Will Stengel
President and Chief Executive Officer at Genuine Parts
Thank you, Tim, and good morning. Welcome to our 4th-quarter and full-year 2024 earnings call. Before we get into the details of our results, I want to take a moment to express my gratitude to our over 63,000 GPC teammates around the world. Your hard work, dedication and unwavering commitment to serving our customers are the foundation of our success. Our people are at the heart of everything we do and we have a culture of service, performance, integrity and teamwork. In 2024, we made meaningful strides in strengthening our teams by making focused investments in talent across the globe at all levels. These people investments are helping build a stronger organization. As evidence of the strength of our culture, we're proud to share that in our most recent global engagement survey, a record 81% of our teammates reported being highly engaged with our company, up 3 points from the survey a couple of years ago. Reflecting on 2024, our end-markets did not perform at the levels we planned at the start of the year. But I'm proud the team stay focused on what we could control as we advanced our strategic initiatives to improve the business and effectively manage our operations against the backdrop of challenging macroeconomic conditions. Our strategic investments continue to enhance the customer experience, improve productivity and drive profitable growth as we leverage our global scale and teamwork to prioritize opportunities that make GPC smarter, faster and better. Technology and data underpin our investment priorities with an emphasis on talent, sales and supply-chain. We're confident that our investments and actions continue to strengthen the business and create long-term value. We complement our core investments with disciplined bolt-on acquisitions. In 2024, we acquired over 100 companies that added talent, geographic coverage, new capabilities and value to GPC. I'd like to take a few moments to highlight some of our key accomplishments from 2024, and Bert will share more details on the 4th-quarter and our 2025 outlook in a few moments. A few financial highlights for 2024 include, total GPC sales were $23.5 billion, an increase of approximately $400 million or 1.7% compared to 2023. Included in our sales growth was a benefit of 260 basis-points from strategic acquisitions, which offset weak market conditions, particularly in our Industrial segment. First, adjusted gross margin increased 70 basis-points, driven by acquisitions and our strategic pricing and sourcing initiatives. We generated strong cash flows with $1.3 billion of operating cash-flow and we executed a global restructuring to proactively offset softer market conditions, which led to $45 million in cost-savings in 2024 with more to be realized in 2025. In addition to our investment in the business, we returned over $700 million or nearly 60% of our operating cash-flow to our shareholders in the form of dividends and share repurchases. As a sign of confidence in the long-term outlook for GPC, this morning, our Board approved a 3% increase to our dividend, marking the 69th consecutive year we've increased the GPC dividend. Turning to our results by business segment. In 2024, total sales for Global Industrial were $8.7 billion, a decrease of 1.4% compared to last year with comparable sales down 2% as weak market conditions resulted in reduced customer demand for the full-year. Within Motion's business, in 2024, our core MRO and maintenance business, which accounts for approximately 80% of Motion sales was essentially flat with the prior year. Our corporate account customers, which account for approximately 45% of Motion sales, saw low single-digit growth., looking at our diverse collection of industries served, we saw growth across four of our 14 end-markets with strength in pulp and paper, mining and DC and logistics. This growth was offset by softer demand in-markets like equipment and machinery, automotive and metals. The remaining 20% of Motion sales originates for more capital-intensive projects, including our value-added service offering. This business was down mid to-high single-digits for the year. While we've seen customers delay certain capital-intensive projects given the environment, we remain bullish on the long-term opportunities in this portion of the business as customer spending rebounds. For the full-year, Global Industrial segment EBITDA was $1.1 billion, which was 12.6% of sales, a decrease of 20 basis-points versus the prior year. While profitability continues to be impacted by sales deleverage and inflationary cost pressures, we're confident that our strategic initiatives and cost actions will drive margin expansion as market conditions improve. Despite the tough market in 2024, Motion North-America improved gross margin and delivered EBITDA margin of approximately 13%, down only approximately 10 basis-points versus prior year. Over the last five years, Motion has expanded its profit margin by over 300 basis-points. While the industry faces temporary headwinds, we're energized about how Motion is positioned in the market and the opportunities available to us. We operate in a large and highly fragmented market and despite being the number-one player in the industry, we still hold less than 10% market-share, which reinforces the significant runway we have for continued profitable growth. During 2024, we executed a disciplined succession plan at Motion by promoting James How as President. James has a 35-year track-record in the industry and started in the business as a Motion field sales rep. The Motion senior leadership team has 200 years of experience at Motion and 270 cumulative years of experience in the industry. And most importantly, we go-to-market with an unmatched team of local, highly technical account and product specialists that know our customers' operations and the equipment they utilize as they create tailored solutions to keep their businesses running smoothly. Recall, in many instances, our motion associates are physically located in customers' facilities. First, Motion leads the industry with its scaled technical capabilities, value-added solutions and local support offering, complemented by our national network of both branches and distribution centers as well as unparalleled investment in inventory, we believe Motion offers the best-value proposition regardless of customer size, type or location. In 2024, we further expanded our depth of inventory by over 60,000 SKUs, while simultaneously improving inventory efficiency. First, our network enables the right inventory strategically located in the right markets to ensure we're at our customers' facility promptly to get them back up and running. In addition to the traditional MRO and maintenance solutions, Motion also serves its customers with a robust value-add service offering, where we help our customers improve their operations, drive productivity and create value. This includes designing and delivering solutions such as fluid power systems, electrical and automation systems and conveyor systems to solve specific customer applications. Additionally, Motion offers its customers predictive and preventative maintenance solutions to help minimize the risk of an unexpected part failure. We've installed thousands of sensors into our customers' facilities that give them critical insights into the cycle times and the health of their operations. These solutions are designed to improve throughput and productivity, helping our customers optimize their operations. First, Motion extends its competitive advantage with its repair and service offering, including our new state-of-the-art facility in Houston. This team works hand-in-hand with customers to diagnose the root cause of machinery problems, perform repairs and train their teams on proper installation and maintenance of equipment. Key end-markets where we provide these services include mining, steel, cement and paper mills. In 2024, we realigned our value-add solutions team with our core distribution leadership to ensure a seamless and coordinated customer experience. This differentiated approach improves our ability to deliver our full Motion offering to each customer., while industrial market conditions remain challenged, we're confident in Motion's ability to navigate the near-term headwinds and continue to drive value for our customers. Our leadership position, unmatched technical expertise and broad portfolio of scaled solutions position us well to capitalize on growth opportunities as industrial activity recovers. This, coupled with opportunities with advancing trends around nearshoring have us excited about what's ahead for Motion. We're cautiously optimistic to see three months of sequential improvement in PMI with January at 50.9. However, we believe it's prudent to be cautious with our enthusiasm until additional evidence of a sustained market recovery is clear. Turning to the Global Automotive segment. Total sales in 2024 were $14.8 billion, an increase of approximately 4% compared to last year. Automotive sales growth was comprised of a benefit of 370 basis-points from acquisitions, largely in the US and flat comparable sales growth. The moderation in the sales benefit from inflation continued to be a factor-in our year-over-year comparisons. As expected, global automotive sales inflation remained below 1% throughout 2024. For the full-year, Global Automotive segment EBITDA was $1.3 billion, which was 8.7% of sales, a decrease of 70 basis-points versus 2023. Our results for Global Automotive reflect ongoing pressures from a soft market environment and cost pressures, particularly in Europe and the US. Now let's turn to our automotive business performance by geography. Starting in the US, total sales were up approximately 3% in 2024 with roughly flat comparable sales growth. During the year, sales out to our commercial customers were flat, while sales out to do-it-yourself customers were down low-single digits. Within commercial, we saw low single-digit growth in our Napa Auto Care and other wholesale customer segments, while fleet and government was flat. Major account sales were down low-single digits, but showed sequential improvement through the back-half of the year. Looking at our comparable-store sales, both sales out from company-owned stores and comparable sales into independent stores performed relatively in-line with each other, approximately flat for the year. Turning to our product category performance for the year, we continue to see relative strength from our non-discretionary repair categories, which accounts for approximately 50% of NAPA's business, up low-single digits in 2024. General maintenance and service categories like braking, filters and chemicals, which represents about approximately 35% of our business were also up low-single digits versus the prior year. And lastly, we continue to see softer demand in discretionary categories, which represent approximately 15% of the business, down mid-single digits from last year. While 2024 market growth proved to be softer-than-expected. We were encouraged by the progress we've made to improve NAFA's capabilities, service and position in the market. Our back-to-basics mindset has driven material improvement in our internal metrics around inventory stocking levels, customer service and on-time delivery. As an example, we're making notable progress improving the operations inside our current DCs. Our internal metric for service levels from our DCs to stores improved almost 800 basis-points in 2024 and our safety metrics improved by approximately 20%. And we did all of this while investing in inventory and flowing more product through our facilities to ensure we have the right part in the right place at the right time. While much of the focus at NAPA in 2024 was ensuring we're executing the key aspects of the customer experience at a high-level, we continue to make investments in the business to position us for long-term success. We're investing in the supply-chain at NAFA and completed the expansion of our Indianapolis distribution center, increasing capacity to support growing customer demand and improved delivery speed across key markets. This facility includes a significant technology and automation upgrade, which will drive cost efficiencies and inventory productivity. In addition, in 2025, we're leveraging our global scale to launch a professional hand in-service tool and equipment offering that will allow us to further capitalize on a large and growing industry opportunity. Our acquisition of MPEC and Walker are on-track relative to operational plans and financial targets. In total, we've integrated approximately 55% of the stores into Napa technology platforms, which enables consistent control of local operations. In 2024, the transactions delivered sales, gross margin and operating profit margin benefit as expected. We've been pleased with the progress to date and we'll continue to execute our post-close integration strategies. While the broader consumer continues to feel pressure from macro headwinds like high-interest rates and persistent cost inflation, the automotive aftermarket industry fundamentals remain supportive of long-term growth, including increasing miles driven and aging car park and high and new and used vehicle pricing. In addition, we view commercial customers as the growth engine of the industry as the complexity of vehicles continues to increase. With this backdrop, Napa operates from a position of strength with 80% of our business concentrated in commercial, supported by our network of more than 6,000 store locations and approaching 20,000 auto care centers. In 2025, Napple will celebrate 100 years of history, a truly remarkable accomplishment. We're thrilled to celebrate this milestone, but we're even more excited for what the next 100 years is going to bring. Thank you. As we look at our results outside the US, in Europe, throughout 2024, we navigated a weak economic backdrop, which resulted in a lack of market growth for the aftermarket. In 2024, total sales were up 6% in local-currency with flat comparable sales growth. These results reflect ongoing execution of our initiatives, including key account wins, expanding the Napa brand and strategic bolt-on acquisitions. In 2024, we grew NAPA branded sales 16% versus 2023 to EUR500 million, a remarkable accomplishment since its launch five years ago and a testament to the power of the Napa brand. The rollout of Napa across Europe has been a competitive differentiator, especially in a challenging market and has far exceeded our expectations. NAPA branded sales now represent approximately 15% of our sales in Europe and we can see a path of this penetration climbing to over 20% over the next four to five years. In our other international geographies, Asia-Pacific and Canada, we continue to enjoy leading market positions despite challenging market conditions. In Asia-Pacific, sales in 2024 increased 6% in local-currency with comparable sales growth of up approximately 4%. Our Asia-Pacific team continues to execute at a high-level, delivering their fifth consecutive year of double-digit profit growth. Their ability to drive market-share gains, deliver strong operating leverage and strategically and consistently invest for the future has been instrumental in their success. In Canada, total sales in 2024 increased approximately 1% in local-currency with comparable sales growth down approximately 2%. Our Canadian team continues to execute well despite a softer macroeconomic backdrop and a more cautious consumer. As I mentioned, our accomplishments and results around the world are bolstered by investment in technology and complemented by strategic acquisitions. Acquisitions have been a hallmark of GPC and 2024 was no different. During the year, we made progress on our initiative to own more of our NAPA stores here in the US, completing the acquisition of more than 500 stores, mostly from our independent owners. Our store footprint in the US is now approximately 35% company-owned with the balance being our independently-owned stores. Over-time, we see a path to bring our network closer to a 50-50 mix, with our independent owers always continuing to play a critical role in our network, particularly in smaller and more rural markets. In addition, Motion acquired four bolt-on acquisitions in 2024 to build upon its technical and value-added solutions capabilities, and we've remained active to start 2025. Going-forward, we believe M&A will continue to play an important part of our growth profile in both our automotive and industrial business. We play in two large and fragmented markets and enjoy the flexibility of a strong balance sheet. Beyond M&A, our global investments in technology are advancing well. This year, we're focused on improving catalog and search capabilities using Google Cloud, enabling us to deliver a more seamless experience, particularly for our commercial customers. As examples within our automotive catalog, we've made material enhancements that help our commercial customers find what they need, leading to lower order cancellations and returns. And we're now leveraging machine-learning and automation to help our catalog continuously improve itself without the need for manual data entry. Within search, we used Google Cloud to build an automotive-specific search experience focused on our commercial customers. Our search results are now four times faster, two times more accurate, all at half the cost. There are numerous other examples of progress within recent technology investments where we've leveraged our global scale to make us smarter, faster, better. For example, the recent completion of our global HR rollout with Workday to create a standardized company-wide platform that simplified 40 disparate HR platforms to one. In addition, we've ramped-up our capabilities at our Poland Tech center now comprised of nearly 300 engineers that lead global technology initiatives across pricing, inventory, catalog, search and cyber security. Not only has the tech center added capabilities and speed, but also resulted in material cost-savings. Less visible, but critically important, we've made material progress to simplify our core tech infrastructure as we've improved stability, performance and scalability. Looking ahead into 2025, we have opportunities to build-on our momentum and drive organic growth by enhancing our customer value proposition, expanding market-share and improving profitability through cost discipline. While we expect soft market conditions to persist into the first-half of 2025, we anticipate gradual improvement as the year progresses. A key aspect of our outlook is the improvement in-market conditions for both industrial and a rebound in the European landscape. Burt will walk you through the details of our assumptions in a few minutes. First, our continued investments in strategic initiatives reflect our commitment to driving growth and improving efficiency. We're confident these actions will support sustainable growth and long-term value-creation. While committed to our long-term strategic investments, we're also balancing the current environment with prudent and urgent cost actions. Our global restructuring efforts announced last year have progressed ahead of plan, delivering cost-savings at the high-end of expectations. Today, we announced that we're targeting an additional $100 million to $125 million of savings in 2025. These efforts continue our focus to simplify our operations and improve productivity. Collectively, our actions across 2024 and 2025 will position us for approximately $200 million in annualized cost-savings beginning in 2026. Thank you. In summary, while our full-year financial results were impacted by challenging market conditions, we're encouraged by the operational progress we've made across our business. GPC's legacy of operational excellence, exceptional customer service and financial discipline continue to guide us. Our market-leading automotive and industrial businesses are well-positioned to capitalize on growth opportunities, driven by supportive long-term industry fundamentals, while leveraging our size, global scale and expertise as a competitive advantage. We remain focused on creating value through a balanced capital allocation strategy, including reinvesting in our business, pursuing disciplined and accretive M&A and returning capital to shareholders through our long-standing dividend. In closing, I want to thank our GPC teammates for their continued hard work and dedication to serving our customers and to our shareholders for their continued trust and support. We look-forward to building on our momentum in 2025 and well beyond. And now I'll turn the call over to Bert.
