LKQ CEO Justin Jude recently held his first earnings call in his new role when the company announced it didn’t meet expectations because of lower repairable claims in North America in the second quarter. 

Jude took on the role of CEO at the start of July. He previously served as executive vice president and chief operation officer for the company beginning in January, according to the LKQ’s website. He also was senior vice president of LKQ Corp. and president of Wholesale for North America from 2015-2023. He held various other roles since he started with the company in 2004. 

“I am deeply honored and excited to be able to speak with you today as the CEO of LKQ,  a company where I have spent the last 20 years working with dedicated colleagues to build a strong and vital business,” Jude said. 

Jude said he would continue to prioritize strategic pillars that are integral parts of the LKQ culture.

He added, “However, this doesn’t mean we will follow the exact same playbook. I expect my team to challenge the status quo, to be innovative, to set goals and communicate them so we hold each other accountable and to learn from mistakes.” 

The company has paused any large-scale acquisitions that don’t meet new criteria that have been set, Jude said. 

“In fact, we have walked away from deals in recent months because the returns on investment did not meet our new criteria,” he said. 

The company is also routinely examining its current assets, he said. 

“As part of this process we identified certain lines of business that did not fit our strategic objectives and we took action divesting 14 businesses in the last five years which represented over $600 million in low-margin revenue,” Jude said. “We will continue to carefully evaluate whether we are the right owners for any of our businesses while we focus on our core strengths.” 

Jude said the company’s first and second quarter results have not met expectations. 

“We faced revenue headwinds from a decrease in repairable claims in North America, which was influenced by mild and dry winter weather conditions,” Jude said. “In our Q1 commentary, we noted there would be a carryover effect in the second quarter as shops had lighter backlogs than normal going into April and we acknowledged a further risk to revenue if repairable claims didn’t rebound.” 

In Enterprise Mobility’s Q2 2024 Length of Rental Report, John Yoswick, CRASH Network editor noted that the average backlog of work fell nearly nine days between Q1 and Q2 which is the largest decline since the 10-day drop during Q2 2020 when COVID-19 pandemic lockdowns began.

The average scheduling backlog is now 2.7 weeks — three weeks shorter than the high of 5.8 weeks reached in Q1 2023.

Repairable claims in the second quarter were down by 7%, Jude said. This was partly impacted by aftermarket inventory following disruptions in the Panama Canal, he said. 

The company also found repairable claims were impacted by rising insurance costs, declining used car values, and a combination of economic factors. 

“We believe that most of these factors are temporary as weather conditions will fluctuate from year to year and economic conditions should normalize over time allowing for insurance costs to moderate and used car prices to stabilize,” Jude said. “We believe that an improvement in economic conditions will contribute to more cars being repaired.” 

Overall, revenue for Q2 was $3.7 billion, an increase of 7.6% compared to $3.4 billion during Q2 2023, according to an LKQ release. 

Parts and services organic revenue decreased 2.1% (2.9% decrease on a per-day basis), the release says. The net impact of acquisitions and divestitures increased revenue by 11.8% 

“Based on a projected continuation of the revenue headwinds we experienced in the first half of 2024, we are lowering our full-year guidance,” said Rick Galloway, senior vice president and CFO, in the release. “While we have taken actions to reduce costs and protect our margins and cash flows, the benefits are not expected to offset the full impact of the lower revenue expectation. We are confident in LKQ’s ability to deliver on these expectations given our market-leading businesses, successful operational excellence strategy, and the strength of our team.”

Jude replaced Dominick Zarcone on July 1. The company announced the succession plan in November 2023. Zarcone transitioned to executive advisor until Dec. 31,  according to an SEC filing. 

The filing notes Zarcone’s salary remains for all of 2024 as it was in 2023. 

Jude’s annual base salary is listed as $1 million with a bonus opportunity equal to 75%, 150%, and 300% of his annual base salary at threshold, target, and maximum, the filing says.

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