Genuine Parts Company

Thank you. Thank you. Thank you for watching. Thank you for watching. Good morning, ladies and gentlemen, and welcome to the Genwyn Parts Company second quarter 2026 earnings conference call. At this time, all lines are in a 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, July 21, 2026. I would now like to turn the conference over to Tim Walsh. Please go ahead.

Thank you, and good morning, everyone. Welcome to Genuine Parts Company's second quarter 2026 earnings call. Joining us on the call today are Will Stengel, Chairman and Chief Executive Officer, and Bert Nappier, 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, July 21, 2026. 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 include forward-looking statements regarding the company and its businesses as defined in the Private Security 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 FEC filings, including this morning's press release. The company assumes no obligation to update any forward-looking statements made during this call. With that, I'll turn it over to Will.

Thank you, Tim. Good morning, everyone, and thank you for joining our second quarter 2026 earnings call. I want to begin by thanking our teammates around the world for their hard work, resilience, and commitment to serving our customers. Their dedication continues to be a defining strength of GPC. This morning, I'll review our second quarter results by segment, provide perspective on the current operating environment, and share an update on the planned separation of our automotive and industrial business We remain on track for a separation in the first quarter of 2027. We delivered a strong second quarter, reflecting focused teamwork and disciplined execution across the businesses, despite a dynamic global macro environment. I'm proud of the work the team is doing as we simultaneously navigate the developments in the Middle East, manage the business in a persistent inflationary environment, and execute a meaningful body of strategic work at the company. Despite the environment, we executed well and delivered performance in the second quarter that exceeded our internal plans and underscores the agility and determination of our teams. Turning to our financial results, a few highlights for the quarter include total GPC sales of 6.5 billion, an increase of approximately 400 million, or up approximately 6% compared to the second quarter of 2025. Adjusted growth margin expansion of 20 basis points, in line with our expectations and driven by strategic pricing and sourcing initiatives. Segment EBITDA growth in all three business segments, with industrial EBITDA increasing approximately 10% versus prior year. And adjusted earnings per share of $2.15, up from $2.10 in the same period last year. Now, turning to our results by business segment. Total sales for industrial were $2.4 billion, an increase of approximately $160 million or up 7% versus the same period in the prior year, with comparable sales up 6%. During the quarter, the benefit from price inflation was approximately 2.5%. From a cadence perspective, all three months of the quarter were similar on an average daily sales basis growing mid to high single digits versus last year. Motion delivered an excellent quarter with balanced growth across large corporate accounts, small to medium sized local customers, as well as its value add solution offerings. We're optimistic about the industrial market conditions and we're encouraged by six consecutive PMI readings over 50 and the strong performance to start the year. Regardless of the environment, Motion has the scale, unique value proposition, and operating discipline to differentiate itself from the competition and deliver profitable growth. Looking at the performance across our end markets, we saw growth in 11 of our 14 end markets we track, which is up from 10 in the first quarter and 5 in the same period of the prior year. During the quarter, we saw notable growth in two key end markets, equipment and machinery and food product. We also saw strength with iron and steel, automotive, mining, fabricated metals, DC and logistics, oil and gas, and equipment rental and leasing. This growth was slightly offset by softer demand in pulp and paper, lumber and wood, and rubber and plastics. Our core MRO business, which accounts for approximately 80% of motion sales, was up approximately 7% during the quarter and sequentially improved from the first quarter. Looking at the remaining 20% of motion sales, which originates from more capital-intensive projects, we saw strong sequential improvement from the first quarter with sales up approximately 9%. This project-based demand was the strongest performance since the first quarter of 2023. Industrial segment EBITDA in the second quarter was $316 million, up approximately 10% and 13.1% of sales, which represents a 30 basis point increase from the same period last year. To close out on motion, we're encouraged by the work we're doing with customers and the overall sentiment. Deferred maintenance seems to be normalizing, larger capital investment projects are improving and our strategic initiatives are delivering the benefits we expected. We're leaning into the strong core performance with disciplined and focused investments to position motion for continued growth, all while delivering strong operating leverage and returns on invested capital. Moving now to our automotive segments. In North America Automotive, total sales in the second quarter increased approximately 4%, while comparable sales increased 2.6%. The team continues to advance our strategic priorities while navigating a cautious consumer backdrop and persistent inflation, both of which are impacted by the Iran conflict. During the quarter, North America automotive segment EBITDA was $208 million, up 6% and 8.2% of sales. This represents a 20 basis point increase from the same period last year and a 160 basis point increase from the first quarter. The increase year over year reflects ordinary course seasonality, ongoing benefits from our strategic initiatives, and Restructuring Actions, partially offset from pressure driven by cost inflation in healthcare, rent and freight. Within North America, total sales in the US were up approximately 3% for the quarter, with comparable sales up approximately 3% and price contribution of approximately 2.5%. From a cadence perspective, average daily sales were up low to mid single digits in April and May and roughly flat in June, We've seen an improvement July month to date with average daily sales growth tracking in line with our expectations. In the second quarter, comparable sales at our company-owned stores increased approximately 4%, with commercial up approximately 5.5%. Independent same-store purchases sequentially improved from the first quarter, Increasing approximately 1.5% versus last year. Our team continues to execute well on our company-owned store initiatives, and we're working closely with our independent owners. Looking at the comparable sales performance of Napa to the end customer, which includes our company-owned sales as well as the sales out to the end customer from our independent stores, the Napa system delivered sales growth of 3% in the second quarter. By customer type, comparable sales to our commercial customers for the quarter were up approximately 4%, while comparable sales to our retail customers decreased approximately 3%. Within commercial, we saw solid growth in all four customer segments, with particular strength in other wholesale and major account customers. Across our product categories during the quarter, we saw continued relative strength in our non-discretionary, Repair and Maintenance and Service categories, which were both up low to mid-single digits. As a reminder, combined, these categories account for approximately 85% of our U.S. business. Discretionary categories sequentially improved in the second quarter and were up low single digits. In Canada, our team is executing well despite ongoing softer market conditions. We saw sequential improvement from the first quarter with total sales increasing 9% in local currency versus the same period last year and comparable sales up 1%. The Benson acquisition continues to provide a nice tailwind for our business and we remain ahead of our financial and operational target plans. Turning to our international automotive business, total sales during the quarter increased approximately 8% with comparable sales up approximately 1%. International Automotive Segment EBITDA for the quarter was $150 million, up 6% and 9.4% of sales, which represents a 20 basis point decrease from the same period last year. The decrease in EBITDA margin was predominantly driven by inflationary cost pressures from higher salaries and wages, rent and freight, which was partially offset by our restructuring initiatives and cost action. By geography, in Europe, total sales for the quarter increased approximately 4% in local currency, with comparable sales positive, up approximately 1%. Overall, results sequentially improved from the first quarter, and we saw notable improvement in the UK and Germany. We believe our teams are performing better than the market, driven by our strength with key account customers and the NAPA offerings. Our accretive bolt-on acquisitions continue to add local service density and growth in priority geographies. The investments we've made in supply chain and technology across the region are also delivering the intended results. And when combined with our productivity initiatives, the business is well positioned as the market recovers. Lastly, our team in Asia Pacific had a solid quarter despite challenging market conditions In addition to the conflict, Australia has already experienced three interest rate increases this year with a 30-year record low consumer sentiment. Despite these conditions, our team is focused, motivated, and executing at a high level to win profitable market share and add capabilities. For example, the team continues to invest in its supply chain. and seamlessly executed a modern warehouse management system implementation on time, on budget in a key distribution center. Total sales in the second quarter increased approximately 2% in local currency with comparable sales up 1%. Both trade and retail posted positive results during the quarter with retail performance continuing to stand out. In fact, during the quarter, our Repco business was named Australia's 2026 Major Retailer of the Year, a huge achievement for an auto parts retailer, and a further testament to Repco being an employer of choice and an innovative market leader. Lastly, I want to provide an update on our announced plan to separate our global automotive and global industrial businesses into two independent public companies. As mentioned, we remain on track for the separation plan for the first quarter of 2027. We continue to make meaningful progress against all of our key milestones. We have a rigorous operating cadence with a cross-functional project management office that is coordinated across our various tasks. We have created an enterprise communication portal to update the global organization with important developments. We created disciplined processes to understand and track all in-flight activities against standalone and dis-energy estimates. I'm really proud of the collaborative global teamwork and momentum. The work for the standalone audit has now been completed, which is an important step in preparing each company to operate independently and provides the foundation for other important near-term work. We also expect to confidentially file the Form 10 with the SEC later this summer. This is another key milestone in the process and will allow us to advance the required regulatory work. In addition, Bert will share the estimated allocation of GPC's current corporate costs and provide commentary in a moment. At the board level, the work is progressing well, including the ongoing evaluation of leadership and governance for each company. We're taking a thoughtful and deliberate approach to ensure both organizations are positioned with relevant expertise and board governance to execute the business strategies and create long-term value. Finally, we anticipate hosting investor days for both companies in early December in New York. We look forward to using these events to provide investors with a more comprehensive view of each company's strategy, financial profile, capital structure, Capital Allocation Priorities, and Long-term Value Creation Opportunities. Additional details and logistics will be announced later this fall. Before I close, I'd like to take a moment to emphasize our focus on the work to create two public companies. We are aware of recent market speculation about a potential transaction between the global automotive business and a competitor. I want to take this opportunity to officially confirm that we are not currently in discussions with any competitor. We remain committed to maximizing shareholder value and will always evaluate all potential options in that pursuit. We're making progress towards a separation in the first quarter of 2027 and are excited by the opportunity to create value as two industry-leading public companies. In closing, we're pleased with our performance through the first half of the year and remain focused on controlling what we can control. We're executing with discipline in a dynamic market environment. We will continue to prioritize serving our customers and advancing our initiatives that extend our leadership positions in our markets. Thank you to our teammates around the world for your hard work and commitment. I'll now turn the call over to Burke.