LKQ Corporation (Nasdaq: LKQ), one of the largest distributors of aftermarket and recycled collision parts in North America, reported first-quarter 2026 financial results April 30 showing top-line growth alongside continued pressure on profitability.
For collision repair shops, the most relevant signal from the quarter was performance in LKQ's North America wholesale segment, which serves as a direct measure of collision parts demand: CEO Justin Jude said the business "held up well in the quarter with above market growth," and that the company is "starting to see signs of recovery in the market."
Q1 Financial Results
Total revenue for Q1 2026 was $3,469 million, up 4.3% from $3,327 million in Q1 2025. The increase was driven primarily by a 5.1% favorable foreign exchange impact. Parts and services organic revenue declined 1.6% year-over-year.
Net income from continuing operations was $77 million, compared to $158 million in Q1 2025.
On an adjusted basis, net income was $171 million compared to $193 million in Q1 2025, and adjusted diluted EPS was $0.67 compared to $0.74 a year earlier, a decline of 9.5%.
Free cash flow was negative $96 million in Q1. The company said first-quarter free cash flow is typically negative due to seasonal working capital dynamics as receivables increase from year-end levels, and it expects positive free cash flow in each of the remaining three quarters of 2026.
Total Segment EBITDA was $347 million, or 10.0% of revenue, compared to $379 million, or 11.4% of revenue, in Q1 2025.
North America: Above-Market Growth, Aftermarket Collision Outperforms
On the earnings call, Jude said North America organic revenue declined 0.5% on a per-day basis in Q1, an improvement from a 4.1% decline in Q1 2025 and sequential improvement from Q4 2025's 1% decline.
Jude said on the call that the aftermarket collision product line surpassed segment growth levels during the quarter, driven in part by alternative parts utilization reaching a record high of nearly 40% through February. LKQ also renewed several MSO agreements and continued integrating ordering capabilities with key partners. Jude said MSO customers are higher users of alternative parts than non-MSO customers and that automated ordering integrations drive incremental volume toward LKQ's products.
CFO Rick Galloway said on the call that gross margin compression in the North America segment reflects the dilutive effect of passing through tariff-related cost increases. He said year-over-year margin comparisons are expected to improve in the second half of 2026 as the tariff cost step-up anniversaries. North America SG&A improved 90 basis points as a percentage of revenue compared to Q1 2025.
Collision Market Indicators: Used Car Prices, Insurance Premiums
Jude described several demand indicators that the company views as positive signals for the collision repair industry. Repairable claims across the industry were down approximately 2% to 4% in Q1 2026, a meaningful improvement from the 4% to 6% decline reported in Q4 2025.
On the earnings call, Jude said used car values improved every month of the quarter, with March alone up 6.2%. He explained the mechanism directly: as vehicle values rise, more damaged vehicles fall below the total loss threshold in the claims estimating process and convert to repairable claims. Non-comprehensive total loss rates are declining, which LKQ views as a favorable indicator for parts demand.
Jude also said auto insurance premiums are easing, with some states already seeing rate reductions. He said this dynamic, while slower-moving than used car price changes, is expected to contribute to further improvement in repairable claim volumes as consumer behavior normalizes. In Q3 2025, Jude had noted that carriers were filing for rate reductions, describing that as an early indicator of premium normalization. The Q1 2026 call reflected continued progress along that trajectory.
Elitek and Calibration Services
Jude noted on the call that Elitek, LKQ's calibration and diagnostics business, delivered strong organic growth and healthy EBITDA margins in Q1. He said the proportion of collision repairs requiring calibration and diagnostics has risen to approximately 75% today from roughly 62% three years ago, and characterized that trajectory as a durable, long-term growth driver for the business.
Guidance Reaffirmed
CFO Galloway said in the press release that LKQ is "seeing improving performance trends across our global footprint, with continued strength in North America and early signs of stabilization in Europe." Full-year 2026 guidance for organic parts and services revenue growth of negative 0.5% to positive 1.5%, adjusted diluted EPS of $2.90 to $3.20, and free cash flow of $700 million to $850 million was reaffirmed.
Galloway said on the call that management still considers it too soon to build a meaningful market recovery into its guidance range.
The Q3 2025 earnings report showed LKQ's organic revenue decline narrowing before the current quarter's results continued that trend. LKQ Q1 2025 results had reflected a 4.3% organic parts revenue decline as the industry contended with higher costs and fewer claims.
