Genuine Parts Company

Good day, ladies and gentlemen. Welcome to the Genuine Parts Company third quarter 2023 earnings conference call. Today's call is being recorded. 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 1 on your telephone keypad. To withdraw your question, please press star, then 2. At this time, I would like to turn the conference over to Tim Walsh, Senior Director of Investor Relations. Please go ahead, sir.

Thank you, and good morning, everyone. Welcome to Genuine Parts Company's third quarter 2023 earnings call. Joining us on the call today are Paul Donahue, Chairman and Chief Executive Officer, Will Stengel, President and Chief Operating Officer, and Bert Napier, Executive Vice President and Chief Financial Officer. In addition to this morning's press release, a supplemental slide presentation can be found on the investor's page of the Genuine Parts Company website. Following our prepared remarks, the call will be open for questions. If we're unable to get to your questions, please contact our Investor Relations Department. 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. Today's call may also involve forward-looking statements regarding the company and its businesses, as defined in the Private Securities Litigation Reform Act of 1995. 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. With that, let me turn the call over to Paul.

Thank you, Tim, and good morning. Welcome to our third quarter 2023 earnings conference call. I'd like to start this morning with a few remarks on our overall performance before turning it over to Will to cover the highlights of the automotive and industrial businesses. And then Bert will get into the details of our financial performance before we open a call to your questions. To recap the third quarter, total GPC sales were 5.8 billion, an increase of 2.6% compared to last year. Total company segment margin was 10.4%, a 70 basis point increase from last year, And diluted earnings per share were $2.49, an increase of 11.7% from adjusted diluted earnings per share in the same quarter last year. I want to take this opportunity to give a call out to our GPC teammates around the globe as we delivered our 13th consecutive quarter of double-digit EPS growth. Our third quarter results reflect our strong operating discipline and our ability to improve our operating margins and profits despite a more challenging top-line environment. Overall, we continue to benefit from solid industry fundamentals in both the automotive and industrial end markets, including rational pricing environments in both segments. In our global automotive business, the underlying fundamentals of the aftermarket remain favorable. increasing miles driven, an aging and complex vehicle fleet, and high vehicle prices and financing costs. Within our global industrial business, we benefit from a highly diversified portfolio of customers and end markets, with overall growth driven by manufacturing and opportunities with onshoring and reshoring trends. Our automotive and industrial businesses are mostly break-fix and non-discretionary in nature, And as a result, we remain focused on offering solutions that support our customers to have the right part in the right place at the right time across both business segments. Sales in our industrial business were up slightly in the third quarter, and the team continues to deliver exceptional profit conversion as evidenced by 180 basis points of segment margin expansion. During the quarter, demand trends were positive but continued to moderate relative to the first half as expected. Over time, Motion has transformed its business into an industrial solutions provider with a compelling value proposition. Motion serves diverse end markets with many of its product offerings being highly technical in nature. In addition, with the acquisition of KDG, Motion has added scale and enhanced its industry-leading offering of value-added services, such as fluid power, automation, conveyance, and repair. The Motion team is focused on executing on our strategic initiatives to expand gross margin while remaining disciplined on cost, driving further segment margin expansion. Turning now to our global automotive business, We continue to see strong results across our international automotive businesses with the eighth consecutive quarter of double-digit sales growth in Europe and record sales and profits in Australia and New Zealand. Our teams continue to focus on our key organic initiatives in addition to our bolt-on acquisition strategy. During the quarter, we announced the acquisition of Gaudi, one of the largest independent players in Spain, Europe's fifth largest car park. Building on our 2022 acquisition of Lausanne, Gaudi mainly operates in the Catalonia and Madrid regions and creates further scale and a national platform across Iberia with the addition of 22 stores to our market-leading position. We expect this acquisition to be accretive to our European business, Post Synergies. We welcome the Gaudi team to GPC. While we were pleased with the growth internationally, the U.S. automotive business performance was below our expectations with sales down 1.1%. Let me take a moment to share a few thoughts on the performance at U.S. Auto. There is no doubt we've seen some challenges in 2023. From the record levels of inflation seen a year ago, which benefited the industry and have faded throughout 2023 as anticipated, to challenges across our own execution. Our year-to-date results demonstrated that we have not operated to our full potential in 2023. As many of you know, success in the automotive aftermarket is highly dependent on availability of inventories. particularly for the important DIFM customer, which represents approximately 80% of our automotive revenue. Further, the automotive aftermarket has demonstrated consistent performance throughout all economic cycles. As we close out 2023, we are taking actions to better service our customers and ensure our commercial activities are where they need to be. Under the leadership of Randy Breaux, We are confident the U.S. automotive team is taking the measures to improve execution with our customers. Will plans to discuss these actions in greater detail. And before passing the call over to Will, we'd like to highlight our 2023 sustainability report, which we published earlier this month. At GPC, we embrace our responsibility to build a more sustainable and equitable future for our planet. This year's report highlights the progress we've made as a company to measure and reduce our carbon footprint. This year, we are proud to report that in 2022, we further improved the measurement of our carbon emissions and have reduced Scope 1 and Scope 2 emissions by over 10%. We encourage you to visit the sustainability page on our website for more information on our progress. So in closing, our performance in the third quarter, again, demonstrates our unique and differentiated portfolio. Will and I continue to visit with our global teams, including a recent trip to Europe and Australia. The teams are investing in the right areas of the business to drive long-term profitable growth, and they couldn't be more energized. We enjoy the benefit of strong global brands, and the GPC culture is alive and well across all our global operations. Further, we remain committed to the strategic investments and initiatives that we highlighted at our investor day back in March. We believe these investments are critical to our long-term success and are contributing to our financial performance both now and for years to come. We want to thank each of our 58,000 GPC teammates for their hard work and continued dedication to serving our customers around the world. So with that, I'll turn the call over to Will.