Good morning. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the LKQ Corporation's fourth quarter and full-year 2020 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. As a courtesy to others, we ask that each participant limit themselves to one question and, if necessary, one follow-up question before returning to the queue. I would now like to turn the call over to Joe Boutross, Vice President of Investor Relations for LKQ Corporation. You may begin your conference. Thank you, operator. Good morning, everyone, and welcome to LKQ's fourth quarter and full-year 2020 earnings conference call. With us today are Nick Zarcone, LKQ's President and Chief Executive Officer, and Varun Laroyia, Executive Vice President and Chief Financial Officer. 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. During this call, we will present both GAAP and non-GAAP financial measures. 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-K in the next few days. With that, I am happy to turn the call over to our CEO, Nick Zarcone. Thank you, Joe, and welcome to everybody on the call. This morning, I will provide some high-level comments related to our performance in the quarter, and then Varun will dive into the financial details and discuss our 2021 outlook before I come back with a few closing remarks. A year ago on this call, we mentioned the coronavirus a couple of times, mostly related to supply chain considerations. With a year of hindsight, I can safely say that we, like the rest of the world, vastly underestimated the impact that COVID-19 would have on our way of life. I want to express my condolences to all those who have suffered a personal loss through this unfortunate pandemic, and my sincere thanks go out to all those on the front line, the doctors, nurses, first responders, teachers, and all those putting themselves at risk to serve their communities. We simply cannot thank you enough. During the fourth quarter, we faced the second wave of the pandemic and related restrictions on mobility. Yet, we still produced very strong results, which were materially ahead of our expectations when we chatted with you on our third quarter call. As we mentioned at the outset of 2020 and reiterated throughout the pandemic, we were focused on a few key initiatives. I am proud to say our segment teams again embraced and executed on many of these initiatives, not only in the fourth quarter, but for all of 2020. Let me restate our key initiatives, which continue to be central to our culture and our objectives as we've entered 2021. First, we will continue to integrate our businesses and simplify our operating model. Second, we will continue to focus on profitable revenue and sustainable margin expansion. Third, we will continue to drive high levels of cash flow, which in turn will give us the flexibility to maintain a balanced capital allocation strategy. Fourth, we will continue to invest in our future. We have three market-leading businesses, and the benefit of this structure shined brightly during 2020. Each business made significant progress on its goals, and the diversity of markets and customers helped to balance out some of the ebbs and flows impacting any individual business. Alongside these operating initiatives, the continued build-out of a comprehensive ESG program is a key focus for the organization on a go-forward basis. We made tremendous progress. I am pleased to announce that we will be releasing our inaugural Corporate Sustainability Report in the second quarter of this year. While this will be our first formal report, we have been an environmental leader since the day we were founded in 1998 as a salvage dismantler and recycler of passenger vehicles. Today, we are the largest global recycler of vehicles, having processed over 810,000 cars and trucks in 2020. While we are widely known for our recycling and environmental stewardship, we also have a long history of responsible and thoughtful social and governance practices, which we look forward to highlighting in the coming months. Now on to the quarter. As noted on slide four, total revenue for the fourth quarter was $3 billion, a decline of 1.9% from the comparable period of 2019. Parts and services organic revenue declined 5.2% in the quarter and 6.1% on a per day basis. Net income during the fourth quarter was $180 million, an increase of 29% year-over-year. Diluted earnings per share for the fourth quarter was $0.59, an increase of 28% year-over-year. On an adjusted basis, net income was $212 million, an increase of 27% over 2019. Adjusted diluted earnings per share for the quarter was $0.69, an increase of 28% year-over-year. Let's turn to some of the quarterly segment highlights. Slide five sets forth the monthly revenue trends from October through January, and it's quite clear that we didn't witness any change to the upside, either in North America or in Europe. There was simply no meaningful catalyst to reverse the ongoing constraints on mobility. We are encouraged by the initial rollout of the vaccine in the U.S. and certain parts of Europe, but there still remains uncertainty about virus resurgence, vaccine distribution, fiscal stimulus, and geopolitical risk. As we begin to see the benefits of the vaccine come through and further relief from the stay-at-home mandates, we should see some positive movement in mobility. We are cautiously optimistic that we may see a slight recovery in demand towards the second half of this year. As you will note from slide six, organic revenue for parts and services for our North American segment declined 13.7% in the quarter. While still down on a year-over-year basis, we continue to perform well in North America, especially when you consider that, according to CCC, collision and liability- related auto claims declined 27% in the fourth quarter. Faced with year-over-year organic declines in parts and services revenue in each quarter of 2020, the North American team used its agility and decisiveness to protect the business by focusing on profitability, embracing various KPIs to drive efficiency, and aggressively rightsizing the cost structure to be aligned with the revenue trends. These actions contributed to North America having its highest annual EBITDA margins in the history of the company. Moving to our European segment, organic revenue for parts and services in the fourth quarter declined 3.1%. Demand trends softened sequentially in the fourth quarter as a second wave of lockdown provisions were enacted across all of our European regions, with larger impacts in November and December. Most of our regional operations experienced similar revenue declines in the quarter, except for Italy, which struggled. As we articulated at our Investor Day in September of last year, we continue to execute on our 1 LKQ Europe Program. Of note, during 2020, we added significant talent to the European team, including new operating leaders in Italy, the Benelux region, and Central and Eastern Europe. We recruited a new CFO and added new positions of Controller, Head of HR, VP of Strategy, and several other positions. Our shared services effort is progressing well with a new center located in Poland that should become operational in the second half of 2021, and we are also currently leveraging our Bangalore captive. Our Pan-European ERP initial implementation was successfully completed at Rhiag Switzerland, and we expect to go live with Rhiag Italy in mid 2021. Our team is actively focused on driving permanent reductions in SG&A as available government support diminishes. Our vendor financing program is coming along really well. Our LKQ Europe head office in Zug, Switzerland, was occupied beginning of January 2021. Lastly on Europe, this time last year, I mentioned that we began construction on our new central distribution center, or CDC, for our Fource business in the Benelux region. Today, I am happy to report that the keys have just been turned over, our team is starting the logistical and operational phases of the build-out. The logistical layout is expected to be completed in the second quarter of 2021, after which LKQ Fource will enter the testing phase. At the end of this year, we will begin using the shuttle system and the new software. During 2022, we will begin to migrate the activities in the four existing distribution centers over to the new CDC. As part of LKQ's sustainability agenda, the roof of this new building is fully equipped with solar panels, making the building completely energy self-sufficient. The building is also completely gas-free and will provide sufficient charging infrastructure for plenty of electric vehicles. Additionally, the large number of windows in the building provides plenty of natural light, creating an attractive work environment for our team. Now let's move on to the Specialty segment. During Q4, Specialty reported organic revenue growth of 16.6%, performance well above our expectations, and represents the highest quarterly organic revenue growth since the closing of our acquisition of Keystone Automotive Operations back in 2014. A primary factor driving this tremendous performance is the ongoing demand for RV parts, a trend we anticipate will continue as the growth in new unit RV sales will result in a larger RV park, and that will inevitably need more replacement parts as those vehicles work through their life cycle. No one is better positioned to take advantage of that opportunity than LKQ. Also, driving the performance was demand of our drop ship business and consistent with the industry, strong demand for our Warn products. From a corporate development perspective, in 2020, our team did a fantastic job of focusing their efforts on rationalizing our asset base and divesting non-core assets. In 2020, we completed four divestiture transactions, all of which related to European assets that came along with the 2018 STAHLGRUBER acquisition. As you all know, vehicle technology continues to lead to more complex repairs, and to be positioned at the forefront of this trend, we have made strategic acquisitions in the diagnostics space. Since acquiring Elite Electronics and VeTech Automotive Electronics in 2019, we have grown to become the largest U.S. provider of mobile on-site vehicle services to the automotive collision repairers, mechanical repairers, and the national fleets. This past January, we combined the two mobile automotive services together under a single brand known as Elitek Vehicle Services. We remained confident that we will continue to increase our marketshare and brand awareness within this unique and rapidly growing market. Yet we are just scratching the surface on the opportunities ahead during these exciting times for passenger and commercial vehicle design. As the car park evolves, we have a tremendous opportunity to leverage our distribution network to increase our product and service offerings to capture the growth in hybrids and EVs. Our strategy and development teams continue to identify new markets and products to pursue, some of which we touched on during our Investor Day back in September. No one, in my opinion, is better positioned to take advantage of those opportunities than LKQ, as we have the people, the network, the scale, and the capital to be successful. I will now turn the discussion over to Varun, who will run you through the details of the segment results. Thank you, Nick, and good morning to everyone joining us today. While there is a lot to share from our fourth quarter results, full year 2020 and outlook for 2021, I'll keep my prepared comments brief as there is a lot more detail in the accompanying earnings presentation. While 2020 proved to be an extremely challenging year for a variety of reasons, LKQ's resilience shone through in tough times, as evidenced by the following highlights. One, record high annual EPS, including the two highest quarterly results in the company's history, those being the third and the fourth quarter. Two, record high annual segment EBITDA margin for North America and for the company since 2015. Three, record free cash flow at well over $1 billion. The first time we've exceeded $1 billion, and now the third in a row record free cash flow year in the company's history. Finally, net leverage dropped to 1.9 x, the first time it's been below 2x since 2015, which was well before the Rhiag, PGW, STAHLGRUBER, and several other acquisitions. To put these results in perspective, consider we beat the midpoint of our pre-COVID-19 adjusted EPS and cash flow guidance despite falling well short of our organic revenue growth range of 0.5% - 2.5%. In dollar terms, that's over $1 billion shortfall on revenue relative to our original guidance at the midpoint. Our profitability and cash flow results are a testament to the ongoing margin and cash programs that we accelerated and actions we prioritized at the onset of the lockdown measures last March. We all know such outcomes don't happen by accident. A massive thank you to all my LKQ colleagues for their tireless efforts over the last year to deliver a truly outstanding outcome for our company, customers, suppliers, and several other stakeholders while persevering through the ongoing pandemic. I'll now cover the fourth quarter financial highlights and liquidity before sharing our thoughts on the outlook for 2021. As you can see on slide 11, North America continued to deliver in the fourth quarter with segment EBITDA margin up 420 basis points over the prior year and 60 basis points sequentially. Permanent cost savings in overhead expenses was the primary driver of the improvement; precious metal prices remained and gave us a healthy tailwind for the quarter, with an estimated $18 million year-over-year benefit on gross margin. Moving over to slide 12, Europe produced another solid quarter with an 8.6% segment EBITDA margin, up 100 basis points relative to a year ago, largely due to operating expense reductions. Importantly, Europe generated an 8.9% segment EBITDA margin for the second half, which is solidly above the 8%-8.5% range provided at last September's Investor Day and represents good progress towards delivering on the 1 LKQ Europe Program. These results include higher year-over-year transformation expenses. Despite the negative effects of the second wave of COVID-19, at this time, we remain comfortable with our 2021 projection of segment EBITDA margin of 9.2%-10.3% for the segment. With Specialty on Slide 13, Nick highlighted the impressive 16.6% organic growth in the fourth quarter. Gross margin was down 40 basis points owing to unfavorable movements in vendor and customer rebates, though some of the fluctuation is timing, as we had positive true-ups from the fourth quarter activity a year ago and negative impacts this year with the volume increase. Overhead expenses were favorable by 50 basis points and would have been more without a negative effect of about 80 basis points from incentive compensation adjustments. On to cash flow and liquidity. Q4 was yet another successful quarter for cash flow generation. We added a further $309 million in operating cash flows as we continued to benefit from the trade working capital programs we've been driving since 2018. Benefits from receivables and payables offset the expected growth in inventory, although the inventory rebuild wasn't as high as previously anticipated due to supplier delivery challenges. As shown on Slide 14, operating cash flows were $1.4 billion for the year, and CapEx cash outlays were $173 million. The resulting free cash flow and cash on hand was used to pay down almost $1.4 billion in debt for the year. We're very pleased with the trend in EBITDA to free cash flow conversion, as presented on Slide 15. Though, as I previously highlighted, the 2020 ratio of 98% just isn't sustainable as we flex inventory levels by over $400 million to align with demand forecasts. As growth returns, we plan to invest in inventory levels, though largely offset by the ongoing vendor financing program to ensure we maintain our best-in-class service levels and fill rates. On Slide 16, you can see the progress we've made this year to strengthen our liquidity position. I want to specifically highlight the net leverage ratio, which has decreased to 1.9 x from 2.6 x at the end of 2019 and is in line with our target net leverage of approximately 2 x. We are very comfortable with our liquidity position, including the availability and cost of funds, and believe we are very well positioned in our pursuit of investment-grade metrics. As mentioned last October, we restarted our share repurchase program after the third quarter earnings call. During the quarter, we repurchased roughly $30 million of LKQ shares for a total investment of $117 million for the year. We had $531 million available on our authorization as of the year-end. Now, I will close with our thoughts on 2021. As COVID uncertainties remain, we are not providing full financial guidance for the year at this time. We will revisit this position as the year progresses and we have greater clarity on the vaccine rollout and its impact on the duration and severity of the pandemic. We are comfortable providing the following statements, all of which are based on the assumption that, one, extreme mobility restrictions beyond what are currently in place are not re-implemented in our major markets. Two, scrap and precious metal prices and foreign exchange rates continue near their recent levels. A few points to highlight. First, we believe that parts and services revenue will be higher on a full- year basis in 2021, though down in the first quarter relative to 2020. We anticipate that the revenue recovery will accelerate as vaccines are distributed more broadly and mobility restrictions fall off, though we do not expect to return to our 2019 annual revenue figure until sometime in 2022. Please note that we have two fewer selling days in North America in 2021, one fewer in Q1 and the second in Q4, while Europe is flat with one fewer day in Q1, though that catches up in the second quarter. The second point I'd like to highlight is with revenue growth and the ongoing benefit of our margin and operating expense programs, we expect our 2021 adjusted diluted earnings per share will be above the comparable figure for 2020. With that in mind, we are projecting an adjusted diluted EPS range of $2.65-$2.85 with a midpoint of $2.75. On a GAAP EPS basis, this would be $2.40-$2.60. Given the momentum of our European business in the second half of 2020, exceeding the upper end of the range provided last September, we are reaffirming the outlook for the European 2021 segment EBITDA margin range of 9.2%-10.3%. Four, we project the free cash flow for the full year 2021 will be a minimum of $800 million. While the absolute number is lower than the 2020 figure, we've been very clear throughout this past year that 2020 was a strange year for cash generation as a result of the pandemic. As we aligned inventory levels to forecasted demand, our stock levels declined by well over $400 million, which in turn produced a significant cash inflow. However, we are going to give some of the inflow back in 2021 as we replenish our inventory levels to support the anticipated revenue growth. Some of the investment in inventory will be offset by improvements in days payables resulting from vendor financing program, which we expect to yield more significant benefits in 2021, in line with the target we had set out in September of 2019 when we launched the 1 LKQ Europe Program. Finally, on capital expenditure, we plan to get back to our normal levels of 2%-2.25% of revenue. All of these factors will produce a lower free cash flow amount than 2020, but importantly, will still put us within our target conversion range of 55%-60% for free cash flow to EBITDA, widely considered to be best in class for industrial distribution companies. Thank you once again for your time this morning. With that, I'll turn the call back to Nick for his closing comments. Thank you, Varun, for that financial overview. In closing, if you asked me in late March 2020, after the onset of the pandemic, to predict the financial results that we would achieve in 2020 and how we'd end up the year, I would likely have not even come close to guessing at such a remarkable outcome. The one thing I never question are the capabilities of my team. These results are a clear testament of the pride, dedication, resiliency, and capabilities of the LKQ team members across the globe. One famous college football coach said, "Ability is what you're capable of doing. Motivation determines what you do. But it's attitude that determines how well you do it." Despite the challenges and unknowns we faced, it is the positive, nothing will stop us attitude that our 44,000 dedicated team members bring to work each day. That carried us through the headwinds of 2020, that simultaneously generated favorable outcomes that allowed us to reach certain key milestones. We right-sized the North American segment and generated record margins. We made solid progress on our 1 LKQ Europe Program and generated higher second half margins than projected at our September 2020 Investor Day. The uniqueness of our diversified portfolio of businesses allowed us to benefit from the rise in demand for RV replacement parts. We effectively managed our working capital and generated almost $1.3 billion in free cash flow, an annual record for the company. The excellent free cash flow allowed us to pay down a record $1.4 billion of debt, reducing our leverage ratio below 2x. We continued our talent acquisition initiatives by adding individuals to key roles across our broad and diversified portfolio of businesses. We made good progress on our global sustainability programs, and we continued to provide the best-in-class customer service in spite of the pandemic, and importantly, all while focusing on the health and safety of our team. As I've said both internally and externally, we will come out of this pandemic period a stronger, better organization, further solidifying our market leading positions. With that operator, we are now ready to open the call for questions. Thank you. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Again, as a courtesy to others, we ask that each participant limit themselves to one question, and if necessary, one follow-up question before returning to the queue. Your first question comes from Craig Kennison of Baird. Your line is open. Hey, good morning, thanks for taking my question. Congratulations on navigating a tough year. My question is on inflation here. Just curious how your business is set up to absorb inflation and where you see your most important sensitivities, whether it's gas prices, metals, or other factors? Good morning, Craig. Good morning. It's Varun out here. Absolutely. I think it's a great question. I'd say over the past couple of months, we've certainly seen inflation move up, whether it be ocean freight, which we know is running at record highs at the moment. We know wages. Here in the U.S., it's difficult to find delivery drivers. I think you kind of get the message in terms of the inflationary pressures that are building up. Also, with oil prices now moving up in the higher $50s, close to $60 /bbl, in any case. Listen, we have navigated, as you know, not just this past quarter, but I'd say starting 2018, when we put in place our margin programs and obviously kind of accelerated our OpEx programs in conjunction with the cash programs. Our teams have navigated those inflationary pressures pretty darn well. We're proud of what they do. We believe we have the ability to continue to drive a number of the permanent cost reductions that our North America business has taken the lead on. I do know that our European team is also following up with. Long story short, yes, are there inflationary pressures? Absolutely. Are we well set up to undertake those inflationary pressures? Yes, up to a certain point. It really depends in terms of what kind of comes through the next call in several weeks as such. We do expect a number of these inflationary pressures to begin to ease up, for example, on ocean freight, as the empties get back to the appropriate positions back out in Asia and things along those lines. Nick, anything to add from your end? No, I think that was great, Varun. Thanks, guys. Craig, if there's any follow-up question, be happy to take it now, or if you'd like to get back in the queue, we can certainly take it there also. Your next question comes from Scott Stember of C.L. King. Your line is open. Good morning, guys, and I echo Craig's comments on the great job in navigating a very tough year. Thank you. Thank you. Let me talk about the North American business. I know that much of this is based on miles driven and people getting out and mobility, but we look out the window, the weather has been quite awful the last six weeks. I'm trying to figure out whether you guys have seen any change in demand there, and if you think that maybe there could be a potential tail to that as we go from the first quarter and then to the second quarter. Great question, Scott. Again, the weather has been nasty, particularly the last couple of weeks. I'm actually sitting in Austin because I got iced in going back to the Sunday. The reality is our business is very much driven by total miles driven. As you saw in the chart we included in the earnings deck, kind of the revenue trends, not just for the fourth quarter, but also for January. You can see that January kind of picked off where December left off, or picked up where December left off. Right? Until there is a really meaningful mobility, we think we're going to be kind of in this level of activity. Ultimately, we've gotten a number of questions in the past about what's going to drive an increase in mobility. Clearly, getting through the pandemic and people getting out of their homes and returning to their daily lives will be the biggest impact. We don't believe that everyone is going to work from home forever. We don't think everybody on this call is going to permanently be working from home. While we've all become fairly efficient and productive in the working from home, there's clearly a lack of community that is hard on organizations. We may not get back to 100% of folks being back in the office, but we do think a number of folks will get back into the office. We think kids are going to get back into school. When all that happens, we think the use of public transportation will remain depressed for a longer period of time, just because of the safety issues related to the virus and the like. As some of those workers begin to head into the office or back into their workplaces, those who took public transportation may opt to take private transportation, which means instead of hopping on a train or a bus, they're going to hop in a car. We're cautiously optimistic that miles driven will move back north, and that will help our business. Clearly, with the ice storms and the like that have hit the last couple of weeks throughout the United States, that should ultimately create demand for our business. I will tell you here in Texas, based on the news stories of the pileups in Dallas, and Austin, and Houston, that's probably going to create a bigger opportunity from a salvage buying perspective than a parts perspective, because a lot of those cars are just totaled, and when they hit ice going 40 mph. Again, we're cautiously optimistic that we will get back to more normal levels of miles driven, which will lead to a more normal level of demand. It's going to take some time. We don't think it's going to just pop back in the second or third quarter. Hopefully, by 2022, we'll be back at historical levels of miles- driven. Got it. Then last question on the Specialty side. You talked about RVs really leading the way. I guess that's more retail- driven, but you also last year expanded your warranty program. Could you talk about how that contributed and how that probably will contribute even more as we move through the next year or two, more RVs on the road, many of which were potentially hastily built and just more opportunities on that side? Absolutely. There was, and has been, I think, as everybody knows, a massive shift in discretionary spending away from things like restaurants and lodging and air travel, theaters, sporting events, all those group events, right? Outdoor recreation and camping has absolutely been a huge beneficiary of that shift in discretionary spending. Our RV business historically has not been tied to the RV SAAR in any particular year, but has been very highly correlated to campground spending. In 2020, the OEMs produced about 425,000 RV units, which was a great year. The expectation for 2021 is over 500,000 units will be all-time record high. The key there is that the size of a park, the number of RVs in the park is expanding, and that's great for the Specialty business, as all those incremental units that will be on the road for years and years to come will create demand for the parts that we sell. Even if the SAAR ultimately settles down over the next two or three years, the units are still going to be on the road, and that larger base is going to provide a great opportunity for us to sell specialty parts for many years to come. The growth may ultimately slow down. We don't think we're going to continue to grow at 16% year-over-year like we did in the fourth quarter, but we don't anticipate substantial declines in the overall revenue base. Got it. That's all I have. Thanks, guys. Thank you, Scott. Your next question comes from Bret Jordan of Jefferies. Your line is open. Hey, good morning, guys. Hey, good morning, Bret. Good morning. Hey, sort of a big picture question here around parts demand for EVs, obviously, Europe's got a jump on us. You did a lot of business in Norway. Could you talk a little bit about how you see the different parts versus internal combustion, and what this does to demand down the road, long term? Sure. It's a great question, obviously one that's been kind of floating around the industry now for the better part of the year. The reality is, we believe that the supply chain, and really the manufacturers of the EV parts, will ultimately look pretty much the same as the supply chain for internal combustion engine parts. There's going to be a lot of overlap in suppliers, and we fully anticipate that some of the bigger vendors like Bosch, or Continental, or Schaeffler will absolutely develop parts for electric vehicles. While they're going to start with the OEMs as their focus, what they know today is that their current aftermarket business makes better profit margins than their OE parts business. It won't be long before they take that OE manufacturing capacity and start making parts for the aftermarket. We have very strong relationships with all those vendors. They know that we've got the leading distribution capabilities, at least as it relates to Europe, and it's a natural fit for us to do business together. Secondly, a lot of the conversion over the next 10 years or so, Bret, on electrification is going to come through hybrids. A hybrid, as you know, is a combination of an internal combustion engine and an electric motor. The opportunity for LKQ there is twofold. First, there's all sorts of new part types that we're going to be able to sell. Things like battery coolant pumps and coolant fans, electric air conditioning compressors, electric-driven motor inverter coolers. I mean, just a whole new set of products that we can ultimately distribute. What we also know is that hybrid parts related to the internal combustion engine side of the powertrain are more expensive than similar parts on a non-hybrid car. Like an AC compressor for a hybrid vehicle, and we talked about this during our Investor Day back in September, can be 3x as expensive as an AC compressor for a normal, just internal combustion engine car. A coolant pump can be 5x or 6x more expensive. We think there's a good opportunity for us to distribute those parts as well, and they're higher- value parts. Lastly, we think the big opportunity ultimately, as it relates to EVs, is the battery. Just like the engine is the most valuable part of a car that has an internal combustion engine, the battery is the most valuable part of an EV. Batteries have a defined life. They're not going to go on forever. The car is going to be around a lot longer than that initial battery. There will be opportunities, we believe, for us to remanufacture EV batteries, because generally it's not the whole battery that goes bad at once. It's just a couple of cells, and it's going to be too expensive to replace the whole battery. We think there's just a bundle of good opportunities for us in the future as it relates to the electrification of the car park. Thanks. Thanks for that. A question on the technology as well, so your scanning and diagnostics program that you just talked about, could you sort of talk about the revenue expectations and maybe the margin structure of a more service-based business like Elitek? Yeah. This industry is nascent, and it's pretty small. The typical competitor is somewhere between six and 12 technicians that have banded together to provide services to the marketplace. Okay? Our business is just shy of the $50 million mark today, and it's growing. The great thing about the services business, it has better EBITDA margins than our North American parts business. That should help as that business continues to grow. Now, we're not going to be able to grow that business necessarily through acquisition to gain significant scale, because, like I said, most of these operators are tiny. They're tiny. We will buy and look to buy perhaps some of the larger groups, even though that's still pretty small, and roll out on a greenfield basis by really educating technicians and then putting them out in the field as part of our Elitek service offering. We're excited about the business. All right. Thank you. You're welcome. Your next question comes from Stephanie Benjamin of Truist. Your line is open. Hi. Good morning. Good morning, Stephanie. Good morning. Congratulations again on a really nice year. I wanted to touch on, you kind of brought up at the beginning of your prepared remarks, that really the fourth quarter exceeded your expectations, and even how you outlined things the last time we spoke. Would love to hear some color about what moved in your direction during the quarter and how you're seeing things trend out in the beginning of 2021? Thanks. Sure. Great question. The revenue didn't help us, and if you go back to that page where we laid out the last four months, you can see that, save for the specialty group, which just rocked during the fourth quarter, the revenue in both North America and Europe were down pretty consistently from the prior year levels. Obviously, Europe was doing better than North America because of our collision focus here. It really wasn't revenue that led to the outperformance, Stephanie. It was our operating margins. We had good improvement on the gross margin line. While on a consolidated basis, it looks like gross margins came in a couple of basis points, that's just a mixture because the North American business has margins north of 46%, the Specialty business has margins around 28%, yet the high-margin business kind of falling 13%, and the low gross margin business growing 16%. You shouldn't take anything from that at all. The key is the operating leverage that we got out of the business. Each of our segments worked hard to get the cost structure to reflect the current state of demand. We're very proud of what our folks have done. Unfortunately, a lot of that has come on the backs of labor. We are down substantially from a total number of employees today versus where we were a year ago, but that's just what it took to right-size the business. Those are permanent reductions. We're going to be very cautious to add people and/or expense back to the SG&A line until we see the revenue rebound. Then we will need to add some people back to keep our customer service levels where they need to be. Think about the intense focus on controlling our cost because we're in an environment where we don't necessarily control our revenue. Absolutely. That's really helpful. I'll get it back in the queue. Thank you. Your next question comes from Gary Prestopino of Barrington Research. Your line is open. Morning, everyone. Gary. A couple of questions here. Varun, what is your priority for your free cash flow? I assume it would be paying down debt this year? Yeah, I think it's a great question, Gary. Simply put, if you kind of go back to our Investor Day presentation from September, probably about five, six months ago, we were very clear in terms of we expected our free cash flow generation on a sustainable basis to kind of continue. We've kind of reset the overall business model. That kind of starting off is a great option to have as a business. We've always said that the key priority is investing in our own business. Capital expenditures will be kind of priority number one. Following that, we've said high synergy tuck-ins and building up critical capabilities. There was a question earlier on the call about scanning and diagnostics. That is a business that we are investing heavily into, you know. Again, as Nick said, they're very small transactions, 6- 12 technicians, on a market-by-market basis. Certainly, wherever we have the ability, we're certainly acquiring those, but really also supplementing it with capital expenditures to kind of expand that specific service. We do not have any large platform transactions on the horizon. We do not see we need those at this point of time, which essentially leads us to a point where the excess free cash flow really would go towards either debt paydown, although, as you've seen, we've certainly made a tremendous amount of progress, being at $1.4 billion in 2020. We are well within our target leverage at this point of time. Really, it becomes the highest return on capital opportunities, and we still believe that our shares are undervalued, and we certainly see no reason, given the authorization we have from the board, to be able to repurchase our stock. Okay. Thank you. Lastly, in terms of what you've done with the cost structure and what you can do, obviously, in the future, as you move from an acquisition growth strategy to more of just integrating and bettering your operations. Every year, I would assume you're really pushing your divisional heads to get the costs down. I just want to know where is the biggest component of costs going to come out in the future for the company? I assume you're going through a program every year of, we need to get our costs better in line on an annual basis. Absolutely, Gary. It's Varun here. Two years ago, as you rightly pointed out, we pivoted to an operational excellence mode. Ever since that, we've essentially been driving productivity through integration. These programs, you really see in terms of how our North America business has taken the lead on that front. Just look at fourth quarter operating expenses. In that business, yes, we've certainly had challenges in terms of what the VMT has been, and so collision rates have come down. As we think about how our collision business has performed relative to the data we're getting in from CCC, we are performing much better than what the repairable claims are out there. That's kind of good, but really it is the productivity piece of it that our North America leadership team has just done an outstanding job. You then move over to, say, for example, the next large component of our overall business, and that's in Europe. Europe also has kind of begun to make some progress. We certainly saw some operating expenses come down in the fourth quarter. There's a lot more productivity to go get out there, and that really is the overall 1 LKQ Europe Program. We need to make investments out there, for example, in the European ERP program, setting up a back office, for example. Really, the longer term productivity really is from our European business, and that is something that we know our European team has a laser-like focus in making sure that they certainly follow. From within the portfolio companies, as we share best practices between our businesses and our divisions, I know our North American leadership team has spent time with our European team also. It's one thing Nick and I kind of pushing and pulling certain levers. As the peers speak with one another, largely it's a very similar business. It's a distribution business. That certainly has helped a lot, also. Yes, you're right. Overall, productivity programs, every business of ours, every function of ours has productivity programs, to essentially offset the inflationary pressures that typically come around in any case. It's the nimbleness and the agility that we are tremendously proud of, and that really came through in spades with the onset of the pandemic. I hope that responds to your question. Sure does. Thank you. Again, if you would like to ask a question, press star, then one on your telephone keypad. The next question comes from Daniel Imbro with Stephens. Your line is open. Yeah. Good morning, guys. Thanks for taking my questions. Good morning. I wanted to start on a broader supply chain question. Obviously, you mentioned maritime rates are much higher. There's a problem getting things over from overseas. How has that impacted your aftermarket supply here in North America? Related to that, with limited supply at auction and potentially disruptions in the aftermarket side, do you think your supply chain can support the anticipated return to growth in North America, or could that be a pinch point this year as we look forward? Yeah. Listen, Daniel, good morning to you. It's Varun here. I think it's a great question. We've got tremendous vendor partners on the aftermarket side of the business. They have been tremendously supportive, not just now, but ever since we got into the business. That is kind of one thing. With regards to kind of ocean freight and the challenges associated with it, whether it be the number of carriers that are moored outside of the Port of L.A., Long Beach, for example, or, for that matter, getting those empty cans back to Asia to kind of get refilled and come over. We have long-term contracts with vessel providers, but also with certain brokers. We are still being able to get space. While we're having to pay up for it, we're still being able to get space on those carriers. The other one, as you probably know, is LKQ has always had a class-leading inventory and fill rates. We've made sure that we always have the product. Yes, there are certain areas where we're having to run local or shuttles within the region, for example. We won't ship something from, say, New England to California, but say, within the region, we are kind of making sure that our fill rates remain. We do have the inventory. It may not always be in the right part, but we certainly learned a lot over the past few years in terms of making sure our fill rates remain. At the same time, we're not kind of taking on excessive cost associated with it. Over time, we know that the Chinese New Year had kind of caused a certain splurge in terms of the amount of ocean freight that was coming over. We expect that to abate a little in the coming weeks and months, but clearly that is a risk. As I said previously, we have product. We have more product on the way. In any case, we think this will even itself out. As we return to a growth mode, starting Q2, which is largely kind of easy comps, but really getting back to growth in the second half of the year. Great. That's helpful. Daniel, we just think we're better positioned than the typical competitor out there, given the size and scale, depth and breadth of the inventory coming into this time, where shipping is an issue. We'll be able to work our inventory to be a competitive advantage. That's helpful. Thanks, Nick. The related follow-up to that would be a follow-up on an earlier question on inflation. Obviously, cost inflation is coming, and we just talked about it happening. Are you seeing any signs of being able to pass that through on like- for- like pricing amidst that cost inflation? If not, what do you think it's going to take to see that revenue tailwind return, considering cost pressures right now feel pretty broad? Thanks. Listen, again, just to kind of add to what I'd answered earlier on the call, Daniel, we have a dynamic pricing model, okay? We certainly make sure that while we have a certain threshold, or at least a ceiling associated where OEM parts are, clearly if those kind of begin to move, that would certainly help. We do know that our teams are doing a fantastic job on the pricing side. As I said previously also, our salvage business has been doing really well. From an aftermarket perspective, there is limited supply in the market. We do have the product, listen, we want to kind of help everybody, specifically the carriers and our customers to making sure we get the right parts at the right time. Associated with kind of having the product, the second one clearly is making sure that we are that much more productive. The cost that we've been able to take out initially, what was temporarily in the second quarter, and kind of then switching that into permanent cost reductions, that is certainly working out well for the entire enterprise. Obviously, we can't wait for kind of growth to return. It certainly helps us get more of our folks back in the field. As of now, we're happy with the way our teams are navigating the various puts and takes that are out there. Got it. Thanks so much, guys. Your next question comes from Brian Butler of Stifel. Your line is open. Good morning. Thank you for taking my questions. No problem. Varun, just a quick one on the cash flow and the outlook of the minimum kind of $800 million coming from the $1.3 billion that you saw in 2020. Can you maybe break out the buckets that go from the $1.3 billion to the $800 million? Obviously, inventory is a piece of it. You talked about DSOs as a little bit of an offset in CapEx. Could you give a little bit more color on that? Yeah. Listen, it's actually very simple, and it was in my prepared comments. During 2020, we essentially realigned our inventory base with what demand projections were. Our inventory balances came down by over $400 million. That really is the kind of delta between call it the $1.3 billion and the minimum $800 million that we're talking about. It's all inventory is really it, and I'm guessing a little bit of CapEx? CapEx is about $100 million. Yeah. It's basically inventory about over $400 million, and CapEx is about $100 million. I mean, that's basically your kind of $500 million right there from the $1.3 billion to the $800 million. Okay, that's good. Follow-up, just on the kind of the pace of the growth, kind of going into or through 2021. I expect first quarter remain kind of weak based on the January revenue that you showed. How should we think about that kind of pace of growth for second quarter and then into the second half? Yeah, great question. As he indicated, we are anticipating that Q1's going to be down year-over-year, largely because we started off last January and February of 2020 very strong. Obviously, you can see the January numbers are down, February will be down, March is a easier comparison. Second quarter will obviously be up because even if we just stay at these levels of revenue, the revenue came off so dramatically in Q2 of last year. Second quarter will be up. The third and fourth quarters, those are obviously hard to predict. They're further away. We're anticipating a little bit of upward movement on a year-over-year basis. Again, not back fully to 2019 kinds of levels. Great. Thank you. Just one additional piece to kind of highlight. We do have one less selling day in Q1 across the entire enterprise. In North America, there's one fewer selling day in Q1, a second fewer selling day in the fourth quarter. In Europe, we have one fewer selling day in Q1, but we make up that day in Q2 for the European business. Just to kind of think about, this is something that we've talked about previously and just wanted to make sure that you had that into your models. There are no further questions at this time. I will now turn the call to Mr. Zarcone. Okay. Well, as always, we greatly appreciate your time and attention. We know this is very busy for everybody on the call, earnings season, a lot going on. We appreciate your listening to our story. We are incredibly proud of what we've been able to deliver in 2020, particularly given all the challenges that companies around the globe have had to deal with, and we had our fair share of challenges as well. The team I could not be more proud of. They came through beyond any expectations, and I could not be more proud to work alongside all of them. We look forward to chatting with everybody at the end of April, when we will announce our first quarter results. Again, it's going to be more of the same. We're going to keep our head down. We're going to drive as much revenue out of the market that we can. It's really going to be more focused on keeping our costs under control and generating cash. With that, we'll bring the call to a close. I hope you all have a good day, and we'll speak again in April. Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.