LKQ 2026年第三季度业绩电话会：欧洲业务疲软导致利润下滑

核心要点

• 第三季度营收同比下降5.1%至约33亿美元，零部件及服务有机营收下降5.4%。
• 调整后摊薄每股收益（EPS）从0.84美元降至0.50美元。GAAP摊薄每股亏损为0.09美元，其中包括1.11亿美元的税前非现金减值计提。
• 欧洲市场仍是主要的盈利受压点。有机营收下降9.8%，业务板块EBITDA减少9400万美元至6800万美元，EBITDA利润率从10.0%收缩至4.6%。
• 德国地区的ERP系统中断导致季度营收减少约9500万美元，EBITDA减少约4300万美元。按时按量交付率已恢复至约95%，但日销售额仍维持在上年同期水平的85%左右。
• 北美地区的有机营收下降2.4%，但得益于毛利率改善及成本管控，EBITDA利润率提升了40个基点至14.4%。
• 鉴于高管层变动以及欧洲业务持续面临经营挑战，LKQ暂停了其2026全年的业绩指引和战略审查（包括Specialty业务的出售流程）。

关键财务数据

LKQ在该季度斥资3000万美元回购了约120万股股票，并支付了7600万美元的股息。今年迄今向股东累积回报资本3.13亿美元。董事会于10月27日宣布发放每股0.30美元的季度股息。

业务与经营业绩

欧洲市场

欧洲零部件及服务有机营收下降9.8%，而第二季度为下降12.6%。业务板块EBITDA为6800万美元，同比减少9400万美元，EBITDA利润率从10.0%降至4.6%。

管理层将业绩疲软归因于德国的ERP系统中断、销量下滑、供应商返利减少、运费和燃料成本上升以及与技术项目相关的专业服务费用增加。毛利率下降约220个基点，而销售及管理费用（SG&A）占营收的比例上升了约350个基点。

在德国，当地按时按量交付率达到约95%，较第二季度的80%以下有所回升。管理层表示，该国约155个网点中有75%的运营表现维持在90%-100%的高位区间。然而，由于客户需求尚未完全恢复，日营收仍维持在上年同期水平的85%左右。

英国和荷比卢业务在该季度进一步恶化。管理层指出产品供应、门店选品、服务水平以及缺乏对客户的专注是关键影响因素。公司已聘请Alvarez & Marsal协助稳定欧洲业务、提升服务与库存执行力，并加强成本管控。

北美市场

北美零部件及服务有机营收下降2.4%，对比可维修理赔量下降1%至3%。业务板块EBITDA达到2.03亿美元，EBITDA利润率增长40个基点至14.4%。

得益于LKQ战略定价模式的进一步推广，毛利率提升至42.3%。人员成本较上年同期减少约700万美元，帮助抵消了部分增加的运费和燃料开支。

替代件使用率创下近41%的历史新高。硬件业务连续第三个季度实现有机增长，同比低单位数提升。管理层表示，非碰撞业务部分环节的交付问题拖累了整体有机营收，但这些问题在进入第四季度前已得到实质性解决。

Specialty（特种件）业务

Specialty业务有机营收增长0.9%。业务板块EBITDA为2500万美元，利润率下降约180个基点至5.5%。

运费和燃料成本上升以及与第二季度收购相关的整合挑战对盈利能力施加了压力。管理层还提及汽车业务面临较高的燃料价格和利率压力，以及与贸易紧张局势和报复性关税相关的加拿大需求软化。尽管行业状况疲软，房车及海事部门仍保持增长。

管理层业绩指引

LKQ暂停了其2026全年的业绩指引，管理层表示不应再依赖此前的展望。该决定反映了近期经营表现、欧洲持续面临的挑战以及高管层过渡。

管理层未提供新的季度目标。Rick Galloway表示，他没有看到任何会改变LKQ从第三季度到第四季度正常季节性规律的因素，但他强调这并不意味着恢复正式的业绩指引。

Sal Abbate计划于12月15日出任总裁兼首席执行官。董事会还暂停了包括Specialty业务出售流程在内的战略审查，以便让Abbate对业务和潜在价值创造路径进行评估。

风险与观察要点

• 德国的运营指标有所改善，但日营收复苏卡在上年同期水平的85%附近。
• 服务中断后，部分德国客户转投竞争对手。管理层表示，赢回订单量取决于能否持续证明其可靠性和产品供应能力。
• LKQ预计第四季度在德国采取更激进的商业策略，不过管理层指出单靠价格无法完全夺回客户份额。
• 在产品供应、选品和服务问题的困扰下，公司在英国和荷比卢的市场份额有所削弱。
• 欧洲市场的盈利能力仍受到低销量带来的经营杠杆负面影响、供应商返利减少、运费和燃料开支以及技术相关专业服务费用的拖累。
• 在北美，可维修理赔量下降、非必需涂料需求疲软以及一家大型多门店运营商改变采购渠道，均对销量产生了影响。

分析师问答要点

德国复苏：管理层表示，ERP系统本身已不再是主要瓶颈。工作重心已转向对表现较差的分店进行培训以及重建客户信心。公司已完成另外两次ERP版本发布，以提升效率和可靠性。

ERP回报潜力：LKQ预计德国ERP平台将助力更便捷的电子下单、市场份额提升、总部整合、降低SG&A费用以及更一体化的全欧物流网络。公司未对预期节省的费用或回收期进行定量说明。

欧洲成本：公司增加了约300名临时工以恢复德国的交付性能。管理层表示，绝大多数临时工在季度末已离职，从而削减了一项高昂成本来源。

北美定价与销量：价格同比略有改善，而销量下降拉低了有机营收。管理层表示，台湾汽车关税从25%降至15%开始影响本季度，而《国际紧急经济权力法案》（IEEPA）关税对北美的影响微乎其微。

现金流与融资：管理层表示，欧洲业务中断未导致应收账款保理或供应链融资项目被取消。应付账款的变化主要反映了第二季度和第三季度之间的入账时间差。

业绩电话会议完整文字记录

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完整财报电话会议逐字稿

管理层陈述

Operator

Hello, everyone. Thank you for joining us, and welcome to LKQ Corporation's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Joe Boutross, Vice President, Investor Relations. Joe, please go ahead.

Joseph Boutross

Thank you, operator. Good morning, everyone, and welcome to LKQ's Third Quarter 2026 Earnings Conference Call. To kick off the call, we have a prerecorded message from John Mendel, LKQ's Chairman of the Board, that will provide some additional context related to our recent press release regarding changes to our leadership team and an update on the company's strategic review. Following John's message, Rick will provide some high-level comments on each of our segments, followed by a detailed overview of our financials in the quarter, and then we will open the call for questions. I kindly ask that you focus your questions solely on the company's performance during the quarter.

Please refer to the LKQ website at lkqcorp.com for our earnings release issued this morning as well as the accompanying slide presentation for this call. Now let me quickly cover the safe harbor. Some of the statements that we make today may be considered forward-looking. These include statements regarding our expectations, beliefs, hopes, intentions or strategies. Actual events or results may differ materially from those expressed or implied in the forward-looking statements as a result of various factors.

We assume no obligation to update any forward-looking statements. For more information, please refer to the risk factors discussed in our Form 10-K and subsequent reports filed with the SEC. And during this call, we will present both GAAP and non-GAAP financial measures, and a reconciliation of GAAP to non-GAAP measures is included in today's earnings press release and slide presentation. Hopefully, everyone has had a chance to look at our 8-K, which we filed with the SEC earlier today. As normal, we are planning to file our 10-Q in the coming days.

With that, operator, we are ready to begin the call.

John Mendel

Thank you, Joe, and good morning, everyone. We appreciate you joining us. Following last Friday's announcement, the Board felt it was important that you hear from us directly before Rick takes you through the quarter. I'll keep my remarks brief, but I want to share some perspective on the decisions we made and why. The Board's focus is on delivering results for our shareholders, and that is what guided the changes we announced.

LKQ is an exceptional business. We have unmatched scale, leading market positions in multiple regions, a unique global distribution network and talented teams across the company. But our financial and operating performance has not reflected the strength of this business, and that has been disappointing, both to our stakeholders and to this Board. We've been operating in a challenging environment, and our execution, particularly in Europe, has not met the standards we expect of ourselves.

The Board has been actively engaged on these issues for some time now, and the strategic review we began earlier this year was one part of that work. We believe that LKQ has significant strengths that are not currently reflected in its operating performance, and our focus is on ensuring those strengths translate into improved results for shareholders. Last week, we announced 3 actions. First, we made a change at the top of the company. The Board has appointed Sal Abbate as President and Chief Executive Officer, effective December 15. He succeeds Justin Jude, who departed the company on October 23. We thank Justin for his years of service and contributions to LKQ.

Until Sal joins, the company is being led by an interim office of the Chief Executive Officer, made up of Sue Gove, Chair of our Audit Committee, and me. We're working closely with LKQ's leadership team to oversee the company's operations during this period. After a thorough search, the Board concluded that Sal is the right leader for LKQ at this moment. He spent more than 3 decades leading large, complex distribution and industrial businesses. As CEO of Veritiv, a high-volume multisite distribution business, he led a significant transformation of the company with its share price increasing more than 13-fold during his tenure, culminating in its $2.6 billion sale to Clayton, Dubilier & Rice in 2023. He also brings public company and international experience as well.

Sal knows what it takes to win in a business like ours, and he brings the operating rigor, commercial instincts and sense of urgency we need to sharpen execution and manage change with greater discipline. Second, we made a leadership change in Europe and engaged Alvarez & Marsal to advise the company on its European business on an interim basis. A&M has a mandate to stabilize operations, including the ERP-related issues, and restore service levels across the region. The team is also helping ensure continuity for customers and suppliers across the region while supporting our efforts to improve operational discipline and performance.

Third, we suspended our full year 2026 guidance in light of the company's recent performance and leadership transition and while Sal completes his review of the business. Finally, I want to update you on our strategic review. The Board's commitment to unlocking value for shareholders has not changed. We made changes in leadership and brought in A&M to advise with respect to our European operations because of this. Now in light of the appointment of Sal and the other leadership changes we announced on Friday, the Board has decided to suspend the strategic review, including the specialty sales process. This will give Sal the opportunity to assess the business and the full range of paths to value creation.

The Board remains committed to overseeing strategic direction, protecting shareholder interest and ensuring accountability, including evaluating opportunities that it believes could enhance shareholder value and optimize the company's strategic positioning over the long term. We believe that is the right sequencing for shareholders, and we'll provide updates when appropriate. Everything we're doing is in the best interest of our customers, our employees and our shareholders. I want to thank our more than 42,000 employees around the world for their resilience over the past several months, and our customers and shareholders for their continued support. Sal looks forward to sharing his priorities with you after he joins.

With that, I'll turn the call over to Rick to walk through the quarter in more detail. Rick will be handling the question and answers today and focus on the operating and financial performance in the quarter. We will not be able to comment on the strategic review process beyond what I shared here today. Thank you.

Rick Galloway

Thank you, John, and good morning, everyone. As you've just heard, this is an important moment for our company. We recognize the significance of the leadership changes announced last Friday and the disappointment in our third quarter results. Neither the executive leadership team nor the Board is satisfied with where we are, and we are taking decisive action. Our execution has fallen short, particularly in Europe, and we need to address those issues with urgency, focus and accountability.

I want to be equally clear that we remain confident in the fundamental strength of our businesses. We have strong market positions, differentiated capabilities and dedicated teams around the world. My goal this morning is to speak candidly with you about what happened during the quarter, what we believe drove our performance and where we are focusing our attention going forward. I'll start with our operating performance by segment and then walk you through the financial results. Let's begin with North America.

In North America, organic revenue declined 2.4% compared with a decline in repairable claims of 1% to 3% during the quarter. Auto insurance pricing continues to decrease, making our parts offering even more attractive to carriers seeking cost-efficient repair solutions. The CPI for motor vehicle insurance declined 5.0% year-over-year in September 2026, its lowest level since December 2024. In addition, self-pay repairs are approaching historical highs, and our parts provide a strong trade-down option that helps consumers manage out-of-pocket costs without sacrificing quality or availability. These favorable trends helped drive alternative part utilization to a record of nearly 41% for the quarter, surpassing the previous high that we set back in Q2.

Total loss rates were stable year-over-year with used car prices modestly lower in the quarter. Total losses remain elevated by historical standards, but that trend largely reflects the aging vehicle fleet, particularly vehicles beyond our 4- to 12-year sweet spot, rather than any shift in underlying demand for our parts. The hard parts team posted its third consecutive quarter of organic revenue growth, resulting in low single-digit year-over-year improvement in Q3.

Turning to Europe. We are clearly not satisfied with our performance in Europe. Many of the challenges we faced were self-inflicted, and we take full ownership of them. Simply put, we had too many operational initiatives underway at the same time, which pulled our attention inward and caused us to lose focus on the customer. These challenges manifested in several ways during the quarter, including disruptions to category management and product availability, gaps in our branch profiling and assortment, and service level issues in certain markets. These issues affected our ability to consistently deliver the parts availability, service levels and competitive pricing our customers expect from us. We are moving with urgency and discipline to address them and strengthen our execution across the region.

Turning to specialty. Specialty continued to grow but at a lower rate than we saw in the last several quarters. We experienced some modest external pressure during the quarter, primarily from higher fuel prices and interest rates affecting the automotive portion of the business as well as softer demand in Canada tied to geopolitical trade tensions and retaliatory tariffs. None of these factors were material on their own. But even against that backdrop, specialty delivered organic revenue growth of 90 basis points in the quarter.

The RV and Marine division of specialty continued to grow in the quarter, and we're pleased with that performance given the challenging market conditions. RV results stood out in particular, with retail dealers seeing low double-digit revenue declines and industry wide wholesale shipments down over 16% year-over-year in August, according to the RV Industry Association data. Our ability to deliver growth in that environment highlights the strength of our team, our customer relationships and the durability of our value proposition.

Now turning to our financial results. Beginning with our consolidated results, our reported numbers are consistent with the preliminary ranges we provided on October 23. Third quarter revenue was approximately $3.3 billion, a decrease of 5.1% compared with $3.5 billion in the prior year period. Parts and services organic revenue declined 5.4%. Foreign exchange reduced revenue by 0.7%, and acquisition and divestitures net added 0.6%. Diluted earnings per share was a loss of $0.09 compared with earnings of $0.69 in the prior year period.

Our GAAP results included pretax noncash charges of $111 million, including $88 million related to goodwill impairment on our specialty segment and $23 million related to impairment on net assets held for sale for our operations in Romania, both of which are excluded from our adjusted results. Adjusted diluted earnings per share was $0.50 compared with $0.84 in the prior year period. As in the second quarter, the year-over-year decline largely reflects lower revenue and profitability in Europe.

Turning to segment results. North America parts and services organic revenue declined 2.4%. Despite lower revenue, we were pleased that North America delivered segment EBITDA of $203 million and EBITDA margin of 14.4%, 40 basis points higher than the prior year period. This was slightly ahead of our expectations. Gross margin improved to 42.3%, supported by an expanded deployment of our strategic pricing model. At the same time, the team remained disciplined on costs, lowering SG&A despite higher freight and fuel expenses with personnel costs approximately $7 million below the prior year.

Europe parts and services organic revenue declined 9.8%, an improvement of the 12.6% decline in the second quarter but still well below our expectations. In Germany, branch availability has returned to near pre-implementation levels and on-time in-full delivery reached 95% across the region. However, the revenue recovery has lagged, and it has been slower than we expected when we spoke with you in July as revenue loss in the region due to the ERP was approximately $95 million. Outside of Germany, the execution issues I mentioned earlier affected our competitiveness and contributed to the market share loss in the U.K. and Benelux.

Europe segment EBITDA was $68 million, a margin of 4.6% compared with 10.0% in the prior year period, a year-over-year decline of $94 million. We estimate that the ERP-related disruption in Germany reduced EBITDA by approximately $43 million in the quarter. Most of the remainder reflects lower volumes with negative leverage effect and lower vendor rebates tied to reduced purchase volumes. Gross margin declined approximately 220 basis points year-over-year and SG&A as a percentage of revenue increased approximately 350 basis points, reflecting deleverage on lower volumes, higher freight and fuel costs and higher professional fees related to ongoing technology initiatives.

As John noted, we have engaged Alvarez & Marsal to advise us on our European operations with an initial focus on improving customer service levels, stabilizing operations and strengthening performance and cost discipline across the region. Specialty segment EBITDA was $25 million, with an EBITDA margin of 5.5%, approximately 180 basis points lower than the prior year period. This mainly reflected higher freight and fuel costs and integration-related challenges associated with the acquisition we completed in the second quarter.

Moving to cash flow and the balance sheet. Third quarter operating cash flow was $411 million and free cash flow was $372 million, reflecting improved working capital management and continued strong cash conversion in North America. For the first 9 months of the year, operating cash flow was $466 million, and free cash flow was $336 million. As of September 30, total debt was $3.7 billion, and total leverage as defined in our credit facility was 2.8x EBITDA, consistent with the end of the second quarter. Total liquidity was approximately $1.7 billion. As previously noted, in late July, we prepaid our $500 million term loan originally due in January 2027 using borrowings under our revolving credit facility. We currently have no significant borrowings coming due until 2028.

During the quarter, we repurchased approximately 1.2 million shares for $30 million and extended our share repurchase program through October 2028. We also paid $76 million in dividends. And on October 27, the Board declared a quarterly cash dividend of $0.30 per share. Year-to-date, we have returned $313 million to shareholders. Our capital allocation priorities are unchanged. We remain committed to maintaining a strong balance sheet while continuing to invest in the business and return capital to shareholders.

Turning to our outlook. As we announced on October 23, we have suspended our full year 2026 guidance, and our previous guidance should no longer be relied upon. Given the leadership changes we announced last Friday and the ongoing challenges in our Europe segment, we believe suspending guidance for the remainder of 2026 was the appropriate approach.

Now let me close by reiterating that we fully acknowledge the issues that affected our results, and we are taking immediate action to address them. Our near-term priorities are to stabilize the business, strengthen our operations and improve financial and operational performance. We are examining the business closely, establishing clear action plans and accountability and moving decisively on opportunities to deliver near-term improvement. The Board's decision to suspend the strategic alternatives review reinforces that focus.

We have a strong business, leading market positions and competitive advantages that have been built over decades. We are sharpening our attention on execution, serving our customers and delivering improved results. As John discussed, we look forward to welcoming Sal and working closely with him as we enter this next chapter. In the interim, the office of the CEO will remain closely engaged with our leadership team and the Board, maintain focus on our priorities and ensure a smooth transition so that Sal can move quickly when he joins us.

I also want to thank our employees around the globe, many of whom are listening today. I recognize that the recent leadership transition represents a significant change for our organization, and I am grateful for your continued focus, commitment and dedication to our customers.

Thank you for joining us today. Operator, you may now open the call for questions.

Operator

[Operator Instructions] Your first question comes from the line of John Babcock with Barclays.

分析师问答

John Babcock

I guess just starting out, Germany was a little bit more of a challenge than I think most people probably expected, and it seems like it persisted more into this quarter. How do you get that Germany impact back? Also, why was this so much more of an issue than you thought when the quarter began?

Rick Galloway

Yes. Thanks, John. Appreciate the question. Look, in Q3, we further stabilized the system and operations. The sales are hovering now around 85% versus the prior year on a per day perspective. And one of the big focuses for us is going to be on the operational metrics of OTIF, or on-time in-full. We have to give delivery performance back to where we expect it, which is about 95% right now. Recovery is in progress, and it's a good, positive trajectory.

A couple of other things that we've done is we've successfully concluded 2 more ERP releases to update the system, driving better efficiencies and reliability in the operations. And look, our teams are focused on working with the worst performing branches. The lowest performing branches are where we need to bring them up to the expectations with normal trading through on-site support and targeting training. And then this allows us for our sales teams to work with our customers.

And what we found in the last few weeks and probably the last 4 to 6 weeks is customer sentiment continues to improve across our NPS measurements, and our customer journey insights are helpful in prioritizing the overall improvement initiatives. So the improvements are there. The operational improvements are there. The next phase of this, John, is in control and capable and being able to get our customers to rely on us, and that reliability has much improved, and giving our sales team an opportunity to actually win back that share.

John Babcock

Okay. And then in terms of the U.K. and Benelux, was there any notable change from last quarter? Or was there -- so in other words, was there something that worsened? And then also as a separate point, I was wondering if you also might be able to talk about why Alvarez & Marsal was chosen here to help with the European operations as opposed to doing it internally?

Rick Galloway

Yes. I appreciate the question. There was further deterioration that we saw in Q3 in both the U.K. and our Benelux area. One thing to keep in mind on our Euro Car Parts business, which is in the U.K., they've been struggling for a little bit. What we've identified is many of these are within our control. The struggles that we have are product availability, being able to say yes to our customers more often. But one thing to be clear is we're still #1 in the U.K. by a wide margin. What we need to do is get back to servicing our customers, focus on the customers and get any distractions away from us.

We have the strongest footprint, the strongest delivery network, and the team there is loving to win. They continue to want to win. The focus needs to be on fundamentals. One of the reasons we hired A&M was their big focus on fundamentals of improving service levels, enhancing the inventory, logistics execution and also sharpening our overall approach on this trade segment that we have. These actions are underway immediately. And what we're looking at is the team needs to move with urgency and really take away any distractions. Having A&M come in is allowing us to really focus that team with a team of theirs that has a footprint to help really focus the business on the improvements at hand and really work with urgency.

John Babcock

Okay. Very helpful. And then if you don't mind me squeezing in one more question. Just on North America, it seems like your organic sales pace was maybe not the typical outperformance relative to reparable claims. If you could talk about that, that would be helpful. And then I'll pass it over.

Rick Galloway

Sure. A couple of things that occurred within the quarter actually happened within our non-collision business. We had some delivery performance issues in some of our non-collision parts of the business that tend to outweigh and drive that beat to repairable claims. And they did not see the same improvement that we had seen previously. The good news is that those delivery performance issues have been significantly rectified as we moved into the fourth quarter. And we're looking much, much closer to year-over-year. We're not quite back to growth in those parts of the business, but we're just slightly under in those parts of the business. That was one of the major impacts of why that beat wasn't there as normal.

Operator

Your next question comes from the line of Jeff Lick with Stephens.

Jeffrey Lick

Rick, I just wonder if you could remind us, with the ERP implementation in Germany, presumably, you did that for a reason, eventually, you get to the other side. Could you remind us in terms of what that return on investment will look like in terms of either reduced SG&A, better volumes and better gross margins?

Rick Galloway

Yes. Good question, Jeff. I appreciate that. Look, there were many reasons to do the ERP implementation. One of the reasons to choose Germany was the system itself was antiquated with different areas that we were going to need to upgrade that system and make sure that, that's safe and secure and make sure that we can provide to our customers. One of the things is, a significant portion of our orders in Germany, in particular, come in electronically. And our system that we had prior to this wasn't allowing our customers to do everything that they needed to do. And this opens it up for them to be able to order much easier.

One of the reasons that we've done it is that. And one of the positives we've seen is the new customers we've gone after, we're seeing a really nice win rate on those new customers that weren't impacted negatively in the second quarter. The overall returns and paybacks are pretty significant. We're looking at driving overall revenue increases. We're driving overall market share improvements, along with being able to shut down one of our corporate headquarters. We had two corporate headquarters. We're able to consolidate those and reduce our overall SG&A as well. And then the third thing that this allows us to do is really that the opportunity for us to do logistics without borders and be able to provide a better logistics footprint across the pan-European business as we continue to move down this path.

Jeffrey Lick

And then a couple of follow-ups there. I mean, look, SG&A was $476 million, which was the same as Q2 and a little more than Q3 of last year. I'm assuming there's some elevation there. When you talk about shutting down headquarters, I mean, it sounds like those are some chunky buckets. Could you maybe just -- any degree of magnitude of when the dust settles and you're not paying extraordinary charges right now to fix things where we can get to?

Rick Galloway

We haven't come out and said what those numbers are at this point, Jeff. What we did see within the quarter is we brought in around 300 temporary workers to increase the cost in order for us to get our delivery performance up where we wanted it to get to. Since the beginning of the quarter, those 300 have really pretty much are gone by the end of the quarter, but that was an inflated number that we saw within the quarter. And what we have been able to see is that we've been able to take some of the reductions in our headquarter costs. But as far as quantification on that, we haven't come out and quite quantified that yet. I'd want to wait and not do that on this call.

Jeffrey Lick

One last quick one. Look, when a guy like Sal, the CEO comes in, he generally asks the CFO, like, "Hey, listen, let's get some easy wins, let's just stick to some 80-20 rules." Rick, what are like the 1 or 2, 3 things we can do right away to get some quick improvement? What are you going to tell him?

Rick Galloway

Those are great questions. And when he gets here, him and I are going to have that conversation, Jeff. So him and I will work on that together. But it was -- it's something that we'll work on together as he comes on board.

Operator

Your next question comes from the line of Craig Kennison with Baird.

Craig Kennison

I wanted to stick with Europe. And maybe, Rick, just try to better understand today, as it stands, are you still having an issue with delivering on orders that you get in terms of your fulfillment rate? Or is the issue now just recovering that demand such that your order rate is back to prior levels?

Rick Galloway

You're talking -- Craig, you're talking specifically about the ERP in Germany?

Craig Kennison

Yes.

Rick Galloway

Okay. Yes. So what we're seeing is the measurement that we utilize is on-time in-full, the OTIF measurement. That number in Q2 was less than 80%. That number needs to be in the high 90s in order for us to be able to say yes to a customer enough, right? So where we're at on average right now is 95%. So we're getting really close to that. What I would tell you is 75% of our locations are in the upper 90s. So when we're sitting there and looking at the top 75% of our locations, we have about 155 locations in Germany, the top 75% of them, they're at a position that is at a minimum, meeting the competition and oftentimes beating the competition.

So it's not a system issue per se that is going down and is causing all of these -- causing a whole bunch of problems across the board. Instead, what it is, is it's a training opportunity for us to bring some of our lower performing branches up to the level of expectation and then be able to say yes more often. And so what we're seeing is, again, those top 75% of our branches, they're delivering at a high 90s number and really being able to say yes more often. So that's where I'm having the confidence that we've got to get those bottom ones up to the proper performance and then be able to get the customers convinced to bring -- come back and really be customer-focused on being able to say yes to them more often and not have any disruptions.

Craig Kennison

Is there a way to measure the demand component here? In other words, are your European customers, I guess, in Germany, deprioritizing you because you haven't been able to deliver to their expectation? Are you seeing that show up in weak orders?

Rick Galloway

Yes. We're seeing a couple of different buckets, Craig. We look at different buckets of our customer base. Some customers that we impacted significantly have pulled a significant portion of their business away from us and some have walked away totally and gone to competition. That's a small percentage of the overall customer base. The majority of our customer base is giving us still a majority of their share but not getting us back to the same levels that we had before. And that's a constant conversation. So the good news is that we're still working with them. They still enjoy working with our STAHLGRUBER business and want to give the business back, but we've got to be in control and capable and be able to prove that to them. So that's the efforts that we're doing right now.

The operational improvements are coming through. Now it's that convincing the customer that we're in control and capable, and we can say yes all the time. And so that's where we have confidence that the revenue will come back. But again, we don't want to forecast when that revenue is going to come back, but the relationship with the customer is strong on those individuals. And then, again, we are winning new share, which is something that is encouraging as well.

Craig Kennison

And with respect to winning that business back, should we expect a period of heavier promotional activity to sort of earn the opportunity again?

Rick Galloway

You're -- when you're thinking about overall price and giving it back, look, we're going to remain competitive on price, but price alone isn't the answer. So we're going to have to go and be aggressive -- more aggressive here in the fourth quarter, I think. But one of the things that happens in that business is that they have an annual bonus, is what we call it over there. And the annual bonus really starts on January 1, and then there's a volume component associated to that.

In order to win back some of that share in the fourth quarter, we're going to be aggressive and make sure that we are making sure our customers are made whole with the disruptions that we had earlier in the year. Look, our customers are looking for a better overall value proposition with consistent availability, service levels and reliability, and we haven't been delivering that. So that's where our focus is, and we're actively engaged with both the existing and new customers to win back that share.

Operator

Your next question comes from the line of Scott Stember with ROTH Capital Partners.

Scott Stember

You made a comment earlier that you were a victim of having too many things going on at once, and we talked about Germany and the U.K., but maybe -- I mean, Germany and Europe. Could you talk about anything else that you could refer to for that statement regarding management changes, notably in Europe? Is there anything else that we should keep an eye on?

Rick Galloway

One of the things I think that shows a clear message is really what the Board enacted this week with the suspension of the strategic review. Make no mistake, there's a lot of work that comes behind doing a strategic review and analyzing the overall business. Look, the strategic review led to some significant actions, including new leadership at the top of the company, new leadership in Europe and the engagement of A&M, but suspending the review allows clarity to the organization that the highest priorities are to improve our relationship with our customers and drive operational improvements immediately.

Those are the focuses that we have, and the Board has made it extremely clear that if there's something that doesn't lead to those strategies and those improvements, then we probably put those on a back burner and really focus on delivering to our customers. So that's one of the biggest things of being able to pull that off and say the team needs to focus on operations. And then there's other projects that the team is working on to enhance the future of the company. And so they'll still keep an eye on that, but really need to get back to the basics and driving performance.

Scott Stember

All right. And then last question on the balance sheet. This year, obviously, because of net income, free cash flow has come down, but also accounts payable have reversed. Just trying to get a sense if some of this disruption in Europe has led to an unwinding of any of these receivable factoring programs that you have put in place over the last few years?

Rick Galloway

Simple answer is no. It hasn't led to any of that. There's some timing that happened with payables between Q2 and Q3. So there's a little bit of free cash flow movement between Q2 and Q3 that we saw. But no, Scott, there's no difference on the supply chain financing.

Operator

Your next question comes from the line of Patrick Buckley with Jefferies.

Patrick Buckley

On North America, did you see any notable market share shifts in collision parts? Was there anything on the MSO volume side or in parts or anything notable to call out on the paint side?

Rick Galloway

Business as usual on the paint side, it continues to move in the direction. Look, one of the things we've been really clear about is the most discretionary part of the repair is paint. And so when you're seeing repairable claims at negative 1% to negative 3%, you can imagine that paint tends to be a little bit worse than that, and that continued for this quarter. One of our larger MSOs did have a different sourcing approach that they did within the quarter. It did reduce our share a little bit. Look, we remain active in construction -- constructive with discussions with them. They've been going very well. We've been working to reach an agreement that works for both sides. But beyond that, we're not going to comment on any individual customer relationships.

It's also important to understand that we also have the highest level of CAPA-certified parts and the most recognizable private label brand of Platinum Plus. These are reasons why our relationships with the MSOs are so positive, and we continue to grow with every other MSO within the quarter year-over-year.

Operator

Your next question comes from the line of Jash Patwa with JPMorgan.

Jash Patwa

Just one on North America. Would you be able to parse out the volume versus price trends underlying the negative 2.4% organic revenue growth in North America? I'm wondering if the combination of IEEPA tariff refunds and lowering of the Section 232 automotive tariffs from Taiwan has created a deflationary pricing environment that could weigh on organic revenue growth over the next few quarters? And I have a quick follow-up.

Rick Galloway

Yes. Jash, I appreciate the question. The IEEPA tariffs have minimal impact on our North America business. Those are primarily related to China, and that has a little bit more of an impact on our specialty side of the business. As far as the movement in tariffs that we had with the Taiwanese deal, the tariff did move from 25% down to 15%. We did start seeing some of that reduction within the quarter. We also have a pricing engine that we're pretty excited about that is really looking at many different things to optimize overall pricing to make sure that we're looking at volume versus pricing versus margin, all the kind of stuff that we need to look at. It's showing some nice early signs.

As far as the price versus volume goes, price was a little bit favorable year-over-year. And then the downside was on the volume side of things, especially with what the point I just made up on -- made it with the prior MSO. So I think that, that's temporary in nature on that part of it, and then we should be able to get that back.

Jash Patwa

Great color. And just as a quick follow-up on Germany. I believe the business was running at about 85% of pre-ERP transition level early in the third quarter. Could you give us a sense of how that progressed through the quarter and where it stands today? And just based on your comments around incentive activity picking up sequentially into the fourth quarter, should we expect your EBITDA margins to remain in a similar range as Q3?

Rick Galloway

Yes. So we did withdraw guidance. So I'll be a little bit careful on what I've seen. But look, there's no catalyst that I'm seeing in the business really in any of the segments that would negate our normal seasonality. So keep in mind, we have normal seasonality from Q3 to Q4. I would expect that trajectory from Q3 to Q4 and really all the businesses to continue. So if you're looking back to last year and you see what the movement was, that's sort of the way I'm looking at it because I don't see a major catalyst.

And to the point you're making on the revenue, the revenue was around that 85%, and it's sort of stagnated. The delivery performance has improved, and we haven't seen the revenue return. And that's one of the things that we really need to focus on, is winning back some of that share with our customer base. So I don't think that there'll be anything significant that we're going to have to do as far as the additional bonuses, but we will have to make sure that we're very competitive on the pricing side.

Operator

There are no further questions at this time. I will now turn the call back to Rick Galloway for closing remarks.

Rick Galloway

Thank you, everyone, for your questions. Look, our execution, particularly in Europe, has not met the expectations, and we know we have work to do. Our focus is clear: stabilize performance, improve execution and deliver better results. We also have meaningful strength across LKQ. North America expanded margins in this soft market. Specialty continued to grow, and those businesses give us a strong foundation moving forward. We look forward to Sal joining us on December 15 and sharing his priorities with you. Thank you, and have a good day.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.