Genuine Parts Company

Good day, ladies and gentlemen. Welcome to the Genuine Parts Company fourth quarter 2023 earnings conference call. Today's call is being recorded on February 15th, 2024. All lines have been placed on mute to prevent any background noise. After the speaker's remark, 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. If you would like to withdraw your question, please press star followed by the two. At this time, I would like to turn the conference over to Tim Walsh, Senior Director, Investor Relations. Please go ahead, sir.

Thank you, and good morning, everyone. Welcome to Genuine Parts Company's fourth 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. Today's call is being webcast, and a replay will be made available on the company's website after the call. Following our prepared remarks, the call will be open for questions, the responses to which will reflect management's views as of today, February 15, 2024. 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 also may 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 today's call. With that, let me turn the call over to Paul.

Thank you, Tim, and good morning. Welcome to our fourth quarter and full year 2023 earnings conference call. We are pleased to report that Genuine Parts Company delivered on our financial commitments in 2023 and finished the year with a solid fourth quarter. Will and Bert will cover our results in more detail, but I'd like to share a few highlights. During 2023, total GPC sales topped 23 billion, an increase of nearly a billion dollars from the prior year, and in line with our expectations. We improved our total company segment profit margins by 50 basis points, to nearly double digits, and we had our third consecutive year of double-digit earnings growth. And notably, we returned $788 million to our shareholders this year, and today we announced that our board approved the 68th consecutive annual increase to the dividend. Our teams around the globe delivered a strong performance while remaining focused on our long-term strategic initiatives to profitably grow our business and deliver value for our customers. I want to take this opportunity to thank our more than 60,000 GPC teammates across the world for their dedication and hard work. Our fourth quarter and full year results, again, demonstrate the value of our complementary business mix paired with our geographic diversity. At our investor day back in March of 2023, we showcased our strategic initiatives and announced long-term financial targets for the first time in our history, all focused on delivering for our customers and delivering shareholder value. Clearly, this past year had its share of challenges and opportunities, but our performance in 2023 was a good start to achieve our three-year goals, highlighted by the following. Our Motion team completed the integration of Command Distribution Group, and we exceeded our synergy target a full year ahead of plan. As an integrated business, Motion is a clear leader in their space, providing industrial aftermarket solutions with a compelling value proposition to more than 200,000 customers around the world. In addition, during 2023, Motion continued to roll out their fulfillment center strategy, which is driving cost efficiencies, inventory productivity, and improved customer service levels. During the fourth quarter, I had a chance to visit our fulfillment center in Lakeland, Florida, and I can't say enough positive things about the team and their dedication to serving our customers. We're excited about the rollout of these facilities in 2024 and 2025. Within automotive, our international automotive businesses outperformed our expectations in 2023. Our European team continues to expand their presence and gain market share through both strategic acquisitions and organic growth. In 2023, we expanded our presence in Spain Europe's fifth largest car park, with the acquisition of Gaudi, securing our position as the leader in this strategic market. And finally, the rollout of NAPA-branded product in the European market has continued to surpass our expectations, a testament to the strength of the NAPA brand. In Australasia, our team is profitably growing market share with their fourth consecutive year of double-digit profit growth, on top of industry-leading sales growth. Our supply chain investments in the region have improved the customer experience while driving productivity in our business. In North America, while results fell short of our expectations, we remain focused on our strategic initiatives and continue to make solid progress. We've undertaken a comprehensive review of the NAPA business to identify key issues, and we have taken action to improve the performance at Napa. We are confident we are focused on the right initiatives to positively impact our performance in the quarters ahead. These initiatives, along with plans for long-term investments, were rolled out to our field leadership teams and across our independent owner group in December. The team's competitive drive and energy were on full display, and we know that the best days for Napa are in front of us. And finally, as part of our long-term growth strategy, our teams continue to expand our footprint through bulk-on acquisitions. During the year, our global automotive store count expanded by 173 net new stores, up approximately 2% from 2022. We remain disciplined in our playbook for acquisitions and are confident in our ability to continue seamlessly integrating future businesses across all our segments and geographies to create value for our shareholders. As we look ahead to 2024, we are seeing supportive industry fundamentals in both the automotive and industrial land markets. Within our global automotive business, we continue to see an increase in miles driven, an aging and complex vehicle fleet, and high vehicle prices and financing costs, all supportive for the automotive aftermarket. And we remain uniquely positioned in this space with our global footprint. Within our industrial business, macro indicators like industrial production and the Purchasing Managers Index continue to show improvement after 15 months of contraction. We stand to benefit from a highly diversified portfolio of customers and end markets, and we are well positioned now and in the future to capitalize on reshoring trends. While industry fundamentals remain supportive, broader macroeconomic factors like high interest rates and persistent inflation in everyday purchases are pressuring the consumer and businesses alike. That said, the vast majority of parts and solutions we provide across both businesses are break-fix and non-discretionary in nature. In our business, parts availability is paramount, and we are leveraging our enhanced data analytics and science to have the right part in the right place at the right time. As we continue to navigate the environment in 2024, it is imperative that we remain agile and move forward with a sense of urgency. Given current market conditions, we need to continuously take action to position our business for long-term success. This morning, we announced a global restructuring initiative to further simplify and streamline our business. Will and Bert will share more about the specific actions we are taking, along with the financial implications. So in closing, we are proud to have delivered on our financial commitments for 2023. We accomplished this while taking decisive actions to improve our NAPA business in the U.S., while at the same time investing in our strategic priorities to drive profitable growth. We believe the execution of our strategic initiatives, along with our team's relentless focus on our customers, will drive value for our customers and our shareholders both now and for years to come. So with that, I'll turn the call over to Will.