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Item 2. Management’s Discussion and Analysis

2025-07-24 compared with 2025-04-24 · 200 added, 91 removed, 273 unchanged (52% of the section changed)

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Our 2024 Form 10-K includes a summary of the critical accounting estimates we believe are the most important to aid in understanding our financial results.

There have been no changes to those critical accounting estimates that have had a material impact on our reported amounts of assets, liabilities, revenues or expenses during the three months ended March 31, 2025.

Recently Issued Accounting Pronouncements

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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 (used in) operating activities, less purchases of property, plant and equipment.

• 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.

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Revenue 100.0 % 100.0 % 100.0 % 100.0 %

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Provision for income taxes 1.9 % 2.2 % 1.9 % 2.1 %

Equity in losses of unconsolidated subsidiaries — % 0.1 %

Equity in (earnings) losses of unconsolidated subsidiaries — % — % — % — %

Net income 5.3 % 5.0 % 5.1 % 4.6 %

net income attributable to noncontrolling interest — % — % — % — %

Net income attributable to LKQ stockholders 5.3 % 5.0 % 5.1 % 4.6 %

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

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

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

Three Months Ended March 31,

Three Months Ended June 30,

2025 2024 Change

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Total revenue $ 3,642 $ 3,711 $ (69)

The decrease in parts and services revenue of $75 million, or 2.1%, represented decreases in segment revenue of $36 million, or 2.6%, in Wholesale - North America, $32 million, or 1.9%, in Europe, $5 million, or 9.8%, in Self Service, and $2 million, or 0.4%, in Specialty.

This overall decrease was driven by an organic parts and services revenue decrease of $122 million, or 3.4% (2.7% decrease on a per day basis), and a $34 million, or 1.0%, decrease due to the net impact of acquisitions and divestitures, partially offset by an $82 million, or 2.3%, increase due to fluctuations in foreign exchange rates.

Refer to the discussion of our segment results of operations for factors contributing to the changes in revenue by segment for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

Cost of Goods Sold

Cost of goods sold decreased by $40 million, or 1.8%, to $2,230 million for the three months ended June 30, 2025.

Cost of goods sold primarily reflects decreases of $32 million from Europe, $4 million from Self Service, and $3 million from Wholesale - North America.

Cost of goods sold as a percentage of revenue remained flat at 61.2% for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

Cost of goods sold as a percentage of revenue primarily reflects an increase of 0.4% from Wholesale - North America, partially offset by a decrease of 0.3% from Europe.

Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold by segment for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

Selling, General and Administrative Expenses

Our Selling, general and administrative ("SG&A") expenses increased by $22 million, or 2.3%, to $998 million for the three months ended June 30, 2025.

The year over year increase in SG&A expense primarily reflects increases of $18 million from Europe, $3 million from Specialty and $1 million from Wholesale - North America.

SG&A expenses as a percentage of revenue increased to 27.4% for the three months ended June 30, 2025 from 26.3% for the three months ended June 30, 2024.

SG&A expenses as a percentage of revenue primarily reflects increases of 0.8% from Europe and 0.2% from Wholesale - North America.

Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses by segment for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

Restructuring and Transaction Related Expenses

Restructuring and transaction related expenses decreased by $41 million, primarily due to a $31 million decrease in restructuring expenses related to our 2024 Global Restructuring plan and a $10 million decrease in restructuring expenses related to our Acquisition Integration plans.

Provision for Income Taxes

Our effective income tax rate for the three months ended June 30, 2025 was 26.3%, compared to 30.9% for the three months ended June 30, 2024.

The decrease in the effective tax rate for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 is primarily attributable to the 5.2% year over year favorable impact of discrete items, mostly related to the favorable tax effects of the reversal of a tax assessment in the current year and the nonrecurring unfavorable tax effects of the Global Restructuring Plan impairments in the prior year.

See Note 5, "Restructuring and Transaction Related Expenses" for further information on the impairments.

Foreign Currency Impact

We translate our statements of income at the average exchange rates in effect for the period.

Relative to the rates used during the three months ended June 30, 2024, the pound sterling, Czech koruna and euro rates used to translate the three months ended June 30, 2025 statements of income increased by 5.8%, 5.6% and 5.3%, respectively, while the Canadian dollar rate decreased by 1.1%.

Realized and unrealized currency gains and losses combined with the translation effect of the change in foreign currencies against the U.S.

dollar had a net positive effect of $0.03 on diluted earnings per share relative to the prior year period.

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

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

Six Months Ended June 30,

2025 2024 Change

Parts & services revenue $ 6,772 $ 7,087 $ (315)

Other revenue 333 327 6

Total revenue $ 7,105 $ 7,414 $ (309)

The decrease in parts and services revenue of $315 million, or 4.4%, represented decreases in segment revenue of $154 million, or 4.7% in Europe, $122 million, or 4.3%, in Wholesale - North America, $31 million, or 3.4%, in Specialty and $8 million, or 7.8%, in Self Service.

This overall decrease was driven by an organic parts and services revenue decrease of $151 million, or 4.3% (3.1% decrease on a per day basis), a $56 million, or 1.6%, decrease due to fluctuations in foreign exchange rates and a $32 million, or 0.9%, decrease due to the net impact of acquisitions and divestitures.

Refer to the discussion of our segment results of operations for factors contributing to the changes in revenue by segment for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

This overall decrease was driven by an organic parts and services revenue decrease of $273 million, or 3.9% (2.9% decrease on a per day basis), and a $66 million, or 0.9%, decrease due to the net impact of acquisitions and divestitures, partially offset by a $26 million, or 0.4%, increase due to fluctuations in foreign exchange rates.

Refer to the discussion of our segment results of operations for factors contributing to the changes in revenue by segment for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

Cost of Goods Sold

Cost of goods sold decreased by $165 million, or 7.3%, to $2,086 million for the three months ended March 31, 2025.

Cost of goods sold decreased by $205 million, or 4.5%, to $4,316 million for the six months ended June 30, 2025.

Cost of goods sold primarily reflects decreases of $122 million from Europe, $55 million from Wholesale - North America, $19 million from Specialty, and $9 million from Self Service.

Cost of goods sold as a percentage of revenue decreased to 60.2% for the three months ended March 31, 2025 from 60.8% for the three months ended March 31, 2024.

Cost of goods sold as a percentage of revenue primarily reflects decreases of 0.2% from Europe and 0.2% attributable to restructuring.

Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold by segment for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Cost of goods sold as a percentage of revenue decreased to 60.7% for the six months ended June 30, 2025 from 61.0% for the six months ended June 30, 2024.

Cost of goods sold as a percentage of revenue primarily reflects a decrease of 0.4% from Europe, partially offset by an increase of 0.2% from Wholesale - North America.

Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold by segment for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

Selling, General and Administrative Expenses

Our SG&A expenses decreased by $55 million, or 5.3%, to $989 million for the three months ended March 31, 2025.

The year over year decrease in SG&A expense primarily reflects decreases of $34 million from Europe, $16 million from Wholesale - North America, and $5 million from Specialty.

SG&A as a percentage of revenue increased to 28.6% for the three months ended March 31, 2025 from 28.2% for the three months ended March 31, 2024.

SG&A as a percentage of revenue primarily reflects an increase of 0.3% from Wholesale - North America.

Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses by segment for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Our SG&A expenses decreased by $33 million, or 1.6%, to $1,987 million for the six months ended June 30, 2025.

The year over year decrease in SG&A expense primarily reflects decreases of $16 million from Europe and $15 million from Wholesale - North America.

SG&A expenses as a percentage of revenue increased to 28.0% for the six months ended June 30, 2025 from 27.2% for the six months ended June 30, 2024.

SG&A expenses as a percentage of revenue primarily reflects increases of 0.4% from Europe and 0.3% from Wholesale - North America.

Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses by segment for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

Restructuring and Transaction Related Expenses

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Provision for Income Taxes

Our effective income tax rate for the three months ended March 31, 2025 was 27.7%, compared to 30.7% for the three months ended March 31, 2024.

The decrease in the effective tax rate for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 is primarily attributable to the 3.2% year over year decrease in the unfavorable impact of discrete items, mostly related to the nonrecurring unfavorable tax effects of the 2024 Global Restructuring Plan impairments in the prior year.

Our effective income tax rate for the six months ended June 30, 2025 was 27.0%, compared to 30.8% for the six months ended June 30, 2024.

The decrease in the effective tax rate for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 is primarily attributable to the 4.3% year over year favorable impact of discrete items, mostly related to the nonrecurring unfavorable tax effects of the Global Restructuring Plan impairments in the prior year.

See Note 5, "Restructuring and Transaction Related Expenses" for further information on the impairments.

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We translate our statements of income at the average exchange rates in effect for the period.

Relative to the rates used during the three months ended March 31, 2024, the Canadian dollar, euro, Czech koruna and pound sterling rates used to translate the three months ended March 31, 2025 statements of income decreased by 6.0%, 3.1%, 3.0% and 0.6%, respectively.

Relative to the rates used during the six months ended June 30, 2024, the pound sterling, Czech koruna and euro rates used to translate the six months ended June 30, 2025 statements of income increased by 2.6%, 1.4% and 1.1%, respectively, while the Canadian dollar rate decreased by 3.6%.

Realized and unrealized currency gains and losses combined with the translation effect of the change in foreign currencies against the U.S.

dollar had a net negative effect of $0.01 on diluted earnings per share relative to the prior year period.

dollar had a net positive effect of $0.02 on diluted earnings per share relative to the prior year period.

Results of Operations—Segment Reporting

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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):

Three Months Ended March 31,

2025 % of Total Segment Revenue 2024 % of Total Segment Revenue

Three Months Ended June 30, Six Months Ended June 30,

2025 % of Total Segment Revenue 2024 % of Total Segment Revenue 2025 % of Total Segment Revenue 2024 % of Total Segment Revenue

Third Party Revenue

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Specialty 464 466 857 888

129 133 265 270

Total third party revenue $ 3,642 $ 3,711 $ 7,105 $ 7,414

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Specialty 465 466 859 889

129 133 265 270

Eliminations (1) (1) (2) (2)

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See Note 13, "Segment and Geographic Information" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a reconciliation of total Segment EBITDA to net income.

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

Wholesale - North America

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

Three Months Ended March 31,

Three Months Ended June 30,

Wholesale - North America 2025 % of Total Segment Revenue 2024 % of Total Segment Revenue $ Change

1 unchanged sentence

Other revenue 80 75 5

Intersegment revenue — 1 (1)

Total segment revenue 1,442 1,474 (32)

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Segment EBITDA $ 227 15.8 % $ 256 17.3 % $ (29)

(1) Parts and services revenue decreased by $86 million, or 6.0%, to $1,336 million for the three months ended March 31, 2025.

This decrease was primarily due to a parts and services organic revenue decrease of $76 million, or 5.4% (4.1% on a per day basis), primarily due to a reduction in repairable claims and having one fewer selling days in the current year, partially offset by targeted actions to increase market penetration.

The decrease was also driven by an exchange rate decrease of $14 million, or 1.0%, primarily due to the stronger U.S.

(1) Parts and services revenue decreased by $36 million, or 2.6%, to $1,362 million for the three months ended June 30, 2025.

This decrease was primarily due to a parts and services organic revenue decrease of $36 million, or 2.6% (2.2% on a per day basis), driven primarily by lower volumes in our paint, body and equipment business from increased competition and lower repairable claims, partially offset by pricing initiatives and targeted actions to increase market penetration.

(2) Gross margin decreased by $29 million, or 4.4%, to $619 million for the three months ended June 30, 2025.

This decrease was driven by lower revenue as described above as well as unfavorable customer mix not fully offset by price increases due to market competition.

(3) SG&A expenses remained relatively flat to $398 million for the three months ended June 30, 2025, primarily due to (i) $5 million from increased vehicle costs, and (ii) other individually immaterial factors representing a $1 million unfavorable impact in the aggregate, partially offset by (iii) $5 million from decreased professional fees.

(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 5, "Restructuring and Transaction Related Expenses" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on restructuring charges.

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

Three Months Ended June 30,

Europe 2025 % of Total Segment Revenue 2024 % of Total Segment Revenue $ Change

Parts & services revenue $ 1,601 $ 1,633 $ (32) (1)

Other revenue 6 6 —

Total segment revenue 1,607 1,639 (32)

Cost of goods sold 988 1,020 (32)

Gross margin 619 38.5 % 619 37.8 % — (2)

Selling, general and administrative expenses 474 29.5 % 456 27.8 % 18 (3)

Other segment items (4)

Segment EBITDA $ 151 9.4 % $ 174 10.6 % $ (23)

(1) Parts and services revenue decreased by $32 million, or 1.9%, to $1,601 million for the three months ended June 30, 2025.

This decrease was primarily due to (i) a parts and services organic revenue decrease of $81 million, or 4.9% (3.8% on a per day basis), driven by decreased volumes due to difficult economic conditions, heightened competition in certain markets, temporary operational challenges, and a negative effect from one fewer selling days, and (ii) an acquisition and divestiture decrease of $36 million, or 2.2%, primarily related to the divestiture of certain operations in Poland, Slovenia and Bosnia in 2024, partially offset by (iii) the effect of an exchange rate increase of $85 million, or 5.2%, primarily due to the weaker U.S.

dollar against the euro and pound sterling, and to a lesser extent, the Czech koruna.

(2) Gross margin was flat at $619 million, as the decrease resulting from lower organic growth was offset by net procurement savings contributing to an increase in gross margin percentage of 0.7% compared to the prior year period.

(3) SG&A expenses increased by $18 million, or 4.3%, to $474 million for the three months ended June 30, 2025.

The increase in SG&A expense is primarily due to (i) a $25 million unfavorable foreign exchange impact from a weakening U.S.

dollar, (ii) a $12 million non-recurring benefit from a reduction in personnel related accruals in the prior year that were previously recorded as a result of union related negotiations, partially offset by (iii) a $9 million favorable impact from the divestiture of certain operations in Poland, Slovenia and Bosnia in 2024, and (iv) other individually immaterial factors representing a $10 million favorable impact in the aggregate, including cost savings from restructuring and other productivity initiatives.

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

Three Months Ended June 30,

Specialty 2025 % of Total Segment Revenue 2024 % of Total Segment Revenue $ Change

Parts & services revenue $ 464 $ 466 $ (2) (1)

Intersegment revenue 1 — 1

Total segment revenue 465 466 (1)

Cost of goods sold 347 348 (1)

Gross margin 118 25.4 % 118 25.4 % —

Selling, general and administrative expenses 82 17.6 % 79 17.0 % 3

Other segment items (2)

Segment EBITDA $ 39 8.5 % $ 41 8.9 % $ (2)

(1) Parts and services revenue decreased by $2 million, or 0.4%, to $464 million for the three months ended June 30, 2025.

This was primarily due to a parts and services organic revenue decrease of $1 million, or 0.3% driven by demand softness in the RV product line resulting from reduced unit retail sales for RVs, partially offset by growth in our marine product line.

(2) Amounts primarily represent other non operating income and expenses, as well as reconciling items to remove depreciation - cost of goods sold, which are excluded from the calculation of Segment EBITDA.

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

Three Months Ended June 30,

Self Service 2025 % of Total Segment Revenue 2024 % of Total Segment Revenue $ Change

Parts & services revenue $ 50 $ 55 $ (5) (1)

Other revenue 79 78 1

Total segment revenue 129 133 (4)

Cost of goods sold 73 77 (4)

Gross margin 56 43.5 % 56 42.3 % — (2)

Selling, general and administrative expenses 44 33.8 % 44 32.6 % —

Other segment items (3)

Segment EBITDA $ 13 10.0 % $ 13 9.9 % $ —

(1) Parts and services revenue decreased by $5 million, or 9.8%, to $50 million for the three months ended June 30, 2025.

This was primarily due to a parts and services organic revenue decrease of $4 million, or 6.9% (5.9% on a per day basis), driven by lower parts volumes from a reduced number of customer admissions.

(2) Gross margin was flat at $56 million as the decrease resulting from lower revenue was offset by favorable movements in commodity prices.

(3) Amounts primarily represent other non operating income and expenses, as well as reconciling items to remove depreciation - cost of goods sold, which are excluded from the calculation of Segment EBITDA.

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

Wholesale - North America

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

Six Months Ended June 30,

Wholesale - North America 2025 % of Total Segment Revenue 2024 % of Total Segment Revenue $ Change

Parts & services revenue $ 2,698 $ 2,820 $ (122) (1)

Other revenue 156 153 3

Intersegment revenue — 1 (1)

Total segment revenue 2,854 2,974 (120)

Cost of goods sold 1,608 1,663 (55)

Gross margin 1,246 43.7 % 1,311 44.1 % (65) (2)

Selling, general and administrative expenses 808 28.3 % 823 27.7 % (15) (3)

Other segment items (4)

Segment EBITDA $ 449 15.7 % $ 500 16.8 % $ (51)

(1) Parts and services revenue decreased by $122 million, or 4.3%, to $2,698 million for the six months ended June 30, 2025.

This decrease was primarily due to a parts and services organic revenue decrease of $112 million, or 4.0% (3.1% on a per day basis), due to a reduction in repairable claims, and having one fewer selling days in the current year, partially offset by targeted actions to increase market penetration.

Additionally, revenue decreased due to a negative exchange rate effect of $17 million, or 0.6%, primarily due to the stronger U.S.

dollar against the Canadian dollar.

(2) Gross margin decreased by $36 million, or 5.5%, to $627 million for the three months ended March 31, 2025.

This decrease was driven by lower revenue as described above, partially offset by pricing initiatives.

(3) SG&A expenses decreased by $16 million, or 3.6%, to $410 million for the three months ended March 31, 2025.

The decrease in SG&A expense is primarily due to (i) $24 million from decreased personnel costs, (ii) $4 million from decreased freight expenses, and (iii) other individually immaterial factors representing a $2 million favorable impact in the aggregate, partially offset by (iv) $5 million from increased vehicle costs, (v) $5 million from increased professional fees, and (vi) $4 million from increased facility costs due to increased rent and insurance.

(2) Gross margin decreased by $65 million, or 5.0%, to $1,246 million for the six months ended June 30, 2025.

This decrease was driven by lower revenue as described above as well as unfavorable customer mix not fully offset by price increases due to market competition.

(3) SG&A expenses decreased by $15 million, or 1.8%, to $808 million for the six months ended June 30, 2025.

The decrease in SG&A expense is primarily due to (i) $24 million from decreased personnel costs due to cost savings initiatives which were partially offset by inflationary pressures, and (ii) other individually immaterial factors representing a $9 million favorable impact in the aggregate, partially offset by (iii) $12 million from increased vehicle costs, and (iv) $6 million from increased facility costs due to increased rent.

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

Three Months Ended March 31,

Six Months Ended June 30,

Europe 2025 % of Total Segment Revenue 2024 % of Total Segment Revenue $ Change

7 unchanged sentences

Segment EBITDA $ 292 9.3 % $ 317 9.7 % $ (25)

(1) Parts and services revenue decreased by $122 million, or 7.4%, to $1,515 million for the three months ended March 31, 2025.

This decrease was primarily due to (i) a parts and services organic revenue decrease of $45 million, or 2.8% (1.8% on a per day basis), driven by decreased volumes primarily due to difficult economic conditions, heightened competition in certain markets and a negative effect from one fewer selling days, (ii) an exchange rate decrease of $40 million, or 2.5%, primarily due to the stronger U.S.

dollar against the euro, and to a lesser extent, the Czech koruna and pound sterling, and (iii) an acquisition and divestiture decrease of $36 million, or 2.2%, primarily related to the divestiture of certain operations in Poland, Slovenia and Bosnia in 2024.

(2) Gross margin decreased by $32 million, or 5.2%, to $591 million for the three months ended March 31, 2025.

The decrease was primarily attributable to decreased revenue, partially offset by an $8 million reduction in cost of goods sold primarily related to restructuring expenses incurred as part of the 2024 Global Restructuring Plan in the prior year period.

(1) Parts and services revenue decreased by $154 million, or 4.7%, to $3,116 million for the six months ended June 30, 2025.

This decrease was primarily due to (i) a parts and services organic revenue decrease of $126 million, or 3.9% (2.8% on a per day basis), driven by decreased volumes due to difficult economic conditions, heightened competition in certain markets, temporary operational challenges, and a negative effect from one fewer selling days, and (ii) an acquisition and divestiture decrease of $72 million, or 2.2%, primarily related to the divestiture of certain operations in Poland, Slovenia and Bosnia in 2024, partially offset by (iii) the effect of an exchange rate increase of $45 million, or 1.4%, primarily due to the weaker U.S.

dollar against the pound sterling and euro, and to a lesser extent, the Czech koruna.

(2) Gross margin decreased by $32 million, or 2.6%, to $1,210 million for the six months ended June 30, 2025.

The decrease was primarily attributable to decreased revenue, partially offset by a $12 million reduction in cost of goods sold primarily related to restructuring expenses incurred as part of the 2024 Global Restructuring Plan in the prior year period.

These restructuring expenses are excluded from the calculation of Segment EBITDA.

1 unchanged sentence

The increase in gross margin as a percentage of total segment revenue was primarily driven by a benefit from the divestiture of certain operations in Poland, Slovenia and Bosnia in 2024 and lower restructuring expense in the current year as described above.

(3) SG&A expenses decreased by $34 million, or 7.2%, to $459 million for the three months ended March 31, 2025.

The decrease in SG&A expense is primarily due to (i) $23 million of lower personnel costs mainly due to a reduction in personnel related accruals recorded in the prior year as a result of union related negotiations, the divestiture of certain operations in Poland, Slovenia and Bosnia in 2024, foreign exchange impacts of a strengthening U.S.

dollar, and productivity initiatives which were largely offset by inflationary pressures, (ii) $5 million from lower freight costs, and (iii) other individually immaterial factors representing a $6 million favorable impact in the aggregate.

(3) SG&A expenses decreased by $16 million, or 1.7%, to $933 million for the six months ended June 30, 2025.

The decrease in SG&A expense is primarily due to favorable impacts of (i) $20 million from the divestiture of certain operations in Poland, Slovenia and Bosnia in 2024, (ii) $10 million of lower freight, vehicle and fuel cost, and (iii) other individually immaterial factors representing a $6 million favorable impact in the aggregate, partially offset by (iv) a $13 million unfavorable foreign exchange impact from a weakening U.S.

dollar, and (v) a $7 million unfavorable impact in professional fees related to several strategic central and regional information technology initiatives.

1 unchanged sentence

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

Three Months Ended March 31,

Six Months Ended June 30,

Specialty 2025 % of Total Segment Revenue 2024 % of Total Segment Revenue $ Change

7 unchanged sentences

Segment EBITDA $ 60 7.0 % $ 68 7.7 % $ (8)

(1) Parts and services revenue decreased by $29 million, or 6.8%, to $393 million for the three months ended March 31, 2025.

(1) Parts and services revenue decreased by $31 million, or 3.4%, to $857 million for the six months ended June 30, 2025.

This was primarily due to a parts and services organic revenue decrease of $28 million, or 3.2% (2.4% on a per day basis), driven by demand softness in the automotive and RV product lines resulting from declining consumer sentiment and reduced unit retail sales for RVs.

(2) Gross margin decreased by $11 million, or 9.6%, to $95 million for the three months ended March 31, 2025.

(2) Gross margin decreased by $11 million, or 4.8%, to $213 million for the six months ended June 30, 2025.

This decrease was primarily driven by decreases in parts and services revenue and unfavorable sales mix with lower volumes on higher margin product lines.

(3) SG&A expenses decreased by $5 million, or 5.7%, to $76 million for the three months ended March 31, 2025.

The decrease in SG&A expenses was primarily driven by $4 million of lower freight costs and other individually immaterial factors representing a $1 million favorable impact in the aggregate.

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

Three Months Ended March 31,

Six Months Ended June 30,

Self Service 2025 % of Total Segment Revenue 2024 % of Total Segment Revenue $ Change

5 unchanged sentences

Selling, general and administrative expenses 88 33.2 % 88 32.4 % —

Other segment items (3)

Segment EBITDA $ 33 12.3 % $ 29 10.9 % $ 4

(1) Gross margin increased by $4 million, or 6.4%, to $64 million for the three months ended March 31, 2025.

The increase is attributable to improvements in vehicle procurement costs.

(1) Parts and services revenue decreased by $8 million, or 7.8%, to $101 million for the six months ended June 30, 2025.

This was primarily due to a parts and services organic revenue decrease of $7 million, or 6.2% (5.7% on a per day basis), driven by lower parts volumes from a reduced number of customer admissions.

(2) Gross margin increased by $4 million, or 3.1%, to $120 million for the six months ended June 30, 2025.

The increase is attributable to favorable movements in commodity prices and improvements in vehicle procurement costs which more than offset the decrease in revenue.

Liquidity and Capital Resources

6 unchanged sentences

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

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Capacity under revolving credit facilities $ 2,000 $ 2,000

4 unchanged sentences

Total liquidity $ 1,425 $ 1,456

We had $1,062 million available under our revolving credit facilities as of March 31, 2025 .

Combined with $227 million of cash and cash equivalents at March 31, 2025, we had $1,289 million i n available liquidity, a decrease of $167 million from our available liquidity as of December 31, 2024, primarily as a result of increasing our revolving credit facilities borrowings by $160 million.

We had $1,136 million available under our revolving credit facilities as of June 30, 2025 .

Combined with $289 million of cash and cash equivalents at June 30, 2025, we had $1,425 million i n available liquidity, a decrease of $31 million from our available liquidity as of December 31, 2024, primarily as a result of increasing our revolving credit facilities borrowings by $86 million.

On May 2, 2025, we entered into Amendment No.

2 to the Senior Unsecured Credit Agreement which extended the maturity date of the unsecured term loan facility from January 5, 2026 to January 5, 2027 as well as certain other immaterial modifications.

See Note 9, "Long-Term Obligations" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding total debt outstanding.

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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.

A summary of the dividend activity for our common stock for the three months ended March 31, 2025 is as follows:

A summary of the dividend activity for our common stock for the six months ended June 30, 2025 is as follows:

Dividend Amount Declaration Date Record Date Payment Date

$0.30 February 18, 2025 March 13, 2025 March 27, 2025

On April 22, 2025, our Board of Directors declared a quarterly cash dividend of $0.30 per share of common stock, payable on May 29, 2025, to stockholders of record at the close of business on May 15, 2025.

$0.30 April 22, 2025 May 15, 2025 May 29, 2025

On July 22, 2025, our Board of Directors declared a quarterly cash dividend of $0.30 per share of common stock, payable on August 28, 2025, to stockholders of record at the close of business on August 14, 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 of Directors, and based on considerations of capital availability, and various other factors, many of which are outside of our control.

With $1,289 million of total liquidity as of March 31, 2025 and $558 million of current maturities, we have access to funds to meet our near term commitments.

Our current maturities include the $500 million term loan payable under our Senior Unsecured Credit Agreement due January 2026, which we intend to extend or refinance on or before the scheduled maturity.

With $1,425 million of total liquidity as of June 30, 2025 and $34 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.

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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 March 31, 2025.

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 March 31, 2025:

Covenant Level Ratio Achieved as of March 31, 2025

We were in compliance with all applicable covenants under both our Senior Unsecured Credit Agreement and CAD Note as of June 30, 2025.

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 June 30, 2025:

Covenant Level Ratio Achieved as of June 30, 2025

Maximum total leverage ratio 4.00 :

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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 5.6% at March 31, 2025.

Including our senior notes and CAD Note, our overall weighted average interest rate on borrowings was 5.2% at March 31, 2025.

After giving effect to these contracts outstanding, the weighted average interest rate on borrowings outstanding under our Senior Unsecured Credit Agreement was 5.6% at June 30, 2025.

Including our senior notes and CAD Note, our overall weighted average interest rate on borrowings was 5.2% at June 30, 2025.

Under the Senior Unsecured Credit Agreement, our borrowings bear interest at SOFR plus the applicable spread or other risk-free interest rates that are applicable for the specified currency plus a spread.

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The interest rate swaps are described in Note 10, "Derivative Instruments and Hedging Activities" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We had outstanding borrowin gs under our revolving credit facilities and term loans payable of $1,811 million and $1,651 million at March 31, 2025 and December 31, 2024, respectively.

Of these amounts, t here wer e current maturities of $500 million at March 31, 2025 related to the term loan payable under our Senior Unsecured Credit Agreement due January 2026.

There were no current maturities at December 31, 2024.

The scheduled maturities of long-term obligations outstanding at March 31, 2025 are as follows (in millions):

Nine months ending December 31, 2025 (1)

We had outstanding borrowin gs under our revolving credit facilities and term loans payable of $1,764 million and $1,651 million at June 30, 2025 and December 31, 2024, respectively.

Of these amounts, t here wer e no current maturities at June 30, 2025 or December 31, 2024.

The scheduled maturities of long-term obligations outstanding at June 30, 2025 are as follows (in millions):

Six months ending December 31, 2025

Years ending December 31:

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Total debt (2)

(1) Long-term obligations maturing by December 31, 2025 include $23 million of short-term debt that may be extended beyond the current year ending December 31, 2025.

(2) The total debt amounts presented above reflect the gross values to be repaid (excluding debt issuance costs and unamortized bond discounts of $31 million as of March 31, 2025).

As of March 31, 2025, the Company had cash and cash equivalents of $227 million, of which $197 million was held by foreign subsidiaries.

(1) Includes $514 million related to our Senior Unsecured Term Loan Agreement due July 2026, which we intend to extend or refinance on or before the scheduled maturity.

(2) The total debt amounts presented above reflect the gross values to be repaid (excluding debt issuance costs and unamortized bond discounts of $31 million as of June 30, 2025).

As of June 30, 2025, the Company had cash and cash equivalents of $289 million, of which $246 million was held by foreign subsidiaries.

In general, it is our practice and intention to permanently reinvest the undistributed earnings of our foreign subsidiaries.

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See Note 8, "Supply Chain Financing" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information related to our supply chain financing arrangements.

For the three months ended March 31, 2025, net cash used in operating activities totaled $3 million compared to net cash provided by operating activities of $253 million for the same period of 2024.

For the six months ended June 30, 2025, net cash provided by operating activities totaled $293 million compared to $466 million for the same period of 2024.

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.

Accounts receivable represented $7 million in incremental cash outflows for the three months ended March 31, 2025 compared to the same period of 2024.

Inventories represented $34 million in incremental cash outflows for the three months ended March 31, 2025 compared to the same period of 2024.

Accounts payable produced $212 million in lower cash inflows for the three months ended March 31, 2025 compared to the same period of 2024.

For the three months ended March 31, 2025, net cash used in investing activities totaled $50 million compared to $88 million for the same period of 2024.

We invested $17 million of cash in business acquisitions during the three months ended March 31, 2024.

There were no business acquisitions during the three months ended March 31, 2025.

Property, plant and equipment purchases were $54 million in the three months ended March 31, 2025 compared to $66 million in the prior year period.

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

Three Months Ended March 31,

Net cash (used in) provided by operating activities $ (3) $ 253

Inventories represented $57 million in incremental cash inflows for the six months ended June 30, 2025 compared to the same period of 2024.

Accounts payable produced $245 million in incremental cash outflows for the six months ended June 30, 2025 compared to the same period of 2024.

For the six months ended June 30, 2025, net cash used in investing activities totaled $99 million compared to $178 million for the same period of 2024.

We invested $30 million of cash in business acquisitions during the six months ended June 30, 2024.

There were no significant business acquisitions during the six months ended June 30, 2025.

Property, plant and equipment purchases were $107 million in the six months ended June 30, 2025 compared to $146 million in the prior year period.

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

Six Months Ended June 30,

Net cash provided by operating activities $ 293 $ 466

purchases of property, plant and equipment 107 146

Free cash flow $ 186 $ 320

For the three months ended March 31, 2025, net cash provided by financing activities totaled $40 million compared to net cash used in financing activities of $113 million for the same period in 2024.

Cash outflows for share repurchases were $40 million and dividends paid were $78 million for the three months ended March 31, 2025 compared to $30 million for share repurchases and $81 million for dividends paid for the same period of 2024.

Net debt borrowings (net of unamortized bond discounts) were $170 million for the three months ended March 31, 2025 compared to $35 million for the same period of 2024.

For the six months ended June 30, 2025, net cash used in financing activities totaled $169 million compared to $276 million for the same period in 2024.

Cash outflows for share repurchases were $79 million and dividends paid were $156 million for the six months ended June 30, 2025 compared to $155 million for share repurchases and $161 million for dividends paid for the same period of 2024.

Net debt borrowings (net of unamortized bond discounts) were $59 million for the six months ended June 30, 2025 compared to $80 million for the same period of 2024.

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.

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Summarized Statements of Income (in millions)

Three Months Ended

March 31, 2025

Six Months Ended

June 30, 2025

Fiscal Year Ended

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Net income $ 200 $ 428

(1) Guarantor subsidiaries recorded $14 million and $53 million of net sales to and $57 million and $205 million of purchases from non-guarantor subsidiaries for the three months ended March 31, 2025 and fiscal year ended December 31, 2024, respectively.

(1) Guarantor subsidiaries recorded $27 million and $53 million of net sales to and $107 million and $205 million of purchases from non-guarantor subsidiaries for the six months ended June 30, 2025 and fiscal year ended December 31, 2024, respectively.

Summarized Balance Sheets (in millions)

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Current assets $ 2,469 $ 2,321

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Noncurrent liabilities 4,218 4,163

(1) Current liabilities for guarantor subsidiaries included $214 million and $219 million of short term notes payable to non-guarantor subsidiaries as of March 31, 2025 and December 31, 2024, respectively.

(1) Current liabilities for guarantor subsidiaries included $328 million and $219 million of short-term notes payable to non-guarantor subsidiaries as of June 30, 2025 and December 31, 2024, respectively.

Quantitative and Qualitative Disclosures About Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis