Genuine Parts Company

Good day, ladies and gentlemen. Welcome to the Genuine Parts Company First Quarter 2025 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, April 22, 2025. 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 first quarter 2025 earnings call. Joining us on the call today are Will Stengel, President and Chief Executive 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 Investors page of the Genuine Parts Company website. Today's call is being webcast, and a replay will also 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, April 22nd, 2025. 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 Security Litigations 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 Will.

Good morning, everyone, and thank you for joining us for our first quarter 2025 earnings call. Before we get into the details of our results, I always want to start by thanking our over 63,000 GPC teammates around the globe. Your dedication and commitment to serving our customers remain the core of our success, and I'm so proud of the team's continued focus and hard work. We had a solid quarter in line with our expectations, but we're obviously working in a dynamic external environment. Tariffs, trade, and geopolitics are impacting the operating landscape for all companies. These factors combined with inflation and interest rates are adding to an already cautious demand backdrop. Despite this, we remain focused on what we can control, providing excellent customer service and executing on our strategic initiatives to make the business smarter, faster, and better. The teams have navigated multiple market environments over the past five years, And we've used those moments to drive positive change across our company and advance our strategic priorities. We're committed to this approach as we navigate the current environment and are confident that we have the relevant playbooks to remain agile. I experienced our focus on serving our customers firsthand last week at the Napa National Ownership Workshop event where we celebrated Napa's 100-year anniversary. The event highlighted NAPA's status as a global leader and pioneer of the automotive aftermarket industry. Joined by thousands of our repair shop customers, independent owners, and field teammates, we reflected on this significant milestone and reinforced our commitment to delivering outstanding customer service together for the next 100 years. Not only was this event an opportunity to celebrate our history, It was also a chance to detail the in-flight work that's shaping our future. Our working sessions showcase details around talent and culture, sales effectiveness, operational excellence, and technology initiatives, all designed to enhance our customer experience. As an example, we highlighted the recent rollout of our modernized e-commerce platform, Napa ProLink, built specifically for our commercial customers. Developed in partnership with Google, this platform features proprietary search capabilities that are faster and more reliable. The platform offers improved functionality with 10% more product coverage and leverages a more comprehensive and accurate catalog. In 2025, NAPA B2B eSales are growing mid-single digits and capturing new business. The customer feedback on the modernized platform is overwhelmingly positive, and we're excited about the benefits this will deliver to the Napa business and our customers as we move forward. Now, turning to our business results, I'll walk you through highlights of our first quarter performance, which were in line with our expectations. Following my remarks, Burt will provide some additional color on our financial results and touch on our 2025 outlook, which we're maintaining today despite the evolving trade policies. A few highlights from the first quarter include Total GPC sales of $5.9 billion, up 1.4% versus the same period in the prior year. Our sales growth was primarily driven by acquisitions and improving sales in our industrial business, which was partially offset by one less selling day, impacting sales growth in the quarter by 110 basis points. Growth margin expansion of 120 basis points versus the same period last year, reflecting the benefits from acquisitions, and our strategic pricing and sourcing initiatives, and solid progress with our productivity initiatives to manage and optimize expenses. Turning to our results by business segment. During the first quarter, total sales for global industrial were $2.2 billion, approximately flat versus the same period in the prior year, with comparable sales decreasing less than 1%. The one less selling day negatively impacted global industrial sales by 150 basis points. While we continue to navigate sluggish market conditions, we saw sequential improvement from the fourth quarter driven by increased customer activity and motions to find sales initiatives. From a cadence perspective, average daily sales were positive in all three months of the first quarter. Looking at the performance across our 14 end markets, We saw growth in pulp and paper, aggregate and cement, and DC and logistics, while iron and steel, automotive, and oil and gas remained pressured. During the quarter, nine of our 14 end markets saw sequential improvement from the fourth quarter. Our performance by customer type saw continued outperformance with our national account customers. We also saw sequential improvement in our local MRO accounts, and value-added services compared to 2024. Sales from value-added services like automation solutions and fluid power were flat to slightly down, which represents a notable improvement relative to last year. Switching to industrial profit, during the first quarter, segment EBITDA was approximately $279 million and 12.7 percent of sales, representing a 10 basis point increase from the same period last year. Overall, the motion team continues to make progress on its profitable growth, category management, and supply chain productivity initiatives. The team is managing the business with discipline to deliver profitability despite a persistent soft market environment. While industrial activity metrics like PMI and industrial production have been depressed for the longest period in over three decades, we were encouraged to see PMI start the year with some momentum. with two consecutive months above 50, before slipping back to 49 in March. Motion's size and scale, diverse end markets, and strong customer value proposition position us well in a highly fragmented industry and across all market environments. Turning to global automotive segment, sales in the first quarter increased 2.5%, with comparable sales decreasing 0.8% in line with our expectations. The first quarter included one less selling day compared to last year, which negatively impacted sales and comparable sales growth by an estimated 90 basis points. Global automotive segment EBITDA in the first quarter was 285 million, which was 7.8% of sales, representing a 110 basis point decrease from the same period last year. Our first quarter results for the global automotive segment reflect ongoing pressure from softer organic sales in the U.S. and Europe and the one less selling day. Now, let's turn to our automotive business performance by geography. Starting in the U.S., total sales for the first quarter were up approximately 4%, while comparable sales declined approximately 3%. During the quarter, the one less selling day negatively impacted sales and comparable sales growth by approximately 160 basis points. Looking at average daily sales across the business, sales in the quarter were positive in all three months, with March being the strongest. Comparable sales for our company owned stores were up low single digits, while independent purchases were down low single digits. By customer type, total sales to our commercial customers were up low single digits, with all four customer segments being positive in the quarter, while sales to our retail customers decreased mid-single digits. Our performance by category is consistent with the prior two quarters, with non-discretionary repair categories up low single digits and maintenance and service categories flat in the first quarter. The pressure remains in our discretionary categories, which represent approximately 15% of sales, and we're down mid-single digits. Additionally, we acquired 44 stores from independent owners and competitors, further strengthening our footprint in our priority markets. The integration of our recent acquisitions, including MPEC and Walker acquired in mid-2024, are progressing well and remain on plan. Both acquisitions are positively contributing to NAPA's EBITDA margin. Turning to Canada, total sales increased approximately 5% in local currency versus the same period last year. with comparable sales increasing approximately 4%. These results are a testament to the exceptional work of our Canadian team, who delivered strong results despite a softer macroeconomic environment. In Europe, total sales increased approximately 3% in local currency, with comparable sales essentially flat. The team in Europe continues its expansion of the Napa brand and its wins with key accounts. Underlying market demand remains soft across our geographies, driven by macro challenges. Despite these headwinds, our ongoing strategic initiatives, including upgrades to our supply chain infrastructure, are expected to improve productivity efficiencies and support future profitable growth in our geographies. Rounding out automotive, our team in Asia-Pac delivered another quarter of double-digit growth in local currency, driven by both organic initiatives and contributions from recent acquisitions. Total sales increased approximately 12% with comparable sales growth of approximately 3%. Continued strength from our retail business is notable in the market. This sustained performance underscores the strength of our team in the region and their ability to execute effectively in the market. As we look ahead to the second quarter and the rest of the year, we remain focused on what we can control. We believe our diversified global geographies and business mix creates differentiation as we leverage our global relationships to navigate the market. Our scale creates an advantage relative to many other small players in our industries. We've got a battle-tested team in place with required expertise to navigate uncertain markets. We've invested in the business over the recent past to provide tools to help us analyze the business with more granularity. We have a longstanding history of financial strength, characterized by attractive cash generation. Importantly, we also have a team culture defined by an action bias, agility, and a passion for serving customers in every market environment. I want to conclude by thanking our shareholders, customers, and suppliers for their trust and continued support. Most of all, thanks again to our GPC teammates for your dedication and hard work.