The paragraph introduces the Genuine Parts Company's Fourth Quarter 2024 Earnings Conference Call held on February 18, 2025. Tim Walsh, the Senior Director of Investor Relations, welcomes the participants and mentions that the call is being recorded and webcast, with a replay available on the company's website. Joining the call are Will Stengel, the President and CEO, and Bert Nappier, the Executive VP and CFO. The company will discuss its financial results, including non-GAAP financial measures, and address forward-looking statements pursuant to the Private Securities Litigation Reform Act of 1995. After the prepared remarks, there will be a Q&A session. The company provides caution about potential differences between actual results and forward-looking statements, as detailed in its SEC filings.

In the fourth quarter and full year 2024 earnings call, gratitude was expressed to the over 63,000 Global Productivity Company (GPC) employees for their dedication. Despite challenging market conditions, the company focused on talent investment, strategic initiatives, and disciplined acquisitions, enhancing the organization’s strength by hiring globally and advancing its strategic goals. A Global Engagement Survey showed 81% of employees are highly engaged, marking improvement. Strategic investments aimed at improving customer experience, productivity, and growth were emphasized, supported by technology and data, while over 100 acquisitions added value to GPC.

The paragraph outlines GPC's financial performance and strategic initiatives for 2024. GPC achieved total sales of $23.5 billion, a 1.7% increase from 2023, aided by strategic acquisitions despite weak market conditions, particularly in the industrial segment. Adjusted gross margin rose due to acquisitions and strategic initiatives. Cash flow was strong, with $1.3 billion in operating cash, and a global restructuring saved $45 million in costs. The company returned over $700 million to shareholders through dividends and share repurchases and increased its dividend for the 69th consecutive year. Global Industrial sales decreased by 1.4% due to weak market conditions. Motion's core MRO business remained flat, but corporate accounts experienced slight growth. Of 14 industries served, there was notable growth in pulp and paper, mining, and logistics.

The paragraph discusses a decrease in growth for Motion due to softer demand in certain markets and a decline in capital-intensive projects. Despite this, the company remains optimistic about long-term opportunities and aims for margin expansion through strategic initiatives. The Global Industrial segment's EBITDA was $1.1 billion, with a slight decrease in profitability due to market challenges. Motion North America achieved an improved gross margin, and over five years, Motion has expanded its profit margin significantly. As the industry leader with less than 10% market share, Motion sees potential for growth. In 2024, James Howe was promoted to President as part of a succession plan, supported by an experienced leadership team.

The paragraph highlights Motion's comprehensive approach to providing tailored solutions for its customers through a combination of local technical experts, extensive inventory, and value-added services. Motion's team is physically present in many customers' facilities, ensuring timely support and operation efficiency. In 2024, the company expanded its inventory by over 60,000 SKUs and placed essential stock in strategic locations to facilitate rapid customer service. Beyond traditional MRO solutions, Motion offers advanced services such as designing fluid power, electrical, automation, and conveyor systems, along with predictive and preventative maintenance solutions through sensor technology. These efforts aim to enhance customer productivity and operational optimization. Additionally, Motion's competitive edge is reinforced by its repair and service offerings, including a new facility in Houston.

In 2024, the team focused on providing solutions and support for industries like mining, steel, cement, and paper mills, realigning their value-add solutions team with distribution leadership to enhance customer experience. Despite industrial market challenges, they are optimistic about growth opportunities due to their technical expertise and broad solutions. They noted a cautious optimism from an improvement in the PMI to 50.9% in January. In the Global Automotive segment, total sales rose by 4% to $14.8 billion, with a significant portion from acquisitions, while sales inflation remained low at below 1%. However, the segment's EBITDA margin declined by 70 basis points to 8.7% of sales compared to 2023.

The paragraph discusses the performance of Global Automotive, focusing on different geographical and segment results. In the U.S., total sales increased by about 3% in 2024, although comparable sales growth was flat. Sales to commercial customers remained flat while sales to the do-it-yourself market declined slightly. In commercial segments, NAPA AutoCare and wholesale customer sales grew modestly, whereas fleet and government sales were flat, and major account sales declined slightly but improved in the latter half of the year. Product category performance showed nondiscretionary repair categories growing slightly, general maintenance categories like braking and filters also increasing slightly, but a decline in discretionary categories. Despite weaker market growth than expected in 2024, NAPA made progress in improving its capabilities, customer service, and market positioning. The company also bettered its internal metrics in inventory management and service delivery.

In 2024, NAPA focused on enhancing customer experience and operational efficiency within its distribution centers, achieving significant improvements in service and safety metrics. The company invested in inventory and expanded its Indianapolis distribution center to meet growing demand and improve delivery speed. This expansion included technological upgrades to enhance cost efficiency and inventory productivity. Looking ahead to 2025, NAPA plans to capitalize on industry opportunities by launching a professional hand tool and equipment offering. The integration of acquired companies, MPEC and Walker, is progressing as planned, with 55% of stores now on NAPA's technology platforms, delivering expected sales and margin benefits. Despite macroeconomic challenges, the automotive aftermarket industry remains poised for growth due to increasing vehicle usage, aging car parc, and high vehicle prices.

The paragraph highlights NAPA's strong focus on commercial customers as a key growth driver, with 80% of its business in this sector supported by a vast network of stores and AutoCare centers. As NAPA approaches its 100th anniversary in 2025, it remains optimistic about future growth. Despite a weak economic backdrop in Europe in 2024, NAPA achieved a 6% sales increase and significant growth in its branded sales, which now account for 15% of its European sales. The company aims to increase this share to over 20% in the coming years. In Asia Pacific and Canada, NAPA maintains leading market positions; in Asia Pacific, sales rose by 6% with a 4% increase in comparable sales, marking the fifth consecutive year of double-digit profit growth.

The paragraph details the company's strategic successes and future initiatives. In 2024, they achieved modest sales growth in Canada despite economic challenges, and significantly expanded their U.S. operations by acquiring over 500 NAPA stores. Their goal is to balance their store ownership between company-owned and independent ones, particularly benefiting smaller markets. They also made strategic acquisitions in their Motion division to enhance technical capabilities. Going forward, mergers and acquisitions (M&A) will remain crucial for growth in both their automotive and industrial sectors, backed by a strong financial position. Additionally, they are investing in technology to improve customer experience, exemplified by enhancements to their automotive catalog using Google Cloud.

The article paragraph discusses the company's advancements in technology and infrastructure, focusing on improvements in machine learning, automation, and search functionality using Google Cloud, which has enhanced speed and accuracy at reduced costs. It highlights the consolidation of HR platforms using Workday and the expansion of tech capabilities at their Poland center, leading to cost savings and improved efficiencies in various areas like pricing, inventory, and cybersecurity. Looking towards 2025, the company aims to maintain momentum, drive organic growth, and enhance profitability despite expected soft market conditions initially. They are optimistic about market improvements, especially in industrial sectors and Europe, and emphasize their commitment to strategic investments for sustainable growth and long-term value.

The company is pursuing strategic investments while implementing cost-saving measures to cope with current market conditions. Their global restructuring efforts are yielding significant savings, with plans to achieve an additional $100-$125 million in savings by 2025. By 2026, they target $200 million in annualized cost savings. Despite challenging market conditions affecting their full-year financial results, the company is making operational progress, positioning their automotive and industrial businesses for future growth, and maintaining a balanced capital strategy. They emphasize reinvestment, disciplined mergers and acquisitions, and dividends to shareholders. Appreciation is extended to employees and shareholders, and there's optimism for continued momentum in 2025 and beyond. Bert Nappier will discuss fourth-quarter performance and 2025 outlook.

In the fourth quarter, the company experienced revenue growth driven by acquisitions, even amidst challenging market conditions. Despite the revenue and gross margin increase, earnings declined due to planned business investments and cost inflation. Cost-saving measures and global restructuring helped exceed initial expectations for 2024. Adjusted results, excluding nonrecurring costs such as restructuring, acquisitions, and inventory write-downs, amounted to $125 million in pretax adjustments. Total sales rose by 3.3%, largely due to acquisitions and an additional selling day, although slightly negative comparable sales growth was noted due to weak market conditions and declining demand, especially in the industrial sector and Europe. In the Global Industrial segment, sales fell by about 1%, with an extra selling day contributing to a slight offset in the overall decline.

In December, Global Automotive's fourth-quarter results were affected by holiday timing and reduced customer activity due to weaker demand. Total sales rose approximately 6% compared to the previous year, benefiting from acquired businesses and an extra selling day in the U.S., which boosted sales growth by 90 basis points. Sales in the U.S. increased 7%, helped by acquisitions, though comparable sales remained flat. Internationally, European sales grew 3% in local currency, with comparable sales down 1% due to economic conditions. In Asia Pacific, sales rose 14% in local currency, with a 6% increase in comparable sales, and Canada saw a 1% sales increase, though comparable sales fell 1% amid economic challenges. The adjusted gross margin for the fourth quarter was 36.9% after accounting for a $62 million inventory write-down, reflecting a 50 basis point improvement mainly driven by U.S. automotive acquisitions.

In the fourth quarter, the adjusted SG&A as a percentage of sales was 29.4%, an increase of 210 basis points from the previous year, mainly due to cost inflation in salaries, rent, and freight, as well as the impact from acquired businesses and a reserve adjustment for product liability claims. This was partially offset by restructuring efforts. The total adjusted EBITDA margin for the quarter was 7.5%, down 180 basis points year-over-year, affected by lower sales growth and higher cost inflation, but slightly offset by acquisitions and restructuring benefits. The full-year adjusted EBITDA margin for 2024 was 8.5%, down 80 basis points from 2023. The adjusted net income for the fourth quarter, excluding $91 million in nonrecurring expenses, was $224 million, or $1.61 per diluted share, and the full-year adjusted net income was $1.1 billion, or $8.16 per diluted share.

In 2024, the company undertook cost-alignment actions and progressed in global restructuring, incurring $220 million in restructuring costs but achieving $45 million in savings, equating to $0.24 per share. They generated $1.3 billion in cash from operations and $684 million in free cash flow, with $570 million reinvested in capital expenditures for supply chain and IT system enhancements, and $1.1 billion spent on strategic acquisitions, including MPEC and Walker. For 2025, they project diluted earnings per share to be between $6.95 and $7.45, and adjusted diluted earnings per share between $7.75 and $8.25. The outlook anticipates no tariff changes and is based on weak market conditions with lower customer demand. The 2025 outlook also excludes the noncash charge from the U.S. pension plan termination expected by late 2025 or early 2026.

The paragraph discusses factors affecting the company's earnings per share (EPS) outlook for 2025 compared to 2024. The company is transitioning its U.S. pension plan to a third-party insurer, expected to be completed by late 2025 or early 2026, resulting in significantly lower pension income and a $0.28 EPS decline. The strengthening U.S. dollar against the euro, Canadian dollar, and Australian dollar is projected to reduce EPS by $0.15. Additionally, planned business investments will increase depreciation and interest expenses, negatively impacting EPS by $0.60. Despite not providing quarterly guidance, the company shares its views on 2025 earnings cadence and first-half expectations.

The sales outlook for 2025 anticipates a gradual improvement, with weak growth in the year's first half giving way to a stronger second half. Earnings are expected to decline in the first two quarters by 15% to 20% but recover with a 15% to 20% increase in the latter half. The first quarter might see a steeper 20% to 30% drop due to factors like reduced selling days, lower pension income, and unfavorable exchange rates. Overall sales growth is projected at 2% to 4%, despite market stagnation and a 1% inflation benefit. The outlook factors in M&A benefits and strategic initiatives but faces challenges, including foreign exchange headwinds and fewer selling days. Gross margins are projected to expand by 40 to 60 basis points, supported by strategic sourcing, pricing initiatives, and U.S. automotive acquisitions.

The paragraph outlines the company's financial outlook and strategic plans. They anticipate SG&A to deleverage by 20 to 40 basis points due to cost inflation and additional SG&A from acquisitions, offset by global restructuring benefits. In 2025, the company will expand restructuring efforts, incurring expenses of $150 million to $180 million, with expected benefits of $100 million to $125 million. By 2026, these efforts should yield approximately $200 million in savings. For the automotive segment, they project 2% to 4% sales growth and stable to slightly improved EBITDA margins. The industrial segment is expected to see similar sales growth with an EBITDA margin expansion of 20 to 40 basis points. The company plans to generate $1.2 billion to $1.4 billion in operational cash flow and $800 million to $1 billion in free cash flow, with CapEx spending of $400 million to $450 million. M&A investments will focus on value-creating opportunities, moderated to $300 million to $350 million in 2025.

The article discusses the automotive industry returning to more normal activity levels in 2025 amid challenging market conditions. The company is advancing global restructuring to boost profitability despite market-driven lower sales growth. They remain confident in their business fundamentals and are investing for the long term. During a Q&A, Scot Ciccarelli from Truist asks about North American sales lagging behind competitors despite investments and operational improvements. Will Stengel responds by expressing confidence in ongoing efforts, including engaging with independent owners and enhancing company-owned stores, but acknowledges they are not yet fully satisfied with the progress.

In the paragraph, the discussion involves progress and challenges faced by a business as they move forward. Will Stengel expresses pride in their internal improvements, particularly their strength in the commercial sector, despite some weaknesses in the discretionary areas. Both Stengel and Scot Ciccarelli acknowledge ongoing efforts and improvements. Chris Horvers from JPMorgan inquires about future sales growth, specifically regarding the U.S. NAPA business, and the effect of the winter season on their performance. Bert Nappier responds by indicating that they anticipate a challenging start to 2025 due to weak conditions across all business units, a first in their company's history, with expectations that these difficult conditions will continue through the first half of the year. They refrain from giving specific sales guidance for individual business units.

The paragraph discusses expectations for the second half of the year, aiming for improvement in earnings, sales, and comp sales despite challenging market conditions such as high interest rates, inflation, foreign currency issues, and potential tariff impacts. The speaker is cautiously optimistic, citing recent positive trends in PMI and IP, which have a lag effect benefiting their business. They hope for improvements in the automotive sector and are monitoring the industrial sector and Europe. Chris Horvers asks about the lack of weather-related improvement in U.S. NAPA and the impact of tariffs on the Motion business, questioning whether tariffs might delay recovery despite positive indicators like a pick-up in PMI.

In the paragraph, Will Stengel discusses the impact of weather and tariffs on Genuine Parts Company's operations. He notes that the fourth quarter began with disruptions caused by hurricanes, affecting both segments of the company until November. However, better weather in December helped improve automotive sales. On tariffs, Stengel mentions that discussions have been cautiously optimistic, emphasizing the importance of a strong North American manufacturing base. He highlights that Genuine Parts Company is well-prepared for tariff challenges due to its diversified global supply chain. An analysis of product origins showed that GPC's tariff exposure is about 7% in China and less than 5% in Mexico and Canada, while most of the company's operations, particularly Motion, are primarily exposed to the U.S. The NAPA segment has greater exposure to China, Mexico, and Canada.

The paragraph discusses the distribution of purchases from China, Mexico, and Canada, highlighting the company's approach to vendor discussions and market adaptability. Chris Horvers transitions to a question for Greg Melich about sales progression, noting that although sales began below the expected growth range of 2% to 4%, the company anticipates ending higher to meet the annual target. Bert Nappier confirms this strategy of starting lower and ending higher in sales. Greg Melich then inquires about the company's strategy regarding tariffs and their impact on gross margins. Will Stengel explains that the approach depends on specific situations, focusing on category management to either protect gross margin dollars or gross margin rates based on the effects of tariffs.

In the paragraph, Greg Melich and Bert Nappier discuss the company's financials, focusing on interest expenses and pension income. Greg asks if the $150 million interest expense includes the effect of losing pension income due to divestment. Bert clarifies that it does not; pension income is a separate issue and a financial headwind, resulting in an estimated $0.28 decrease year-over-year. Although the actual pension divestment is pending regulatory approval, the company had to rebalance its asset portfolio in advance, leading to a less equity-weighted structure and reduced income. The actual divestment is expected by the fourth quarter or possibly the first quarter of the next year. Finally, Michael Lasser from UBS joins the conversation with a new question.

The paragraph discusses the market share concerns for Genuine Parts' North American business, particularly in the automotive and industrial sectors. Despite some perceptions of market share loss, the company maintains strong performance in Canada and counters claims about its Motion North America division. The focus on improving U.S. automotive market share includes investments in inventory, supply chain, talent, and sales, alongside operating model changes with more company-owned stores, allowing for better control and competitiveness.

The paragraph discusses the challenges posed by a high-interest rate environment and the company's efforts to support independent owners and small businesses by ensuring they have the right inventory and resources to compete effectively. The speaker highlights the company's investments in acquisitions and supply chain technology to enhance competitiveness, with hopes of an improved market by 2025. In response to a follow-up question, the speaker explains that the company is prepared to manage earnings sensitivity through potential restructuring and cost actions if sales fall short, indicating prudent planning for both short-term and long-term needs.

The paragraph discusses a company's strategic focus on restructuring and cost-saving actions while maintaining customer service quality. They emphasize learning the importance of urgency and faster decision-making from 2024, and they plan to monitor developments closely. They are poised to accelerate restructuring if needed, aiming to achieve a "sweet spot" in 2025 by integrating 2024 actions for incremental benefits. This involves restructuring, facility actions, and simplifying operations to be more nimble. An exchange between Michael Lasser and company executives leads to a question from Kate McShane about automotive sales and EBITDA margins, with Bert Nappier addressing margin-related queries and Will Stengel set to discuss independent owners.

The paragraph discusses the company's optimistic outlook for the automotive sector in the coming years. They anticipate an improvement in gross margins and a more favorable sales environment, as well as benefits from cost actions and restructuring in both automotive and other segments. The text also highlights the impact of previous transactions involving independent owner groups, which have allowed for increased influence on local market sales and cost optimization. Despite these transactions being smaller in scale now, the strategy remains an essential part of their operational and financial plans, though it requires significant effort and time.

In the paragraph, Seth Basham from Wedbush Securities asks if company-owned NAPA stores face additional challenges compared to independent stores, possibly affecting their performance. Will Stengel responds that there is nothing uniquely challenging about company-owned stores that would put them at a disadvantage in the market. He emphasizes the focus on fundamental operations, such as inventory, talent, and processes. Stengel mentions they have highly effective stores and aim to improve the performance of underperforming ones. He acknowledges that some independent owners have outstanding stores, and there is a continuous effort to learn from one another and enhance their operations daily to serve customers better.

In the paragraph, Seth Basham asks about the potential market share opportunities following a large competitor's exit from the West Coast. Will Stengel affirms that such changes in the competitive landscape do present opportunities, and emphasizes the importance of executing business operations effectively to capitalize on them. He notes their national account business and network of facilities as strengths. Bret Jordan then inquires about improvements in distribution center (DC) performance mentioned in previous remarks. Will Stengel responds that the DCs are performing exceptionally well due to organizational changes and consistent processes implemented in the operations teams, resulting in disciplined and effective supply chain management.

The paragraph is part of a conversation between Bret Jordan, Will Stengel, and Bert Nappier about improvements in metrics and a tool offering in their business. Will explains that the improvement metrics are due to standardizing processes across their buildings, and there's nothing specific that needed fixing. Regarding tools, Will mentions that while it's not a new category, it's an important one with a significant market opportunity. They plan to enhance their current brand to better serve professional repair shops, focusing on a two-tier brand strategy rather than expanding their SKU count. This approach aims to simplify and enhance their offerings in the tools and equipment segment.

The operator ended the conference call, thanked the participants, and requested them to disconnect their lines.

This summary was generated with AI and may contain some inaccuracies.