Genuine Parts Company (GPC) Earnings Call Transcript & Summary

Begin the program. Today's presentation and webcast include a slide presentation that can be found on the Investors page of the Genuine Parts Company website. Please be advised this presentation and discussion may include certain non-GAAP financial measures. A reconciliation of these measures to the most comparable measure under generally accepted accounting principles is provided in the presentation materials. Today's event may also involve forward-looking statements regarding the company and its businesses. The company's actual results could differ materially from any forward-looking statements due to several important factors described in the presentation and the company's SEC filings. The company assumes no obligation to update any forward-looking statements made during this presentation. [Presentation]

Please welcome Senior Vice President, Investor Relations, Sid Jones.

Thank you very much. Love that video, especially love the messaging to start the day. We are GPC. We keep the world moving. So good morning to all of you. Welcome to Atlanta, sunny and warming Atlanta. Welcome all to the 2023 Genuine Parts Company Investor Day. Great to see a full room -- a full room of folks, both familiar faces. I can see most of you but also new faces. Most importantly, on behalf of the entire GPC team, we really, really appreciate you joining us today. We also want to thank all of our virtual guests on our webcast with us this morning from wherever you are. We hope today will be an informative and productive day for each and every one of you. Moving along, I think we covered our safe harbor comments at the onset. This is our full statement. So we can just keep moving and turn to an agenda that we feel is really packed for you today. That was our intent. This morning, you'll hear key messages from our Chairman and CEO, then our President and COO; and then our EVP and CIDO. After that, we're going to take a break, move out to our initiative showcase. There, we're really excited to show you some of the things we're working on to execute and drive profitable growth into the future. For the virtual audience, this is going to run from around 9:30 to 11 a.m., and we have something for you as well. We invite you to stay on the webcast. We're going to stream videos containing content that are in-person attendees are going to be viewing in the showcase. We're going to return from the tent at 11 a.m., and we're going to continue the stage presentations with Will Stengel and our business unit leaders and then hear from our EVP and CFO, who's going to provide our 3-year outlook. Finally, we're going to bring our speakers back up for a Q&A session. And we know how much you guys love that part. That's going to be followed by a lunch. And all of our management team is here to join you. So please be with us for that. We look forward to it. We look forward to the entire day with each of you. With that, it's my pleasure to turn it over to our Chairman and CEO, Paul Donahue.

Good morning, everybody. So it's great to see everyone. Last time we were together 2019, a lot's happened, right? Lots happened in 4 years. I will tell you, and we're going to get that mug off the screen here momentarily. Had black hair four years ago pre-pandemic. That's what a pandemic will do to one. But it has been 4 years. And really, my objective today is really to share with you what all has happened at Genuine Parts Company in the past 4 years. And certainly, a lot has happened. And I'm pleased to tell you, most of it is really, really good. So let's jump right in. These are our key objectives for the day. And look, we've got a great story to share with all of you. In terms of the objectives, look, we want to make sure you all understand our culture at Genuine Parts Company. Many of you know us very well. I think you do. But for some of the newer folks in the room, we want to walk you through just kind of all the things that we stand for a Genuine Parts Company and how we drive value. We want to showcase our strategic plan and our various initiatives that we've got across both our main businesses. As important as all of that, we really want to highlight and showcase our management team. So you're going to get an opportunity today not only to see some of the executive leaders and business unit leaders up here on stage. But you're also going to see a layer and 2 layers down when you go to the showcase, and we go through the various opportunities that we've got out in the tent. So highlighting our management team is a big one for us. we're going to share our 3-year financial targets. So we're going to save that towards the end. Bert will get up here and walk you through our financial targets. And then last, but certainly not least, we hope that you all leave here with just a real sense of confidence in Genuine Parts Company as a differentiated investment. We are a little different. We get that. We're not some of our competitors who shall go nameless, we are different. There's no doubt. And we hope when you leave here, you'll have a greater appreciation for GPC. So for those of you who don't know us very well, I want to give you just a bit of a snapshot as to who we are really today. So we've been around a long time, 95-plus years, founded right here in Atlanta, one part store back 95-plus years ago. Today, we're in 17 different countries. With the addition last year of Spain and Portugal, took us from 15 to 17 countries. We have well over 10,000 locations. We've got 58,000 really great teammates around the world, passionate teammates. In 2022, we crossed $22 billion in revenue, first time ever for GPC. So we're quite proud of that. We're even more proud of the fact that we posted back-to-back double-digit sales and earnings growth the last couple of years. So how did we do it? When we were together last, you would have seen that pie chart for 2019, so how did we go from that business to the business that we are today? And I'm going to walk you through a little bit of the -- all the initiatives in the middle of that chart. So back in 2019, we had 4 businesses. We had automotive, of course, our legacy business. We had motion, our industrial business. We had S.P. Richards. Many of you remember S.P. Richards, our Business Products Group. And we had an electrical business called EIS. Those 2 businesses, business product and EIS were noncore for us. It didn't necessarily fit in that automotive, industrial world. So we made some tough decisions, and I'll get to that. So I really want to walk you through what all has happened to get us from that '19 pie chart to that '22 pie chart. The first thing we did back in 2019, we were not exactly hitting on all cylinders back in '19. We took a real hard look at our business. We had gotten a little top heavy. Our SG&A had grown to levels we weren't comfortable with, and we knew we had to take some significant action. So what we did back in 2019, the latter part of '19, is we formed a transformation office. And we went out and found Will Stengel to run that transformation office and be our CTO. We divested both EIS and SPR between '19 and '20. We're really good at buying companies, selling companies. It was a little bit of a new twist for us, but we succeeded. Most importantly, in the latter part of 2019, as we looked at that SG&A growth, we knew we had to get that -- get our expenses down. So with Will running the transformation office, we identified $150 million in permanent expenses that we remove from our business. And thank God, we did because literally a few months later, we got hit with the pandemic. And I don't need to tell all of you all hell broke loose, right? And so once a pandemic hit, we jumped in, both took another $300 million out of our cost base. So between the 2 initiatives, $450 million in cost came out. At the same time, we began to identify needs inside of our business that require new skill sets. So we went out and recruited really top talent, new talent for GPC. And look, M&A has always been a hallmark of Genuine Parts Company. You all know that. I would tell you that we've ramped up our M&A, highlighted by the acquisition of Kaman Distribution Group in the early part of 2022. That is a business that has transformed what was already a great business Motion Industries. So I have to tell you, getting from '19 to '22, what I just walked you through in literally 5 minutes, was an incredible amount of work, time, effort, blood, sweat, tears, it was challenging -- challenging for all of us. But I could not be more proud of the work of our team and the things that we did as a group to really bring this business back and position us in terrific shape for the future. And in the end, we've delivered pretty good results and streamlined our portfolio so that today, as you look at GPC, we are all automotive and all industrial, 62% auto, 38% industrial, and we'll talk a bit more about that here shortly. So as we moved out of '22 and what happened since back end we went through our transformation? I want to share with you our results. So you can see top line sales back in '19, almost $17 billion in revenues. We delivered from '19 to '22, 9% sales CAGR annually and added almost $5 billion in new revenues to GPC for a 9.3% overall. 17% annual EPS CAGR going from $5 billion to over $8 billion. Total shareholder return, a stat we're really, really proud of, S&P 500 in that same time frame about 7.7%, Genuine Parts Company, 21.2%. So we often get asked about our business mix. And how does automotive and industrial, I kind of commented on it earlier, how do these businesses fit together? Why have these businesses under the same GPC umbrella? Well, I want to share with you, maybe just a couple of bullets, many of we've talked about before with this group, but I want to just emphasize it a bit more. A streamlined business mix that we now have, unloading the 2 other businesses back in '19 and '20. We've got a business mix that we really believe creates value, and I think we've proven that. Both of these businesses are value-add, service-oriented distribution businesses. We share many of the same suppliers, folks like Bosch and Gates, Mann and Hummel that are global suppliers. We have massive scale when you put these 2 companies together and we sit at the negotiating table with these suppliers, both on the direct side and on the indirect side. We share talent, we share technology, we share best practices between both businesses. And in the end, we believe the 2 businesses complement one another extremely well. And again, I hope that our performance over the last couple of years would support that. So let's dive deeper into the automotive segment. We've got a great presence across the automotive networks around the globe. We've got the largest network of parts stores as well as car care. We've got almost 10,000 stores now around the world. We've got over 30,000 shops that we partner with every day. That is really the hallmark of our automotive business. Brands like NAPA AutoCare Center, Repco authorized service, our stores and shops across Europe, they depend on us every day for their parts and services and to keep them operating. As you look at our pie chart, the diversification of our business around the world today, we're 2/3 North America, and we're 1/3 international. 80% DIFM across North America. This is a segment, and you all know it, that we'll continue to grow year after year. We love our retail business. We'll grow our retail business but the real growth is going to come out of commercial and DIFM. And as I look across our European footprint, it's even higher than 80%. From a branding standpoint, look, we've got iconic brands. The NAPA brand is 85% of everything we sell in our North American automotive business. But I'm really happy to see the progress the team has made across Europe and Australia in promoting that brand. More importantly, how that brand has been accepted in places like Europe and Australia. It's now 10% in just a few short years. 10% of our sales across Europe are now NAPA-branded and about 1/3 of our products we sell in Australasia are NAPA-branded. So I would wrap this slide up with our 3-year return, 7.6% sales CAGR in our global automotive business, more importantly, 110 basis points of margin improvement in that same time frame. So that's a quick snapshot of automotive. Let's segue over to industrial. I had a great story to talk about here, and we are really proud of our Motion business. Our sales in 2022 crossed the $8 billion mark for the first time ever. We are, without a doubt, the market leader in both North America and Australia, New Zealand. We've got over 800 branches and locations now around the world. We've got access to 19 million parts on any given day that we deliver to our manufacturing partners and distribution partners around the world overnight. The acquisition of Kaman Distribution Group strengthened our services offering. And we're going to talk about that kind of throughout the day, and you'll see some great examples when you go out into our showcase outside. We're not just a distributor of parts in our Industrial segment. If you take anything away from this, I really want you to hum in on what our core competencies are in Motion? And we are really a full service provider. Products like fluid power, automation, of which, by the way, Kaman has really added to our arsenal in both of those categories. So we've got an incredibly diverse portfolio of end markets and customers. And I'd wrap this portion up just by telling you the team has put up tremendous results since 2019. 12.4%, 3-year CAGR. Segment margin, again, most impressive, up 240 basis points. So automotive, industrial, and what I want to talk about now is really what that does when you roll it all together and the power, as we talk about internally of One GPC. Hasn't always been the case. I'll be the first to admit it. We -- when you go back 2019 and before, we had 4 siloed businesses. They all operated fine. They all operated well. There was not a whole lot of cross-pollinization that term One GPC did not exist back then. Today, we work together, and we believe by working together, we're going to create more value than what is available through the sum of the parts. And our approach is quite simple. We want to leverage the shared values. We want to leverage our talent. We want to leverage the teamwork that you'll see on display today. By doing all of that, we believe we're going to capture all the opportunities that we believe are uniquely available to Genuine Parts Company due to our size, due to our scale and due to the business mix that we have. And in the end, that's going to translate into improved performance as well as shareholder value. So again, you're going to see a lot of what I just described in action when we head out to the showcase here a little bit later this morning, and you'll have an opportunity to interact with many of our business leaders. So I also want to talk about how the team is working together as it relates to ESG. Our sustainable journey is another example, just one of many of how our global teams are working together every day and sharing best practices. And what I'd like to do is just share a quick video with you that I think will kind of in a nutshell highlight the ongoing efforts to address ESG issues that we're all dealing with across the globe. So if you could guys go ahead and play the video, please. [Presentation]

All right. So I hope you can see our commitment to ESG is clear. We've made really, really solid progress in this space. We got a lot of work yet to do. I think we all do. What I would share with you is that the video really doesn't do justice to the full breadth of our efforts, that's happening around the world, and there are efforts in every one of our business units. What I would ask you if you have further interest is check out our sustainability report, which is on our website. Team has done a great job with it. So please feel free to access at the IR website. So I mentioned our management team, and I want to just spend a minute here because since many of you are here back in 2019, a number of these folks weren't a part of our team then. And I would tell you, half of the folks on this slide either have joined GPC since we were together in 2019 or they have, in the case of a couple been promoted into the roles that they are in today. I would tell you that as I walked you through that 2019 to 2022 transition transformation, it's no coincidence to me that the last couple of years have been arguably the best years in our company's history. And it's all about talent. You guys know that. It's all about getting the right people in the right seats on the bus. As we like to say, talent begets talent. I am proud and incredibly proud to work with this group every day, and many of them will get a chance to hear from later. So backing up that management team, is a great Board of Directors. And I would tell you that we've got a terrific Board. You're going to see that Board here momentarily. Here it is. This is our Directors group. We've got a great group of directors, diverse backgrounds, diverse skill sets, diverse experience. I would tell you we're a better organization today because they've challenged us. They've given us great guidance. They've given us great count. So I would tell you, I'm a better CEO today because of this group. I'm really proud to tell you we've got a couple with us here today. We've got -- I know I saw Jean-Jacques Lafont, JJ. Here he is. JJ is on our Board. JJ is also Chairman of our European business. JJ, glad to have you with us. Is John Holder in the room? John? John, glad to have you with us. John is Chairman of Holder Property, Chairman and CEO of Holder Properties here in Atlanta has been on our board for a number of years. And John, thank you for joining us. Also in the room is somebody that many of you know, and a former Chair of our Board, and that is Tom Gallagher. So Tom, welcome. It's great to have you with us as well this morning. So terrific Board, a lot of support, a lot of guidance and we wouldn't be where we are without this great Board. So look, as I wrap, I really want to leave you with this slide. You got lots of opportunities to invest in great companies around the world. I want to leave you with really 5 reasons to invest in Genuine Parts Company. I've talked about our team. I've talked about the talent. I've talked about the added skills that we brought to this business over the last few years. We've got a deep expertise with this group that's going to continue to drive value. We've got the size, we've got the scale across diverse industries as well as geographies that are going to continue to serve our great customers around the world. We have a leading position. We're either #1 or #2 in every one of our businesses around the world and in large and incredibly fragmented industries like automotive and industrial. So lots of runway to continue to grow. We've got a very clear strategic plan, which, again, I hope we leave here today, you have a much clearer understanding of what that strategic plan is. And that plan, I'm happy to tell you is underpinned by a strength of Genuine Parts Company that has been here for many, many years, as I mentioned earlier, it's underpinned by M&A. And it's going to ensure between that clear strategy that's going to drive our organic growth, coupled with an M&A strategy we're going to continue to drive robust growth in the years to come. And then last but not least, we're going to continue to deliver really strong financial results, and we'll go through the cycles. I don't know where we're going to end up this year. Are we in a recession? Are we headed to a recession? I don't know that anybody really knows. But we've got 2 great businesses that do well regardless of what the cycle is. So -- listen, I really appreciate you all being with us here today. You've got lots of opportunities to go many places, spend your time with lots of different clients and customers. We appreciate you coming here to Atlanta. It means a lot to us. We've got a great program in store for you. So with that, I'm going to introduce our next speaker, and I'll just take one second before he comes on stage. Again, I mentioned, it is no coincidence to me the last couple of years has been some of our best years in our history. Part of that is coupled with the arrival of Will Stengel in our business back in 2019, who really led that transformation, along with many of the great GPC employees in the back. But he really led and drove that transformation from '19 to '22. I couldn't be more proud and more grateful to the great job that Will has done. So if you would, please give him a warm welcome to the stage. Will?

Good morning, everybody. That's very kind to you, Paul. It's certainly a massive global team effort. So the thanks go to the folks sitting in the back of the room on the GPC team over the last couple of years. I will admit to that perhaps my hair was a little bit darker in 2019. I might have even had a little bit more of it at that time as well, but man, has it been worth it. So good morning. Welcome. It's great to see everybody here. Thanks for making the effort to be here. My name is Will Stengel, as Paul mentioned. And as Paul mentioned, I've had the opportunity to be with the organization since 2019. People ask me why I joined Genuine Parts Company? I was pretty straightforward. The quality of the people that I met during my process, the opportunity to be a part of an organization that does business the right way, and I'll talk a little bit more about that. And then lastly, the opportunity to be part of a very storied history that has a ton of potential as we move forward into the future. And certainly, my time in the last 3 years, my expectations have been wildly exceeded not only in terms of the quality of the culture and the people but also the opportunity that we have in front of us. And so I'll bring that to life, hopefully in the next few minutes here. It's an honor to share the story on behalf of the organization, 58,000 global associates. And as I said, it's a massive team effort that everybody is pitching in on. We really do believe that GPC is a compelling investment opportunity. And I think that day-to-day, the recent performance and the future performance will bring that to life. I had really 3 topics, share the vision of the organization, talk a little bit about our market opportunity, talk a little bit of how we're positioned in that opportunity with our capabilities and then importantly, how we're going to win through our strategic initiatives. This concept of strategic initiatives, as you'll see in the showcase, is a big thought. It's how are you taking action each and every day to grow your business faster than your market growth and win share. All right. We talk a lot about culture at Genuine Parts Company and how our culture is unique and important to our success. And I think as I was learning about the organization, you heard that often. And as I said, it is more than true. At Genuine Parts Company, we've been incredibly fortunate to have been led by 5 inspirational leaders over 95 years. Think about that for a second. 5 leaders in almost 100 years, Carlyle Fraser, Wilton Looney, Larry Prince, Tom Gallagher, Paul Donahue. We're even more fortunate to have 40% of that legacy sitting in the room today. Our founding leadership is here. Mr. Gallagher, thank you for all that you've done for our organization. Thanks for your continued support of all that we're doing. It's great to have you part of the team. It's no mistake that culture is rooted in that consistent strong leadership over 100 years. It's that type of leadership that brings with it, things that you see on this page, strong sense of mission, strong sense of values. And we use this slide with our internal teams to communicate our expectations of not only where we're going, but how we expect people to behave. Paul talked about the purpose. We keep the world moving. We think it's really important as an organization to stand for something that's bigger than ourselves. It's not only something bigger than ourselves, but it also reinforces the role that we play for our customers and in the industries in which we operate. We describe our mission on this page. Another way to think about that, what do we aspire to be? We describe vision on this page, what we aspire to do? And we describe our values on this page or how we expect our teammates to behave. So let's talk a little bit about the market that we find ourselves. We're very fortunate to operate in large, fragmented and growing markets. Not every organization can say that. And this has been deliberate and strategic by nature. Paul talked about the need to simplify the portfolio so it can go all in on markets that enjoy these characteristics. We're going to simplify the business and hold leadership positions in these large fragmented markets, and you can see here that's certainly the case. In total, $350 billion market opportunity, less than 10% market share. This is a really important point as you think about the strategic focus. There are a lot of choices and places where organizations can go and grow. The highest return that you can get is focusing where you are today and eating up this white space as we like to talk about. The majority of these markets are comprised of small local competitors. That creates a wonderful opportunity for us to bring scale, technology, supply chain complexity to differentiate ourselves relative to folks in the industry that don't have those capabilities. Our markets are also consistently growing. Going back to '19, say, miles driven in the United States has increased 47 of the last 53 years. 47 of the last 53 years. And if you think about what Paul talked about, this constant, consistent growth through cycles, that's an incredibly attractive dynamic to have in your end markets. PMI index on the industrial side has been an expansion territory for 62 of the last 74 months. A little bit more cyclical, but a nice complement to that consistent, steady automotive business. Here's just a thought for you. If we assume our markets grew at the same rate as they have in the past for the next 30 years, and Genuine Parts Company in its businesses takes 1 to 2 points of market share for the next 30 years consecutively, we still would only own less than 20% of the total addressable opportunity. People can make a career and join the industries in which we operate, creating a ton of value and capturing wallet share from our existing customers. As I'll share with you in a few pages, we believe that we have the right infrastructure to go attack that opportunity. We've got the right relationships. We've got the right footprint, we have the right capabilities, and we've got the right initiatives to make it happen. Not only are they large and growing, but they've got great secular trends that sit underneath them. And you can see here on both sides of our business, very attractive mega trend thoughts that should position us to grow for many years as we move forward. In automotive, miles-driven trends are very positive. People love their cars and we'll continue to use a car as the primary source of mobility. Post-COVID has certainly created a new appreciation for experiences in travel. We have a massive global installed base in the car park. Globally, our addressable car park is 600 million cars. People are holding on to their vehicle longer. The average age of the car in the United States is 12 years, a little bit less than that in Europe. And while the availability of new cars has gotten better. Given chip shortages, manufacturing complexities with automotive dealers, global logistics, investing in your existing vehicle will continue to be a tailwind for the industry. Importantly, the complexity of the car has and will continue to increase. And that positions us really well. You heard Paul talk about our primary customer as the repair technician in our automotive business. As that car gets more complicated, it will be more and more challenging for the average car enthusiast to work on his or her car. You also see here, we believe the energy transition to electric does create an opportunity for Genuine Parts Company. I'll talk a little bit more about that in my presentation. You have a great opportunity to see that live and in person in our showcase. But in the aggregate, we think that is a net benefit to our -- not only our industry but for Genuine Parts Company. In industrial, nearshoring is happening. We talk about it often with our customers and our vendors today. You read it in the press, the global supply chain challenges and geopolitical issues over the past few years have really created a new awareness and intention to relocate and diversify manufacturing in North America. According to one statistic, 80% of manufacturers, the CEOs and the leadership teams in North America are thinking actively about reshoring, and we see it in our business today. Industrial factories continued to struggle with labor and productivity. As you can appreciate through the pandemic, creates incredible opportunities for our Motion business as we think about robotics, and all the value-add services and solutions that we bring to help automate those operations and drive productivity. The manufacturing workforce is changing and aging evolving workforce technical experts that operate the facilities today. They're aging and moving on and getting out of the workforce, which lends itself perfectly to our seasoned and tenured associates. Remember, in many instances, our Motion sales team know the facilities better than the customer. They're in the facilities. They have an appreciation for the equipment and machinery and their base literally next to those employees learning over the last decade to learn and understand the complexity of the operations. Interestingly, electric vehicles and its related industry creates an amazing opportunity for Motion. Some of our fastest-growing largest customers in Motion today are somehow related to EV, and that's a nice balance to our automotive business, and I'll talk about that some more. Together, we believe the markets are well positioned over the long term, and we're excited to seize the opportunity. So we have large markets, great secular growth trends, and we have deep established customer relationships around the world. And this is thanks -- this is in thanks to the hard work of the frontline leaders that are working every single day to deliver service and value to our customers each and every day. A couple of key highlights to mention on this page, predominantly a B2B business, 80% of our global business serving a professional or a trade customer. Incredible installed base of existing customers for which we're very grateful. Nearly 2.5 million relationships already in place. You think about that idea of selling to our existing customers and leveraging and taking share in the markets that we already operate. We have solid diversity amongst our customer base without one real specific customer type or segment representing an outsized portion of the business. And you'll see it today in the showcase that the teams are really taking a new and analytical approach to understand the needs of these customers by capturing feedback to inform what we're working on each and every day and how to evolve our value proposition to deliver service. I would tell you in almost every instance of transaction with our customers is nondiscretionary, which means it's a break-fix business model, where if you're delivering that service, that drives the legacy of the relationship as you move forward. As part of that, it's not a surprise, part of availability, reliable and timely delivery, quality product, those are order qualifiers. That's table stakes. There's the transactional elements of our business and our initiatives help drive improvement in those areas as well. But as we think at a deeper level, we have opportunities to think more broadly about the offering around innovative solutions. And so I'll talk a little bit more about that. You'll see it in the showcase as well. This idea that we're bringing value in addition to the transactional elements of the interaction. And you'll hear Naveen talk about the role that technology plays in really thinking in a disruptive way about what the definition of solution is. Paul talked a little bit about this slide. I think the numbers on this page are pretty startling in a positive way and amazingly different than some of the other competitors in the market. Think about for a second, 90% of U.S. consumers are aware of NAPA. That's not our customers, that's not people in the automotive industry, that's 90% of U.S. consumers are aware of NAPA. You can see that in our business in Australia, 90%, 97% awareness for Repco. That's a 100-year-old organization with the same local credibility that we have as NAPA here. Motion ranks #2 in the North American industrial distribution list in 2022, slightly different branding strategies in Motion, but it is the known brand, not only in North America, but now also in Australasia. And the marketing teams do incredible work to be very thoughtful and strategic about how do we continue to build this brand equity, but I have to say, these are differentiation points for our organization relative to the competitors. People would kill to have this type of brand equity. And it's a great foundation from which we can build and deepen our relationships with customers. You'll hear throughout the day the successful momentum that we have with the NAPA brand in Europe and even Australasia. It's a great case study that proves out this point that the brand travels. It's iconic, it's global and it's a differentiator. I'll show you a quick visual here. It's busy for a reason because I think it drives home the point. We talked about having the infrastructure to execute against the opportunities that we have. Let me build this up. Automotive DCs. Automotive DCs, this is the U.S., just as an example, U.S. automotive DCs in yellow, I just overlaid the company-owned stores on top of that. I just overlaid the independent owned stores on top of that and I just overlaid the 18,000 NAPA AutoCare workshops. I think we've got the market covered, got to go make it happen to execute and earn that wallet share with our customers. Same point on Motion, distribution centers, branches. Gray shadow is all of our customers today with our existing relationships. There's incredible power in this network and untapped potential. Incredible power in this network and untapped potential. We'll talk a little bit about it in the showcase, but how do you optimize this network? It's all of our work around supply chain, how do you make this perfect? And it's a never-ending journey. Okay. So I've laid out for everybody the opportunity we have in front of us, now we do about it, how do we go and execute as a team? And we use this page internally. We call it the GPC operating principles. And I think it clearly lays out for people the expectations of how we execute. You see here how we play One GPC working together to create customer success and shareholder and stakeholder value. Customer success, the center of everything we do and delivering value for our investors. Where we play? We've talked about this. We are very focused on extending leadership positions in the industries, in our existing geographies, in our customers, our suppliers, where we have opportunities to profitably grow. The whole premise and focus of where we need to invest and what we need to execute is how we win. And I'll walk through that in a little bit more detail, and then you'll see it come to life in the showcase. And then at the end of the day, all of our activities have to deliver financial performance, profitable growth in excess of market, operating leverage, which is the concept of profit growth as the numerator over the sales growth free cash flow and return on invested capital. So let me spend a few minutes on how we win. This is the strategic pillar framework that guides all of our investments into the business. This is how we run our organization when we have our business reviews each month and each quarter, we look at the initiatives in these pillars through this prism and talk about progress. And as we refined our priorities coming out of the pandemic and studied globally where everybody was spending time, they fit into these pillars. It's the framework that we use as we're talking about investment of capital, not only just managing the business, talent and culture, the concept here, as Paul said, talent, talent, talent. It's all about the people, building high-performance teams. Sales effectiveness. It brings this concept of making sure that all of our selling assets, whether it's field sales professionals, inside sales, marketing strategy, pricing strategy, how are we optimizing our ability to profitably grow within our customers? Technology means many things. It starts with data. It starts with digital, technology infrastructure, but this idea of creating a better customer experience with a solution using technology, with the supply chain and the next pillar behind it to help support that table stakes, right product in the right market at the right time. And then emerging technology is the idea that we're aware of how our industries are evolving, and we're positioning ourselves to be realistic about what's actionable today, but making sure that we're thinking about the future, and we're in a position to be in a leadership position, and we wrap that all with M&A activity. Let me give a little bit of perspective on each one of the pillars to tee up what you'll see in the showcase. We're proud of this page, we should be. It's incredibly differentiated and unique. Look at the scores there. This is from engagement data from our global employees, 50-plus thousand employees, 80% of the employee base took the time to respond. That's a great day point number one. I commented earlier about culture. It's this consistent leadership at the top. That's what drives a page like this. 80% of the organization is classified as engaged. 80% of the global organization is proud to work for our company. 80% of the organization believes that GPC is a great place to work. Those are amazing statistics. And you would start a company with a foundation like this. You can see on the word cloud side of the page, look at some of the words. This is a global survey, diverse, flexible, inclusive. Remember, we're collecting this data as we've come through a pandemic. This is good stuff. The diversity, we've been very deliberate about making that an important part of building a high-performing diverse team. As an example, in 2022, every single technology hire that we made in the United States, 70% diverse, 30% female. Women in technology, that is a very impressive number, and it's very deliberate and intentional to make sure that when we're bringing new expertise into the organization, we're doing it the right way. There's also words in this word cloud that I think are reflective of where the company has been, things like evolving, transforming, change. And as we look forward in our industries and strategies evolve, we need to continue to evolve our people strategies to add capabilities and expertise. The definition of culture is the way in which work gets done. And it's normal and healthy for that to evolve with its customers, industries and competition. Our obligation as a leadership team is to continue to build on the rich history as we evolve with our customers and industries, and I'm confident that we're doing that and we're doing it thoughtfully. Culture is a competitive advantage for this organization. It should be. And it's critical to being able to deliver differentiated performance relative to our competition. We're going to be very intentional on this point. We will never sacrifice investing in our people, growing them, making them better leaders, and that's the core of who we are. All right. This idea of customer solutions. So more than just the transactional part of our business, that's table stakes, how do we evolve our organization to create more value when we're working with customers? And it is impossible to illustrate all of the different ways in which we do that. Remember, in the automotive business, our customers predominantly, the workshop technician. We have the largest network of workshops across the globe, all technically certified, 28,000 passenger and 2,000 truck workshops. That is a competitive advantage. Now how do we drive solutions through that? The right part, the right place, right time, table stakes initiatives certainly help us do that better, but the word solution is important to emphasize as we move forward. We want to be more than just a part piece provider, we want to be helpful. A few simple automotive examples. We help workshops drive bad traffic and revenue. That makes them more money. That makes them more loyal. We help them improve the profitability of their operations. That makes them more money, that makes them more loyal. We help them being more productive during their day with better technology solutions. We help them be more productive and effective when they're training labor and their workshops. And there are many other ways in which we can innovate to create those solutions where we drive that relationship deeper, that positions us for better wallet share, loyalty, ultimately making us a deeper partner and solution provider to these customers. So in summary, massive installed base of loyal customers. We understand their needs, actively working to bring innovative solutions to them to create a win-win solution. Same concepts in industrial. We want to be more than just sending a part from point A to point B, and that is a big and increasingly big part of the business. You hear us talk about value-add services solutions. This is the concept. We've got things like automation, robotics, fluid power, conveyance, repair. We're one of the largest in our industry, all these offerings bring solutions to our customers to help the challenges that they face. They want more than parts. They want solutions, a technical expertise to limit the downtime of the operations and reduce the total cost of ownership. That's a big, big thought. We are there to make them successful through solutions. As global manufacturing operations evolve, they'll become more dependent on and more connected to an intelligent and automated, and we can provide all these solutions. Digital. What does digital mean? Digital has many definitions. Naveen will follow me to bring his concepts to life and do them justice. But I'll add a few of my thoughts. First, when we say digital, we mean the use of technology as we interact with our customers. For this to work, you obviously need the data that underpins that technology to be actionable, clean, accurate, high-level thoughts on the page, integrate the customer experience in a unique solutions ecosystem. What the heck does that mean? It means we need to build technology solutions that make our customers' lives easier and seamless as they work with us. Map the customer journey to craft omni-channel experiences. What does that mean? To build these solutions, you've got to deeply understand the different types of customers and what they need from us so that you can inform your design. For the U.S. Automotive, for example, you have a driver, we call them the passionate doers. Think about that as the retail car enthusiast that's able to work on his or her car. We talk about the passionate planners. We talk about the Pro such as the independent workshops and major accounts and the partner who's our independent store owners and auto care owners. Examples of our customized digital tools for the driver would be NAPA online and our mobile applications, PROLink and tracks shop management for the Pro and Parts Pro and other business tools for the partner. For Motion, we think not only about the operational buyer in the facility that's trying to keep those operations running. But we also use technology to empower our internal customers, our field sales professionals, our technical experts to interact with the customers and interact with each other. So examples of those would be our motion digital tools where we see spend dashboards and opportunities to penetrate wallet share within our customers. We've got maintenance applications that we can pull up digitally and look our customers to understand where they have needs and a variety of other examples that you'll see in the showcase that will bring to life. Digital, data and technology have an exciting role to play in the future of our industries. And I can tell you, GPC is going to lean into technology and digital and make this a competitive advantage. Pricing. I think we all appreciate the importance of strategic pricing given the environment in which we operate. There's 3 elements that we're going to bring to life in the showcase to you, customer segmentation, end-to-end profitability and then talent. First, customer segmentation, understanding our customer segments in terms of their purchasing behaviors and adjusting frequently based on market dynamics. We get a lot of questions on our earnings call, how do you think about pricing? What are you seeing in the market? And it's changing each and every day. If you're not adjusting your prices at the SKU level by local geography, by customer each and every day, you're not capturing your full potential. So it's a very surgical approach with analytics, science, data to make sure that you're in the right strategic positioning from a strategic pricing standpoint. Second, end-to-end profitability, more disciplined approach to contribution margin. This is a big thought. It's hard. It's a culture change. Our transaction cost with a customer is more than just the product margin. And the teams are doing an amazing job to evolve how they think about the fully burdened cost of that transaction. How do you think about the cost of putting that product in the DC? What about the commission to the sales professional? But a whole another level of science around where are our most attractive opportunities and using this level of analytics and science to drive us to the best opportunities. Thirdly, it's all about talent. You'll see an opportunity. We've got great teams around the world around pricing. This requires a very unique skill set. It's changing fast. It requires science. It requires analytics. If you think about the merchant at a place like an Amazon, they're not a product expert. They're probably a technologist or an engineer. And so this idea of data science and using math to figure out where you have opportunities requires investment, it requires training, and we're well on that journey. Supply chain speaks for itself, 3 main thoughts here that capture in 3 words: consolidate, automate, optimize. Consolidate is the concept of making sure that our facilities are in the right location. Automate is the idea that once your facility is in the right location, it's highly productive. And then optimize this concept of making sure that the network flow from point A to point B is highly efficient. As a distribution business, we need to be excellent at this. It is a never-ending journey. Even when you're best in class, you've got incredible opportunities to drive productivity. You'll hear Bert talk about this as we talk through our financial expression. If you think about the pricing and some of the things that we're doing around profitable growth, that drives gross margin expansion. This area of the business drives incredible productivity in our SG&A and the way in which we serve our customers. Emerging Tech. I think it wouldn't be appropriate if we didn't explicitly talk about our analysis of the impact on electric vehicles to our business. And I can tell you we have studied this topic deeply, and we will continue to study this topic deeply. We have worked with what feels like almost every global consultant, you can on this topic. More importantly, we've developed internal perspective on what we really think it means for our business. The takeaway of this page is that this is a net opportunity for Genuine Parts Company. And when you consider the pluses and minuses down the side of the page in the bar graph there with a growing and aging car park, additional new products that come into the car park, price from the complexity of the repair work on a car, offset by fewer parts, offset by potentially fewer collision parts given ADAS. If you look at Europe, it's all the way down to the U.S., it's plus or minus 1% on the market. And that's in a scenario where we assumed no core market growth -- inflation, excuse me. And we also assume that you just sat there and watch the market. So you don't take any action to see some of the opportunities that I just described. It's not a practical scenario. But even in that scenario, you're talking about a minus 1% to a plus 1% impact to the total market. What we're excited about is the green bar. And why we're spending the time today to do work for the future. The right-hand side of the page shows you it is the future. By 2030 in the U.S., for example, today, EV only represents approximately 1% of the car park. In 8 years, it will be 8%. We're talking about a car park in the United States, 280 million vehicles to calibrate it. So 1% of that 280 million today is EV. Hybrid is a great opportunity for our business. It creates the best of both worlds where we get to sell EV parts and combustion engine parts. In Europe, everyone says, well, it's moving fast in Europe. It is moving faster in Europe. And you can see the statistics here. It's 2% today. People talk about, well, all new cars sold by 2030, 2035 are going to be required to be EV. That's true. 7 years after that new car gets sold becomes the aftermarket opportunity. So I hope you leave this page firstly with a few thoughts. One is we've deeply studied it. And two, it's an opportunity for us to proactively go out and create a leadership position. What I didn't say on this page is for our Motion business, as I talked about on that previous slide, this opportunity is incremental to anything that they contemplated a few years ago. Meaning they have customers with all the EV manufacturers here in the states, some of the fastest-growing customers in their book of business. All the related industries around all things battery is an opportunity. So I hope this point lands well with you. And obviously, we'll have a lot more time to talk about it. Efforts today for us, what are you doing in our green box? What are you doing about it? There are 3 areas: relevant parts, training and access to information and services and equipment. NexDrive is the solution. This is our internal brand and strategy around EV. NexDrive the solution to provide the customer alternative and to prepare those workshops to be ready to work on an EV. Think about that network chart that I described, we are in a position to help thousands of workshops get ready for this and view us as a trusted solution provider when we do so. Training, marketing, tech support, audits and equipment, store training. This is a capital-light initiative. We're not opening new NexDrive stores. We're working with existing workshops to go and be supportive. Today, we have product opportunities that we can act on in EV. Thermal management, electrical systems, cameras and sensors, tools and equipment. Our global partnerships with all of these global innovative supplier partners are positioning us and giving us the first look to take a differentiated path forward on all things, EV. The trend will take time. We always say 10% of your time should be thinking about 5-plus years out, 20% of the time should be thinking about 2 to 5 years out and 80% -- 70% of your time should be thinking about what you're doing today. We're appropriately calibrated on what this opportunity is, and we're not distracted from running a great business for the next decade. All right. Another question we get often asked is M&A, how does M&A fit? How do you create value? This is a legacy capability of this organization that we're going to continue to build on. We use M&A to add density into our existing markets or fill out that strategic network that we talk about. That can mean in a market that we're already in today, it can mean a new geography that enjoys the characteristics of that 1 or 2 -- #1, #2 leadership position in a highly fragmented market where we can go and take advantage of all the things I just talked about. We bring to bear a lot of value when we bring these companies into the organization. Talk about vendor harmonization, payment terms harmonization, SG&A leverage on indirect sourcing, thinking about their supply chain and their footprint in a different way. It's a very powerful repeatable value driver for the business. We do annual bolt-ons consistently as part of our DNA. In every 2 or 3 years, we're willing to do a step out to look at a new platform that gives us some of the things that I've described over the course of my comments. Here's a little bit more information on the specifics of our M&A execution. On the right-hand side, importantly, we have a very robust approach to thinking through why we do what we do. It starts with culture. The worst thing that we can do when we buy a business is bring them into the organization and be a bad culture fit, strategy fit, financial fit, operational fit. On average, we'll deploy $200 million to $300 million in annual capital. And importantly, in the lower right, you can see if we pay in the mid-single digits for a purchase price multiple, we expect to pay that multiple down 2 to 3 turns, and that's been our experience over time. So I'll bring it all together. I hope my comments gave you a better appreciation for a couple of things. One is that we're incredibly focused that we've got great global alignment, and we're really intentional about where we're executing so that we can make a difference. We believe that we do have the right positioning, the capabilities, the strategies to extend these wonderful businesses and extend their leadership position. The GPC culture, in my opinion, does create a competitive advantage. It creates an opportunity for us to leverage our advantages, learn from each other and work together to deliver exciting value creation for our shareholders. With that, it's my absolute pleasure to introduce Naveen Krishna. Naveen has been with our organization for a couple of years now. And Naveen is responsible for all technology across the global business. And his small mandate is to modernize and design tech solutions that will extend the differentiation of our business as we move forward. You can hear hopefully the theme of the role that technology is playing as we continue to drive solutions as part of the evolution of GPC. So with that, Naveen, welcome to the stage.

Thank you, Will. Good morning, everyone. Welcome to Atlanta. Thanks for taking time to meet with us and hear our story. My name is Naveen Krishna, the first time I'm meeting many of you. I've been with the Genuine Parts Company for a little less than 2 years now. Having led technology and digital efforts in many industry segments like home improvement, big retail and department stores, I see tremendous potential in leveraging the solid business foundations that we have, global scale, the vast amount of data that we have and then embracing modern technologies. While we can draw on these experiences, the technology strategy that I'm going to share with you today will set us apart from our competition. I'm especially excited about the potential to harness the power of our data to create long-term stickiness with our automotive aftermarket and industrial solutions customers. Over the next 20 minutes, I will share with you how we see the role of technology evolving at GPC and our mission to transform the customer experience to create long-term value. Traditionally, the role of technology at automotive aftermarket and industrial solutions companies, including GPC, has been mostly utilitarian and viewed as a cost center or, let's call it, keep the lights on and less of a center of -- or a source of revenue and innovation. In the recent past, at GPC, the role of technology has evolved a little bit. It's become a strategic enabler to help drive growth and create value in several key areas. We're expanding our technology platforms to help digitize and drive efficiencies inside of our customers' operations, which is resulting in increased loyalty and also making us a lot more efficient organization. The insights we are now starting to derive from our advanced data and analytics platforms is enabling us to make decisions like we've never made before. It's especially true in pricing, inventory planning and sourcing. We're actively working with virtual reality and augmented reality technologies to drive value for our customers through service delivery efficiencies and create even greater connectivity with our customers. Looking ahead, we are in early stages to leverage artificial intelligence technologies to increase productivity for us and our customers and accelerate the innovation of new business models, products and services. We see technology as being a force multiplier to amplify the potential that exists with the combination of our global automotive and industrial businesses. You will see the beginnings of some of these unique possibilities in our initiatives showcased after my presentation. While customer experience is fast emerging as a single biggest differentiator in both automotive and industrial businesses, we've not seen any meaningful differentiation among any of the companies in this space. We have started that journey, and we will lead it. For us, this means having a maniacal focus on creating frictionless and consistent customer experiences that delight our customers throughout their journey every single time. I mean just like how they're delighted in their daily personal lives at a large coffee chain. Although we are uniquely positioned in our -- with our global scale of over 9,600 locations, the strong supplier partnerships, our deep product assortment, pricing, inventory availability and our execution discipline, these are all table stakes today. Globally, we supply parts to over 1.5 million auto repair and commercial customer locations and over 900,000 industrial customer locations. On the average, our share of the addressable spend is between 12% and 15% with our automotive customers and a little over 25% with our industrial customers. While we will continue to improve on the table stakes, we believe transforming the customer experience is critical to increasing customer loyalty and gaining a larger share of their addressable spend. We'll focus on 3 pillars to transform our customer experience and enable strategic priorities that Will just laid out. First, we'll strengthen our foundational platforms. Second, we'll develop solutions to drive recurring growth and loyalty. Third, we will leverage data to modernize our competitive advantage. Transforming customer experience starts with strengthening our foundational platforms that, first of all, contribute to the friction that our customers face. These platforms include product catalog, search, digital and commerce, payments, supply chain and the solutions to help our customers modernize and improve their productivity. We've assembled some of the best technology talent experienced in building digital transformation platforms in similar business-to-business industries. And we continue to attract top talent in engineering and product. For example, in 2022, nearly 45% of all our new hires in corporate functions across North America were in digital and technology. Our investments in collaboration platforms are already paying dividends by enabling seamless connectivity for our global teams. In late 2022, we established a global technology center in Krakow, Poland. This was to accelerate our digital efforts and increase the collaboration even more with our global technology teams. We are now able to operate in an around-the-clock software development cycle on many of our platforms. We also embraced a cloud-first approach on all our platforms development and that with a mindset of speed over perfection. We have partnered with Google to accelerate this road map, especially in product catalog and search, digital and data platforms and inventory optimization. Approximately 15% of our suppliers are common across automotive and our industrial businesses. As we modernize our product catalog platforms, we will be able to drive more efficiencies won internally and also for our supplier partners. Having an exhaustive catalog requires us to have a very robust search engine. We are working with Google to develop best-in-industry search, and we have conversational AI in the not-too-distant future. Google today powers our search and industrial business. And we have the automotive aftermarket industry-leading search will be available here very shortly. Our investments in commerce platform to serve both the automotive and industrial businesses will help us bring digital capabilities much faster to our customers. And we plan to open up these digital platforms and capabilities for our customers to use in their own operations. Our customers will be able to more seamlessly transition between our stores and our digital properties, creating an interconnected digital experience. We're also strategically investing in our payments ecosystem to streamline the payments processes that we influence at over 40,000 locations around the globe, driving over 400 million payments transactions per year. In addition to reducing the total cost to serve, this ecosystem will create a unique first-in-our-industry solution for our customers to create a differentiated degree of stickiness and also help our customers create stickiness with their customers. Modernizing our global network of 200-plus distribution centers is yet another critical step in reducing friction for our customers. This involves rethinking, rationalizing our distribution network, automating our warehouse operations, using predictive and AI to improve the demand forecasting and inventory planning and driving a value out of more than 13,000 of our last mile delivery vehicles that we have globally. The commercial software group in our automotive business is a relatively little known gem. We license software solutions to over 8,000 subscribing auto repair centers here in the U.S. alone. This is a highly under-tapped opportunity for us. And we are starting to invest in reimagining the auto repair ecosystem, along with our learnings from our EV partnership with NexDrive to create the next-generation platform for auto repair centers operations. Disciplined execution of our operations on these platforms will enable us to create increased stickiness with and a unique position to reuse these platforms across automotive and industrial businesses globally will allow us to reduce our total cost to serve. This is embedded in the financial targets that Bert will share a little later today. We are committed to taking a technology and data-driven approach to strengthening our foundations and transforming our customers' experience. While the underlying platforms can be common and shared across GPC global businesses, leveraging them in our operations to drive growth and loyalty is specific by automotive and industrial business. In our automotive business, we are very uniquely positioned to transform the customer experience. Let me give you 2 examples. After over 1.5 million auto repair centers we serve globally, more than 30,000 of them are GPC branded auto repair centers. And we train auto technicians for many of these 1.5 million repair centers. In 2022 alone, we trained over 50,000 technicians globally. As vehicles become more high tech, more complex, the automotive aftermarket business is going to continue to skew towards -- more towards do it for me. As I mentioned before, we provide repair shop management software to 8,000-plus repair centers just in the U.S. Our digital platforms, that are getting directly integrated into our repair share management solutions, will provide a very unique and frictionless experience for our repair centers to manage their shops and the parts orders all on one platform. The strength of our platforms, combined with the auto repair data and systems, will create unprecedented loyalty with us. As the EV car park grows, our investments and success with NexDrive in Europe has uniquely positioned us to help existing auto repair centers grow into the EV auto repair market through the NexDrive program, further increasing loyalty with us. This uniquely positions GPC to be the largest network of integrated auto parts and repair solutions partner. Next example. Our modernized platforms will further extend our leadership position in seamlessly integrating with procure-to-pay processes for our major accounts, customers, fleet operators and government agencies. Today, our proprietary technology solutions automate integrations into over 35 procure-to-pay systems. This has been a key differentiator in us winning customers and then onboarding some of our largest customers very quickly. And then as our customers had to standardize their global operations, our platforms will be able to provide consistent integrations globally to support their end-to-end processes like visibility to orders, invoices and simplified payments. These simplified integrations and the value-added solutions will continue to be critical for our retention and loyalty of our major accounts fleet and government customers. In our industrial business, the primary rate of stickiness is the depth of knowledge and expertise our employees have of the customers' operations, their machinery and their equipment. Our best customers ran us for total solutions, not just our parts. Let me share 2 examples from our industrial business. Our proprietary IIoT or Internet -- Industrial Internet of Things platform, the operational telemetries data from our customers and the advanced data analytics enables us to create a digital twin of our customers' operations. This enables us to establish a closed loop directly with our plant floor for asset maintenance, repair and replacement needs. It also allows us to extend our digital platforms into the customers' operations in a very unique fashion, resulting in our employees being able to move up the solutioning and buying decision chain, if you will, and creating long-term value. You're going to see some of this at the innovation showcase. Second, we've expanded our inventory network and digital capabilities to offer our industrial customers products that we don't carry in our catalogs. This eliminates the need for our customers to go to multiple vendors and provides a seamless shopping experience through a curated marketplace. Not only does this create a significantly better customer experience, it also increases loyalty with us and expands our share of the customers addressable spend. And now on to the third pillar of our technology strategy. The vast amount of data available across our global operations in automotive and industrial businesses is one of the biggest under-tapped potential we have at GPC today. It's a new oil or, let's call it, our lithium. For example, we have over 24,000 hours of automotive repair content. Will it to further extend and modernize our competitive advantage through data-driven decision-making? So what does that mean? This means using our vast data stores to inform our decisions, leveraging emerging technologies like machine learning and artificial intelligence and being willing to disrupt traditional industry practices to create a step function change in our customers' experience. What you see here on the screen is a simplified representation of our automotive and industrial business supply chain. If you look to the center and towards the left of your screen, the data generated here in the upstream is from part sourcing and parts distribution and also data from our suppliers. These data sets help us improve our operational efficiencies. Many companies have this type of data. Now let's move to the right side of the screen. Consider the data generated here closer to the customer operations. It's highly fragmented. It's less accessible, but a lot more valuable data to help understand and influence our customers' experiences. GPC is uniquely positioned to leverage this type of data sets generated closer to the customer operations. In our automotive business, we have an advantage with access to data sets not just that span across the global network of parts distribution, but also the auto repair centers where the parts are consumed. As we modernize and expand our auto repair center management or shop management offerings, our data sets closer to the customer, that's the repair centers, will provide us much more intelligence and enable us to drive deeper insights to create a differentiated and frictionless experience, both for the repair centers and our motors. In our industrial business, the closed loop we create with our customers through a digital twin is enabling us to leverage the data and derive very unique insights to provide our customers unparalleled friction-free experiences. Also, these richer data sets and machine learning models further enable us to improve our sales effectiveness and then transition our sales force and our selling processes from being an art to a science. We've selected advanced data engineering platforms from Google to unlock the art of possible in these unique data sets. By 20 -- end of 2023, we will have a very large portion of GPC's enterprise data running on Google's data platforms. We are in early stages of modernizing our competitive advantage by leveraging our data and are pleased with our progress so far. The initiatives showcase, you will get a chance to experience beta versions of what's possible at GPC by leveraging our data, applying machine learning and AI algorithms to pricing and supply chain use cases. Look, it's an exciting time to be part of a Genuine Parts Company. We have a solid foundation and an opportunity to differentiate and set a new standard for customer experience and loyalty in the automotive aftermarket and Industrial Solutions segments. We have the talent. We are well underway on our road map. And we will transform the customers' experience. I will do this by strengthening our foundations, developing solutions to drive recurring growth and loyalty and leveraging data to modernize our competitive advantage. Thank you for your time and attention this morning.

Thank you, Naveen. Technology is woven into all of our initiatives, many of which you're going to see in the showcase, which is next on our agenda. So just a few things to know. For those of you on the webcast, please stay with us, as I mentioned earlier, the video will begin in just a moment to share what some of our in-person attendees are going to see. We'll be back with you at 11:00 a.m. So for those of you in the room, the net of the messaging is that we're going to take a quick break, and then we hope to see you in the tent as soon as possible. But I've been asked to give you a little more detail. On the back of your badge, you've got a letter referring to 1 of 6 groups A through F. You also have a table number. For now, focus on that letter. After that quick break, please make your way out to our showcase tent. You're going to see 6 folks with letters, again, A through F, find your guide with your letter. You're going to stick with that person through a showcase of 6 exhibits that we think is just going to be great for you to see. We're excited to share this with you. After the showcase, we're going to make our way back into this room for the remainder of our program. So with that, let's take a quick break. We'll see you in the tent. Thanks. [Break]

[Presentation] We know today in supply chain customers have choices. They have choices around what they buy, how they buy it and when they buy it. So that means we need to build a very dynamic and flexible supply chain that allows us to deliver what customers want, how they want it and when they want it. We believe GPC is uniquely positioned through our global footprint of over 200 distribution centers, over 750 branches, in 9,600 stores and a final mile delivery fleet of over 13,000 vehicles. We are globally transforming our supply chain. Our business units are focused in 3 key areas. First, we're focused on optimizing our supply chain. That means integrating our distribution, fulfillment, transportation, store and supplier networks. We're also investing in the latest tools technology to automate our facilities and where possible, we are consolidating our footprint globally across the business. What I want to do is walk you through at Motion Industries or the Industrial Group, how we recognize and rationalize our real estate, the type of technology that we're used usually to support that real estate and then finally, the science that we're using to understand the type of product we need to have in there as well. For over 75 years, Motion has operated under a hub-and-spoke model, meaning that we have a distribution center, feeding over 20 or 30 branch locations. The branch locations then handle final mile packaging and delivery. This does really mean a hectic stocking method and the customers didn't always have what they needed in the right place. Today, we've removed the layer of logistics, and we are replacing those distribution centers with fulfillment centers, who then will execute final mile packaging and delivery. In addition, we're coupling a world-class final mile, including electronic proof of delivery. We're doing this in a way so that all customers that enter the orders by 3:00 p.m. will have those orders arrive at the following morning of the next business day. And when you take a look at this map, you can see the black dots there. Don't think of them as branch locations, but think of them as heat density for customer demand. And those red dots then would be conceptually where our fulfillment centers but operate. Traditionally, in those distribution centers or fulfillment centers, we would use standard racking and shelving to house the inventory. All in, we would process about 95 lines per hour. It's a rather nonscientific approach for how we would locate those distribution centers. Today, we've identified technology that improves productivity by over 545%, and interestingly, requires 40% less square footage. We use geo-mapping to determine the right location, again, based on that heat density of where our customers are. Here's a picture of the goods suppressor technology called AutoStore that we've deployed. We piloted in Birmingham, Alabama. You can see from the top of the grid looking down, those are the bots. We have 23 of those servicing 30,000 bins, about 25,000 SKUs. The photograph on the right is our new solution in Maryville, Indiana, which is in the process of being constructed. It has 44 bots, 60,000 bins at about 41,000 SKUs. I'd like to show this chart because it talks about lines process per hour and solution size. So lines process per hour or LPPH, again, conventionally would operated about 95 lines. AutoStore has the capacity for 1,000 lines that we would have a throughput for it. VLM is a vertical lift module. These are very tall vending machines. You can string 2 or 3 of those together and pull about 120 lines per hour. And this isn't necessarily a speed play, but it's a way to rationalize your space. So all in, 585 lines per hour in Birmingham, Alabama. But note the solution size, with conventional shelving and layout, we were at 48,200 square feet. Now all of that product plus 30% more capacity sits on 10,500 square feet. As we continue to see pressure on commercial real estate, we'll continue to see prices raise. It's important to understand the size that we need to house all of that equipment. To make sure that we have the right inventory inside that technology, we've deployed something called PRIMA, it's our demand planning and forecasting tool. PRIMA stands for predictive, regressive, integrated, machine learning algorithm. It's scientifically developed internally and homegrown, integrated with AI machine learning. We use to control tower approach, meaning that we can move data from one supplier to another or to any other place we choose to deploy it. It uses both internal and external data or Motion and Market Day. Has about 30,000 lines of code, and we do calibrate it monthly. Now we use it to leverage opportunities and mitigate risk. By that, I mean, to leverage opportunities, that would be to say when we see that things are improving, and we may want to have more inventory in place, we'll pick this up through our forecasted methodology and make sure that we increase our stocking position. Conversely, we know that if we need to be less robust in our purchasing, we can mitigate or have material arrive before you realize you've got more than you really need. On the right-hand side, we take a look at the regressors or data. Again, internally, we're measuring the things you would expect, like sales and bookings, quotes, purchase orders, et cetera. But externally, we're looking at suppliers and suppliers, supplier data, customers, our customers, customers' data and so forth and so on. We're looking at sales surprise, new sentiment, raw material pricing, just to name a few. And all of this could put into that 30,000 lines of code. What we've done is we've placed PRIMA midstream of the data. And so to PRIMA's right or your left, you'll see where we've got our strategic suppliers where we're looking for that external information and other suppliers and also their competitors. To PRIMA's left, we're looking at our internal data, our customers' data, our suppliers customers and so forth and so on. And again, all of this becomes part of the algorithm that we use. We also integrated with purchasing. So what works like this. If we start in the first quadrant there, we'll see where PRIMA will take a look at 1 billion records and throughout all the irregularities. From there, she'll determine usage and lead time by DC, FC or SKU and then finally, analyze our customers' SKUs and mitigate risk. Forecast usage and lead time is considered so that, in number five, stocking levels are calculated and then safety stock. And then finally, we kind of stop and take a look at that and say, are there any inventory procedures that have changed since the last time I ran this formula? Do you have the inventory that you want to speculate on? If the answer is yes, those are contemplated. If not, we then move that over into a shared service center in Atlanta where the purchase orders are built and grouped and the orders are staged. And now what we're doing is actually integrating that with our suppliers so that we electronically feed that order to our suppliers that we have end-to-end demand planning all the way into purchase. Jeff?

So as we optimize and automate our distribution and fulfillment centers, it allows us to have the opportunity to consolidate. You can see across the globe, we have several new distribution centers under construction and/or nearing completion. They are outfitted with the latest tools, technology and automation. And in several instances, we are consolidating 2 to 3 facilities and sometimes upwards of 5 to 7 facilities. Our end-to-end connected slide chain is coming together. It is fully integrated. It is becoming more accurate, transparent in-stock efficient and reliable, which is allowing us to exceed our customers' expectations. We appreciate you giving us a little bit of time to talk to you about what's happening in the supply chain. Thank you. [Presentation]

We're excited to talk to you about emerging technologies today. Although electric vehicle sales are growing, the proportion of EVs on the road will be a more gradual change. ICE vehicles will remain predominant even in 2030. The rate of adoption is quicker in our European and Canadian markets. In the U.S. and Asia Pacific, this propulsion shift comes later. Nonetheless, we recognize this shift comes once in a lifetime, and we're adapting our strategy accordingly. We believe there are 4 competitive advantages that position GPC to be the market leader in our space. Our presence in higher adoption EV markets is something that most North American competitors don't have. Our robust training and garage network management function brings customers on this journey in new technologies. Partnerships with premium suppliers ensure our customers have full access to parts, services, training and information. And finally, our coordinated focus approach to this function. It means we can repay successes from each of our business units across others. We designed our strategy and initiatives around 3 key pillars: most important, training and access to information. Modern vehicles are more complex and the presence of electric current in the vehicle means our technician safety risks. We provide our technicians with the necessary training and provide additional access to vehicle technical information and advanced diagnostics. The second pillar is providing services and an equipment offering to our workshops. We're helping them fulfill their demand for modern solutions to run their businesses and outcompete their competitors. Our third pillar is parts where we continue to remain experts in identifying and purchasing the products our customers need. 90% of the parts on an ICE vehicle will remain on an electric vehicle. There are also opportunities for new EV product families and advanced electronics that my colleague will speak to you later. Finally, I want to call out NexDrive, an exciting initiative we believe, brings together all 3 of these pillars.

So NexDrive, powered by NAPA, was a brand that was launched in the Netherlands in 2020. This brand expanded to the rest of Europe, went over to Canada, the U.S. and expected to be global by the end of 2023. Now what is this brand? Well, it's simply driven by customer need, customers are looking for alternatives to repair and maintain their EVs. The only option they had before was going to the OE dealership. Today, they will have an option to go to the NexDrive, authorized NAPA facility. Also aftermarket shops, I've been looking for solutions for quite a while now, seeing the market change in some areas throughout the world, some faster than others, and they're looking for help in supporting them and leadership into the EV space and the hybrid space. Therefore, NexDrive is a solution that we provide. We launched the program. It's a program that's available to our NAPA networks with a rather small capital investment on their part, and it provides them a solution for their future. There's really 5 pillars holding the strategy for a NexDrive, powered by NAPA. First of all, training. So training will be key. We need to train technicians in every one of the NexDrive facilities to make sure they repair the vehicle right the first time. Marketing and branding, targeted marketing for both the garages and consumers will be used. And we'll be quite a bit stricter on the brand and signage guidelines that we've been using. Technical support, which is well done in Europe today, is also a key piece information will be required. We're looking for a supply partner for North America right now. Equipment, there's specialized equipment that's required for EVs, which did not exist before. So we need to guide our shop owners as to the equipment they need to buy and also have an audit system to make sure that they stay up to date on the equipment and stay up to date on the training because the cars are going to continue to evolve. Finally, NAPA has got the greatest footprint out there in terms of stores. We need to provide store training so that the NAPA store can service the NexDrive facility in the same way. So they both understand EVs and hybrid vehicles and talk the same language.

So when you think about electric vehicles, most of the products and services performed on these vehicles are the same as for combustion engines. That being said, we're very excited about some of the new products that are coming into the market. . I'll start by talking about thermal management. I think about the host systems for a combustion engine versus an EV, the EV is much more complex with many more houses than a combustion engine. Also using Tesla as an example because they are majority market share in the pure electric vehicle market. We offer thousands of parts for Teslas. One example of that is Brembo Brakes, who is the OE supplier for Tesla. We are going to be launch a month an exclusive offer of Brembo Brakes in the U.S. aftermarket and are very excited about that. We're also excited about seeing the different types of new categories that are coming in, for example, vehicle chargers. We have a number of different partners that are supplying these vehicle chargers for us and for our customers. You turn and think about the workshop. They also have a lot of needs around electric vehicles. There's new diagnostic tools as well, in particular, safety equipment. That could be anything from gloves to insulated tools, and we're currently launching a full line of insulated tools under our private label Carlyle brand, and we will be the only ones in the aftermarket to have that. Lastly, I don't want to forget about advanced driving assistance systems. So this is all the functionality up to including self-driving. So think about your lane departure warnings, your adaptive cruise control. All these functions require many sensors and cameras. And this is growing exponentially in the marketplace. So whether you have an EV or not, this is relevant. And it's not just the products, that's an opportunity the workshops need to calibrate these cameras and sensors to make sure they continue to work properly. And we are happy to sell these workshops, the equipment needed to do these calibrations. So in conclusion, we are very excited about our opportunities in emerging technologies. [Presentation]

Genuine Parts is leveraging technology and data to enhance our strategic pricing capabilities across all business units. Pricing creates a unique opportunity for both the automotive and industrial parts groups to gain increased market share while improving profitability. This is an increase in both top line and bottom line. We've developed financial models to quantify relevant costs, profitability and pricing scenarios across all offerings and markets. Our design strategy was built around the unique product and service offerings of the different businesses. We will highlight our approach to customer segmentation, end-to-end profitability, and capability building as we are continuing to invest in technology to further increase our strengths of being competitive and profitable. On customer segmentation, Genuine Parts continues to enhance our data, advanced analytics and digital capabilities to deliver profitable growth and a best-in-class customer experience. Our strategy is to take a customer approach to ensure that we are fully understanding all facets of our customers' needs and behaviors. To do so, we employ surgical price setting done at the customer and product level to most effectively align with customer needs, demand fluctuation and expectations. This includes competitive benchmarking on market pricing, real-time data and analytics and a focus on engaging our customer base with competitive prices and reinvestment in high-growth areas. We continue to refine and test this approach through dynamic and value-based customer pricing. We've developed a comprehensive customer discount decision process, which identifies significant customer attributes for hundreds of product groups from thousands of suppliers and makes over 20 million price recommendations for a single business unit. As many of you know, each of our customers has a choice in how they want to interact with us. So as we refine our pricing strategy internally, we're staying mindful of the importance of pricing for digital and all other omni-channel expansions. Our pricing recommendations will remain consistent and synchronously updated across all buying platforms. As we continue to expand this scalable approach and methodology, our future pricing investments will help allow us to advance our customer segmentation criteria, providing price sensitivity and elasticity across all customers and product groups.

So equally is important to understanding the buying patterns and behaviors of our customers is having an increased visibility into the service levels and customer cost to serve to further optimize that pricing. We're linking new pieces of customer insights to establish and build an end-to-end margin view of true profitability. We're connecting 20-plus data sources to drive innovative visibility into price realization and potential revenue and margin leakage. By having this comprehensive view of cost to serve profit, profitability by customer, product, suppliers, we can account for all stages of value creation and better serve our customers by aligning our services to what our customers actually want and need. With the full visibility in the contribution margin, we're able to create targeted pricing strategies at the customer level. What underpins all of these pricing strategies is profitable, competitive pricing that's designed to unlock growth, but also match expectations of our cost to serve. So as we continue to refine this capability, we'll develop even more detailed analysis and comprehensive understanding of our customers relative to their servicing stores and DCs in the market. One of the most fundamental benefits of this is the increased transparency into different levels of profitability. Everything from gross margin to controllable merch margin, contribution margin, it enables us to further optimize the network service levels and our cost. And as these analytics continue to evolve, they can be integrated into our customer and product segmentation methodology to ensure that our discounts are further informed by cost to serve and relative competitive positioning. As we modernize our platforms, we're identifying opportunities to develop recurring alerts, which will then identify any changes in cost to serve by customer. And as we embed this into our systems, we'll continue to enrich our data with addressable wallet and greenfield opportunity to then tailor our pricing and drive increased sales and market share. One of our additional critical focal points is a continued investment in building the holistic capabilities and talent to the pricing organization. By leveraging in tech and analytics to drive revenue quality through customer-centric focus, we can then systematically improve the speed, quality and the impact of our competitive pricing actions. As we've mentioned, we're currently investing in more advanced and robust technology, both internally developed and also through partnerships with external pricing management software providers. This will allow us to take that next step in terms of tools and resources for not only improved performance visibility but also to support price management and optimization objectives. Combined with this, we're looking to continue to build and supplement our talent profiles to evolve into a best-in-class pricing organization and use this as a competitive advantage for all of GPC businesses. We're looking at the changing dynamics of our pricing strategy and then aligning new talent profiles and positions to complement that evolution of our pricing organization. In the near term, we're building out a pricing analytics and data science team in our Poland Tech center that will help drive increased data analytics. And in support of that effort, we're normalizing in centralizing all GPC data for pricing to Google Cloud, and that will allow us to apply Google's machine learning and other AI tools to then optimize our pricing recommendations. Looking into the future of our establishment of a best-in-class pricing organization, the development of innovative strategies to increase ongoing resource talent and retainment assurance is vital. We look to help accomplish this by offering our talent-based opportunities to grow and expand their knowledge base and career development with things like pricing rotations, data science certifications, et cetera, all part of a comprehensive pricing academy, change management program of work. So a lot of exciting things to come here in the pricing world. [Presentation]

Today, we're going to be walking you through how digital is improving our customers' experience at GPC through a little storytelling. At GPC, we start all strategic initiatives with a deep understanding of the customer derived through customer immersion, principles of design thinking and customer segmentation with clearly articulated customer personas. At NAPA, we have 3 main types of customers. First, the driver is the vehicle owner. Second, the Pro is the repair shop. And third, our partners, independent owners of NAPA Auto Parts stores and NAPA AutoCare centers.

At Motion, we have many types of customers. Today, we will be focusing on 2 primary, first, the operational buyer; second, our sales associates.

We don't think of our customers in silos, rather we see them existing in this fluid customer solutions ecosystem. This unique ecosystem is enabled by technology and proprietary digital interfaces. At NAPA, we have digital interfaces for the driver, for the Pro and for the Partner.

At Motion, we have digital interfaces for our local buyers, for maintenance managers and engineers and for our sales associates.

Meet passionate planer, Rebecca. She's online researching our noise in accurate breaks. She sees an apple community thread with information from other enthusiasts who recommend downloading the NAPA app to get access to diagnostic services, how to videos and tools required to do specific jobs, have vehicle details. After watching, she's a little nervous about doing the job herself. So she clicks on book and AutoCare appointment, which instantly shows you that there's availability the next morning. At the local NAPA Auto has center, Joe has alluded to the new appointment. You can see that the required parts are available at the local NAPA AutoParts store. He assesses the system-generated cost estimate and labor schedule and accepts the appointment. Rebecca receives a guaranteed upfront quote and appointment confirmation. Meanwhile, at the local NAPA AutoParts store, the part order is received, team member Susan immediately picks the parts, which instantly sends a confirmation to Joe that they're on their way. The next morning, Rebecca are letted via the NAPA app that her appointment is running on time. On arrival, she's welcomed by name and a preorder lift is ready to get it to work on time. During the repair, the NAPA AutoCare technician, Max, identifies an unexpected issue. Oh, it's a tricky one. You face times NAPA tech support for diagnostic help. He's instantly connected and using AR technology works through the diagnosis. The system prepares an auto quote for the additional work, checks parts availability and assesses the days schedule to ensure the job can be completed by the end of Rebecca's workday. It can. Jade contacts Rebecca she is not happy. Is this an unnecessary? Upsell. Using Interact video, Joe explains the problem and outlines NAPA's flexible payment plan. Rebecca is impressed. Upon completion of the job, Rebecca receives an alert, details of a payment plan and the time of vehicle will be dropped off at her workplace. A few days after the repair, she receives a thank you message together with invitation to attend the maintenance evening at her local NAPA Parts store. She books herself and a son via the Napa app. Upon arrival, they're welcome by name, and the NAPA team member highlights the exclusive special on wiper blades. As Rebecca approaches the section, the specific vehicle lights up on the shelf and she places payment on the mobile app and it's just in time to enjoy the maintenance workshop. It's being facilitated by Max from the NAPA AutoCare Center, NAPA really is relevant beyond just the parts.

Austin has procurement and operations responsibilities at a large automotive manufacturer. In his role as a buyer, he needs to be able to quickly discover and compare parts, quote and check out. Each day, by list for preventative and reactive maintenance schedules come his way. Motion search experience, powered by Google, gives them quick access to the parts he needs even when he starts to search outside of motion.com. Austin needs insights into transactional data like tracking information, proof of delivery and invoices. Soon, he will have business intelligence and analytics capabilities to review and better manage his spend motion. He has all of this at his fingertips on motion.com and considers these e-commerce table stakes not enough to differentiate motion from its competitors. But when coupled with Motion's other digital offerings, it's a game changer. When Austin fills his operational or engineering rule, his views are accompanied by complete technical attributes and values, ensuring the most technical research is possible. For his engineering work and modeling, 3D product images are available and downloadable, letting him work on the CAD or 3D modeling solution of his choice. As Austin monitors his operations, Motion's platform supports telemetric data feeds from sensors and his plants via an integrated digital twin. This gives him operational insights they would not be able to achieve without massive capital expense. After talking to his sales associate, he knows the plant floor experience is being expanded upon to include augmented reality to facilitate remote assistance or augment the plant floor with dynamic parts viewing that integrate directly into motion.com shopping card. By immersing themselves in his operations, Motion enables Austin to better run his operation using Motion's digital assets. Jessica, an invested sales associate, starts her week by planning our sales and solutions call and analyzing her book of business. She uses a custom mobile sales enablement tool that allows her to manage her business anytime anywhere. At a glance, Jessica checks KPIs, giving quick insights into day-to-day sales, profit and margin. She recalls that she has organic growth targets and a meeting with a new food and beverage customer this week. A quick view of customer snapshot gives her what she needs to best plan our sales topics. Before she finishes her sales planning, she checks on our e-commerce web sales. She's working to flip several progressive buyers to the web platform and is seeing growing success and adoption. Finally, she checks the latest sales place to see what profit optimized targets have come our way. The AI and machine learning algorithm is starting to curate sales place, helping her best serve the customer in the most effective and efficient manner.

NAPA is uniquely positioned for 3 main reasons: First, the strength, trust and credibility associated with a 98-year-old brand leader. Second, only NAPA has branded parts and care at scale. And third, NAPA's independent model, fueled by increasing need to partner with vehicle complexity, emerging technologies and business playbooks for success.

Motion is uniquely positioned for 3 main reasons: First, we are the premier industrial solutions provider because of our people, culture and our digital assets. Second, our customers require partners that will support their current operations and future expansion efforts regardless of the industry and maturity. Finally, we are bringing technology and digital front and center to a 75-year old business model that is ripe for modernization and positive disruption. In closing, we start with the customer experience, technology is infused in all that we do and enables the customer experience. We are guided by the vision of driving relevance beyond just access to the parts and.

We leveraged GPC's unmatched solutions ecosystem to drive business value and differentiation. We want to thank you for listening to our digital presentation today and hearing about how we're improving the customers' experience at GPC. [Presentation]

GPC is uniquely positioned with the world's largest network of affiliated workshops through the brands that are shown on the screen. And we've been in the business of supporting these workshop owners through these brands for over 40 years across the world. And in our experience, these programs are a source of sustainable competitive advantage for GPC. With over 30,000 shops globally, has served the auto service and repair market, the collision repair and the truck service and repair markets. And as you can see, we've got shops located all across America. Canada, the U.K., Europe and even Australia. We also have dedicated teams domiciled in each geography supporting those networks, and our customers are deeply integrated into our parts business. And as a result, we enjoy an upweighted share of wallet of around 50% with these workshop owners. They share our brands with pride. They're really loyal supporters. And as I said, they're deeply integrated into our business. And as a result, they're stickier with GPC. And many of them are very progressive, forward-thinking owners, making them or ideal partners as we continue to evolve and adapt our business to the changing landscape. And an ideal example of that is how we prepare for a world of EV and future technologies and how we bring programs like NexDrive to the market with scale and speed across the world. And finally, we network with each other. We share learning and best practice across the group, and we really bring to life One GPC culture. We use that best practice and shared learning from programs like the ones I've just talked around to strengthen our overall value proposition in the market to all of our customer channels. And speaking of the value proposition, I'll hand over to Bret now and he will take us through it in a bit more detail.

Thank you, Wayne. An important note as we think about the value proposition that we uniquely deliver to the global workshop partnerships, is that we administer these programs by invitation only. So you can't just be a partner of General Parts Company. You're invited to the program. And then we let these customers a variety of different ways. I mean, one unique way is that we validate their technician credentials on their behalf through validation partners and things like ASC certification. So this is the value tree or the value wheel of a customer and how they buy parts from a parts provider. And you could see that it's availability, ease of ordering delivery price, but then it ends up at that value-add program. So we believe that General Parts Company differentiates in the value-add space by focusing on 4 main tenets. The first is that we want to drive customer AutoCare count and revenue. We do that in a variety of ways. One example of that is that we provide nationwide warranty. So when you go to a partner of Genuine Parts Company and get your car fixed. If that car has a problem anywhere in country, across the U.S., across Australia, you can get that car re-repaired and then Genuine Parts Company pays the second repair shops labor and parts, making it a frictionless experience for the motorists. Number two, we provide things like digital vehicle inspection programs. The motorist is getting more accustomed to having digital and images in order to say yes to the estimate we provide those programs, whether it be turnkey marketing, whether it be co-branding, we actually allow our partnership to co-brand with the Genuine Parts Company brands, and we do that through a locally owned nationally known mantra. Number two, we want to drive customer profitability. So they get the car on the shop. Now how can we make them more productive and more efficient in turning their labor? We do that through business coaching. Wayne mentioned that we have teams of people domiciled in the field that are meeting with our partners on a regular basis. And they're doing -- they're having those meetings and being -- taking a consultative approach to how to run their business. Business development groups, they got 20 groups. We foster groups across our countries that allow shop owners to get together and share best practices. We provide priority services, our priority pricing, incentives and rebates. These are value adds that allow the shop to be more profitable, and it really sets it apart as a special customer within the Genuine Parts Company portfolio. We want to drive customer productivity. And the best way to do that is via technology. So things like delivery tracking, where the shop and the technician knows where his part is in the order and the delivery process at all times. Things like B2B e-commerce. These are e-commerce portals where Genuine Parts Company provides enhanced data to the shop floor that allows that shop to order the right part at the right time for that car. Think of things like part attributes, good, better, best strategy, even migrating into repair data. So we provide verified fixed data within our solutions that allows the shop to get to the repair solution that works faster than he would otherwise. And then shop management solutions, we provide a shop management system that includes a point-of-sale and a back office system that makes the shop more productive and allows them to run their business better. And these -- many of these solutions are a very discounted rate or even free as long as they honor us with their loyalty. And then lastly, driving technician efficiency. So last year, we trained 50,000 technicians. We have our own training companies, our own trainers on our payroll. And the way that we do that is we provide classroom training. In the evenings, we get our technicians together. We provide virtual training. We even have an online suite of training that they can take a 24/7/365. And our approach to training is unique. We don't want to train the technician just on the system. We want to actually train them on how to be faster and how to really -- on how their acumen can actually produce profit for the shop in their repair experience. And then finally, we have more technicians leaving the workforce than we have joining the workforce. So we want to help solution that by adding technicians into our global partnerships and then also building technicians from the shop floor up through our apprenticeship programs. So we do that with a 24-month apprenticeship program, teaching the young technician or the new technician on the 4 main repair categories over the course of those 24 months, and these type of programs have been wildly successful, even recognized by the Department of Labor. So in a nutshell, more than just selling auto parts, it's about providing deeply integrated business solutions. And what that does is result in a higher share of wallet for Genuine Parts Company. The end result of this mantra or this model that we've taken to the Street is that these 30,000 repair shops, they actually create a more frictionless repair experience for the motorist. With that, I thank you for your time today. [Presentation]

Motion here today at the industrial customer solutions area is displaying our different opportunities to be able to provide solutions to our end customers in the marketplace. Motion is a premier industrial solutions provider in the marketplace, where we really have positioned not just our products and caring for our manufacturers in the field in keeping their production facilities up and running, but we've also coupled them with solutions. As we move forward into some mega trends that we'll talk about here in the reasons why Motion solutions are being sought after by the marketplace is a rise of Industry 4.0. When you look at the mega trends of connectivity with industrial IoT, industrial networking, intelligence, such as machine learning and cybersecurity, alongside with flexible automation, which includes robotics, vision, conveyance and power solutions, we really are entering a forefront where advanced automation, data exchange and manufacturing technologies are really opening up significant opportunities for companies to embrace more and more digital transformation. So going forth into the positioning of our automation solutions in robotics and conveyance and fluid power technologies, I'd like to just share with you a bit more about where we see full value solution providers going into the marketplace such as industrial manufacturing for us to position Motion and moreover, really bring forward increasing value that is being sought out by industrial manufacturers to optimize their operations and unlock new business opportunities. So there are robust secular growth opportunities for these technologies and how they're being driven by customers shifting business outcomes. We believe that our business and Motion and as far as our solutions are well positioned to capitalize on these opportunities. Full value solution providers, such as Motion are increasingly being sought out by industrial manufacturers to help them optimize their operations and unlock new business opportunities. There are robust secular growth opportunities for these technologies and how they are being driven by customers shifting business outcomes, we believe that our Motion business is well positioned to capitalize on these opportunities. Recent trends show that investment in automation for digital transformation and factories is growing at a compound annual growth rate of 20%. This growth is driven by the need for companies to increase their efficiency, improve product quality and reduce costs. Additionally, 80% of North American manufacturing companies are likely to restore manufacturing, bringing supply chains closer to North America from Asia Pacific. As these manufacturers bring their operations closer to home, they are increasingly looking to adapt advanced technologies to enhance their operations and remain competitive. Another important driver of the adoption of automation technologies is a labor shortages in the manufacturing industry. According to a report that the U.S. manufacturing industry is projected to have 2.1 million unfilled jobs by 2030 due to a lack of skilled labor. Automation technologies offer a way to bridge this gap by replacing tedious repetitive and dangerous manual labor with more efficient, reliable and safe automated systems. We see a robust secular growth opportunities driven by customers shifting to business outcomes supported by solution providers. Here at Motion, we have the solution providers across 3 different segments: Mi Conveyance Solutions, Mi Fluid Power Solutions and Motion Automation Intelligence, Motion Ai. The first business that we highlight is the Mi Conveyance Solutions specializing in design and support of conveyance systems, also manufacturing, light and heavy-duty weight belting repair and services for our customers in the solution space. Additionally, Mi Fluid Power Solutions is positioned for hydraulic specialization with 60 retail stores across nationwide, providing design concepts across hydraulic implementations solutions that are connected in industrial manufacturing environment to provide dual power solutions in the adoption of industry floral across these sectors. And last is the Motion Automation Intelligence, Motion Ai, team of high-tech automation product providers that include robotics, along with inspection systems, which include vision, IoT, for networking, alongside with complete engineered systems in the marketplace across North America. The path is clear for us to grow in automation to take part in future growth around the digitization of manufacturing environments, really having a connected factory floor that will provide us more Motion solution opportunities across all these 3 different business units as we categorize how we can really bring value in bringing efficiency, improve productivity and quality as the rise of automation and robotics and power technologies are applied across the marketplace. [Break]

Hello. My name is Ivo Jurek. And I'm the CEO of Gates Corporation. GPC has been a trusted partner to Gates for decades. For over 75 years, Gates and GPC have worked closely together to serve automotive and industrial customers with the highest levels of service, quality and innovation with approximately 65% of Gates' revenue coming from replacement markets. We continue to invest in distribution channel and partner with GPC to provide the broadest catalog coverage, strong end-user relationships and scale, all advantages helping GDC and Gates win in the aftermarket. Whilst summer, we were honored to be named Motion Industries 2021 Supplier of the Year. The award recognized Gates for our exceptional commitment to motion to quality products and services as well as earning the highest score in the multifaceted supplier stratification ratings system. Our Gates in-region for region manufacturing and distribution aligns well with GPC network across North America, Europe and Australasia. This enables us to provide superior support to GPC locally, with products and technical expertise. GPC has a long track record of steady and consistent growth and is a market leader. This makes GPC an attractive long-term partner for Gates, as their growth is also positive for us. We look forward to continuing these partnerships for decades to come and deliver above-market growth, driven by new products and focused investments in our growth initiatives, such as [indiscernible], oil and gas, diversified industrials and vehicle electrification. Working through the challenges of the past few years further highlights the strength of this relationship as well as our optimism for our future combined success.

And now for the business unit presidents panel, please welcome President and Chief Operating Officer, Will Stengel; and the business unit presidents, Franck Baduel, Randy Breaux, Rob Cameron, Kevin Herron and Alain Masse.

Well, first and foremost, I think the video that we just saw was a reflection of some of the things that we were talking about earlier, this idea that our strategic supplier partners view GPC on both our automotive and industrial side of our business as a real partner of choice as they think about growing in their industries and into the future. So we could have had many other video clips like that, a special thank you to our partners at Gates, who I know are listening. We appreciate the partnership and the support and look forward to profitable growth together as we move forward. I thought what we would do or we thought what we would do here is really give the audience a better perspective of some of the things that we talk about often as a team, help you get a better perspective of the business units through the lens of our great leaders here. I hope you found the showcase to be incredibly helpful. We had great engagement. And special thank you to a lot of people that worked hard to make that come to life. I hope it was additive to the comments that we shared with you earlier this morning. But here we are. We've got, in my opinion, the best team in the industry on the stage, it's my privilege and honor to be here facilitating this discussion. And as I said, maybe we'll frame it around some of the topics that both our investment community, the investors about as well as what we're working on each day. And Franck, maybe since you're sitting closest, we'll start with you. Franck leads our European automotive operations. And obviously, a lot happening in Europe, but maybe give us your perspective on the market over there and what you're seeing and how you're winning.

Sure. Thanks, Will, for asking. So GPC operates in Europe in a market that is very comparable to the U.S. in many aspects, both macroeconomic and also automotive market-specific indicators. With 27 countries, Europe is composed of 500 million inhabitants to be compared to 330 million inhabitants in the U.S. And the European GDP accounts for 75% of the U.S. GDP, knowing that the first three European economies are also well ranked globally. Germany is fourth largest economy across the globe, the U.K. and France, seventh. These three countries being the 3 most important GDC countries in Europe in terms of business. About European automotive indicators, the number of cars on the European road is more than 300 million to be compared to 285 million in the U.S. The European market in value is very large, approximately EUR 70 billion, meaning 80% the U.S. market with an average age around 11 years, slightly lower than the U.S. In a nutshell, the potential in Europe is significant. And comparable to the U.S., the only one notable difference is that the European market is 90% DIFM-oriented with only 10% DIY. Thanks to its track record over the last years compared to main European competitors, its high level of excellence, profitability, talented team presence in 9 countries, GPC has all the assets to continue to grow in the European market.

Franck, we talked this morning about the role a little bit about how that plays into your strategy.

Yes, you're right, Will. The European market remains highly fragmented. I mean we have -- if we consider the top 8 players, they only account for 25% of the overall market, the top three players 17%, including AAG, which has 5% to 6% market share. Over the years, we have demonstrated our ability to generate organic growth that exits the market, but also our main competitors. And we also grew through external growth managed in a profitable way and also successful way. M&A is part of our DNA in Europe, and our team is used to integrating companies, cultures, talents, but also new assets. If we have a look at what has been done over the last two years only, thanks to GPC shareholding, we bought 30 transactions, including in '21, a significant acquisition in Ireland to enter the country, an acquisition in Benelux to -- with the acquisition of the digital market leader online. In 2022, a significant acquisition in Germany to have a complete coverage of the territory in the largest European automotive market. And finally, the acquisition of the market leader in Spain to enter Spain and Portugal. All these companies are now fully integrated and very profitable as part of GPC.

Well, I would tell you the slide that we shared on bolt-on M&A activity, Franck and his team do a wonderful job on buying a business and really bringing incremental value to that target when they come into the AAG and GPC family. So Franck, you also have a lot of really nice momentum, obvious effectiveness pillar. Maybe comment on a couple of things, in particular, NAPA.

Yes, for sure. So I mentioned that we have been outperforming the markets and why? As part of the largest automotive company with a global footprint, we are able to differentiate ourselves. We found the inspiration and duplicated the offer in Europe, launched in the middle of 2019. Now they have sold in 8 countries. We reached $300 million in the end of 2022, and we are on the right track to achieve $400 million in the end of 2023, thanks to the NAPA offering. GPC in Europe is the only one company with a unique and solely owned brand throughout the European footprint. In addition, and this is an important point, the NAPA volume has an attractive effect by 500 bps on the overall gross profit rate of the company, thanks to a common global sourcing organized with our peers. The second good example is key accounts. It has been representing 70% growth over the last 4 years and now accounts for close to 10% of the European revenue. We reached $260 million in 2022, and we ambition to reach $300 million by the end of 2023. Key accounts in Europe are looking for at least a European player, but more and more a global player to partner with. And GPC is ideally positioned to grow in this segment, not only in Europe, but globally. And this is the reason why we foresee, I would say, a bright future and a potential growth above plus 50% by 2025.

Will, when you think about the power of that NAPA brand, there's not too many businesses. In fact, there's very few number of businesses in the world. where the sign above the door can actually be the sign on the product as well. And NAPA, Kevin, has that powerful brand to be able to do that. We've got Repco in Australia that can do that as well. That power of that NAPA brand actually translates internationally. We've seen Franck's -- you've seen it in Europe. And we've seen it in Australia as well as we brought the NAPA brand to life. We've got 75 branches now with that NAPA brand. And the acceptance of the brand in the marketplace has been inspirational really to us. It's a very powerful brand.

You're right, Rob. We see tangible global value in the NAPA brand. So thanks for your comments. Needless to say that our consolidation of the European market means also purchasing and productivity gains, leading to an improvement of the overall profitability in Europe. Even if the profitability in Europe is already very high, we are also striving to make the company leaner, better, more efficient by implementing initiatives, all of them are fully embarked in our strategic plan, Vision 2025, GPC road map. And we have several pillars as examples. Logistics efficiency with two mega DC projects with automation robots provided by Exotec, the automation solution, both in France and the U.K. digitalization including a state-of-the-art e-catalog, Part 360 already implemented in Benelux. IT projects by implementing Microsoft Dynamics 365 to generate productivity gains. And last but not least, several HR projects as well addressing culture training, communication, digitalization and talent to be able to attract talent and retain our talent. And just to conclude about Europe, if I may, Will, I just would like to mention a few words about electric vehicles. Electric vehicles will come faster in Europe than the U.S. or Australia. If we have a look at the new cars sold in 2022, it accounts for 15% considering only EV. It will be 50% in 2030. So the switch seems to be massive, and we can consider that this transition is going to be significant. But we have to keep in mind as well that IC will remain predominant with 84% of the overall car park still IC. As a major player, we are already working on this transition to address the opportunities and to stay ahead of the pack. We have EV experts everywhere across the globe, including in Europe. We're looking for GPC on button notification, parts availability, partnership with premium suppliers, very well-introduced in the OE world, but also agreements with carmakers. And above all, we have rolled out our NextDrive concept, addressing training, certification, outlet, marketing, technical support, part notification and supply, a global concept deployed in each country. We reached 150 NextDrive point of sales in 2022, and we ambition to have 500 NextDrive point of sales in Europe by the end of 2023, the largest network in Europe to cope with EV.

Franck, if I can jump in. You know what, it's been fantastic for us in Canada to be able to piggyback of the tremendous work that you did in Europe. You're 2 years ahead of us. But we launched it early first quarter in 2022. And the response has been incredibly positive from our repair shop customers. They were looking for a solution for the future, training, vision, and it was great to work together. So thanks, Franck.

Alain, maybe we'll stick with you. Alain runs our Canadian business and does a wonderful job, great leadership position up in that segment of the market. Maybe for those who aren't quite as familiar with the Canadian market, give a little bit of perspective on how we're organized and how it's similar or different to the United States model?

Sure, I'd be happy to, Will. Thanks. well, first and foremost, UAP was founded back in 1926. We're known as a stable, strong business. We have strong margins that are accretive to Genuine Part companies. We have a great corporate culture with fantastic team members across the country. We have the strongest aftermarket brand in the automotive space in Canada, and we're going to be celebrating 100 years very soon, very similar to what you've done last year, Rob. So really, really good brand. We rolled that out back in 2002 after being acquired by Genuine Parts Company back in 1998. I would tell you that on the automotive side, we are definitely the market leader by a large margin with a 19% market share. But despite the 19% market share, there's plenty of room to grow. So maybe a bit of some statistics in terms of our footprint on the automotive side. We have 570 NAPA auto parts stores, over 2,000 NAPA AutoCare centers across the country. And we have 625 NAPA Auto Pro centers, which is our highest tier. Speaking of NAPA Autopro, we're really proud of that network. It was founded 40 years ago. So it's going to be a good celebration this year. And we're really proud as well because once again, in 2022, we won the J.D. Power & Associates overall customer satisfaction among independent repair shops in 2022. And of note, that's the seventh time that we've won over the last 13 years. So a really strong brand in Canada, taking great care of consumers. On the major accounts side, you've talked about it, Franck. For us, in Canada, it's also a big part of our business, and it's continuing to grow. It's 30% of our overall business on the automotive side. So a significant portion of our business. And just maybe one last point on the EV side. For us, it's important. We're much more closely aligned, Will, to the European market in terms of adoption rate. To give you an idea, in 2022, 11% of new vehicle registrations in Canada were either electric or hybrid. And in certain markets, that percentage was a lot higher. In Vancouver, British Colombia, 20% of new vehicle registrations last year were EV or hybrid. So significantly higher and then 15% in the province to come back. So it really varies across our geography.

Yes, it also demonstrates our ability to work all together on such significant topics. NextDrive is a good example. We have in collaborating everywhere and providing the EV experts to prepare our road map and to be able to roll out this NextDrive concept everywhere across the globe.

Absolutely. Thanks for the reminder, Franck.

Alain, anything else in terms of your initiatives as you think about kind of the uniqueness of the market that's driving growth as we move forward?

Yes. Well, at UAP, we were very strong on the automotive side. We have two other important differences. The most important one is on the heavy-duty side. So the strength of our heavy-duty business accounts for 35% of our overall sales for UAP. And we're also the #1 -- in the #1 market share position in that space. So we're -- the way it's split across the country, we have 120 traction heavy-duty stores from coast to coast. We have 132 truck Pro locations and traction is super well-established in Canada. In fact, we're going to be celebrating this year our 60th anniversary of the traction banner. So a very solid part of our business. And then I'd say similarly to NAPA, the heavy -- in the heavy-duty space, our major account and key account -- large national fleets across the country are a very important part of our business. And it's normal that they partner with us because we're uniquely positioned to satisfy their needs from coast to coast. I'd say the second, the most important difference is everything to do with the collision space. So we have a specialized team, everything to do with collision and paint. Again, specialized team. And we go to market through our NAPA Cmax banner in our country, and that positions us as well as the #1 collision and accessories supplier in the country. So those are the areas, Will, that stand out. for us in Canada. And maybe if I can just say on behalf of the team here, it's been really good to really expedite -- like it really accelerated over the last several years, how we work together as one GPC leveraging not only NextDrive in our case, where we just talked about that, Franck and I, but everything to do with technology, logistics, automation. It's a good time to be a part of GPC.

No, I appreciate you saying that, Alain. It obviously relates back to a lot of the comments that we made about the culture. Obviously, big, strong inspirational leaders, but the willingness to work together and partner and share ideas Hopefully, you can see that here on the stage today. Randy, I know you don't want to stay quiet for too long.

I wanted Franck to catch a breath here. He just kept going and going and going.

Well, Randy you certainly have turned some heads with the performance of the industrial business, including the acquisition of KDG. Tell us a little bit about your great business and perhaps continue to educate us on maybe what people don't really appreciate about how sweet your business really is?

Well, thanks, Will. And we think there's a lot to like about the industrial business. and the customers that we serve in the various markets. When we consider the market dynamics for industrial, Motion serves a very fragmented market, about $150 billion. We're the #1 player in the market today at about $8 billion, and our closest competitor is about half our size. So just like in automotive, size and scale are very powerful in the industrial market. The addition of Command in 2022 with its incremental volume, the customer relationships that they had, which really didn't overlap with ours, the technical talent and the other capabilities they provided have truly been transformational to our business in the last year and will be in the future. Our team did a tremendous job last year managing the integration. We took that motion -- the Command business and we integrated it into the Motion business over the last 15 months. And we originally said we would do it in 3 years, and I'm here to tell you we're going to do it in about half that time. So as a result, we had an exceptional year in 2022, without the Command integration. If you had to look at it that way, but with the Command integration, really a fantastic year. We're well positioned to perform through the cycles in the years ahead, and we will provide industry-leading growth and profitability. Now on the market side of it, we participate in a lot of diversified markets. Motion sells into just about every industrial market in North America, but we really focus on 15 end markets. The end markets would include things like machinery and equipment, iron and steel producers, food and beverage, one of our larger markets and just to name a few of the ones that have been mainstays. But there are some new and fast-growing markets that we participate in, like logistics and distribution centers. We talked a lot about EV vehicles today. And the EV manufacturing is a big market for us as well as the battery manufacturers that are coming online. So that is a very fast-growing market for us. We've been able to get into these markets early, and we've demonstrated the solutions that we can provide and the capabilities. And I'll tell you, this should be a good business for us for many, many years to come and provide us great growth opportunities for a long time.

Well, Randy, you bring up a point that -- maybe I'll jump in and you talk about EV manufacturing and some of the battery manufacturing plants that you all are there from day 1. Those are great door openers for the NAPA team here in the U.S. We've built relationships early on based on the relationships the most industry team has with those, and it's really helping us open up some doors and drive some business through the NAPA store.

Yes. Well, it's great, Kevin. And I do appreciate the comments, and we will continue to collaborate every time we can. These type of crossover sales opportunities are a huge advantage for GPC, as are the opportunities with global suppliers like Gates that you saw earlier, and I'll be seeing Ivo tonight at a sales meeting we're having in Denver. So we try to look at any opportunity like that we can to help each other out. And I'll tell you, this is a great collaborative team we have up here. In addition, we look at best practices in our operations, for example, so while we're employing automation in some of our distribution centers, all these guys are doing the same, and we cross-pollinate, if you will, to make sure we're getting the best piece of machinery and equipment in our distribution centers and fulfillment centers. So there's great collaboration. And all that just benefits the operating leverage that we get in all of our businesses. So we really, really think this is very beneficial.

Randy, you're so right. I mean the -- I think what really brings One GPC to life for me is the collaboration that you and I've had with your North American Motion business and what we're doing in Australia as well. So the learnings that we've got from you in terms of the way that you go into market, the processes that you've got, the best practices that you've got, the collaboration amongst our teammates as well as just been extraordinary, not to mention suppliers too. And so we're really creating a global industrial business under that motion banner working really closely together. So I think that kind of brings One GPC to life, Will.

Yes, I agree with you, Rob. I mean we enjoy working with your team. We do a good job. We're usually down in Australia a couple of times a year, and I'll be coming down in October. So it's always great to get together. We always learn something from each other. So, Will, maybe just a few more highlights on the industrial business. We have a fairly high concentration of what we would call national accounts or corporate accounts. So at the beginning of a year, the 45% of our business is under contract today, and those are multiyear agreements. So we like to think that at the beginning of the year, we come out of the chute on January 1, knowing that the tank is about half full, and that's a good feeling to have. And we will continue to do that. We think that mix is about right, too, About half of our business under contract, half not. The other thing is from a technical side, we bring a lot of technical competencies to our customers. In many cases, we operate on the plant floor with our customers. And we know what's going on in the plant and the applications better than they do. So our job is to really find solutions that will help them keep their downtime to a minimum, reduce their operating experience. And at the end of the day, let them focus on building the product that they manufacture and us focus on keeping their plants up and running on a timely basis. So that's a big part of our business. And that's why we don't see ourselves as just a distributor. We are truly a solutions provider. To take it one step further, we are very service-oriented. So when you were out in the vendor fair of the displays, you saw that we have four vertical business units within Motion that we focus on. And these business units combined now are representing just about $1 billion in revenue. So they've become very important, not only to us, but also to our customers. So automation, fluid power, conveyance and repair. These are critical to allow us to bring solutions to the customers that our competitors can't. So they work hand-in-hand with our branches. And our branches will, in many cases, bring these vertical businesses into our customers. So there's great collaboration within Motion. I think we've got a great model. I think we have a great team. And, Will, I think we're built for growth in the future.

Well, you certainly had just an incredible run. I think we owe all of the teammates at Motion who did all that great work to integrate KDG and pulled that time line forward. I think it's a great case study and the ability to get a lot of value through M&A. So Randy, thank you.

Certainly, a team effort.

Thanks for the hard work and the performance. Maybe a good segue, Rob, for Asia Pac. We bought that business, as I described earlier this morning, a little bit of a platform as we think about future growth. That was about 10 years ago. Man, has that been the case, one of the most consistent performers in the portfolio over the last 10 years. Why don't you give a little bit of background and insight in terms of how you thought about evolving that business over the last decade to deliver performance?

10 years, it kind of feels like yesterday a bit. Yes, 10 years since GPC, made that first investment into Australasia in automotive. And then around 5 years ago, we made a further investment into the industrial sector as well with the acquisition of Inenco or Motion Asia Pacific. So I'll talk about maybe from an automotive perspective first. So over those 10 years, sales have doubled, and EBITDA has grown 3x. So that's a sales CAGR of around 8% and an EBITDA CAGR over at the same time, about 10.5%. So really good, consistent growth. And what I would say, 5 years now with the industrial business, it's actually following a similar trajectory. So...

You like that business, don't you?

I do like the industrial business, Randy. Absolutely. So when I think about the business now will Asia Pac, we've -- we're a $3 billion organization now with healthy double-digit EBITDA margin. So yes, I'm really pleased with how our team have brought that business together and the operating that we've done. It's been a great job.

It's incredible. How do we -- I'm sure everyone wants to know how do we keep it going as you look forward and think about the future?

Well, I think what we've done in the organization has been really transformative, if you like, and that has created the conditions for ongoing, sustained success. So when I think about what we've done in automotive, we've increased our store count by 30%. All of our stores are company-owned stores as well. We've really invested in the range that we have and the depth of inventory, worked really closely with understanding our customer value proposition to do that. And significantly, we've restructured the business. We've really simplified our operations. We went to market with about 17 different brands 10 years ago. We've actually simplified that net down to 3 brands. So I think that's been really important for us as well. I think one of the other things we've done is with our Repco brand. It's an iconic brand. It's a 100-year-old brand, and we've really invested into our brand from a retail perspective as well in the way we go to market with our sponsorships and motor sports. And that's been tremendous for us is growing that Repco brand and notoriety. So yes.

Hopefully, you saw a little bit a little bit in the showcase about how we're sharing best practices around the globe but we're also sharing best talent. And Rob is a perfect example here about 6, 7 years ago.

Sharing or stealing my talent?

Yes, depends on whether you're the giver or the receiver.

Which is it, Kevin?

About 7 years ago, Rob shared what was supposed to be a short period of time, but he's now here permanently, the leader of the retail team. And Cameron, he would saw in the showcase this morning has come across the pond as they call it. and now leads our retail efforts. The Repco brand is 50% retail. So they brought so much of those learnings over here. It's really helped us grow and build our strategy over the last few years and for the next few years in our retail business.

Well, I stole your NAPA brand, so I can -- so I think that's pretty fair. We've also got some really market-leading motorcycle accessories business in Australia. I think that differentiates us a little bit as well. We've done a lot of work in that space. And we're actually transforming the market, Will. It's -- we've developed a big box retail format. And so it's fundamentally shifting the market in Australia. So look, I think we're a much simpler business now. We've got a more compelling new proposition for our customers, and they're obviously voting with their feet. As we've rolled out each of these initiatives, our sales and EBITDA CAGR is actually accelerating, which is quite exciting. So that's automotive. And then in the industrial space, actually following a similar playbook. We've branded -- we've rebranded Inenco into Motion and taken your branding and your thinking, implementing the same go-to-market models that you've done here in North America, the same vision, the same strategies kind of -- I've got saying, well, I like coming over and just copying and stealing shamelessly, putting out a little bit of twist on it and it seems to work a similar playbook. We've branded with -- we've rebranded Inenco into motion and taken your branding and your thinking, implementing the same go-to-market models that you've done here in North America, the same vision, the same strategies, kind of -- I've got saying, well, I like coming over and just copying and stealing shamelessly putting out a little bit of twist on it, and it seems to work. So it's early days yet, but the results are really encouraging in our Motion Industries business in Australia, and Randy will we'll work really closely with you and make sure that we continue to copy and steal shamelessly from you.

You're welcome to do it. You're welcome to do it.

Thanks, Rob. Great update, and thanks to you and your team down under. It's an impressive track record. I know you're excited about the future. Kevin, that brings us, lastly, to you, probably the part of our business that the investment community knows most about. Talk to us a little bit about what you're excited about and how you think about driving growth and margin expansion as we look forward?

Yes, certainly, Will. I appreciate the opportunity to be in front of the group. Our focus starts here on this campus as we build a foundation that can service our 6,000 NAPA Auto Parts stores, hopefully, you got a feel for some of the talent that you met out in the showcase. I'll first start with pricing. And Brooke, who presented is on our team here in U.S. Automotive. We're investing in talent, and we're investing in tools to drive our margin at the store level. It's talent-external combined with -- excuse me, its talent, external combined with our internal talent, it's really helped us produce 5 consecutive quarters of gross profit, a margin improvement and really [indiscernible] last state. So this team is just getting started, but it's starting to pay dividends. We've selected a new pricing software that we'll look to implement over the next few months and years that really will provide benefit for all 6,000 of our NAPA Auto Part stores. Sourcing, category management, huge opportunities and again, we've invested in talent and more importantly here we've invested in training. We've added resources from several major companies around the globe. I don't want to talk about them here on stage because we still had some really good talent from some great companies. But we've also put them through training. Green and Black Belt training by Delta associates, and we did that along with our supply partners, so we're all speaking the same language. And it's really helped us improve these teams. And then finally, you think about supply chain, we've got a tremendous amount of work to do here in the U.S. We're starting to build out what does our model look like as we think about supply chain going forward. But again, 3 parts of our business were invested in talent, external and internal, with all of those working towards driving profitability through the NAPA Auto Parts store. I think about our market share, 7%, $130 billion market. And I think about our NAPA AutoCare centers. You heard a little bit from Bret and Wayne 18,500 NAPA AutoCare centers here in the U.S., that's the backbone of our DIFM business. We're 80% commercial. We like that as complexity of vehicles continues. We think that puts us in a leading space. Hybrids and BEVs, bring them on. We're starting to get ready. We love hybrids, right? It's 2 systems, more opportunities for things to break. So who wouldn't want that in our space. And then you think about the NAPA AutoCare Network, again, 18,500 AutoCare centers. You heard Bret talk about the value-add services, NAPA TRACS our stand-alone business unit, business management system, 8,000 here in the U.S. that helps our independent owners run their business. Training is critical. We trained 50,000 technicians around the globe, 40,000 of those here in the U.S., and I'm really proud of our team for getting that done. But there's 860,000 technicians in the U.S. So that just tells me there's a huge opportunity for us to continue to train technicians. We know there's a shortage and we're also investing in new technicians. And again, you heard this from Bret. Our apprenticeship program been in the works for about 3 years, and we couldn't be happier with 1,000, but we can't stop at 1,000. We have got to continue to build out technicians. And again, we're so excited about where we stand in our DIFM market at 80%, and more importantly, our NAPA AutoCare centers across the country.

It's a great update. And those really do kind of wrap up. Hopefully, everybody got a perspective, wrap up our thoughts from the business unit leaders. As I said at the beginning, Genuine Parts Company is very lucky to have 5 great inspirational leaders working with our teams and our customers each and every day. And hopefully, you got a flavor of their perspective on why we're excited about what we're working on and the path forward. So with that, we will move the presentation and the show forward. [Presentation]

Please welcome Executive Vice President and Chief Financial Officer; Bert Nappier.

Well, good morning, and I'm still the newest of the news, so I got the last spot. I don't have a lot of cloud left with my colleagues, so I get to take the last straw here and close things out. I first want to thank Earl for his passion in our business, and hopefully, that came through and you can see that. It's also the same passion that we all have that you've seen this morning. We're really excited about GPC and this business and where we are. We're energized about what we're doing. And I'm thrilled to be able to take the stage and share our financial targets with you. It's a privilege to be a part of this business. I've been here almost a year as CFO. I'll be a 1-year CFO as of May 1. I've gotten the chance to know many of you over the year, and thank you for your warm welcome. Look, we have a unique business. And as Paul and Will and the rest of the team have outlined we're really well positioned as we look ahead. Our business mix, we have a unique value proposition with our business mix, our team and our strategic initiatives. And we're able to lean as we think about going forward, able to lean into a very strong legacy around this business, one that is rooted in financial discipline of growth and financial performance and capital allocation. We have an outstanding culture. You've heard a lot about that this morning when you heard Will talk about our team and how we're investing in team and we're making these investments for our future and talent. And we harness a culture that's all around the world, and that teamwork is an intangible that helps us be able to execute through today, but also into our future. Our disciplined capital allocation is also a part of a hallmark that we have on the financial side. And we're proud to take all of these things forward and share with you today where we're headed from a financial perspective. It's been great to see what's going on in the business strategically. But I want to show you what the financial expression of that looks like as we look ahead. I first want to start though with where we've been. Paul talked about this a little bit this morning in terms of our history. But I also want to underscore the backdrop of where we're headed in the next 3 years is rooted in a very strong track record of performance. When you look at this slide, you see performance through many cycles, over a 20-year period. You see a sales CAGR of 5%. You see an EPS CAGR of 8%. And more importantly, as Paul highlighted this morning, you see an inflection in the performance of the business over the last 3 years with a sales CAGR of 9.3% and an EPS CAGR of 16.7%. This performance and our ability to execute over the last 3 years positions us to take the momentum for what we're talking about today financially and go execute. We believe it's a really nice mix of ambition and GPC execution mixed against a bit of a macro backdrop that's mixed and a little uncertain right now, and we see an ability to move past that as we look ahead. I do want to call out a few specifics. When we think about what's happened since 2019, we've had a strong track record over the last 3 years. A few more things to call out in addition to some of the things you heard about this morning already, we've delivered 8 consecutive quarters of topline growth. You combine that with 3 straight years of EBITDA margin expansion, 2 highlights that are important as we look ahead. We also have been able to fuel with that performance, $2.1 billion of returns to our shareholders through our dividend and share repurchases. That's at the same time while continuing to invest in CapEx and M&A. And you've heard about our M&A strategy this morning, and we'll talk a little bit more about capital here shortly. These investments, this performance is generating a return on ROIC and on TSR. When we think about ROIC, we have a long-standing focus internally on ROIC but it's something that we haven't necessarily talked a lot about externally. I want to call it out on this slide, our 3-year average ROIC is 34.3%, highlighting the discipline that we have when we're making capital investments across the business. Collectively, we take all of this together, our TSR over the last 3 years, 21.2% capped off by 2022 with a 26.8% TSR, placing us in the top 9% of the S&P 500. And think about that for just a moment. We all know what happened to the equity markets. When you look at the capital markets more broadly, an analyst I saw published a piece in January that said the bond markets were the worst in 250 years. So the backdrop for GPC's performance last year was truly outstanding when you think about the equity and bond markets and we look forward to continuing to drive this kind of return as we move ahead. So now the moment you've all been waiting for. You saw the press release this morning. And I know you've been dying to hear a little bit more color about it, the targets that we have set forward for 2025. I want to start with a very important point. We are reaffirming our guidance for 2023 from our earnings call last month. So we start from a place of reaffirmation of that target for this year, and we build from there. Again, this is also the first time we've ever done this. So we're stepping out a bit with 3-year targets. But we believe that what we're doing is rooted in the strategies that you've heard about across the morning through the Expo, through Naveen's presentation, Paul's comments, Will's presentation and the great comments you just heard from the strength of the global business, we believe that sets the backdrop for where we're headed to 2025. And broadly, when I look at our outlook, it comes from 2 levers: revenue growth that will be above market and operating leverage that will come through gross margin expansion and SG&A leverage as well. As you can see here on the slide, we're forecasting topline growth of approximately 6% to 7% CAGR, which will translate into expected EBITDA CAGR of 10% to 11%, and this will result in our expectations for EBITDA margin to reach double digits for the first time in the history of GPC, something we're very proud of. This execution will lead to an EPS forecast that we've shared today, and it's here on the slide of $11 to $11.50 and a 10% to 11% CAGR over the 3-year period. And I'll drill down into some of the specifics in just a moment to give you this new trajectory for our business. As we think about the targets more broadly, we're very mindful of the macroeconomic environment. And I shared these comments last month on the call, but I'll reiterate them again. We do have risks. There are risks in the marketplace around inflation. Paul said it this morning, is it a recession or not. We're not going to call that. I think we could all agree it's recessionary conditions. We have capital market disruption over the last couple of weeks, and we know we have ongoing geopolitical conflict across the globe. We're balancing all of that against our very bullish view on the execution of the strategies you've heard about today. They're outlined in our expo, they were outlined here on the stage. And we put that with strong industry fundamentals, and we're very, very optimistic about where we're headed. It's a nice mix of ambition while being very prudent on the dynamics we see in the marketplace and the macro. So let me give you a little bit more color and drill down just a little bit more into the details of the forecast. As we look at the sequential, and I want to start at the very highest level with a broader macro, we see a moderated growth environment in 2023 with a macro pressure that's there, no different than the view we shared last month on the call. But as we look ahead to 2024 and 2025, we see that dissipating and getting past some of that recessionary pressure and providing a little bit more of an environment tailwind as we look to those 2 years. When we look at the topline, as you can see here on the slide, we see the market driving about 3 percentage points of growth and our core driving between 2 and 3 percentage points of growth with M&A kicking in about another point as we go into the future. That's a very modest assumption on M&A as you look at our historical performance across the last several years. I'll break down the sales in just a few more components and moving across the lines there with some color on the market. As you look into the market growth, we would expect industrials to grow somewhere between 2% and 4%. And auto to grow somewhere between 1% and 3%. And that assumes that inflation returns to a more normal level next year. So I know you all have questions about inflation. You've heard me talk about where I think we'll be for this year. We're assuming we return to something more normal as we get into 2024. When we look at core growth, we expect our core growth to outpace the market by 2 to 3 percentage points. And that really comes down to -- and this is why we invested the time today to show you what we're doing in this business, not just to tell you, that comes down to the ongoing transformation of customer solutions across both segments, across both businesses that's powered by data, that's powered by analytics and it's going to collectively improve our customer experience and drive that loyalty across the business and continue to unlock incremental value as you heard when Naveen talked this morning. If I shift to EBITDA and think about EBITDA, we expect operating leverage in this business. That includes gross margin improvement and SG&A leverage as we look ahead. Our current expectation is that, that will be about 50-50. Now you all know, you've worked with forecast before. That's our current expectation. We'll keep you updated on how we see it. But as we look over the 3-year period, we really see a 50-50 mix today between those 2 levers. Collectively, when I look at our profit improvement out over the period, and we continue to into transformation and execution of strategy, we see the initiatives you've heard about today and that Will outlined in his presentation, contributing about half of our EBITDA growth as we look into the future. All right. So let's talk about these margins. Many of you who have talked to me over the last year, as I've taken the chair as CFO, you'd like to ask me those first gotcha questions. And many times, it's been are you going to get to double-digit EBITDA margins. Well, I'm glad to say on this stage today that we're presenting double-digit EBITDA margin to all of you. We believe it. And we've been on a transformation journey, as Paul talked about, and that has resulted in continued expansion of our margin over the last several years, including in 2022, where we saw a segment margin of 9.4% and an EBITDA margin of 9%. And that was year-over-year improvement on segment margin of 60 basis points and EBITDA margin of approximately 15 basis points. So we've delayed the groundwork for the focus of our team on continued expansion of margin. As we look into our forecast period, we're looking at 100 basis points of EBITDA margin expansion over the next 3 years. Those benefits come from gross margin expansion. That's through pricing and sourcing, many of those things you heard about this morning when you were with James and Brooke. We're also going to get SG&A leverage, and that comes from productivity benefits as we lower our cost to serve, we're going to modernize, automate and optimize our supply chain. You heard about that from Joe and Jeff. And that modernization and investment in technology carries over into our back office where we'll continue to modernize and drive out cost. The value lock from IT can't be understated. What Naveen talked about this morning, that threat of IT is underpinned across everything we're doing and drives incremental value in the business. One other point I would make, and maybe a little bit understated and underestimated is the power of the industrial business and driving the overall margin up. Randy talked about there's a lot to like about industrial, and there is as that mix of profit continues to grow, it will continue to drive the overall margin of the business up. And you can see that here on this slide. Our initiatives are a significant portion of where we're headed. And we're excited about that, and we're looking forward to continue to execute on those, and we've seen some of those benefits already in the business as we look at 2023. And that's why we spend a lot of time sharing those with you today. And collectively, we'll drive the improvement through those levers, and that makes us a little less reliant on external factors to look and drive the business as we move ahead. So all of that performance drives a great foundation for our financial flexibility. When we think about where we're headed, we think about it through a prism of starting with a very strong financial position. And I can really break that down into 3 buckets. One, we have excellent liquidity. We have great cash balances, and we have the ability to tap into a $1.5 billion revolving credit facility as needed. We also enjoy access to the capital markets. And prior to the pandemic, that wasn't true for GPC. And so when we talk about things that were beneficial through the pandemic, Paul talked about transformation and cost savings. We also talk about the fact that during COVID, we got our first ever credit rating, an investment-grade credit rating that we're very proud of and committed to maintaining but that gives us access to the capital markets during periods of dislocation and stress and we have that ability as needed. Finally, I would say that we're in great shape from our leverage. We're 1.7x, that's well below our stated range of 2 to 2.5x, and that gives a lot of dry powder as we look ahead for opportunities across the globe. And so we like the position we're in of financial strength and that will continue to be seen as we look ahead. Our forecast calls for $4 billion of operating cash flow over this period with nearly $3 billion of free cash flow over the same period. That cash generation allows us to be faithful to our very long history of being disciplined on capital allocation. And we're not going to change the priorities that we have in the business, those remain the dividend, M&A, share repurchases and CapEx. And so I want to just reaffirm that we stay very focused on those 4 prisms and this cash generation allows us to do so. Will talked this morning about the M&A strategy. So I don't want to spend a lot more time on that. Share repurchases, we're looking ahead to continued share repurchases to offset dilution. So as you think about where the allocation of capital will go there, it will look very much like it will this year in 2023. But I do want to focus on 2 other areas, I think, of note and of interest to this group, the first being CapEx. As we look at CapEx and we look ahead and we look to the period of 2025, we will increase our overall allocation of capital to CapEx, moving from about 1.5% of revenue to 1.7% of revenue in the forecast period. I think you've seen today, particularly from Will's comments and Naveen's and in the expo where we're going to be investing additional dollars and we see those additional dollars driving the modernization of this business forward across multiple prisms. Overall, our investments in the business are going to underscore that EBITDA growth and that margin expansion that we're looking for. It will drive some modernization of the supply chain, which you know brings productivity benefit. It will drive the investments in pricing, which you know will bring gross margin expansion. And the investments in IT and lowering our cost to serve are important as well as we look ahead. All of that is intended to do one simple thing, make the experience for our customers better and with less friction, and we're excited about that as well. As you can see here on the slide, our investments have a great return. We're driving a 38.7% ROIC on a 3-year average basis in 2022. And our ROIC remains well above our weighted average cost of capital. I also want to talk about the dividend. Just a few brief comments. Our views on the dividend remain unchanged. We have a strong commitment to our dividend, 67 years of consecutive increase and we've done that again this year with our recently announced 6.2% increase in the dividend, right in line with our 20-year average of 5.8%. And over the last 3 years, we've been able to return $1.4 billion to our shareholders through our dividend. As we look ahead, we'll be growing the dividend in line and along the same lines of our increase in earnings growth. So as we look at that, we'll continue to increase the dividend as our earnings grow going into the future. Make a few comments and then get off the stage, and we'll move to a Q&A session right after this. I know you're all anxious to ask a few questions. But as I -- as you all leave here today, I want you to remember one really important thing. GPC truly is differentiated, whether it's our business mix, our global footprint, our size and scale, the execution of initiatives or our talent. We have a unique value proposition as we look ahead for returns to our shareholders. That's going to be highlighted by these things we've talked about today. And I just want to remind you of our key financial takeaways before we move to Q&A. That's double-digit margins by 2025. Double-digit profit in earnings growth over the 3-year period, operating cash flow of nearly $4 billion and free cash flow of nearly $3 billion, giving us an excellent position as we look ahead for balance sheet strength and financial flexibility. We're well positioned to execute. We're well positioned to grow as we look ahead and deliver strong returns to our shareholders. I want to thank you all for joining today, and I hope you feel like I do, along with the rest of the GPC team, there is absolutely no better time than now to be a part of GPC. Thank you.

Please welcome back the executive team and business unit presidents for our Q&A.

All right. So we're going to take the next -- yes, here you go, guys. This is going to be kind of an informal session. I know you're all getting a little hungry, and I promise we're going to feed you. The fewer questions you ask, the quicker we'll get to lunch. No, I'm just joking. You guys have been a great audience, and we want to thank all of our folks out there in the virtual world as well. The folks in the virtual world, you got a question, send it in, and our guys will take it, and we'll try to get to it. So priority is going to be this room. And we got a lot of talent you've heard from during the course of the day, I can assure you, I'll be quarter back of this session. My intent is just to get your question to the right person up here so that they can answer, right? So we've got folks roaming with mics, Camel over here. You're ready, Tim. Okay. Did I miss anything, Tim? We're ready to roll. [indiscernible], we're good. Okay. Fire away. Is that Chris right here in the front row. Chris? All right. Here's the mic, right here.

So I guess the first question would be on the dividend and the balance sheet that you're building. You're sitting on a lot of cash, you're below your leverage level, in the past 2 years, you raised your dividend at a fraction of the rate of earnings growth. So I guess my question is -- and this is not a gotcha question, it's a real question. Like my question is, why should we -- how should we interpret this? Should we be thinking that you see a big acquisition, something out there that you want to add to the business, another vertical, another competitor? Or is just prudence because of the environment? And I guess, as a dovetail to that is like, how are you feeling about the broader environment today versus the last time we spoke to on 4Q earnings? And I have a follow-up.

Yes. So I'll take the first shot and I know Bert is itching to jump in here as well. Look, Chris, I think given the current environment, to your point, the prudent thing for us to do is just stay conservative, preserve our cash. We are always on the lookout for good acquisitions. And I think as you saw last year where we did the biggest acquisition in the industrial space in our history with the acquisition of Command, we're not afraid to step out. In the meantime, that if you look at our track record over the last 15 years, those big strategic acquisitions. So Australia, 10 years ago, Europe 5 years ago, Command last year. It's been kind of on it every 5 years. That wasn't intentional. It just kind of as they come. In the meantime, we'll continue to invest in our bolt-ons. You saw a slide from Will, how much we've invested in bolt-on acquisitions. We'll continue to do that. But I do believe in the environment we're in right now, the prudent thing to do is just stay a little conservative and keep our powder dry. You want to comment on the dividend discussion Bert.

Sure. So look I think I'd pull it -- Chris, pull it up a little bit when we think about -- we don't exclusively think about the dividend, we think about the basket of capital allocation and we look at all the different levers. Our dividend increase this year, 6.2%. Again, as I just said, above our 20-year average. We think that's a pretty healthy pace of a 6.2% increase this year. We're not changing our philosophy on being fully committed to our dividend. I don't want that to be the takeaway. We're going to continue to increase the dividend as our earnings increase. That pace will pivot from year to year. Because as you've heard today and hopefully, as you've seen today, we've got some great opportunities in the business that have high returns. When you're looking at ROIC in the 30s, our discipline around capital investments is pretty strong. And we've got great opportunities to invest. And so I would just tell you that as we look ahead, we've got to pivot here to CapEx. And we're going to make a little bigger investment, as I said, 1.5% in 2022 of revenue for CapEx. We'll be looking in the forecast period of 1.7%. So a little lift there, but we think that comes with the profit benefit that I talked about as these strategic initiatives will contribute nearly half of the improvement to EBITDA. So I wouldn't over-index on how we're thinking about the dividend and that there's something different going on. It's just that we have a lot of dials and we're able to adjust the dials as we go to make sure we're putting it in the right place in the business. As you look across the forecast period, there's other things to think about and Paul is right, we are being a little conservative right now. We've got debt maturities, one this year and one next year that we need to be mindful of. So we're really trying to stay very balanced as we think about that. And as we can make the right choices across the way to change other aspects, we will. But I feel good about where we are. And you asked about the environment over the last few weeks. Look -- and I don't know what to say. I mean, I've listened to a lot of folks talk about what's happened in the last 2 weeks in the banking world. And I would just say that I'm of the view, and this is Bert's view that I think that's 2 very specific episodes related to 2 very specific banks. It's caused a lot of noise and disruption and paying to some of the deposit holders of those 2 institutions. But I don't think that, that's changed the overall broader view of the world. And this period of dislocation and disruption will move on, and I think we'll get back to where we're focused on more normal circumstances.

Some of our bankers would like to opine further on that. Our discipline around capital investment is pretty strong. And we've got great opportunities to invest. And so I would just tell you that as we look ahead, we've got to pivot here to CapEx. And we're going to make a little bigger investment, as I said, 1.5% in 2022 percent revenue for CapEx would be looking in the forecast period of 1.7% so a little lift there, but we think that comes half of the improvement in EBITDA. So I wouldn't over-index on how we're thinking about the dividend and that there's something different going on. It's just that we have a lot of dials and we're able to adjust the dials as we go to make sure we're putting it in the right place in the business. As you look across the forecast period there's other things to think about. So we're really trying to stay very balanced as we think about that. And as we can make the right choices across the way to change other aspects, we will. But I feel good about where we are. And you asked about the environment over the last few weeks. Look, and I don't know what to say. I mean, I've listened to a lot of folks talk about what's happened in the last 2 weeks in the banking world. And I would just say that I'm of the view, and this is Bert's view that I think that's 2 very specific episodes related to 2 very specific banks. It's caused a lot of noise and disruption and paying to some of the deposit holders of those 2 institutions. But I don't think that, that's changed the overall broader view of the world. And this period of dislocation and disruption will move on. And I think we'll get back to where we're focused on more normal circumstances.

May be some of our bankers would like to opine further on that. We have a couple in the room.

I didn't know this was a sharing session, right.

It's compliance here. The -- so my follow-up question is one of the most common question that I think we all get about your business is the industrial side of the business and because you have some of your peers talking about like what they're seeing in end markets, and that seems to be the biggest, I think, overhang as it thinks about your overall business. So maybe you could share a little bit about your latest thoughts about what's going on in the industrial side?

And I'll let you jump in or you as well will Chris, we've been getting asked every time we get together with some of our investors and analysts, are we seeing a slowdown in the industrial business? Because historically, our Motion business tracked with anything greater than [ 50 ] Industrial world is growing, expanding. Manufacturing is expanding. We've seen a slowdown in the last what, 4 months, 5 months. But I'm pleased to tell you our business continues to be really strong. And I think I mentioned at a -- during 1 of our recent conference calls that our business -- our Motion business has shifted over the last 5 years. In essence, we were a bearing distributor for years and years, maybe safety supplies, commodities. That's not our Motion business today. And I think what you saw in the showcase, and what you heard from Randy up here, we're much more a service and solution provider, all things, conveyance, automation, robotics. So I don't know that we are going to be directly tied to a slowdown in PMI, which would directly relate to a slowdown in our business. But Randy, maybe I missed a point or 2, you want to jump in?

You're spot on, Paul. I mean when you think about the industrial business, our customers more than half the time, don't know they need the product until it fails in the plant. So we have to be Johnny on the spot there to take care of them. What we've done over the last 2 years has really positioned ourselves well with our inventory to make sure that we have the right inventories on hand. We have seen our customers start to pull back a little bit on CapEx. So just like everybody is maybe a little cautious in the market. Our customers are cautious, but on the CapEx side, but they still have to operate their plants. So when something breaks, he who has the product to replace it wins. On top of that, we have more solutions that we offer now. When you saw it out there with automation, with conveyance, with fluid power and repair and services. So repair and services is a perfect example where something of high dollar value fails, they might take it to us to repair it versus buy new. So we kind of are a buffer there when things get a little tough. We've got an alternative solution for them. So as Paul said, our business, we saw a nice January and February and March is holding up. And if we see something that really is going to slow, I think it will be in the second half of the year, but not in the first half of the year so much.

Okay. Thank you, Chris. Go ahead. Yes.

Greg Melich with Evercore ISI. You have a nice pie chart -- a lot of good pie charts, but at the beginning, you talked about the white space and the fragmented business. that $200 billion automotive and I guess, $150 million in industrial, could you give us a little more granularity as to where that fragmentation is both geographically and maybe by product line?

Yes, it's a great question. Why don't we go by business unit. We did a little bit of it in the BU panel, but maybe summarize it, Frank. Your market inside of the $200 billion, you talked about your share percentages, give a little bit of perspective of how your market breaks down underneath some of those.

Yes, for sure. So the European market accounts EUR 70 billion, meaning around $80 billion. If you have -- considering our presence in 9 countries, we have access to 66% of this $80 billion market. And so the 3 largest markets are Germany, the U.K. and France by far, which represents more than half of the total. And if we consider -- the most significant is Germany by far, which is the largest market, reason why we decided [indiscernible] in 2022 to complete the coverage of the German territory to have access to the largest market in Europe.

Kevin, do you want to do the breakdown of the U.S.?

Yes. So Greg, we've put ourselves at about a 7% market share here in the U.S. When you think about it, there's 4 public competitors that are less than 50%, let's say, that just tells you how fragmented the market is. You saw Will's slide up there that showed our concentration of distribution centers and stores and half or care centers. It's pretty full, but there's still tremendous opportunity, not only on the store side, but also on the NAPA AutoCare center side.

Alain, just because I know you had your statistics in your prepared remarks, why don't you share a little bit, and then we'll go to Rob.

Happy to, Will. So for us in Canada, we measure it in -- on the automotive side, the market size is $9.2 billion. we're at 19%, and we analyze that throughout the country down to the shop level. So we actually analyze it and look for areas for improvement every single day. On the heavy-duty side, the market size is $4.1 billion, and we have over 16% market share on the heavy-duty side. So also the same granularity, the same work behind driving the business forward and there's ample opportunity in both industries for growth.

And then, Greg, in Australia and New Zealand. Our automotive market is around about $10 billion, and we've got 23% market share in our automotive business. It's really a market of 3. So we're the clear leader. And then if you add up the 3 big players, that's again what Kevin, like here in the U.S., it's less than 50% of the market. And then, Randy, if I think about our industrial business, again, in the markets, the end markets that we plan, we're a clear market leader, and we have less than 15% market share. So plenty of us by source .

Great. I guess the follow on to that Bret, if you want to opine more on industrial.

Well, I'll just say industrial is $150 billion in North America, and that's really the footprint we cover about 6% to 7% of that. We took out our #2 competitor when we acquired Command they're still a formidable competitor that's about half our size. And once you get below that, there's just a ton of what I would call regional players as well as a lot of independents in the market that we compete in. And they're typically local. So that's kind of how we split up the market. At one point, the market was defined at about [ 200 ], but when you start to look at it, there's a lot of product that falls into categories that we don't play in. So the true market that we play in is about $150 billion.

[indiscernible] I got you question, then the setup will be, with that sort of framework, when you think about M&A as part of growth, is that staying within those regions and product lines? Or would you consider going back to Mexico or South America or other parts of the world geographically or by product line?

Well, I'll take a shot at that. We certainly wouldn't rule that out, Greg. But I think what you're hearing, the opportunities that we've got in our existing markets is huge. So I would tell you before we do a significant step out, whether it's -- we're often asked, is there a go back to a third leg outside of industrial and automotive. Honestly, I don't see that in the cards. When you think about the market share that each of these guys just mentioned, huge opportunities to continue to expand our footprint in the existing markets. Okay. Bret, right here in the middle. Kate, you're next.

Bret Jordan with Jefferies. You talked a lot earlier about data and digitization and pricing analysis. And -- how do you bring the independent NAPA stores over the hump on that? I mean, obviously, to get that to face the end customer, what's the strategy? And have you seen any sort of adoption on the initial stages?

Go ahead [indiscernible].

So look, what I would say is we look at it as an NAPA stores, right, whether it's an independent or a corporate store, they want those tools to drive business. So we look at stores by market share. And if those help us drive the market share at that store, it really doesn't matter to us whether it's independent or corporate. And independent owner like Euro Flak who there is thousands from Portland Maine to Portland, Oregon, they'll take all that information to help drive their business. So we don't really see a difference between our independent or corporate when it comes to that.

Very consistent adoption. You see them taking it across the board?

Absolutely.

Kate.

Thank you can, Goldman Sachs. Bert, I was wondering if you could talk a little bit about the cadence of the adjusted EBITDA expansion. Is it fairly even over the next few years? Or is it more weighted towards the end 2025? And then second, we just wondered more specifically, can you put a finer point on when you think the dynamic pricing strategy will start to yield better profitability at the enterprise level.

Yes. So I'll start with the beginning on the EBITDA cadence. The initiatives that we talked about have a varying degree of adoption and burn in. So some of the things that [indiscernible] working on have a little quicker uptake. Than maybe the things you heard about from Jeff and Joe this morning where the physical transformation of DCs has a little longer lead time. The net sum of all that is that our guidance for 2023 there will be a step change in terms of how we get to 2024 and then 2025. So I'd say, it's a little bit more weighted towards the last 2 years than this particular year in terms of how that initiative delivery will be realized, but we certainly have some of it in 2023, both in technology and across the sales effectiveness dimension and some supply chain benefits, too. But I would say, probably weight them a little bit more to the '24 and '25 period in terms of the overall pricing. We're already seeing benefits from pricing now. So to the second part of your question, we're seeing benefits from the work that James and Brooke described this morning, we're seeing that today. And that's a part of our improvement in 2023 and our outlook, and that will continue to ramp as well across the years, along with, in the forecast period, that being spread out further than just motion and U.S. auto as the teams continue to look to adopt that technology over the period. So that one, I would say, in terms of timing of when it gets to full maturity, I don't know that we'll -- that opportunity has a very long runway. And I think it actually might extend beyond the forecast period that we're looking at today in terms of how data and analytics can be used in our business, not only in pricing, but in other dimensions, I wouldn't limit the period of time for that to something just for the next 3 years. The horizon for that, I think, is much longer. And Naveen, I don't know if you want to chip in.

Yes. I mean in data and analytics, I would say we are probably the first innings, and we have a long way to go. But this is not wait for 5 years. This is every month that goes by, we leverage data, and we will see a step function here very soon.

Go ahead, Tim.

Scot Ciccarelli, Truist. Paul, this morning in your presentation, you talked about taking out $450 million of expenses on a permanent basis. Now kind of looking over the years with GPC, you guys would take out costs and then cost to kind of creep back in. Can you help us better understand kind of like the mentality change that's occurred at GPC that this is going to be a more sustainable kind of a change in the cost structure as you guys target new margins?

Yes. I want to clarify 1 point that you made, Scott. Your numbers are correct, the $450 million. The $150 million was permanent. That was largely headcount. And that was the latter part of 2019 into early '20. When we got hit with the pandemic, like probably every business in here, we pulled every lever to get cost out of our business. So that $150 million and $300 million, that $300 million, I hate to use the word temporary, but it was pandemic-related costs we took out immediately. So you're right, the $450 million was our total expense reduction. $150 million was permanent reduction. I would tell you that there -- the disciplines and the impact that we saw when we pulled those levers in '19 and '20, that has stuck with all, I can assure you everyone on this panel. So it took an incredible amount of effort, hard work. It's not fun to take costs out of the business. We will all absolutely have a heightened level of discipline to ensure those costs don't creep back into the business. And that's -- as a leadership team, that's on us. And I would tell you, I see that discipline at a higher level today than I've seen it in our business probably ever.

And then, Bert, related to when you're talking about the SG&A leverage, is it actually cost coming out?

Or is it just kind of the natural sales leverage as you kind of grow your ED dollars? It's a combination, Scot, of a few things. I would say, one, I'll build on Paul's point, this discipline to take cost out is augured into this leadership team in a way as a newcomer, I haven't seen it in a business. And so that's always going to be a part of it. We're always looking to take the cost out. And I think we all see collectively the power of reinvestment of a portion of that in other parts of the business. So that continuous transformation improvement cost reduction will always be there. The SG&A leverage will also come from many of the things you heard about this morning. So it's not just about taking cost out, it's also about being smarter about how we're running the business and being more productive. So the tailwinds we'll get from the optimization, automation and transformation of supply chain will provide a benefit in terms of productivity that will be there. And you saw some of that when you talk to Joe and Jeff this morning. The other one that I would say is the modernization of our back office and the continued transformation of technology and the use of technology and some of the things that we're doing that when you make an investment in a particular system and then you can eliminate dozens of others because of our legacy, that's a real transformation and modernization. That also brings other benefits in terms of how people work and how much more productive they can be. So I would say it's across multiple dimensions in terms of how we'll see that leverage come through the business.

Okay. Other questions Mario?

Yes, Mario Gabelli. I'm extraordinarily well done, and I commend you for the details in your annual report. Just a couple of minor questions. First, you're assuming constant currency over the next 3 years in your models?

So Mario, I would say this year, we've got a little bit of a currency headwind that we described on our call. We've got a very slight headwind for currency in 2023. And and then the currency impact in 2024 is pretty negligible.

Okay. And the cash taxes as opposed to books tax is a unusually we should be aware of?

There's nothing unusual in the tax profile and a cash pay.

The ability to take cash out of the non-U.S. operations is back?

That's always a challenge, Mario.

Just a couple of little thoughts like this and then I ask it in a...

Look, we work....

I entered the month of March thinking it was going to be B2B basketball madness. Now it's B2B basketball of banks madness. So I have to ask the question. I'm assuming when you look at your pricing on your core, you said historical norm. So if I had constant volume, constant mix, constant customer, blah blah blah. Are we talking about a 1% inflation? Or are we talking about 2 or -- just you know just [indiscernible].

Look, we talked about inflation on the Q4 call, and I'll just reiterate the thoughts there. We certainly came out of Q4 with inflation moderating into Q1 as we saw the early innings of this quarter developed. That was our expectation. We do have the expectation that global monetary policy will be effective and do what it's supposed to do. So as you tick down through the course of the year, we see mid-single-digit at a GPC level inflation moderating across the quarters, closing out the year in the low single-digit range and then probably getting to and staying at the 1% to 2% range as we look in '24 and '25. But again, I'm not an inflation expert. So that you said pick a number. There's my assumption.

I got it. I had [ Purdue ], but knock down. Independent of that.

I still got [ bema ] in there, Mario.

I'm getting close to your hope -- the balance sheet, you go Page 28, you go through financial, you go through a whole bunch, I'm a vendor. I do my financing, things have gotten pretty nasty recently in terms of floating rate. You got your own receivables outstanding. What are the vendors telling you about how they -- how much they're paying? And how does that get adjusted in the system.

That I'm going to let actually going let Kevin answer that one.

Well, Kevin, it's about times. It's a 3-point shot for you.

First off, Mario, I had Kansas. So I've been out real early. Look at the vendors. Look at the vendors obviously bring it up, but I also remind the vendors of the good days when interest rates were really low. And it really is a short conversation when it comes to that. I think that's probably the best way to sum up where we're at.

And I might just add a little color, too. Like our programs, Mario, are being utilized at the highest level ever. So while there's been pressure on rate, the structure of our program and what our treasury team has done has put together an opportunity to borrow at a cost of capital that many don't have access to on an independent basis. And so while we talk about rates and we've had pressure in our P&L from the rates, at the same time, at the end of the day, the utilization of the program remains very robust. And so we're sensitive to this. We want it to be a good experience. We talked -- Kevin and I talk frequently about this. It's a team sport. So having said that, we're always focused on making sure the program is competitive, the most number of platforms and partners that can be there to provide the right solution with the owners.

Mario, I want to just add on to that as well. So every time I think that we have run out all that we can on the DPO side, we get another win. And the real opportunity for us, and we've seen this over the last couple of years, Europe. So the 1 thing and I've tried to convey it this morning, we've got a global supplier base. So the way we're approaching those suppliers doesn't matter whether you are in the U.S. or Europe or Australia, our expectation is we get the same payment terms. So Frank and our AAG team continues to get wins in Europe similar to what we got in the U.S. 5, 6, 7 years ago. So we're not done ringing out additional wins on the DPO side. Carolina have a question?

Yes. I just -- I had 2 questions. One quick follow-up on that, Bert. You said that you felt you -- I won't know the exact words that you said, but it was -- you've talked about the cost of the higher rates through your P&L. But that does the -- do the factor in programs actually go through your P&L?

On our AR factoring, we had a little bit of a P&L pressure there. So I was looking at that a little more broadly. The supply chain that's unique to those folks.

[indiscernible] clarification question. And then the second, I just wanted to talk more about the cash conversion outside of the payables, but you talked about consolidating the distribution centers, but also the efficiencies you're going to gain through optimizing your inventory through a lot of these data programs. So I was just kind of hoping you could go over your thoughts on cash conversion and kind of what you see in the long term as you implement those programs?

Well, it's an opportunity for us as we think about cash conversion. I mean we gave you a cash forecast of nearly $4 billion and nearly $3 billion on free cash flow. Those were being prudent, as Paul and I talked about on some of that. We've got some debt maturities that are coming up that we need to be thoughtful about. And we've got a capital expenditure uptick here that we also talked about. At the same time, we've got opportunities out in the future, particularly when we think about inventory, not only in the context of the opportunity that comes from consolidation of facilities as you aptly point out, but just being smarter about how we manage our inventory today. And we do think that we will be looking at good opportunities there. They're probably a little upside to our forecast that we haven't baked in as we get smarter on managing inventory. Our business unit leaders know that it's a focus for us, and it's a place where we've had great success on DPO and DSO. We're turning our attention to the DIO, and we'll be looking to get a little bit of benefit there. Will, I don't?

You got my answer.

Tim, do you have additional questions or anything from the virtual community. Okay. Great. Go ahead, then we'll come back to you, Tim. Okay.

A quick follow-up on that, and then I have 1 more. Regarding your ROIC, great performance over the last 3 years, but with the higher CapEx, do you expect ROIC to be down over the next 3 years in your forecast period? Or will that be offset by some of the working capital and other improvements and better margins?

Yes. No, we're not projecting ROIC to go down. Our focus is on continued improvement. That's why we need to be smart and do some work here on inventory. We see it as a real opportunity to continue to improve. The capital that we're putting into the business comes with a high return. So that will continue to generate ongoing improvement in ROIC. So as we look ahead, we're not seeing a headwind when it comes to the 3-year target and we're actually incorporating ROIC into our incentive compensation programs this year as well. And so we'll be continuing to focus on the ongoing year-over-year improvement.

Great. And then secondly, the question around the EV slide that you had. You're looking for 1% plus or minus impact from EVs in 2030 in a base case non inflation scenario. What is that relative to market growth would be your view, ex inflation? Is it 2%?

If I understand the question, I mean, that would be in isolation from your core market that's growing like it usually does, low-single digit, 1% to 2%. So in Europe, if you put that chart into context, if you believe that scenario, it takes a point or 2 out of it or adds to it.

Thanks, Seth. Yes. said you can't ask questions. Is this from the virtual audience here?

Of course. Yes. Yes, we've got a couple from the virtual attendees. So they are listening. Good to know. First question asked recognizing that we released earnings and provided our full year outlook last month, can we speak to what we're seeing as we're approaching the end of Q1, our performance thus far? Any color, automotive, industrial, et cetera.

Why don't I take that one? Obviously, we have earnings scheduled for April 20. So we'll share all the details with everybody. Then as we think about what we said on our Q4 call, we talked about on the industrial side, some nice momentum. Randy just reiterated that. I think we continue to see that through the first quarter. They started the year nice and strong. International operations continue to perform well and build on the strength to close. We also talked a little bit about weather. Weather Q4, Q1, always a bit of a wildcard every year. It was a little bit of a sluggish start for North America, driven by weather, but we've seen that acceleration through the second part of the quarter. So we'll give everybody more details on April 20. And as Bert reiterated this morning, the full year we reiterated earlier today.

Sid, I would just add to that. The -- used to be on our calls, we used to talk about weather for half an hour. Didn't we, Greg, that was everybody, we did a weather forecast. We really haven't talked about weather. We don't talk about weather much anymore. But I will tell you, it is reality and certainly in the automotive aftermarket. And I don't know in my career here, I can remember as much volatility in the weather as we've seen these last number of months.

This week.

The West Coast operations, Kevin, and I talked on a daily basis, how many stores, how many distribution centers we've had closed due to snowfall, tornadoes, rain, which out west just never happens. Northeast, many of you are from that part of the country, that virtually little or no winner, no snow to speak of and maybe 1 or 2 snowfalls. Here, about a month ago, we had a string of a couple of weeks towards 80 degrees. So the volatility in the weather this year has made it a challenge for our -- not only our company stores that we run, but also our independent owners. It's just -- it's been a real roller coaster. So that -- like it or not, I hate to play the weather card, but it does impact business. There's no 2 ways around it. You had another 1, Sid, or do we go back to the live audience here? Campbell, you got anybody else? Okay. Everybody -- did you have another one, Sid?

Yes we do. Okay. So this picks up on our discussion of our value-add services, Randy, in the industrial business. And the question is it being at $1 billion now, how do we see that growth forecast, if you will, relative to the overall industrial business you serve? And have you established any targets for how large that could be over time?

You got the mic bro, go ahead.

It's a great opportunity for us. There are those 4 verticals that I mentioned. When we acquired KDG, basically, we doubled our automation business. We also doubled our Fluid Power business. What we brought to them was the conveyance business and the repair and services business. So there is opportunity to accelerate growth in those 2 areas of the business just because we now have another tool for them to go out and sell, if you will. I do believe that there is some good growth opportunity in those businesses. Yes, combined, they're approaching $1 billion or right at $1 billion. And I do think that over the next 3 to 5 years, we can certainly accelerate that growth both organically and through acquisition, maybe at a little bit faster pace than we could accelerate our core business. So it's just about finding the right players. A lot of those acquisitions in that area are not going to be extremely large. They may be $20 million up to, say, $200 million. So sometimes you have to buy several of them and put them together. But our plan is to have a North American border-to-border, coast-to-coast footprint for those 4 vertical businesses. And I think we're well on our way now, and I look forward to seeing that continue to grow at a rapid pace as we move forward.

Perfect. Thank you, Randy. So is that guidance said? Any?

No questions.

Okay. Well, listen, we'll go ahead and start to wrap up. I've got 1 last slide I'll share with you. And then we have lunch out here in the lobby out next to the kind of where you all came in next to the NAPA race car. We've got a signed tables. I think you have your number on the back of your bags. We hope you can stick around and join us. We'll continue some of the conversation over lunch. But listen, as we wrap, we really want to thank. All of you guys have been great. And we appreciate you traveling down here to Atlanta and spend the day with us. We appreciate your interest in and your continued support of Genuine Parts Company. And as we said at the outset when I kind of kicked off, we really hope you leave here today with a solid understanding of our culture and how we drive value. We hope you leave here with a greater appreciation of our overall global strategy and the number of initiatives that we have in place. You've seen our talented management team. This is just some of the talent we have out in the field and a lot of the folks in the back and a lot of the folks that you saw in the showcase. We are -- in my 20 years here at Genuine Parts Company, I've never felt better about our future, and that's because of the talent that we have in place. Bert shared with you what I hope you agree are some pretty compelling 3-year targets. And look, we've got a lot of work to do, but we're very confident that we can get that done. And then certainly, lastly, we hope you leave here today with just an enhanced level of confidence in Genuine Parts Company as a differentiated investment. So with that, we'll go ahead and wrap up. We look forward to seeing you out at lunch, and thank you again for your support.