SMP - Earnings call transcript Q4 2024 | Standard Motor Products, Inc.

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Operator

Good day, everyone, and welcome to the Standard Motor Products Fourth Quarter 2024 Earnings Call. [Operator Instructions] Please note this call is being recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Tony Cristello, Vice President of Investor Relations. Please go ahead.

Anthony Cristello

Thanks, Nikki, and good morning, everyone, and thank you for joining us on Standard Motor Products Fourth Quarter 2024 Earnings Conference Call. Larry Officer; Emeritus; Officer; Jim Iles, Financial are and Sills, and today Chief Executive Chief Burke, Officer. me Sills, Eric Chairman Chairman Nathan With Chief Operating

our will then Q&A. will our up remarks financial then an Eric and and will discuss today, Eric some call the quarter, our overview On for of provide performance results. open in Nathan call give concluding the

to today remind that we include you estimate some like generally Before I'd are begin our material discussing morning, anticipate, forward-looking these of financial we regarding we'll statements like be expected results. may this forward-looking the believe, and use expect, statements. that business or When words

information believe in they and expectations reflected us that us, are certain these assumptions we made reasonable, correct. we prove the that available based you currently cannot assure by to statements Although on and will forward-looking they are

Securities discussion over that You our forward-looking with Sills, filings Commission differ from call now the should statements. uncertainties CEO. our and Eric Exchange risks our I'll a read turn also could results the to the and for to actual our cause of

Eric Sills

you discuss shortly. for earnings in continue saw XX% overall, the line call. morning, good thank quarter full per and new line a we for Tony, a fourth showed year. welcome which to to pleased contribution And including strong quarter earnings our we Overall, X.X% Well, up Top to the you, not be I'll trend our and everyone, quarter, making are our the share good growth diluted and improving year. with with today. in It's performance of solid of finish the adjusted with bottom the an acquisition,

segment separately own each Let story. me its discuss has each as

nature difficult professionally in high quality offering to largely year, as to allowing the as outperform vehicle in Our year, a our a product are nondiscretionary We benefited categories we last them technicians setting a quarter increase has on mostly X.X% that's reputation in business high by post the for of believe out us we installed, watermark that the And tend from conditions. products X.X% in economic the over marketplace. believe these seeking increased types our segment. full for control

Lastly, ongoing we are seeing trend they to in the an recognizing as the increase by best larger expect locations we distributors wins marketplace, forward store inventory investment inventory and deployed incremental that the add and assortments, in continue. this

XX% trend for the smallest for continued seasonal Control has Temperature fourth were been the quarter, were up the away enjoying Sales is it best strong year though quarter and always up XX.X%, we full division the year, category. Our in the the the far But all segment. year. the in

is control, category In and also that the in the weather-dependent of all nondiscretionary XXXX across addition way to It vehicle records. products year. this set discussed country got stayed early all hot highly and nature the

our full year, the With keep although were demand, such slightly experience who thank our our year and we to softness folks are we sales and are able them. distribution quarter. Engineered Solutions over Within we pleased with did up in prior very operation the throughout, outsized segment, up

and provides know, across vehicle end segment As to equipment markets. new production this various you parts

turn as parts like quarter to third schedules discussed call, their softened, suppliers from their As production their demand our their we dampened in our began us. in of customers slow purchases certain which

reduction these solely our It's important to to slowdowns. note that is volume due

growth. this be the said, have as we have long-term lost any than has great can volatile and segment aftermarket, We a more still And of not but always potential business. trajectory

we vast new a we as business awards. a are global small are marketplace. known as are gaining player, And getting a We in player capable

temporarily and cyclical impacted truly remain it As bullish nature we the has can a of the segment future. be by tremendous very that the it on such, believe market, while

consummated hurdles, of typically speak regulatory S&P, Lastly, as on piece, expected, cleared recognizing semi-seasonal. it these the performed Having And X months part our about that Automotive. business all Nissens newest I'll November low for deal are that was the a X. months we it for that's

First, let Nissens with and as a the with you me aftermarket leading bit is complementary business. product player market similar and go strategy categories about in Europe strengths. remind S&P a to overlapping years, They have systems, categories fall vehicle conditioning portfolio. and control inroads and in the last both are management air powertrain in that within made thermal largely our cooling in strong few

of have expansion their through gains market offerings a of mid-teen share strong both generate growth, and and EBITDA. They record

integrating heavily We benefits our in X of combination the are that provides. now the engaged the seeking business, companies

closely reduction savings across buy opportunities as cost and teams working cost and identifying of well. areas of other the for seek is consolidation a together product versus inputs. leverage, front, we on, The cost, best many have savings to there make supplier are areas biggest but host On so

acquisition, very in time $XX rate the million are at we months stated confident run synergies remain we of to and number. reduction $X in XX As the within that million cost targeting

to not reflected just these all we each across other, look Nissens. segments, As help improvements be will

product a each standpoint, fleshing have From catalogs. offering out we other's begun

potential the these companies ocean. make product the with to well begun side standpoint, stronger to commercial In more either discussions are addition ever. quite X are partnering The lastly, holes to product in the of well. early discussions than in identify a groups, complementary accounts add to and filling going bullish still enthusiasm other's common And we from have categories contagious. days, opportunities, both each we aligned, identifying teams are and are is but We're on

forward keeping of our you abreast success. So we to look

I will more provide to turn over who will details. that, it with Nathan, So

Nathan Iles

morning, everyone. Thank and right. good you, All Eric,

with outlook for full finish an full and go through sheet I'll of then the flow balance on for consolidated quarter we at color our As on a year some XXXX. give numbers, update I'll level. financial cover summarize the some segment cash by results and the first year the the and key metrics results for

the at our X.X%, driven increase products. rate, year, of see margin our you segment, EBITDA can Controls by driven $XXX.X for QX partly that solid slide Vehicle demand net the looking from of gross Control sales with on the were fourth million in better First, Vehicle operating by quarter last expenses. offset was leverage adjusted a but by down lower in up

sales pleased to are rates sales also last were The margin leverage product of result as rate higher as percent The last lower than was year. as inputs operating a different cost impacted interest gross and margin the of increased QX volume, was higher higher some sales, But decline by over our dollars factoring costs as year. we given expense well see improved slightly mix. gross

Turning quarter of with to that of the Temperature from up elevated were Control. staying the The quarter. pattern fourth continued quarter into in weather segment through favorable that Net year and early summer another the XX%. benefited million fourth in demand started season sales for the $XX

sales led customer Temperature X.X% a wins improved full with Engineered customers Sales gross year the expenses production they Controls for rates new down of new noted increased were in schedules percent operating We've as our impacted adjusted were sales markets. segment and sales markets to QX X% of existing for a EBITDA to quarter the to by business but we in and see offset slowing our our for market quarter, we increase were as higher cause given the in various higher both as across quarter. as softness Solutions pleased to in serve softness. and lumpiness margin some can react sales the volumes X.X% the

better for EBITDA last expenses remained Solutions saw which a Engineered Adjusted quarter improved from in X.X% of sold, was the of well control. margin the and gross mix up products as under rate we year operating

sales and Nissens We the operating closed net does business given and to as on Nissens Last performing talk added out it, $XX.X me have profit it expected, in the results. million November I the should adjusted our The our included Eric seasonality $X.X nature about aspect X but noted, not on in the Temp point of is Automotive. products. let that a of similar certain but of have segment, million least, months Control and as X, business of EBITDA. for segments, of acquisition quarter sales to

being from be a different quarter the from year. fourth and is can familiar seasonal the know you As business, full usually with

acquisition So coincided months slowest our with the the timing of and December. of year November in

other pick is EBITDA sales point as different business EBITDA. with go gross annually sales you'll XXXX, line segments. to in volume mid-teens a with a about prior up profit One Nissens and our notice Nissens' expect SG&A other margin than expenses, regarding we profile million that We through which is in $XXX and expectations,

result year, some gross in higher a mid-teens this business distribution As range noted. see as but when combined adjusted that the more will and than full in of margins, EBITDA expenses I SG&A for distribution also the higher manufacturing, an is we'll

for and per were sales consolidated results all diluted the increased sales, to up increased the earnings Putting together X segments QX, versus adjusted non-GAAP XX% XX.X% of year. share while X.X% net last EBITDA across

consolidated our results. full year to Turning

overall when with churned all up excluding were and solid in X.X%, segments. Nissens, we see X.X% a You'll sales Net performance. were sales up across up

and the Our Temp our Control strength of XX.X% Nissens. to of rate the gross increased business on margin addition

factoring, contained distribution costs our start-up While year and Nissens the up business to consolidated expenses, were for center. the excluding related SG&A of the year, additional new

have costs, been SG&A of as SG&A showing XX%, improved Nissens' higher of volume. performance million would a DC percent sales $XX.X Excluding million sales and on of start-up $X.X

On achieve diluted year. share improvement increase the growth, expenses well-controlled bottom for in helped operating an us earnings line, per X.X% margin and non-GAAP the sales

of business. higher and Nissens' than about Accounts sheet. $XX legacy end due balance of the QX from sales higher were addition at to now the year, $XXX.X million last the receivables the the million Turning year receivable of to

year the volumes. the Nissens' up addition also at of sales Inventory to increased from to and of satisfy levels million, due million year, $XX higher finished levels needed mainly inventory $XXX.X last

million Our cash by not was the reduction million inventory as down cash levels this cash last in generated compared last year year in operations did flow $XX.X statement back we cash to after $XXX.X inventory for Please of generated operations generated brought year that of normal. aided to note balances a recur in year. reflects that

repurchases activities our showed distribution as to which million, of and borrowings were Financing the increasing million activities Nissens. year share primarily payment of investment $XX.X $XX dividends our million fund related Shawnee acquisition well capital for $XX.X center. million to used that $XXX.X $XX.X year of expenditures as this but investing of Our to million, of of showed includes

EBIT. of of $XXX.X Nissens end debt and leverage Xx EBIT. QX million for a pro X funds with keep from in was We includes the ratio actually net year leverage X.Xx QX was mean months finished forma the Our of than would months this for just last But higher at mind, results borrowing acquisition. of after XX under

see may debt from slight the we in expect ratio of seasonal working ratio due pay and into improve down to XXXX first Nissens in in leverage needs, While half add to leverage a capital as uptick XXXX. we the EBITDA our we

We target Xx of continue to than end EBITDA by of the leverage XXXX. less

expectations Before profit want XXXX. year update on I I for an to and the our full finish, sales give of

Regarding the Automotive American of and continuing in Solutions, we reflects which and mid-teens markets sales production end are line, our the top customers also which from XX headwind sales, which see reduced and addition But to to growth Engineered from in as sale favorable percentage year, of North the inventory. lower dynamics. product XXXX growth Nissens basis expect full soft was aftermarket consolidated the ACI a line our currently remain work slight about sales for through points of

to debt depreciation results be for our Nissens' we and Nissens and of full growth outstanding year, amortization to $XX increase Automotive investments amortize outlook, range months and service. as and place adjusted million expect rate that our income includes be tax million X XX we XXXX to to in $XX interest for we'll $XX on intangibles expect adjusted about We expense of the XXXX. to versus a center from as and our million XX% to distribution months have In in with connection XX%, be EBITDA to XX% EBITDA

operating incurred million keep with and variability of expenses, be have the $XXX expenses, million XXXX. approximately with these do and in inclusive mind in expenses operating quarter each expenses business. We more some but year, the seasonality factoring ratably such, will in are to total Regarding across additional will anticipate fluctuate $XX as Nissens sales

costs potential we by tariff our Finally, please not passing business, is recently from for change higher U.S. address note government potential XXXX the actions, price uncertainty outlook does the include the dollar impact constantly, but in plan to and The any things creating to on announce market. our announced them dollar. that Whatever actions. in impact continues through

both year with very the of we growth as quarter To as well full in earnings wrap XXXX our growth. our and were sales up, pleased

are for $X.XX to opportunities X%, Given forward Nissens looking our increases were trend I'll working share, many raise also XXXX quarterly per back your comments. pleased for Thank to continuing increase to Eric our results, of the you years. and an creating the dividend to happy to we beyond. over We're some of final almost board and on team call exciting the for together, turn attention. have

Eric Sills

Thank you, Nathan.

be to XX% close, just the Needless resilient to in we're in to believe which we how are So we predict. highly times business business instability. complex tends minute our But resides spend to over safe future. making overall, largely times, let The harbor. represents a of of things that about me on aftermarket, say, the in thinking difficult our

to period a the major Nathan nondiscretionary through purchases. choice We've and to heading extent. repairs keep Nissens, motorists similar repair necessary to as also not as to And at and be we we them anticipate related they car tends accounted make XXXX time of But but tariffs. will our feel We're the outlook. demand. these have items, people implemented with Europe into to any in to some tell age their North expect across of case and sense in to our expect pass we resist America park disruption as in which cars during uncertainty such, what exposure said, As we with tend would as not seen history have a the our largely Only the The have to we for globe get with And cost. guide, uncertainty, this cycles here these dynamics. ability no of operational.

to expect sales increase of that would new if benefit the new cost dampen Meanwhile, thus tariffs cars, car and we further. aftermarket the

near-term can expect markets will see business may new for Solutions experience favorable some different us to shape. trend while while temporary are we end as headwinds, perform business trends. Certain we Engineered our others awards long-term Our take well, contraction. be And and experiencing customers the

global initiatives make us group to diversified make we stronger Meanwhile, implement the to all we continue people many a of best and and to company, have it more happen.

it prepared remarks. about this will do the future. concludes That And up questions. feel point, so good we we very At our open for your

Operator

We'll Instructions] from first Jordan [Operator question Bret our with Jefferies. take

Bret Jordan

guess, the how for portfolio? contribution American Are I see you Nissens' about, talk to your product to that you Could North from the guided 'XX? growth there the in adding synergies business

Nathan Iles

thanks Yes, Bret, the for question.

the of as at cost through roll summer, portfolios. when and to Eric just synergies, this target revenue at, some mentioned synergy across take So expect signed think themselves. the were to we some looking that the than come, product look at said synergies deal costs revenue was you, that we longer guess before XXXX, of will it last terms will terms of just bit product I I further we've in we the to in a the we around looking be more the remind cost of synergies out. But And and probably different that

Eric Sills

balance because And sheet have times is before hits go P&L product has a add to to reductions, and and to as through largely there the the can cost lead on. you timing that, it it lag so about vendor be it

made making offset we're while of getting So decisions there is lot and a timing. the in an progress, nice

see the tremendous hit, year. don't hopefully, some term, of we end towards not the certainly So but of it a expect amount more in near to we'll the

Bret Jordan

strong comes any do potential is purchasing of given level of data what underlying And Temperature you talk Mexico? you tariffs is? product sort you at customer sell-in? see demand about could with of a that just product aligned lot being ahead your Is a can Control. inventory -- the of Or it And there? that that Obviously, POS about just versus levels sort of talk really the customer very the Okay. from

Eric Sills

to divisions asking control, the quarter X related the seen clear, obviously I'll and in business. aftermarket POS guys. you're Vehicle inventory, about about separately. with was North So be we And flat saw basically what what the POS the talk from just we've American big

sell-in as what adding they're was referring hundreds to slightly expect I our And as trends being was than expansion broadening those again, of kind so that, really you And higher inventory to saw this and that continue. of would stores as assortments. their ongoing we

the That sell-in. rebuild inventory we POS a side, quite but Control we what strong because the not in bit in saw saw quarter, a a strong as XX% their of was On as Temperature roughly beginnings we for years. big the at was of of as And the a fourth as it growth them such last been see now, orders throughout preseason the we the continuing it had few at, that to that, XXXX. comparable look season right selling preparing we saw,

As a se. seeing tariffs, still any it that whether to of of we're think impact pull the is purchases potential per that relates the purchasing rational. We ahead -- it's that forward pretty not is there of

Bret Jordan

one how then do looks think in 'XX question. same 'XX? I inflation And sort versus like of see guess, would ex you tariffs? SKU last you Okay. What inflation

Nathan Iles

Yes.

where from the as just Let no seeing, inflation everyone the me I else is cost offset think largely the tariffs. take back see across sans normal environment is Bret, guess we through expect markets inflationary can. we that side, price to But I it

Bret Jordan

with Is been X% that mean expectation. customers I of Okay. is sort about have aligned thinking? where talking most of their your you're

Eric Sills

very in range. single-digit will It that reasonable. low that's So be

Operator

comes Stember question ROTH MKM. from next with Our Scott

Scott Stember

have you unfold could could the where exposure know and of front? I we all remind Canada, just nobody versus going obviously just your regions is Mexico, things how idea accelerate Europe, and on that But if China are a happen. things versus to hot this what's an topic tariffs, so Regarding knows us

Eric Sills

a Sure. company. into I'm -- but as not you to going we details, we're are know, get specific global

in America Europe manufacturing here well amount as and as across the continents significant well We North supply multiple is have in that global. base in Asia as a as

future as and potential So any but the we about in concentrated we tariffs, particular area. overly exposure think announced both see necessarily throughout, not

still then are in in details how Mexico. to And terms going the even accounted for be of being are like places been have even tariffs of -- lot a developed

And intent that announcements a offset to them So get very we're it the while of may pass prepared to be announced tariffs will close then on share as the accommodate work in staying through. made. we'll it, There pay and pain, timing remarks, we in nimble we through we did it we the how can the being it to are to said attention work a bit our suppliers as as be largely inventory. we plan to the of in have basically. with our but to through pass say the well XXXX some as But is,

Scott Stember

helpful. energy segments; go Got it. the And That's efficiency. the X engine and just Nissens, then of air new maybe through addition with conditioning, cooling individual

one could. this is that year-over-year of each perspective. remind what and you is the segment how a performing I I doing a know each is but sales each if from us on performing, Just us just basis, give guess, sense how first a is quarter,

Eric Sills

split the business healthy between mover single radiators, the it, very but cooling categories, Well, of largest big Europe. Sure. first, terms which has the over within in the biggest is various it and is needle the types and it engine in product is X, of in X a

last very efficiency. Temperature conditioning volume. as being And biggest the of the a our That's what for business roughly them. X/X they vehicle we newer Air division. is similar call engine This offering being of It's call control. second Control what category, would the a much

like adding vehicle that been by going where as began one wide it's opposed subcategory so they control, have subcategory it's very with turbos done they've And our to well.

EGR lost valves they electronic getting to now that, are After and bodies. throttle

of that that impressive to and scale subcategory So years for subsegment market to they them. they they not have launch more really very in than has where opening were unheard X ago. they're where these something an to and subcategory by believe really the ability believe looking really they gain us, where And been it's their sell

are X. temperature of All -- the performing X categories most one air expected. the of being the The well, seasonal performing as conditioning the

very does, the with are degree efficiency as seeming with in So right doing are in Europe fall their it's market expectation and well significant well. their are perform a rise engine and will it and that the there's as ours well a very now player off-season, they now, share legacy to with do weather, but categories every but to

Scott Stember

Got it. Kansas. the then question, over just And in on movements update last facility and Very an new give helpful.

Nathan Iles

progressing the very doing there. automation, well we're installation there. Yes, we're The

we're As automation from in then Edwardsville, vehicle facility there. capacity. We're on and recall prepared going for of plan market, then more then of have pieces Kansas everybody, existing few in in. miles the from the own the in we're XXXX. that hopefully much that control we existing final Kansas, exit facility, center there. expanding is The But Edwardsville, be We move our risk be to our a us the believe 'XX, scheduled and both gives early the we our put end moving distribution to Edwardsville by which which we'll avoidance in there, to we'll and product control, within putting temperature wire we

Operator

will with Gabelli. We move Jolly Instructions] next Carolina with [Operator

Carolina Jolly

expecting your Can in talk underlying from were little a exclude puts to with growth about some start, Nissens. growth of your of obviously, there? to And guidance of Just we vehicle are the business? growth, maybe takes control you and mid-teen the the you contribution

Eric Sills

and seem nondiscretionary within vehicle healthy year had of a last we market we trends the for our X this Nissens be some it's but good Good but it's the see other so And days, it's Give obviously level. at Trends, we early that for year. yes, us. the majority on segments, just category. of now, give being look those side, segment basic the at market mid-teens guidance along new lines trends control Eric. morning is as growth in remains business as don't flavor, Carolina, typically you to that But continuing we

year, see is, up Nathan Control strong we lift sold points the we of going expectations window is with as well have backwards to rise Temperature last know and side, few will it's fall a absence as the On gets we're the But starting with the little it season, just which it it business, do, percentage we a that as mentioned, start going ACI what business bit against we hot depending very when to gets. hot you get and how that again. a and hot as on

Engineered Solutions is last starting the ended year as it year.

say you of But the could fourth of So these very segments can out really trends all kind continued lumpier. X have it are be coming -- quarter. be the of can it

hope see back markets. so we some bounce can as to as difficult we end end the we'll continue of their predict, markets level markets their -- on continue but assuming softness And that certain some It's we're see of that trajectory.

end takes. we I puts even yet. February different long-winded and of It's So that the realize answer not that that's says a see of kind

But think So overall, out. we'll be see a as to the how our year legacy healthy continues that we whole. rolls business

Carolina Jolly

make the I want And just Perfect. a this is follow-up just quick on then to guidance. right. sure

about? to I in of are Shawnee that adjusted to to Is -- of kind forecast, will are Within you be there's the that costs expect think improve XX% guess, going be there attributed to, correct costs. out, some duplicate to EBITDA no XXXX would once necessarily but aren't XX% that

Nathan Iles

Nathan. That's correct. Yes, it's

But start-up million in think not then out. to couple we're those adjust it's we and have those and XXXX, them of the going continue to numbers, type come of in some in still costs XXXX. dollars out will We a

Operator

question next Performance Our for from Robert Investing. Smith the comes with Center

Robert Smith

would is point I to but pay or down too it you at further time in until debt? be say this that aggressive in you your that opportunistic, interested of fair acquisitions know you're not some

James J. Burke

Yes, a is fair Robert, Jim this assessment. Burke. that's

our While is capital we're to down the debt plans the our allocation, and pay levels. -- are intent

to But Nothing have where of initial Xx on may any get we expect pro stay X. always a we're And end think to 'XX, with announce we by that the nor I forma said, what's market. down plans. have the abreast today. near basis, do of talked Nathan in to we

the is there pay debt, down dividend. to intent our immediate Our maintain

Robert Smith

dividend you I thanks the perhaps potential and examining the the artificial are intelligence for you're it's from By increase. Could efficiencies working this? but how how early with? stage, Yes. Or who way, you describe know you're approaching

Eric Sills

that be, whether applications or -- think helps future. we at our the I it can it efficient us more where us a our company makes offering are looking makes Well, potential us product or with

we're space. So to different it disposal our in lot at to the the companies easily a be I relatively a can similar tools that think seek are looking benefit. What at deployed of other

We have that a handful are underway.

algorithms. was. Some of has but artificial it was much used basically we which, its our that's It frankly, an example, them, never predictive within demand in what for planning, to call intelligence, analytics, gotten now sophisticated more

us make deploy company. And sort a better artificial of to so we that to intelligence continue

small So pieces, but us. which on different we're for that, makes giant working of lot sense no advancements, a

Robert Smith

working this you or Are at with company present program particular time? any

Eric Sills

feel I We none but would work parties, with comfortable that third various advertising.

Operator

any further our closing I no questions or back remarks. will for And there appear to this be presenters turn to call additional the at time.

Anthony Cristello

our happy of lot today. and information Nikki, call and for follow-up thank there's presented, everyone a conference to may in want understand to questions we have. participating you Thanks, answer we'll We be any

a is our Investor or on you Relations day. have website. great I press Thank information contact you. Our hope release available

Operator

And this Thank participation. does program. your conclude for you today's

may at You any disconnect time.

Standard Motor Products (SMP) 27 Feb 252024 Q4 Earnings call transcript