Good day, everyone. Welcome to the Genuine Parts Company Third Quarter 2021 earnings conference call. This call is being recorded. I would now like to hand it over to Sid Jones, Senior Vice President of Investor Relations. Please proceed, sir.

Good morning. And thank you for joining us today for the Genuine Parts Company, Third Quarter of 2021 Earnings Conference Call. With me today are Paul Donahue, our Chairman and Chief Executive Officer, Will Stengel, our President, and Carol Yancey, our Executive Vice President and Chief Financial Officer. As a reminder, today's conference call and webcast include a slide presentation that can be found on the Genuine Parts Company Investor Relations website. Please be advised, this call may include certain non-GAAP financial measures, which may be referred to during today's discussion of our results, as reported under Generally Accepted Accounting Principles. A reconciliation of these measures is provided in the earnings release, issued this morning, which is also posted in the Investors section of our website. Today's call 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 Company's latest SEC filings, including this morning's press release. The Company assumes no obligation to update any forward-looking statements made during this call. Now, I will turn it over to Paul for his remarks.

Thank you, Sid, and good morning. Welcome to our third quarter 2021 earnings conference call. We are pleased to report strong financial results again this quarter, which reflects the consistent execution of our strategic priorities as the global markets continue to recover. As we assess the business climate and how we are managing through the recovery, we can report the GPC team is generating positive momentum in both our sales and operating results. And we are well positioned for both near and long-term growth. Despite inflationary pressures, our margins reflect the success of our category management initiatives and cost control efforts which have offset these increases. Our strategic efforts with our global supplier partners have prevented significant shortfalls in our overall inventory levels, allowing us to deliver quality customer service. Taking a look at our third quarter financial results, total sales were 4.8 billion, up 10% from last year and up 11% from Q3 of 2019. We also produced our 16th consecutive quarter of gross margin expansion. Furthermore, we improved our productivity and customer service capabilities with ongoing execution of our operational initiatives. As a result, segment profit increased 14% and our segment margin improved 30 basis points to 9.3%. This represents our strongest margin in two decades and confirms our key initiatives are driving meaningful improvements. Net income was 229 million or $1.59 for diluted share and adjusted net income was 270 million or $1.88 per share, a 15% increase from 2020, establishing a new record for GPC's quarterly earnings. Total sales for global automotive also set a new record at 3.2 billion for the quarter, representing an 8% increase from Q3 2020, and a 15% increase from Q3 of 2019. On a comp basis, sales were up 5% from last year and up 7% on a two-year stack, with our strongest year-over-year automotive comps coming from the U.S. business. Additionally, sales held up well through the quarter, with the strongest average daily sales volume in each of our geographies coming in September. The broad strength in our global automotive sales reflects several factors. First, we're proud of our team's efforts to shore up our supply chain amidst the difficult backdrop of product delays and logistics challenges. Supply chain disruptions have been more substantial for U.S. automotive than in our international or industrial operations. We continue to work closely with our global suppliers to manage through these issues and ensure we have the right inventory available for our customers. We are confident in the effectiveness of our global sourcing team and believe we are well-positioned in the industry. We also continue to benefit from our key growth initiatives and market tailwinds. Among our growth initiatives, our focus on innovative sales programs and sales force effectiveness is positively impacting commercial sales. For example, we recently finalized an exclusive partnership in the education space for technician recruitment with over 10,000 active tech students in the process of earning their credentials. We are also excited that NAPA and AAA have executed an agreement for NAPA to be the exclusive auto parts supplier for the new AAA branded premium battery, which will be available to all consumers, focusing on the over 62 million AAA cardholders and 5,400 approved auto repair centers. Additionally, we’re equipping our sales team with incremental resources, training, and development, which have led to more productive, customer-facing calls. Our omni-channel investments continue to drive strong B2B and B2C digital sales. Finally, the international rollout of the NAPA brand is fostering significant growth in both our European and Asia-Pac operations. Turning to the market tailwinds, these macro drivers include the ongoing reopening of the economy and improving miles driven, which generate the need for repairs and maintenance. A robust used car market is keeping more cars on the road longer, and improving aftermarket fundamentals, such as the growing and aging vehicle fleet, will continue to benefit the industry over the long term. Next, let's look at our automotive highlights by region; total U.S. sales were up 9%. Comp sales increased 8% from last year and are up 5% on a two-year stack. In Canada, total sales were up 1% with comp sales essentially flat both year-over-year and on a two-year stack as lockdowns in major markets have slowed the recovery. It's been encouraging to see these restrictions ease of late, which should lead to stronger demand through the final three months of 2021. Our U.S. sales were driven by strong demand for product categories such as exhaust, ride control, brakes, tools, and equipment, all of which outperformed. Additionally, both retail and commercial ticket and traffic counts were positive for the third consecutive quarter. By customer segment, sales to both commercial and retail customers held strong, with DIFM sales outperforming DIY for the second straight quarter. We remain pleased, however, with the continued strength of our DIY business and believe we can drive additional growth with ongoing initiatives, such as B2C digital investments. NAPA online, B2C sales continue to grow rapidly, up over 40% from the third quarter, and up 2x from 2019. The strength in commercial sales during the quarter was driven by several initiatives mentioned earlier, along with the ongoing economic recovery in the U.S. Sales to our major account partners achieved mid-teen growth, followed by sales for our NAPA AutoCare customers, which were up low double digits. We would add that our NAPA AutoCare membership has surged with the reopening of markets, including nearly 400 shop upgrades thus far in 2021. This is tremendous momentum for our premier independent garage program. Rounding out our commercial segments, fleet, government, and other wholesale customers also posted high single-digit growth for the quarter, showcasing strong results across all commercial accounts. These encouraging trends give us confidence in our growth strategy and our key priorities to deliver customer value and ultimately sell more parts for more cars. Our AAD team in Europe continues to perform well, with total Q3 sales up 8%, achieving a robust 23% growth on a two-year stack. Comp sales increased 2.5% from last year and improved 14% on a two-year stack. While the UK and Benelux continue to stand out with strong results, we are also pleased with the solid performance in each of our seven European markets, reflecting stable market conditions and the execution of our key sales initiatives. The continued rollout of the NAPA brand and ongoing emphasis on key account development are driving market share gains. On the Asia-Pac side, total sales were up 2% from 2020 and up 18% on a two-year stack. Comp sales were up slightly from last year and increased 15% on a two-year stack, with both commercial and retail sales up double-digits, driven by positive growth from the Repco and NAPA brands. We are pleased with these results, especially given the severe lockdowns in major markets such as Sydney, Melbourne, and Auckland for much of the quarter. We are energized to see the reopening of these markets finally underway, and we expect a surge in demand in the coming months. Now let's discuss the Global Industrial segment. Total sales for this segment reached 1.6 billion, a strong 15% increase from last year, and a 5% increase from 2019. Comp sales were up 13% and 4% on a two-year stack. Through the quarter, average daily sales in July and August were consistent with the second quarter, while our strongest results were in September. This quarter's positive momentum in industrial exceeded our expectations, reflecting the excellent work by our motion team and the strengthening of the industrial economy. Both PMI and industrial production were positive, correlating closely with the overall healthy state of the industrial sales climate. For the second consecutive quarter, we saw positive sales growth across each of our served industries. The sectors that stood out with double-digit growth include equipment and machinery, iron and steel, automotive, aggregate and cement, lumber and wood, fabricated metals, equipment rental, and oil and gas. Furthermore, our newly added fulfillment and logistics industry experienced tremendous growth. The current growth in our industrial business is broad across the markets we serve. As previously conveyed, our Motion business is a market leader in the industrial distribution space in North America and Australasia. The DMI team strives to be the preferred industrial solutions provider in the industries we serve, partnering with the best manufacturers to provide Tier 1 brands that our customers demand. Additionally, we constantly broaden our product offerings and service capabilities to maximize our sales potential and drive market share gains in a large, fragmented market. With these business fundamentals in mind, our focus on continued profitable growth in this segment remains grounded in five key initiatives: an omni-channel build-out to accelerate e-commerce growth; the expansion of our industrial services and value-add solutions such as equipment repair, conveyance, and automation; strategic M&A to generate significant growth in new markets and products; enhanced strategy for a dynamic pricing environment providing a competitive advantage; and finally, network optimization and automation to improve our operating efficiencies and productivity. We are pleased with the progress on these initiatives so far and excited about future opportunities. Another third-quarter highlight is the publication of our 2021 sustainability report update, showcasing our initiatives over the past year in promoting diversity, equity, and inclusion. We've also taken steps to reduce the environmental footprint of our operations by lowering energy and emissions and increasing recycling opportunities worldwide. The events of 2020 tested all of us and underscored the importance of supporting our teams and communities. We're proud of our GPC teammates around the world for their resilience and contributions to our sustainability goals. We invite you to learn more about these initiatives in our full report available on the GPC website. In summary, we've made great progress in important areas during the third quarter, and we are very pleased with the strong results in our automotive and industrial businesses and the continued improvement in our sales and operations. We couldn't be prouder of the GPC team. Now, I will turn the call over to Will.

Thank you, Paul. Good morning, everyone. First, let me reiterate Paul's comments and acknowledge the continued strong team performance this quarter. It's always a proud moment to have the opportunity to showcase our global team's hard work, relentless customer service, and winning performance. It's a challenging environment, and the teams have done an exceptional job adjusting and delivering results. We continue to focus on our key pillars, including talent, sales effectiveness, digital supply chain, and emerging technology. The teams are executing initiatives well and consider strategic initiatives a central part of our operating cadence. The teams have rigor around measurement and progress visibility and are ahead of our 2021 plan established at the beginning of the year. As we execute our GPC strategic planning process for the upcoming year, we reflect on learnings and refine our priority initiative executions. Throughout the year, we share best practices around the globe for common strategies to help us continuously learn and improve as one GPC team. While our geographies and end markets are diverse, we share similar GPC global initiatives, all designed to deliver profitable growth exceeding market growth, operating leverage, and free cash flow. Despite a challenging environment, we are pleased to see more normal team activities and customer interactions starting to be possible in most geographies. We recently had the chance to meet in person with the U.S. Automotive Executive and Field Management team in Atlanta. We listened to field feedback, shared performance trends, enjoyed team camaraderie, introduced new talent, and collaborated on strategic priorities for the upcoming year. Similarly, approximately 70 motion executive and field leaders recently met for the first time since early 2020 to discuss business performance and review strategic initiatives. In Europe, our AAG executive leadership team met in person for the first time in nearly two years. Our Atlanta-based GPC and U.S. NAPA field support teams also hosted an employee appreciation event for 400 teammates, featuring a well-received visit from NAPA racing teammates, including Chase Elliott. We are cautiously optimistic that our teams in Australasia will soon exit lockdown in November and return to more normal in-person routines. At each of these events, it's energizing to witness the positive attitudes, strong team alignment, and visible excitement about our GPC momentum and vision. It's also reassuring to see our unique GPC culture intact. Paul and I have also had the opportunity to spend time in person with customers and vendors this quarter. These discussions are critically important as we share our growth visions, listen to feedback, and explore ways to deepen our strategic partnerships. These conversations reinforce our GPC core strategic priorities: talent, sales effectiveness, digital tech, supply chain, and emerging technology, while affirming the unique customer value propositions across our GPC businesses. Growth, technology solutions, supply chain excellence, product and technical expertise, and long-standing local relationships are always key themes. For instance, we recently visited with an industrial customer enjoying exponential growth. Our Motion teammates co-locate associates at the customer's facility to provide real-time expertise on the plant floor, ensuring the facility operates at its potential. Discussions with this customer explored the use of embedded technology solutions making customer ordering easier and faster. We are building plans to triple the size of this customer relationship over the next few years. In our customer discussions, a common theme is the supply chain challenges faced by all companies. We explained our belief that our global scale, in-country resources, data and analytics, investments in our supply chain, and proactive daily team approach position us to navigate headwinds relative to others. We constantly discuss top-level issues with our supplier partners, many of whom view GPC as a large and important global customer. Over the past quarter, we've held numerous top-to-top meetings with global executive leadership and vendor partners to review progress and jointly solve problems. It's a challenging environment, but our global teams and partners are proactively working daily to navigate these challenges. Turning to talent, we recently completed an end-to-end strategic review of our global GPC employee value proposition and talent initiatives. This disciplined work ensures we have the right capabilities aligned to current and future business strategies and reinforces our striving to be an employer of choice in this dynamic and competitive talent environment. Around the world, we are taking deliberate actions to lead, recognize, and support team well-being. For example, we recently streamlined recruiting processes to attract talent faster, introduced new wellness incentives, improved holiday schedules, enhanced vacation eligibility and flexibility, invested in healthcare to reduce burdens on our associates, and revised dress code policies, among others. Talent remains our most important advantage, and we will always work to take care of and invest in our people. We also continue to execute well against our broader digital and technology initiatives. During the quarter, teams made exciting progress under the leadership of our new Chief Information and Digital Officer, Naveen Krishna. We focus on building high-performing teams that engineer technology to solve customer problems at scale. Additionally, we are optimizing human and financial resources to prioritize the most impactful activities. Our emerging technology initiatives, including electric vehicles and related technologies, continue to advance. The global teams are collaborating effectively to execute a disciplined and coordinated strategy. We remain pleased with team momentum and will dedicate resources to this exciting effort. Lastly, teams are executing our M&A strategy with discipline. For instance, we added several store groups to our North American and European automotive networks to enhance local market density and announced the acquisition of J&S Automotive Distributors, a leading automotive parts distributor in Ireland, marking the 15th country where GPC operates. We also signed a definitive agreement to acquire AutoAccessoriesGarage, a leading U.S.-based digital platform specializing in automotive accessories. This strategic digital acquisition enhances capabilities and accelerates growth in a strategic product category for the U.S. automotive team. The acquisition pipeline remains active, and we remain disciplined in prioritizing transactions aligned with our GPC strategic and financial criteria. We are thrilled to welcome our newest teammates to the global GPC family. Overall, we are pleased with record-setting team performance, with teams rallying every day to service customers and deliver results. We look forward to closing the year strongly and building on our solid momentum as we move into 2022. With that, I will turn the call over to Carol.

Thank you, Will, and thanks to everyone for joining us today. We are very pleased with our third quarter financial performance and look forward to sharing additional details with you. Recapping revenues, total GPC sales were 4.8 billion in the third quarter, up 10%. Gross margin improved to 35.5%, an increase of 50 basis points from 35.0% last year. The improvement in gross margin was primarily driven by increased supplier incentives due to improved volumes and the positive impact of strategic category management initiatives. In the third quarter, we experienced continued pricing activity with our suppliers as anticipated, resulting in additional product cost inflation. Our team was well-positioned to address these increases with effective pricing and global sourcing strategies and price inflation improving neutral to gross margin. On a total company basis, we estimate a 3% inflationary impact on Q3 sales, consisting of 3.5% inflation in global automotive and 1% to 2% in industrial. Based on current trends, we expect to see additional price inflation in the fourth quarter, and we will utilize our strategies to protect our gross margin as needed. Our total adjusted operating and non-operating expenses were 1.35 billion in the third quarter, reflecting an 11% increase from 2020 and accounting for 28% of sales. The increase from last year is due to several factors, including a prior-year benefit of around 60 million and temporary savings from the pandemic. Additionally, third quarter expenses reflect increased variable costs due to 450 million in additional year-over-year sales and cost pressures in areas like wages, incentive compensation, rent, and health insurance. We continue to execute ongoing initiatives to control expenses and improve operations. While we are pleased with progress, we see room for further improvement in the coming quarters. Our total segment profit for the third quarter was 447 million, a 14% increase with a segment profit margin of 9.3%, compared to 9.0% last year, representing a 30-basis point year-over-year improvement and up 130 basis points from 2019. We are pleased with the continued improvement and the excellent work by our team. Looking ahead, we raised our margin expectations for the full year, currently expecting the segment profit margin to improve by 40 to 50 basis points from 2020 or 80 to 90 basis points from 2019—our strongest full-year margin in over 20 years. Our tax rate for the third quarter was 24.9% on an adjusted basis, up from 23.4% last year, with the increase primarily related to an income mix shift to higher tax jurisdictions. Our third quarter net income from continuing operations was 229 million, with diluted earnings per share of $1.59. Our adjusted net income was 270 million or $1.88 per diluted share, which compares to 237 million or $1.63 per adjusted diluted share in the prior year, indicating a 15% increase. Turning to our third quarter results by segment, our total automotive revenue reached 3.2 billion, an 8% increase from last year. Our segment profit rose 6% to 281 million, with a profit margin of a solid 8.8%. While this reflects a 20-basis point decline from 2020 due to a temporary prior-year benefit, it represents an 80-basis point margin improvement over 2019, reflecting underlying operational progress. For the nine months, profit margin is 8.6%, up 80 basis points from 2020 and up 90 basis points from 2019, driven primarily by margin expansion in our U.S. and European operations. Our industrial sales reached 1.6 billion, marking a 15% increase from 2020, while segment profit hit 166 million, up 32% year-over-year, and profit margin improved to 10.3%. This reflects a 140-basis point increase from 2020 and up 220 basis points from 2019, marking the first double-digit margin for industrial since Q4 of 2006. The year-to-date profit margin for this segment is 9.4%, up 120 basis points from 2020 and up 150 basis points from 2019. This team is executing extraordinarily well, delivering excellent operating results amid the industrial recovery. Now, let's turn to the balance sheet. As of September 30th, total accounts receivable decreased by 3.5%, primarily due to the timing of 300 million accounts receivables sold in October 2020. Inventory increased by 10%, aligning with our sales growth and reflecting our commitment to maintaining the right parts in the right place at the right time. Accounts payable rose 20% over last year due to increased inventory levels and favorable payment terms with certain suppliers. Our AP to inventory ratio improved to 129% from 118% last year. Our total debt decreased to 2.4 billion, reflecting a 16% decline from September last year and a drop of 245 million from December 31, 2020. We closed the third quarter with available liquidity of 2.4 billion, and our total debt to adjusted EBITDA improved to 1.5 times from 2.2 times last year. Our teams continue to excel in optimizing working capital and capital structure. We continue generating robust cash flow, with 300 million in cash from operations in the third quarter and 1 billion for the first nine months. We expect our earnings growth and working capital to drive 1.2 billion to 1.4 billion in cash from operations for the full year. Free cash flow is projected to be between 950 million and 1.15 billion. Our key priorities for cash remain the reinvestment in our businesses through capital expenditures, M&A, share repurchases, and the dividend. For the nine months, we've invested 138 million in capital expenditures and have plans for additional investments to drive organic growth and enhance efficiencies through the year's end. Additionally, we utilized 143 million in cash for strategic acquisitions facilitating growth, including the previously discussed automotive store groups and entry into Ireland. We maintain a robust pipeline for further strategic and bolt-on acquisitions in both automotive and industrial segments, including the anticipated close of Auto Accessories Garage in Q4. Consistent with our long-standing dividend policy, we have distributed over 349 million to shareholders through the first nine months. The Company has paid a dividend every year since going public in 1948 and has raised it for 65 consecutive years. We've also been active in share repurchases, dating back to 1994. In the third quarter, we spent 100 million to repurchase 800,000 shares, with 284 million spent year-to-date to buy back 2.2 million shares. The Company is currently authorized to repurchase an additional 12.2 million shares, and we expect to remain active in this program moving forward. Turning to our current outlook for 2021, we are raising our full-year guidance from our earnings release on July 22, 2021. We now anticipate total sales for 2021 to be in the range of +12% to +13%, a rise from our previous guidance of +10% to +12%. By business segment, we expect +14% to +15% total sales growth for automotive, an increase from +11% to +13%, and a total sales increase of +10% to +11% for the industrial segment. On the earnings side, we're raising our guidance for adjusted diluted EPS to a range of $6.60 to $6.65, which represents a 25% to 26% increase from 2020, an upgrade from our previous guidance of $6.20 to $6.35. We are encouraged by the strength of our Q3 financial results and nine-month performance as we enter Q4, focused on initiatives aimed at meeting or exceeding our yearly outlook. We look forward to reporting on our Q4 and full-year financial results in February. Thank you, and I will now turn the call back over to Paul.

Thank you, Carol. As we close out another strong quarter, we are pleased with our progress in driving profitable growth, strong cash flow, and shareholder returns. We attribute the positive momentum in our business to our global teamwork and disciplined focus across all operations. Our team has confidence in the strategic plans we have established to capture long-term growth and margin expansion. Our strategic plans, combined with an exceptional balance sheet, position GPC with the financial strength and flexibility to pursue growth opportunities through organic investments and acquisitions while also returning capital to shareholders through dividends and share repurchases. Looking ahead, we are encouraged to see the global pandemic's impact subsiding while the fundamentals of our two global businesses remain solid. Our GPC teams worldwide are stepping up under challenging circumstances and taking great care of our customers. Thank you for your interest in GPC, and we extend our gratitude to each of our GPC teammates for their passion, dedication, and hard work. Let me turn the call back to the operator for your questions.

Thank you. At this time, we will be conducting a question-and-answer session. Our first question is from Chris Horvers of JP Morgan, please state your question.

Thanks. Good morning, everybody.

Good morning.

My first question is, you talked about September being the best average daily volume in the automotive business, and obviously Motion has seen strong two-year acceleration. Can you discuss potential outcomes for the fourth quarter in both businesses and given that commentary, would you expect the two-year trend to accelerate in Q4 on comps?

Well, Chris, first off, thanks for your question. You've hit it when you look across all our businesses. The third quarter got stronger as we progressed, with September being our strongest month. Currently, the trends we saw in September are carrying over into October. So we're feeling good about where we are and have strong projections for Q4. Right now, everything is looking solid.

Excellent. And then, Carol, could you diagnose the 50 basis points of gross margin expansion? Some of that was vendor allowance; how much of that is perhaps not sustainable on the vendor allowance side, and how does that correlate with Motion's operating margin over time? Thank you.

We are extremely proud of the team's work on gross margin, and I want to give thanks to our procurement, as well as all of our teams involved, due to a considerable amount of effort. When evaluating the inflationary impacts, we implemented effective category management initiatives, global sourcing, and pricing strategies successfully. While the quarter showed some impact from volume incentives, the underlying initiatives have continued to benefit our numbers. Overall, the Q4 outlook is positive regarding gross margin. We anticipate that it will continue positively for the year and show gain in the two-year stack.

And what about the Motion operating margin?

The motion operating margin reflects strong performance for the nine months. It showcases improvements in gross margin and expense leverage, and the team has effectively lowered its cost structure. We should see continued improvement in Q4, which implies an 80 to 90 basis point overall improvement for the full year—just outstanding results.

Got it. Thanks so much, and have a great fourth quarter.

Thanks, Chris.

Thank you.

Our next question is from Bret Jordan of Jefferies. Please state your question.

Hey, good morning, guys.

Morning.

Hi, Bret.

You mentioned the share gains in Automotive. Regarding the U.S., are you observing shifts from smaller wholesalers, or are the changes occurring among larger competitors in the market?

It's hard to say where we're gaining this year. I can tell you that the product category growth we’re seeing in Q3, along with a solid Q2, indicates we are outpacing the general market. The automotive aftermarket remains incredibly fragmented, but we are pleased with the NAPA team's performance and solid back-to-back quarters. We're out of the gates in great shape for October, so we expect this trend to continue. Our international automotive businesses in Europe and Asia-Pac are also performing well.

My follow-up question relates to the European team. You mentioned rolling out the NAPA private label program in Europe—is that gaining traction? Could you give us a feel for the margin benefits of private label over there?

The acceptance of the private label has surpassed our expectations, prompting us to accelerate the number of product lines being rolled out. Across Europe, we started in the UK, which continues to outperform, and we've expanded to other markets with similar success. We're also rolling this program out in Australia and New Zealand with positive results.

Regarding margin, the private labels in Europe are neutral to their gross margin rate. However, they positively impact working capital as they often come with extended terms, allowing reinvestment into additional product offerings and M&A like the earlier mentioned discussions.

What percentage of your inventory mix is private label over there?

We haven't disclosed that yet, but it's starting slow with a number of product lines. Although we aim for 10% incremental improvement year-on-year, it may rise in future years as we expand into new product categories.

Alright, thanks. If you go back in time, there was very little private brand sold through the AAG network when we entered Europe in 2017. All current movements through the NAPA brand is incremental, and as Carol mentioned, we are targeting 10%.

You're welcome.

Our next question is from Greg Melich of Evercore ISI. Please state your question.

Thanks. My first question focused on inflation. The 3% inflation you observed in third-quarter sales—how will that accelerate in Q4 to maintain neutrality on a margin standpoint?

We predict Q4 inflation for Global Automotive to be around 3% to 4%, with 1% to 2% for industrial—slightly higher on U.S. automotive than international. We're confident in our ability to manage through this and continue delivering gross margin improvements despite increased inflation.

Has there been any shift in mix or demand destruction that you've noticed?

Currently, our top-line results indicate strong demand across both divisions, whether in industrial or automotive. We haven't observed significant pushbacks—pricing remains rational despite inflation seen across sectors.

Got it. Moving on to a strategic question. Will, regarding M&A, the market is dynamic. How do you find suitable opportunities while adhering to historical valuations?

Thank you for your question. M&A operates within a dynamic environment right now. Our approach remains disciplined when considering deals strategically and financially, focusing on value creation potential. In our bolt-on acquisitions, particularly in automotive, valuations remain reasonable and align closely with historical metrics. We'll continue being cautious and disciplined regarding M&A.

Appreciate the overview, and congrats to you all.

Thanks.

Thank you, Greg.

Thank you.

Our next question is from Daniel Imbro of Stephens.

Thanks for taking my question. This is Andrew on behalf of Daniel. On the industrial side, September PMI stepped up a bit, which was a nice surprise. Are you able to meet the demand in the market today? Have there been any issues with risk?

Our industrial business has remained strong; the figures reflect robust Q3 performance. We have not encountered supply chain disruptions on the industrial side, contrasting with the North America automotive sector. Our industrial team entered 2021 with a solid inventory position, sustaining that throughout the year, leading to impressive sales growth in Q3. Everything is secure on the industrial front.

Excellent. You mentioned the rollout of a buy now pay later feature. Is that exclusive to the DIY side or could it potentially expand to the DIFM channel to help affordability on repairs?

It's primarily on the DIY side; early pilots are being tested. It's an excellent case of understanding customer needs; it’s early, but online retail is likely where this is most relevant.

Perfect. Thanks for your insights.

Thank you.

Our next question is from Seth Basham of Wedbush Securities. Please state your question.

Thanks, and good morning. My query pertains to the U.S. Auto business—the acceleration in growth noted in September—can you clarify if that was purely due to comparison, or were other factors contributing to that acceleration in September and October?

It's a combination of factors, Seth. The U.S. automotive team has gained solid footing; the quarter continues to improve and evolve positively across regions and both DIY and DIFM segments. October remains strong as well. Everything appears positive and steady.

Great insights. Is there acceleration in new customer growth, or is the growth more due to expanding business with existing commercial entities and major accounts?

It's both, Seth. Our strategy emphasizes sales team effectiveness with an enhanced focus on end-user customers. Notably, our wholesale business saw high single-digit growth year-over-year, demonstrating successful initiatives for both existing customers and new opportunities.

Thank you.

Thanks, Seth.

Our next question is from Liz Suzuki of Bank of America. Please state your question.

Thanks for accommodating my question. Will mentioned multiple enhancements to employee benefits focused on being a global employer of choice. Can you quantify the cost of these initiatives? If not, can you clarify how you believe SG&A would be impacted? Do you think it’s reasonable to expect growth in wages and benefits to outpace historical growth rates for the foreseeable future?

These initiatives hold significance for our teammates and workforce but don't come with substantial costs. The primary relevance to SG&A relates to increased labor and wage inflation. We're committed to all mentioned aspects, including healthcare among others; however, the major concern is the true wage inflation. Nonetheless, we take pride in having permanently reduced our cost structure to offset much of the inflationary impact with our strategies. So, we don't foresee needing to model significant incremental expenses for our benefits initiatives, which are factored into labor in our full-year operating margin improvement projections. We’re excited about the outlook.

Understood. Regarding the raised guidance for the year, and considering the quarter likely exceeded your expectations, what results have surprised you positively vs. prior estimates?

There weren't major surprises; results stemmed from elevated sales and continued recovery in automotive and industrial sectors. The 16th consecutive quarter of gross margin gains occurred amid heightened inflation, coupled with effective cost controls. We experienced terrific cash flow despite multiple supply chain disruptions, which has favored further improvement in industrial recovery. Thus, our forecast for Q4 remains very positive, optimistic about results for the remainder of the year—it has truly been a unified team effort.

Thanks very much.

Our final question comes from David Bellinger of Wolfe Research. Please state your question.

Hi, everyone. Appreciate the time, and well done on the results today. Regarding the 350 basis points of inflationary benefits within Automotive, are the majority of those price increases fully executed, or is there still room for further adjustments next year? Are there any pricing actions setting you apart from competitors?

It’s a fluid landscape regarding price adjustments; we work closely with suppliers on timing and potential inflation. Some will indeed carry over into next year, but negotiations surrounding pricing becomes a week-to-week effort. We anticipate this more normal inflation will also apply in industrial sectors, while U.S. automotive experiences exacerbated price increases. Nonetheless, teams excel in navigating through it to enhance growth.

Thanks for clarifying, and I wanted to ask about the Buy Now Pay Later feature. Can you provide any insight into its potential size? Is it intended primarily to extend the NAPA customer base in a manner? Also considering the acquisition you've announced, will the online business percentage continue to peak in coming years?

The Buy Now, Pay Later pilot is currently operating in about 250 NAPA stores. Credit to the team for seizing this opportunity; it's quite early, so I wouldn’t put a number to it yet. We have not rolled it out anywhere else at this point, so stay tuned for future developments. The acquisition of AutoAccessoriesGarage is exciting and aligns with our strategic aims helped by recent ventures in Europe and beyond; early results indicate true potential.

Very much appreciated. Thank you.

Thank you.

We have reached the end of the question and answer session. I will now turn the call back to management for closing remarks.

We'd like to thank you for participating in today's earnings call. We look forward to providing updates on our year-end and fourth-quarter results in February. Thank you for your support.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.