LKQ Corporation (NASDAQ:LKQ) Q4 2022 Earnings Call Transcript

Scott Stember: Got it. And then, just a follow-up…

Nick Zarcone: There is no indication at this point in time, but again, we’re not — but — what, sort of 45 days after the announcement that they’re going to extend the program to new product types. That’s certainly our hope. We think that is the logical thing to do, but we thought that was the logical thing to do for the last 20 years.

Scott Stember: Got it. Well, clearly in a better spot than we were 10 years ago. So…

Nick Zarcone: Absolutely.

Scott Stember: And just if I could just slip one last question in Europe. I don’t know if you gave granularly detailed by market. But what are you seeing — the countercyclical benefits of the aftermarket — or the mechanical parts aftermarket starting to kick in? Maybe just give us a little color there.

Nick Zarcone: Yes. So, as Rick and I both indicated, organic growth in Europe in the fourth quarter was a little bit over 5% on a per day basis, on a same day basis, which was terrific. Every single one of our markets was up nicely and either in and around that mid-single digit range with the exception of one business, which is, we call, components business on a year-over-year basis, that was still negative, because that’s the business that used to sell into Russia. And if you recall, we shut every single element of that down the day that proven they rolled tanks over the border. And so, on a year-over-year basis, that volume has just gone. But all the geographic platforms showed really good organic growth in the fourth quarter.

Scott Stember: Got it. Thanks, guys.

Operator: Your next question comes from the line of Bret Jordan from Jefferies. Your line is open.

Bret Jordan: Hey, good morning, guys.

Rick Galloway: Good morning, Bret.

Nick Zarcone: Good morning.

Bret Jordan: You called out strength in alternative parts utilization in North America. Is that a tailwind from OE certification programs or what they’re doing in collision on the OE side driving prices up to the point where it forces more alternative parts utilization, or what do you see as the tailwind of that mix?

Nick Zarcone: Well, we believe that in the fourth quarter, the biggest part of that tailwind is that the aftermarket, including ourselves, by far the largest player, we actually had inventory to sell. As you recall, we had supply chain challenges coming out of 2021 into 2022 and our fulfillment rates, because of that, were down. I mean, historically, we’ve been in this the mid-90% range. And as we indicated in prior quarters, we’re down into the low to mid-80%-s, right? The fact that we actually have the inventory need to be responsive to customer demand is the primary reason the whole aftermarket industry was able to grab over 2 percentage points of share back from the OEs. And we think that — and we’re very proud of that. Obviously, we’re the largest player in the aftermarket parts space. We’re charging hard to take share, not just from the OEs, but from our smaller competitors as well.

Bret Jordan: Okay, great. And then, on the recycling of batteries in North America, the partnership you talked about, can you give us a little more detail sort of is that something that you use your existing infrastructure? And obviously, not a lot of batteries in the vehicle park yet, but where do you see that being a contributor?