Genuine Parts Company

Good day, ladies and gentlemen. Welcome to the Genuine Parts Company fourth quarter 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note, Today's call is being recorded. At this time, I would like to turn the conference over to Sid Jones, Senior Vice President, Investor Relations. Please go ahead.

Good morning, and thank you for joining us today for the Genuine Parts Company fourth quarter and full year 2022 earnings conference call. With me today are Paul Donahue, our Chairman and Chief Executive Officer, Will Stengel, our President and Chief Operating Officer, and Bert Napier, Executive Vice President, and Chief Financial Officer. As a reminder, today's conference call and webcast include a slide presentation that can be found on the investor's page of the Genuine Parts Company website. Please be advised this call may include certain non-GAAP financial measures, which may be referred to during today's discussion of our results as reported under generally accepted accounting principles. A reconciliation of these measures is provided in the earnings press release issued this morning page of our website. Today's call may also involve forward-looking statements regarding the company and its businesses. The company's actual results could differ materially from any forward-looking statements due to several important factors described in the company's latest SEC filings, including this morning's press release. The company assumes no obligation to update any forward-looking statements made during this call. Now, I'll turn the call over to Paul for his remarks.

Thank you, Sid, and good morning. Welcome to our fourth quarter 2022 earnings conference call. We are pleased to report the GPC team capped off a record-setting year with a strong fourth quarter, highlighted by double-digit sales and earning growth, coupled with continued margin expansion. We are incredibly proud of the progress in our operations and thankful to our teammates across the globe for their ongoing commitment to excellence. With the support of strong industry fundamentals and resilience of our automotive and industrial businesses, our teams were focused on executing key initiatives to drive sales growth faster than the market, improve gross margin, and enhance operational efficiencies. As a result, we delivered in several key areas in the fourth quarter and full year. A few highlights in the fourth quarter would include Total sales of $5.5 billion, up 15%, and our seventh consecutive quarter of double-digit sales growth. Segment margin of 9.5%, up 80 basis points from the prior year, and adjusted earnings per share of $2.05, up 15% from 2021, and our 10th consecutive quarter of double-digit earnings growth. For the full year, our strong quarterly performance drove record total sales of $22.1 billion, up 17%, which follows a 14% increase in 2021. Segment margin of 9.4%, up 60 basis points from 2021. Adjusted earnings per share of $8.34, up 21% from the prior year, and a new GPC record. and strong cash flow with cash from operations up 17% and free cash flow up 14% from 2021 levels. Reflecting on the record year, which followed an outstanding 2021, we are confident that our transformation efforts, including the streamlining of our businesses to an automotive and industrial-centric business, along with our ongoing strategic initiatives, has been highly successful. Throughout 2022, our teams navigated the dynamics of the macro economy and have continued to deliver market share gains while delivering positive momentum across our core businesses. We continue to make significant investments in talent and technology to maximize the impact of our key initiatives. As examples, we made solid progress to advance our pricing strategies and optimize our supply chain and network footprint. Our execution in the field has proven effective in driving core improvement in gross margin and SVNA, as well as parts availability, all of which provide additional opportunities for us in the future. As we build on the competitive advantages of our size and scale, we continue to look for strategic M&A opportunities to further boost our product and service offerings and expand our automotive and industrial footprint. As you will hear from Will, last year's acquisition of Command Distribution Group has been transformational for our industrial segment. ADG had a significant impact on our industrial performance in 2022 and has elevated our capabilities as a premier industrial solutions provider. Our global automotive teams were also active with acquisitions including geographic expansion in Europe with the addition of operations in both Spain and Portugal. For the year, we added 138 net new stores across our global footprint, with the U.S. and Europe leading the way. Looking ahead, we have a healthy pipeline of acquisition targets, and M&A remains an important element of our global growth strategy. As we turn our attention to 2023, while the macro environment remains uncertain, we are confident in our strategic plans to drive ongoing market share gains with sustained sales and earnings growth, continued margin expansion, and strong cash flow. Looking at the operating environment more broadly, our automotive business is benefiting from several tailwinds, including the geographic diversity of our markets, the increase in vehicle miles driven, an aging vehicle fleet, and limited new car inventory. These tailwinds are driving steady levels of demand in the aftermarket, with particular strength in the DIFM segment. In industrial, we continue to see solid demand trends with new and existing customer activity and reshoring trends, each presenting growth opportunities. We believe the strong performance in our industrial business reflects the diversity of our product and service offerings, as well as our end markets, which all performed well in the fourth quarter. In addition, as you'll hear from Will, our growing capabilities in industrial solutions, including automation, fluid power and conveyance, are proving to be differentiators for our business. Collectively, we believe these strong fundamentals combined with a rock-solid balance sheet, positioned GPC with the financial strength and flexibility to continue to pursue strategic growth opportunities through both organic and acquisitive investments, while also returning capital to shareholders. So before I close, I'd like to remind our investor community that we will be hosting an Analyst and Investor Day on Thursday, March 23rd, here at our headquarters in Atlanta. We will be sharing more about our strategic initiatives and provide an update to our long-term financial targets. We look forward to hosting this event next month and hope to see you all here in Atlanta. We had an exceptional 2022, which included celebrating our 95th year of operations. Our accomplishments as one GPC team are evident in this milestone year, and we are proud to lead a company with such a long and rich history. that differentiates GPC across all of our marketplaces. So now, I'll turn the call over to Will.