncertainties

Accounting for business combinations requires management to make significant estimates and assumptions to determine the fair values of assets acquired and liabilities assumed at the acquisition date. Although we believe the assumptions and estimates we have made in relation to the acquisitions are appropriate, they are based, in part, on historical experience, information obtained from management of the acquired companies and information obtained from independent third party valuation firms and are inherently uncertain. Critical estimates in valuing certain acquired intangible assets include, but are not limited to, future expected cash flows including revenue growth rate assumptions from product sales and customer contracts, estimated royalty rates used in valuing related intangible assets, customer attrition rates and discount rates. The discount rates used to discount expected future cash flows to present value are typically derived from a weighted-average cost of capital analysis and adjusted to reflect inherent risks. Unanticipated events and circumstances may occur that could affect either the accuracy or validity of such assumptions, estimates or actual results.

Sensitivity of Estimate to Change

While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. Changes in the estimates applied or values of acquired assets and liabilities could have a material impact on our financial statements. As a result, during the measurement period, which may be up to one year from the business acquisition date, we may record adjustments to the originally assigned values of assets acquired and liabilities assumed with the corresponding offset to goodwill.

Recently Issued Accounting Pronouncements

See "Recent Accounting Pronouncements" in Note 2, "Summary of Significant Accounting Policies" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for information related to new accounting standards.

Financial Information by Geographic Area

See Note 12, "Revenue Recognition" and Note 25, "Segment and Geographic Information" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for information related to our revenue and long-lived assets by geographic region.

Key Performance Indicators

We believe that organic revenue growth, Segment EBITDA and free cash flow are key performance indicators for our business. Segment EBITDA is our key measure of segment profit or loss reviewed by our chief operating decision maker ("CODM"). Free cash flow is a financial measure that is not prepared in accordance with U.S. generally accepted accounting principles (“non-GAAP”).

•Organic revenue growth - We define organic revenue growth as total revenue growth from continuing operations excluding the effects of acquisitions and divestitures (i.e., revenue generated from the date of acquisition to the first anniversary of that acquisition, net of reduced revenue due to the disposal of businesses) and foreign currency movements (i.e., impact of translating revenue at different exchange rates). Organic revenue growth includes incremental sales from both existing and new (i.e., opened within the last twelve months) locations and is derived from expanding business with existing customers, securing new customers and offering additional products and services. We believe that organic revenue growth is a key performance indicator as this statistic measures our ability to serve and grow our customer base successfully.

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•Segment EBITDA - See Note 25, "Segment and Geographic Information" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for a description of the calculation of Segment EBITDA. We believe that Segment EBITDA provides useful information to evaluate our segment profitability by focusing on the indicators of ongoing operational results.

•Free Cash Flow - We calculate free cash flow as net cash provided by operating activities, less purchases of property, plant and equipment. Free cash flow provides insight into our liquidity and provides useful information to management and investors concerning cash flow available to meet future debt service obligations and working capital requirements, make strategic acquisitions, repurchase stock, and pay dividends.

These three key performance indicators are used as targets in determining incentive compensation at various levels of the organization, including senior management. By using these performance measures, we attempt to motivate a balanced approach to the business that rewards growth, profitability and cash flow generation in a manner that enhances our long-term prospects.

Results of Operations—Consolidated

The following table sets forth statements of income data as a percentage of total revenue for the periods indicated:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023"],["Revenue","100.0","%","","100.0","%"],["Cost of goods sold","60.9","%","","59.8","%"],["Gross margin","39.1","%","","40.2","%"],["Selling, general and administrative expenses","27.3","%","","27.9","%"],["Restructuring and transaction related expenses","0.9","%","","0.5","%"],["Depreciation and amortization","2.5","%","","2.0","%"],["Operating income","8.4","%","","9.8","%"],["Total other expense, net","1.7","%","","0.9","%"],["Income from continuing operations before provision for income taxes","6.7","%","","8.9","%"],["Provision for income taxes","1.9","%","","2.2","%"],["Equity in earnings of unconsolidated subsidiaries","0.1","%","","0.1","%"],["Income from continuing operations","4.8","%","","6.8","%"],["Net (loss) income from discontinued operations","\u2014","%","","\u2014","%"],["Net income","4.8","%","","6.8","%"],["Less: net income attributable to continuing noncontrolling interest","\u2014","%","","\u2014","%"],["Net income attributable to LKQ stockholders","4.8","%","","6.7","%"]]
[[/GREPCENT_TABLE]]

Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Revenue

The following table summarizes the changes in revenue by category (in millions):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023","","Change"],["Parts & services revenue","$","13,718","","","$","13,174","","","$","544"],["Other revenue","637","","","692","","","(55)"],["Total revenue","$","14,355","","","$","13,866","","","$","489"]]
[[/GREPCENT_TABLE]]

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The increase in parts and services revenue of $544 million, or 4.1%, represented increases in segment revenue of 9.9% in Wholesale - North America and 1.3% in Europe, partially offset by decreases of 8.4% in Self Service and 0.7% in Specialty. This overall increase was driven by a 6.3% increase due to the net impact of acquisitions and divestitures, partially offset by an organic parts and services revenue decline of 2.2%. The decrease in other revenue of 7.8% was primarily driven by a decrease in organic revenue of $56 million, or 8.1%, due to lower commodities prices and volumes compared to the prior year, which resulted in a $46 million organic revenue decrease in our Self Service segment and a $12 million organic revenue decrease in our Wholesale - North America segment. Refer to the discussion of our segment results of operations for factors contributing to the changes in revenue by segment for the year ended December 31, 2024 compared to the year ended December 31, 2023.

Cost of Goods Sold

Cost of goods sold as a percentage of revenue increased to 60.9% for the year ended December 31, 2024 from 59.8% for the year ended December 31, 2023. Cost of goods sold primarily reflects an increase of 1.0% from our Wholesale - North America segment. Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold as a percentage of revenue by segment for the year ended December 31, 2024 compared to the year ended December 31, 2023.

Selling, General and Administrative Expenses

Our SG&A expenses as a percentage of revenue decreased to 27.3% for the year ended December 31, 2024 from 27.9% for the year ended December 31, 2023. The year over year decrease in SG&A expense primarily reflects an impact of 0.7% related to our Wholesale - North America segment. Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses as a percentage of revenue by segment for the year ended December 31, 2024 compared to the year ended December 31, 2023.

Restructuring and Transaction Related Expenses

Restructuring and transaction related expenses increased by $70 million, primarily due to (i) a $98 million increase in restructuring expenses related to our 2024 Global Restructuring plan, partially offset by (ii) a $17 million decrease related to transaction related expenses and (iii) an $8 million decrease in restructuring expenses related to our 2022 Global Restructuring Plan.

Depreciation and Amortization

Depreciation and amortization expense increased by $78 million, primarily due to an increase in amortization expense of $56 million driven by an increase in Wholesale - North America primarily due to our acquisition of Uni-Select in August 2023.

Provision for Income Taxes

See Note 23, "Income Taxes" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further information.

Total Other Expense, Net

Interest Expense

Interest expense increased by $48 million, primarily due to (i) a $52 million increase from higher outstanding debt primarily related to the permanent financing for the Uni-Select Acquisition, and (ii) a $5 million increase from higher interest rates for the year ended December 31, 2024 compared to the prior year, partially offset by (iii) a $9 million decrease related to amortization of pre-acquisition bridge loan financing costs related to the Uni-Select Acquisition.

Gains on Foreign Exchange Contracts - Acquisition Related

Gains on foreign exchange contracts - acquisition related decreased due to the $49 million pretax gain on the foreign exchange forward contracts related to the Uni-Select Acquisition in 2023. See Note 3, "Business Combinations" and Note 19, "Derivative Instruments and Hedging Activities" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further information.

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Foreign Currency Impact

We translate our statements of income at the average exchange rates in effect for the period. Relative to the rates used for the year ended December 31, 2023, the Czech koruna and Canadian dollar rates used to translate the 2024 statements of income decreased by 4.4% and 1.5%, respectively, while the pound sterling rate increased by 2.7% and the euro was flat. Realized and unrealized currency gains and losses (including the effects of hedge instruments) combined with the translation effect of the change in foreign currencies against the U.S. dollar had a net negative effect of $0.20 on diluted earnings per share relative to the prior year primarily related to the $49 million pretax gain on the foreign exchange forward contracts related to the Uni-Select Acquisition in 2023.

Results of Operations—Segment Reporting

We have four reportable segments: Wholesale - North America; Europe; Specialty; and Self Service.

We have presented the growth of our revenue and profitability in our operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our growth and profitability, consistent with how we evaluate our performance, as this statistic removes the translation impact of exchange rate fluctuations, which are outside of our control and do not reflect our operational performance. Constant currency revenue and Segment EBITDA results are calculated by translating prior year revenue and Segment EBITDA in local currency using the current year's currency conversion rate. This non-GAAP financial measure has important limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of our results as reported under GAAP. Our use of this term may vary from the use of similarly-titled measures by other issuers due to potential inconsistencies in the method of calculation and differences due to items subject to interpretation. In addition, not all companies that report revenue or profitability on a constant currency basis calculate such measures in the same manner as we do, and accordingly, our calculations are not necessarily comparable to similarly-named measures of other companies and may not be appropriate measures for performance relative to other companies.

The following table presents our financial performance, including third party revenue, total revenue and Segment EBITDA, by reportable segment for the periods indicated (in millions):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2024","","% of Total Segment Revenue","","2023","","% of Total Segment Revenue","","2022","","% of Total Segment Revenue"],["Third Party Revenue"],["Wholesale - North America","","$","5,762","","","","","$","5,281","","","","","$","4,556"],["Europe","","6,407","","","","","6,323","","","","","5,735"],["Specialty","","1,654","","","","","1,665","","","","","1,788"],["Self Service","","532","","","","","597","","","","","715"],["Total third party revenue","","$","14,355","","","","","$","13,866","","","","","$","12,794"],["Total Revenue"],["Wholesale - North America","","$","5,763","","","","","$","5,282","","","","","$","4,556"],["Europe","","6,407","","","","","6,323","","","","","5,735"],["Specialty","","1,657","","","","","1,668","","","","","1,791"],["Self Service","","532","","","","","597","","","","","715"],["Eliminations","","(4)","","","","","(4)","","","","","(3)"],["Total revenue","","$","14,355","","","","","$","13,866","","","","","$","12,794"],["Segment EBITDA"],["Wholesale - North America","","$","959","","","16.6","%","","$","975","","","18.5","%","","$","852","","","18.7","%"],["Europe","","634","","","9.9","%","","614","","","9.7","%","","585","","","10.2","%"],["Specialty","","113","","","6.8","%","","134","","","8.0","%","","199","","","11.1","%"],["Self Service","","50","","","9.3","%","","36","","","6.0","%","","83","","","11.7","%"],["Note: In the table above, the percentages of total segment revenue may not recalculate due to rounding."]]
[[/GREPCENT_TABLE]]

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The key measure of segment profit or loss reviewed by our CODM, our Chief Executive Officer, is Segment EBITDA. The CODM uses Segment EBITDA to compare profitability among the segments and evaluate business strategies. Segment EBITDA includes revenue and expenses that are controllable by the segment. Corporate general and administrative expenses are allocated to the segments based on usage, with shared expenses apportioned based on the segment's percentage of consolidated revenue. We calculate Segment EBITDA as Net Income excluding net income and loss attributable to noncontrolling interest; income and loss from discontinued operations; depreciation; amortization; interest; gains and losses on debt extinguishment; income tax expense; restructuring and transaction related expenses; change in fair value of contingent consideration liabilities; other gains and losses related to acquisitions, equity method investments, or divestitures; equity in losses and earnings of unconsolidated subsidiaries; equity investment fair value adjustments; impairment charges; and direct impacts of the Ukraine/Russia conflict. See Note 25, "Segment and Geographic Information" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for a reconciliation of total Segment EBITDA to net income.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Wholesale - North America

The following table provides a reconciliation of Revenue to Segment EBITDA in our Wholesale - North America segment (in millions):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["Wholesale - North America","2024","","% of Total Segment Revenue","","2023","","% of Total Segment Revenue","","$ Change"],["Parts & services revenue","$","5,465","","","","","$","4,974","","","","","$","491","","(1)"],["Other revenue","297","","","","","307","","","","","(10)"],["Intersegment revenue","1","","","","","1","","","","","\u2014"],["Total segment revenue","5,763","","","","","5,282","","","","","481"],["Cost of goods sold","3,252","","","","","2,796","","","","","456"],["Gross margin","2,511","","","43.6","%","","2,486","","","47.0","%","","25","","(2)"],["Selling, general and administrative expenses","1,567","","","27.2","%","","1,535","","","29.0","%","","32","","(3)"],["Less: Other segment items(4)","(15)","","","","","(24)","","","","","9"],["Segment EBITDA","$","959","","","16.6","%","","$","975","","","18.5","%","","$","(16)"]]
[[/GREPCENT_TABLE]]

(1)Parts and services revenue increased by $491 million, or 9.9%, to $5,465 million for the year ended December 31, 2024. This increase was primarily driven by acquisitions, net of divestitures revenue of $779 million, or 15.7%, primarily due to the acquisition of Uni-Select in the third quarter of 2023. See Note 3, "Business Combinations" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further information on the acquisition of Uni-Select. This was partially offset by an organic revenue decrease of $278 million, or 5.6% (6.3% on a per day basis), primarily due to a reduction in aftermarket collision volumes, which were negatively impacted by a reduction in repairable claims. We believe this is mainly attributable to difficult economic conditions. Additionally, organic revenue was negatively impacted by (i) a reduction in paint revenue related to increased competition and (ii) weather related events in 2024.

(2)Gross margin increased by $25 million, or 1.0%, to $2,511 million for the year ended December 31, 2024. This increase was driven by the acquisition of Uni-Select, partially offset by a decrease in parts and services organic revenue and a decline in commodities prices. The decrease in gross margin as a percentage of total segment revenue of 3.4% for the year ended December 31, 2024 compared to the prior year was primarily due to the dilutive nature of the acquisition of Uni-Select, which changed the segment's product mix to reflect a greater percentage of paint, body and equipment and maintenance product lines. These product lines have a lower gross margin structure than our other wholesale product lines. Additionally, the gross margin was negatively affected by the related mix effect resulting from lower aftermarket revenue, which has a higher margin than our other wholesale lines as well as decreases in salvage margins tied to softening salvage revenue and a decline in commodities prices.

(3)Selling, general and administrative expenses increased by $32 million, or 2.3%, to $1,567 million for the year ended December 31, 2024. The increase in Selling, general and administrative expense primarily reflects unfavorable impacts of (i) $71 million from personnel costs excluding incentive compensation primarily due to the acquisition of Uni-Select, (ii) $36 million from facility costs primarily due to the acquisition of Uni-Select, (iii) $11 million from increased freight, vehicle, and fuel costs, partially offset by (iv) $42 million from lower incentive compensation, (v) $27 million from

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professional fees primarily related to proceeds from the favorable settlement of a legal claim in 2024, (vi) $6 million from lower charitable contributions in the prior year period, and (vii) other individually immaterial factors representing an $11 million favorable impact in the aggregate. Selling, general and administrative expenses as a percent of total segment revenue decreased by 1.8% to 27.2% for the year ended December 31, 2024. In addition to the factors noted above, the decrease in Selling, general and administrative expenses as a percent of total segment revenue was driven by cost saving initiatives and acquisition related synergies, partially offset by inflationary pressures.

(4)Amounts primarily represent other non operating income and expenses, as well as reconciling items to remove depreciation - cost of goods sold and restructuring - cost of goods sold, which are excluded from the calculation of Segment EBITDA. See Note 13, "Restructuring and Transaction Related Expenses" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information on restructuring charges.

Europe

The following table provides a reconciliation of Revenue to Segment EBITDA in our Europe segment (in millions):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["Europe","2024","","% of Total Segment Revenue","","2023","","% of Total Segment Revenue","","$ Change"],["Parts & services revenue","$","6,386","","","","","$","6,303","","","","","$","83","","(1)"],["Other revenue","21","","","","","20","","","","","1"],["Total segment revenue","6,407","","","","","6,323","","","","","84"],["Cost of goods sold","3,953","","","","","3,886","","","","","67"],["Gross margin","2,454","","","38.3","%","","2,437","","","38.5","%","","17","","(2)"],["Selling, general and administrative expenses","1,855","","","28.9","%","","1,842","","","29.1","%","","13","","(3)"],["Less: Other segment items(4)","(35)","","","","","(19)","","","","","(16)"],["Segment EBITDA","$","634","","","9.9","%","","$","614","","","9.7","%","","$","20"]]
[[/GREPCENT_TABLE]]

(1)Parts and services revenue increased by $83 million, or 1.3%, to $6,386 million for the year ended December 31, 2024. This increase was primarily due to a parts and services organic revenue increase of $76 million, or 1.2% (0.7% on a per day basis), driven by pricing initiatives to offset increased costs resulting from inflationary pressures and, to a lesser extent, increased volumes.

(2)Gross margin increased by $17 million, or 0.7%, to $2,454 million for the year ended December 31, 2024. This increase was primarily attributable to increased revenue through pricing initiatives, partially offset by unfavorable customer mix, inflationary pressures and a $16 million reduction primarily related to restructuring expenses incurred as part of the 2024 Global Restructuring Plan. These restructuring expenses are excluded from the calculation of Segment EBITDA. See Note 13, "Restructuring and Transaction Related Expenses" and Note 25, "Segment and Geographic Information" for further information.

(3)Selling, general and administrative expenses increased by $13 million, or 0.7%, to $1,855 million for the year ended December 31, 2024. The increase in selling, general and administrative expense primarily reflects unfavorable impacts of (i) $15 million from professional fees related to several strategic central and regional IT initiatives, (ii) $14 million from increased outbound freight and logistics costs, (iii) $7 million from increased personnel costs mainly due to wage inflation, and (iv) other individually immaterial factors representing a $1 million unfavorable impact in the aggregate, partially offset by favorable impacts of (v) $13 million due to lower energy and utilities costs compared to the prior year across all geographies, and (vi) $11 million of non-recurring expense in the prior year related to the settlement of a value-added tax issue in Italy.

(4)Amounts primarily represent other non operating income and expenses, as well as reconciling items to remove depreciation - cost of goods sold and restructuring - cost of goods sold, which are excluded from the calculation of Segment EBITDA. See Note 13, "Restructuring and Transaction Related Expenses" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information on restructuring charges.

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Specialty

The following table provides a reconciliation of Revenue to Segment EBITDA in our Specialty segment (in millions):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["Specialty","2024","","% of Total Segment Revenue","","2023","","% of Total Segment Revenue","","$ Change"],["Parts & services revenue","$","1,654","","","","","$","1,665","","","","","$","(11)","","(1)"],["Intersegment revenue","3","","","","","3","","","","","\u2014"],["Total segment revenue","1,657","","","","","1,668","","","","","(11)"],["Cost of goods sold","1,238","","","","","1,238","","","","","\u2014"],["Gross margin","419","","","25.3","%","","430","","","25.8","%","","(11)","","(2)"],["Selling, general and administrative expenses","315","","","19.0","%","","305","","","18.3","%","","10","","(3)"],["Less: Other segment items(4)","(9)","","","","","(9)","","","","","\u2014"],["Segment EBITDA","$","113","","","6.8","%","","$","134","","","8.0","%","","$","(21)"]]
[[/GREPCENT_TABLE]]

(1)Parts and services revenue decreased by $11 million, or 0.7%, to $1,654 million for the year ended December 31, 2024. This was primarily due to a parts and services organic revenue decrease of $75 million, or 4.5% (5.3% on a per day basis), driven by demand softness in the RV and automotive product lines, as unit retail sales for RV and certain automotive categories have declined year over year. This was partially offset by a net increase of $66 million, or 4.0%, in acquisition and divestiture revenue primarily related to our acquisition of one Specialty business in 2023.

(2)Gross margin decreased by $11 million, or 2.6%, to $419 million for the year ended December 31, 2024. This decrease was primarily driven by higher discounts to help maintain sales volume in the first six months of the year, as well as lower revenue.

(3)Selling, general and administrative expenses increased by $10 million, or 3.3%, to $315 million for the year ended December 31, 2024. The increase in selling, general and administrative expenses reflects unfavorable impacts of (i) $5 million from increased personnel costs, (ii) $3 million related to higher credit loss reserves compared to prior year, and (iii) other individually immaterial factors representing a $5 million unfavorable impact in the aggregate, partially offset by a favorable impact of (iv) $3 million due to lower freight, vehicle and fuel expenses.

(4)Amounts primarily represent other non operating income and expenses, as well as reconciling items to remove depreciation - cost of goods sold and restructuring - cost of goods sold, which are excluded from the calculation of Segment EBITDA. See Note 13, "Restructuring and Transaction Related Expenses" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information on restructuring charges.

Self Service

The following table provides a reconciliation of Revenue to Segment EBITDA in our Self Service segment (in millions):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["Self Service","2024","","% of Total Segment Revenue","","2023","","% of Total Segment Revenue","","$ Change"],["Parts & services revenue","$","213","","","","","$","232","","","","","$","(19)","","(1)"],["Other revenue","319","","","","","365","","","","","(46)","","(2)"],["Total segment revenue","532","","","","","597","","","","","(65)"],["Cost of goods sold","305","","","","","375","","","","","(70)"],["Gross margin","227","","","42.7","%","","222","","","37.2","%","","5","","(3)"],["Selling, general and administrative expenses","179","","","33.6","%","","188","","","31.5","%","","(9)","","(4)"],["Less: Other segment items(5)","(2)","","","","","(2)","","","","","\u2014"],["Segment EBITDA","$","50","","","9.3","%","","$","36","","","6.0","%","","$","14"]]
[[/GREPCENT_TABLE]]

40

(1)Parts and services organic revenue decreased by $19 million, or 8.4% (8.7% on a per day basis), to $213 million for the year ended December 31, 2024. This decrease was primarily due to lower parts volumes from a reduced number of customer admissions.

(2)Other organic revenue decreased $46 million, or 12.7%, to $319 million for the year ended December 31, 2024. This decrease was primarily driven by (i) a $28 million decrease in revenue from precious metals due to lower prices and lower volumes and (ii) a $24 million decrease in revenue from scrap steel primarily related to lower volumes and lower prices, partially offset by (iii) a $6 million increase in revenue from other scrap (e.g., aluminum) and cores due to higher prices, partially offset by lower volumes.

(3)Gross margin increased by $5 million, or 2.3%, to $227 million for the year ended December 31, 2024. The increase is attributable to improvements in vehicle procurement costs, partially offset by lower commodities prices. Decreases in precious metals prices contributed an estimated $13 million decline in gross margin relative to the year ended December 31, 2023. During the year ended December 31, 2024, scrap steel prices had a $2 million unfavorable impact on gross margin, compared to a $5 million favorable impact during the year ended December 31, 2023. The unfavorable impacts for the year ended December 31, 2024 resulted from decreases in scrap steel prices between the date we purchased a vehicle, which influences the price we pay for a vehicle, and the date we scrapped a vehicle, which influences the price we receive for scrapping a vehicle.

(4)Selling, general and administrative expenses decreased by $9 million, or 5.0%, to $179 million for the year ended December 31, 2024. The decrease in Selling, general and administrative expenses primarily reflects individually immaterial factors representing a $9 million favorable impact in the aggregate primarily related to operational productivity initiatives.

(5)Amounts primarily represent other non operating income and expenses, as well as reconciling items to remove depreciation - cost of goods sold and restructuring - cost of goods sold, which are excluded from the calculation of Segment EBITDA. See Note 13, "Restructuring and Transaction Related Expenses" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information on restructuring charges.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

Wholesale - North America

The following table provides a reconciliation of Revenue to Segment EBITDA in our Wholesale - North America segment (in millions):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["Wholesale - North America","2023","","% of Total Segment Revenue","","2022","","% of Total Segment Revenue","","$ Change"],["Parts & services revenue","$","4,974","","","","","$","4,207","","","","","$","767","","(1)"],["Other revenue","307","","","","","349","","","","","(42)","","(2)"],["Intersegment revenue","1","","","","","\u2014","","","","","1"],["Total segment revenue","5,282","","","","","4,556","","","","","726"],["Cost of goods sold","2,796","","","","","2,347","","","","","449"],["Gross margin","2,486","","","47.0","%","","2,209","","","48.5","%","","277","","(3)"],["Selling, general and administrative expenses","1,535","","","29.0","%","","1,372","","","30.1","%","","163","","(4)"],["Less: Other segment items(5)","(24)","","","","","(15)","","","","","(9)"],["Segment EBITDA","$","975","","","18.5","%","","$","852","","","18.7","%","","$","123"]]
[[/GREPCENT_TABLE]]

(1)Parts and services revenue increased by $767 million, or 18.2%, to $4,974 million for the year ended December 31, 2023. This increase was primarily driven by an acquisition and divestiture parts and services revenue net increase of $432 million, or 10.3%, primarily due to the acquisition of Uni-Select in the third quarter of 2023, partially offset by the divestiture of our PGW aftermarket glass business in the second quarter of 2022. See Note 3, "Business Combinations" and "Other Divestitures (Not Classified in Discontinued Operations)" in Note 4, "Discontinued Operations and Divestitures" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further information on the acquisition of Uni-Select and the divestiture of PGW, respectively. Additionally, parts and services organic revenue increased 8.2% (8.6% on a per day basis) for the year ended December 31, 2023 compared to the prior year, primarily driven pricing initiatives which focused on offsetting inflation on input costs and a net volume increase. Aftermarket collision parts volumes increased year over year due to reduced pressures on our supply chain. Aftermarket

41

collision parts volumes also grew as a result of the continued rollout of State Farm's aftermarket parts program, which began on a trial basis in June 2022 and has subsequently been expanded.

(2)Other revenue decreased by $42 million, or 12.0%, to $307 million for the year ended December 31, 2023. This decrease was primarily due to an other organic revenue decrease of $41 million, or 11.8%, primarily related to (i) a $46 million decrease in revenue from precious metals (platinum, palladium, and rhodium) due to lower prices, partially offset by higher volumes, partially offset by (ii) a $5 million increase in revenue from other scrap (e.g., aluminum) and cores due to higher volumes, partially offset by lower prices.

(3)Gross margin increased by $277 million, or 12.5%, to $2,486 million for the year ended December 31, 2023. The decrease in gross margin as a percentage of total segment revenue of was primarily driven by (i) an unfavorable impact of 2.1% related to the acquisition of Uni-select in the third quarter of 2023 due to product mix as the paint, body, and equipment and maintenance parts lines have a lower gross margin structure than other wholesale product lines, partially offset by (ii) a 0.5% benefit from lower inbound freight costs and (iii) a 0.2% mix benefit resulting from the PGW divestiture in the second quarter of 2022.

(4)Selling, general and administrative expenses increased by $163 million, or 11.8%, to $1,535 million for the year ended December 31, 2023. The decrease in Selling, general and administrative expenses as a percentage of revenue reflects favorable impacts of (i) 0.9% related to the acquisition of Uni-Select as Uni-Select operates with lower overhead expenses than our other wholesale product lines, (ii) 0.5% from decreased freight, vehicle, and fuel costs and (iii) other individually immaterial factors representing a 0.2% favorable impact in the aggregate, partially offset by (iv) 0.4% from higher professional fees and (v) 0.2% from higher charitable contributions.

(5)Amounts primarily represent other non operating income and expenses, as well as reconciling items to remove depreciation - cost of goods sold and restructuring - cost of goods sold, which are excluded from the calculation of Segment EBITDA. See Note 13, "Restructuring and Transaction Related Expenses" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information on restructuring charges.

Europe

The following table provides a reconciliation of Revenue to Segment EBITDA in our Europe segment (in millions):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["Europe","2023","","% of Total Segment Revenue","","2022","","% of Total Segment Revenue","","$ Change"],["Parts & services revenue","$","6,303","","","","","$","5,711","","","","","$","592","","(1)"],["Other revenue","20","","","","","24","","","","","(4)"],["Total segment revenue","6,323","","","","","5,735","","","","","588"],["Cost of goods sold","3,886","","","","","3,520","","","","","366"],["Gross margin","2,437","","","38.5","%","","2,215","","","38.6","%","","222","","(2)"],["Selling, general and administrative expenses","1,842","","","29.1","%","","1,651","","","28.8","%","","191","","(3)"],["Less: Other segment items(4)","(19)","","","","","(21)","","","","","2"],["Segment EBITDA","$","614","","","9.7","%","","$","585","","","10.2","%","","$","29"]]
[[/GREPCENT_TABLE]]

(1)Parts and services revenue increased by $592 million, or 10.4%, to $6,303 million for the year ended December 31, 2023. This increase was primarily due to (i) a parts and services organic revenue increase of 6.9% (7.4% on a per day basis), primarily driven by pricing initiatives across all geographies to offset increased costs resulting from inflationary pressures and to a lesser extent, higher volumes, (ii) an acquisition and divestiture revenue net increase of $76 million, or 1.3%, primarily related to our acquisition of seven wholesale businesses from the beginning of 2022 through the one-year anniversary of the acquisition dates and (iii) an exchange rate increase of $121 million, or 2.1%, primarily due to the weaker U.S. dollar against the euro, Czech koruna and pound sterling for the year ended December 31, 2023 relative to the prior year.

(2)Gross margin increased by $222 million, or 10.0%, to $2,437 million for the year ended December 31, 2023. Gross margin as a percent of total segment revenue was flat on a year to date basis, as favorable impacts from price increases were offset by inflationary pressures and difficult macro-economic conditions causing consumer price sensitivity, most notably in our Central and Eastern European regions.

42

(3)Selling, general and administrative expenses increased by $191 million, or 11.6%, to $1,842 million for the year ended December 31, 2023. The increase in selling, general and administrative expense as a percentage of total segment revenue primarily reflects the unfavorable impacts of 0.2% due to the settlement of a value-added tax issue in Italy and leverage effects of 0.2% caused by strike activity in Germany.

(4)Amounts primarily represent other non operating income and expenses, as well as reconciling items to remove depreciation - cost of goods sold and restructuring - cost of goods sold, which are excluded from the calculation of Segment EBITDA. See Note 13, "Restructuring and Transaction Related Expenses" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information on restructuring charges.

Specialty

The following table provides a reconciliation of Revenue to Segment EBITDA in our Specialty segment (in millions):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["Specialty","2023","","% of Total Segment Revenue","","2022","","% of Total Segment Revenue","","$ Change"],["Parts & services revenue","$","1,665","","","","","$","1,788","","","","","$","(123)","","(1)"],["Intersegment revenue","3","","","","","3","","","","","\u2014"],["Total segment revenue","1,668","","","","","1,791","","","","","(123)"],["Cost of goods sold","1,238","","","","","1,270","","","","","(32)"],["Gross margin","430","","","25.8","%","","521","","","29.1","%","","(91)","","(2)"],["Selling, general and administrative expenses","305","","","18.3","%","","325","","","18.2","%","","(20)","","(3)"],["Less: Other segment items(4)","(9)","","","","","(3)","","","","","(6)"],["Segment EBITDA","$","134","","","8.0","%","","$","199","","","11.1","%","","$","(65)"]]
[[/GREPCENT_TABLE]]

(1)Parts and services revenue decreased by $123 million, or 6.9%, to $1,665 million for the year ended December 31, 2023. This decrease was primarily due to a parts and services organic revenue decrease of 10.1% primarily due to demand softness in the RV product line, as RV unit retail sales and wholesale shipments have declined year over year. This was partially offset by an acquisition and divestiture parts and services revenue net increase of $64 million, or 3.6%, primarily related to our acquisition of one Specialty business in 2023.

(2)Gross margin decreased by $91 million, or 17.4%, to $430 million for the year ended December 31, 2023. Gross margin as a percent of total segment revenue decreased primarily due to product channel mix toward lower margin auto and marine products and increased competitive pricing due to broader availability of inventory among competitors in the market.

(3)Selling, general and administrative expenses decreased by $20 million, or 6.4%, to $305 million for the year ended December 31, 2023. The decrease in selling, general and administrative expenses as a percent of total segment revenue was primarily due to a 0.2% decrease in personnel costs, mainly driven by decreased workers compensation and health insurance expenses, as well as restructuring activities.

(4)Amounts primarily represent other non operating income and expenses, as well as reconciling items to remove depreciation - cost of goods sold and restructuring - cost of goods sold, which are excluded from the calculation of Segment EBITDA. See Note 13, "Restructuring and Transaction Related Expenses" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information on restructuring charges.

43

Self Service

The following table provides a reconciliation of Revenue to Segment EBITDA in our Self Service segment (in millions):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["Self Service","2023","","% of Total Segment Revenue","","2022","","% of Total Segment Revenue","","$ Change"],["Parts & services revenue","$","232","","","","","$","227","","","","","$","5","","(1)"],["Other revenue","365","","","","","488","","","","","(123)","","(2)"],["Total segment revenue","597","","","","","715","","","","","(118)"],["Cost of goods sold","375","","","","","437","","","","","(62)"],["Gross margin","222","","","37.2","%","","278","","","38.8","%","","(56)","","(3)"],["Selling, general and administrative expenses","188","","","31.5","%","","196","","","27.4","%","","(8)","","(4)"],["Less: Other segment items(5)","(2)","","","","","(1)","","","","","(1)"],["Segment EBITDA","$","36","","","6.0","%","","$","83","","","11.7","%","","$","(47)"]]
[[/GREPCENT_TABLE]]

(1)Parts and services organic revenue increased by $5 million, or 2.4%, to $232 million for the year ended December 31, 2023, primarily driven by pricing initiatives which focused on offsetting inflation on input costs resulting from greater competition for vehicles.

(2)Other revenue decreased by $123 million, or 25.2%, to $365 million for the year ended December 31, 2023, primarily driven by an other organic decrease of $93 million, or 19.1%, due to (i) a $79 million decrease in revenue from precious metals (platinum, palladium, and rhodium) due to lower prices, (ii) a $20 million decrease in revenue from scrap steel related to lower prices and lower volumes, partially offset by (iii) a $6 million increase in revenue from other scrap (e.g., aluminum) and cores primarily related to higher volumes, partially offset by lower prices. Additionally, acquisition and divestiture other revenue was a net decrease of $30 million, or 6.1%, due to the divestiture of a business in the third quarter of 2022. See "Other Divestitures (Not Classified in Discontinued Operations)" in Note 4, "Discontinued Operations and Divestitures" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further information on the divestiture.

(3)Gross margin decreased by $56 million, or 20.0%, to $222 million for the year ended December 31, 2023 primarily due to an unfavorable impact resulting from vehicle procurement costs decreasing at a lesser rate than commodity prices. Decreases in precious metals prices contributed an estimated $60 million decline in gross margin relative to the year ended December 31, 2022. Net sequential changes in scrap steel prices partially offset the impact of the decline in precious metals prices. During the year ended December 31, 2023, scrap steel prices had a $5 million favorable impact on gross margin compared to a $15 million unfavorable impact during the year ended December 31, 2022. The favorable impacts for the year ended December 31, 2023 resulted from the increase in scrap steel prices between the date we purchased a vehicle, which influences the price we pay for a vehicle, and the date we scrapped a vehicle, which influences the price we receive for scrapping a vehicle.

(4)Selling, general and administrative expenses decreased by $8 million, or 3.9%, to $188 million for the year ended December 31, 2023. The increase in selling, general and administrative expenses as a percent of total segment revenue was primarily due to a negative leverage effect of 5.7% from decreases in metals revenue, partially offset by other individually immaterial factors representing a 1.5% favorable impact in the aggregate.

(5)Amounts primarily represent other non operating income and expenses, as well as reconciling items to remove depreciation - cost of goods sold and restructuring - cost of goods sold, which are excluded from the calculation of Segment EBITDA. See Note 13, "Restructuring and Transaction Related Expenses" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information on restructuring charges.

Liquidity and Capital Resources

We assess our liquidity and capital resources in terms of our ability to fund our operations and provide for expansion through both internal development and acquisitions. Our primary sources of liquidity are cash flows from operations and our revolving credit facilities. We utilize our cash flows from operations to fund working capital and capital expenditures, with the excess amounts going towards paying dividends, repurchasing our common stock, paying down outstanding debt, or funding acquisitions. As we have pursued acquisitions as part of our historical growth strategy, our cash flows from operations have not always been sufficient to cover our investing activities. To fund our acquisitions, we have accessed various forms of debt

44

financing, including revolving credit facilities, term loans, and senior notes. We currently believe we have sufficient access to capital markets to support our future growth objectives.

The following table summarizes liquidity data as of the dates indicated (in millions):

[[GREPCENT_TABLE]]
[["","December 31, 2024","","December 31, 2023"],["Capacity under revolving credit facilities","$","2,000","","","$","2,000"],["Less: Revolving credit facilities borrowings","664","","","914"],["Less: Letters of credit","114","","","110"],["Availability under credit revolving facilities","1,222","","976"],["Add: Cash and cash equivalents","234","","","299"],["Total liquidity","$","1,456","","","$","1,275"]]
[[/GREPCENT_TABLE]]

We had $1,222 million available under our revolving credit facilities as of December 31, 2024. Combined with $234 million of cash and cash equivalents at December 31, 2024, we had $1,456 million in available liquidity, an increase of $181 million from our available liquidity as of December 31, 2023, primarily as a result of reducing our revolving credit facilities borrowings by $250 million.

See Note 18, "Long-Term Obligations" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for information regarding total debt outstanding.

We believe that our current liquidity, cash expected to be generated by operating activities in future periods and access to capital markets will be sufficient to meet our current operating and capital requirements. Our capital allocation strategy includes spending to support growth driven capital projects, return stockholder value through the payment of dividends and repurchasing shares of our common stock, completing highly synergistic tuck-in acquisitions and debt repayment.

See Part II, Item 5 of this Annual Report on Form 10-K for further information regarding the dividend activity for our common stock for the year ended December 31, 2024.

On February 18, 2025, our Board declared a quarterly cash dividend of $0.30 per share of common stock, payable on March 27, 2025, to stockholders of record at the close of business on March 13, 2025.

We believe that our future cash flow generation will permit us to continue paying dividends in future periods; however, the timing, amount and frequency of such future dividends will be subject to approval by our Board, and based on considerations of capital availability, and various other factors, many of which are outside of our control.

With $1,456 million of total liquidity as of December 31, 2024 and $38 million of current maturities, we have access to funds to meet our near term commitments. We have a surplus of current assets over current liabilities, which further reduces the risk of short-term cash shortfalls.

Our Senior Unsecured Credit Agreement and our CAD Note both include two financial maintenance covenants: a maximum total leverage ratio and minimum interest coverage ratio. The terms maximum total leverage ratio and minimum interest coverage ratio are specifically calculated per both the Senior Unsecured Credit Agreement and CAD Note, and differ in specified ways from comparable GAAP or common usage terms. We were in compliance with all applicable covenants under both our Senior Unsecured Credit Agreement and CAD Note as of December 31, 2024. The required debt covenants per both the Senior Unsecured Credit Agreement and CAD Note and our actual ratios with respect to those covenants are as follows as of December 31, 2024:

[[GREPCENT_TABLE]]
[["","Covenant Level","","Ratio Achieved as of December 31, 2024"],["Maximum total leverage ratio","4.00 : 1.00","","2.3"],["Minimum interest coverage ratio","3.00 : 1.00","","7.5"]]
[[/GREPCENT_TABLE]]

The indentures relating to our U.S. Notes and Euro Notes do not include financial maintenance covenants, and the indentures will not restrict our ability to draw funds under the Senior Unsecured Credit Agreement. The indentures do not prohibit amendments to the financial covenants under the Senior Unsecured Credit Agreement and CAD Note as needed.

45

While we believe that we have adequate capacity under our existing revolving credit facilities to finance our current operations, from time to time we may need to raise additional funds through public or private financing, strategic relationships or modification of our existing Senior Unsecured Credit Agreement to finance additional investments or to refinance existing debt obligations. There can be no assurance that additional funding, or refinancing of our Senior Unsecured Credit Agreement, if needed, will be available on terms attractive to us, or at all. Furthermore, any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants or higher interest costs. Our failure to raise capital if and when needed could have a material adverse impact on our business, operating results, and financial condition.

As part of our effort to improve our operating cash flows, we may negotiate payment term extensions with suppliers. These efforts are supported by our supply chain finance programs. See Note 17, "Supply Chain Financing" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for information related to our supply chain financing arrangements.

We hold interest rate swaps to hedge the variable rates on a portion of our credit agreement borrowings. After giving effect to these contracts outstanding, the weighted average interest rate on borrowings outstanding under our Senior Unsecured Credit Agreement was 5.8% at December 31, 2024. Including our senior notes and CAD Note, our overall weighted average interest rate on borrowings was 5.3% at December 31, 2024. Under the Senior Unsecured Credit Agreement, our borrowings bear interest at the Secured Overnight Financing Rate (i.e., SOFR) plus the applicable spread or other risk-free interest rates that are applicable for the specified currency plus a spread. Under the CAD Note, the interest rate may be (i) a forward-looking term rate based on the Canadian Overnight Repo Rate Average ("CORRA") for an interest period chosen by the Company of one or three months or (ii) the Canadian Prime Rate (as defined in the CAD Note), plus in each case a spread. See Note 18, "Long-Term Obligations" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for information related to our borrowings and related interest. The interest rate swaps are described in Note 19, "Derivative Instruments and Hedging Activities" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

We had outstanding borrowings under our revolving credit facilities and term loans payable of $1,651 million and $1,943 million at December 31, 2024 and 2023, respectively. Of these amounts, there were no current maturities at December 31, 2024 or 2023.

See Note 18, "Long-Term Obligations" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for information regarding the scheduled maturities of long-term obligations outstanding.

As of December 31, 2024, the Company had cash and cash equivalents of $234 million, of which $213 million was held by foreign subsidiaries. In general, it is our practice and intention to permanently reinvest the undistributed earnings of our foreign subsidiaries. We believe that we have sufficient cash flow and liquidity to meet our financial obligations in the U.S. without repatriating our foreign earnings. We may, from time to time, choose to selectively repatriate foreign earnings if doing so supports our financing or liquidity objectives. Distributions of dividends from our foreign subsidiaries, if any, would be generally exempt from further U.S. taxation, either as a result of the 100% participation exemption under the Tax Cuts and Jobs Act enacted in 2017, or due to the previous taxation of foreign earnings under the transition tax and the Global Intangible Low-Taxed Income regime ("GILTI").

The procurement of inventory is the largest operating use of our funds. We normally pay for aftermarket product purchases on standard payment terms or at the time of shipment, depending on the manufacturer and the negotiated payment terms. We normally pay for salvage vehicles acquired at salvage auctions and under direct procurement arrangements at the time that we take possession of the vehicles.

For the year ended December 31, 2024, net cash provided by operating activities totaled $1,121 million compared to $1,356 million for the same period of 2023. Cash flows related to our primary working capital accounts can be volatile as the purchases, payments and collections can be timed differently from period to period. Inventories represented $324 million in incremental cash outflows for the year ended December 31, 2024 compared to the same period of 2023. Accounts payable produced $256 million in incremental cash inflows for the year ended December 31, 2024 compared to the same period of 2023. Other operating activities primarily reflect the aggregate effect of lower cash earnings, higher interest payments (primarily due to additional borrowings for the Uni-Select Acquisition and higher interest rates), and higher cash paid for taxes during the year ended December 31, 2024 compared to the same period of 2023.

46

For the year ended December 31, 2024, net cash used in investing activities totaled $406 million compared to $2,442 million for the same period of 2023. We invested $49 million and $2,225 million of cash in business acquisitions during the years ended December 31, 2024 and 2023, respectively. Proceeds from the disposal of businesses, net of divested cash were an outflow of $11 million for the year ended December 31, 2024, compared to an inflow of $110 million for the year ended December 31, 2023, primarily related to the sale of GSF Car Parts. Property, plant and equipment purchases were $311 million for the year ended December 31, 2024 compared to $358 million in the prior year. During the year ended December 31, 2023, we settled our foreign exchange forward contracts related to the Uni-Select purchase price with the counterparties and received $49 million due primarily to strengthening in the Canadian exchange rate relative to the contract rates.

The following table reconciles Net Cash Provided by Operating Activities to Free Cash Flow (in millions):

[[GREPCENT_TABLE]]
[["","","","Year Ended December 31,"],["","","","","","2024","","2023"],["Net cash provided by operating activities","","","","","$","1,121","","","$","1,356"],["Less: purchases of property, plant and equipment","","","","","311","","","358"],["Free cash flow","","","","","$","810","","","$","998"]]
[[/GREPCENT_TABLE]]

For the year ended December 31, 2024, net cash used in financing activities totaled $746 million compared to net cash provided by financing activities of $1,102 million for the same period of 2023. The decrease is primarily due to proceeds (net of unamortized bond discounts) of $1,394 million from the issuance of the U.S. Notes (2028/33) in 2023. Cash outflows for share repurchases were $360 million and dividends paid were $318 million for the year ended December 31, 2024 compared to $38 million for share repurchases and $302 million for dividends paid for the same period of 2023. Net debt payments (net of unamortized bond discounts) were $17 million for the year ended December 31, 2024 compared to net debt borrowings (net of unamortized bond discounts) of $111 million for the same period of 2023 (excluding proceeds from the issuance of the U.S. Notes (2028/33) of $1,394 million).

We intend to continue to evaluate markets for potential growth through the internal development of distribution centers, processing and sales facilities, and warehouses, through further integration of our facilities, and through selected business acquisitions. Our future liquidity and capital requirements will depend upon numerous factors, including the costs and timing of our internal development efforts and the success of those efforts.

We have various contractual obligations and commitments arising in the normal course of business. The following represent our anticipated material cash requirements from known contractual and other obligations as of December 31, 2024.

•Long-term debt of $4,198 million and related interest totaling $914 million, of which $38 million and $223 million, respectively, is expected to be paid within twelve months. See Note 18, "Long-Term Obligations" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for more information related to debt amounts outstanding at December 31, 2024.

•Operating lease payments of $1,838 million, of which $333 million is expected to be paid within twelve months. See Note 21, "Leases" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for more information related to lease amounts outstanding at December 31, 2024.

•Purchase obligations of $693 million for open purchase orders for aftermarket inventory all expected to be paid within twelve months.

•Net pension obligations of $84 million, of which $8 million is expected to be paid within twelve months. Benefit payments for our funded plans will be made from plan assets, whereas benefit payments for our unfunded plans are made from cash flows from operating activities. See Note 22, "Employee Benefit Plans" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for more information related to net pension obligations at December 31, 2024.

•Self-insurance reserves of $144 million, of which $79 million is expected to be paid within twelve months. See Note 7, "Self-Insurance Reserves" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for more information related to self-insurance reserves at December 31, 2024.

47

Summarized Guarantor Financial Information

Our U.S. Notes (2028/2033) and Euro Notes (2031) are guaranteed on a senior, unsecured basis by certain of our subsidiaries (each, a “subsidiary guarantor” and, together with LKQ, the “Obligor Group”), which are listed in Exhibit 22.1 in Part IV, Item 15 of this Annual Report on Form 10-K. The guarantees are full and unconditional, joint and several, and subject to certain conditions for release. See Note 18, "Long-Term Obligations" in Part II, Item 8 of this Annual Report on Form 10-K for information related to the Euro Notes (2031) and U.S. Notes (2028/2033).

Holders of the notes have a direct claim only against the Obligor Group. The following summarized financial information is presented for the Obligor Group on a combined basis after elimination of intercompany transactions and balances within the Obligor Group and equity in the earnings from and investments in any non-guarantor subsidiary.

Summarized Statements of Income (in millions)

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended December 31,"],["","2024","","2023 (2)"],["Revenue","$","6,968","","","$","6,954"],["Cost of goods sold","4,192","","","4,079"],["Gross margin (1)","2,776","","","2,875"],["Income from continuing operations","428","","","602"],["Net income","$","428","","","$","589"]]
[[/GREPCENT_TABLE]]

(1)Guarantor subsidiaries recorded $53 million and $53 million of net sales to and $205 million and $203 million of purchases from non-guarantor subsidiaries for the fiscal years ended December 31, 2024 and December 31, 2023, respectively.

(2)Information reflects the current Obligor Group listed in Exhibit 22.1 in Part IV, Item 15 of this Annual Report on Form 10-K.

Summarized Balance Sheets (in millions)

[[GREPCENT_TABLE]]
[["","December 31,"],["","2024","","2023 (2)"],["Current assets","$","2,321","","","$","2,167"],["Noncurrent assets","5,722","","","5,699"],["Current liabilities (1)","1,206","","","925"],["Noncurrent liabilities","4,163","","","4,031"]]
[[/GREPCENT_TABLE]]

(1)Current liabilities for guarantor subsidiaries included $219 million of short term notes payable to non-guarantor subsidiaries as of December 31, 2024.

(2)Information reflects the current Obligor Group listed in Exhibit 22.1 in Part IV, Item 15 of this Annual Report on Form 10-K.