Standard Motor Products, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Overall top-line growth nearly 25%, legacy business up nearly 4%.
• Vehicle Control had wire set decline but POS positive for large accounts; Temperature Control had robust sales up 15% YTD.
• Nissens added strong sales and EBITDA, working on synergies and cross-selling.
• Engineered Solutions sales decline leveled off, adjusted EBITDA steady.
• Tariffs in more stable environment, expenses offset by pricing.

Segment Performance

• North American aftermarket (Vehicle Control): Net sales in Q3 were $197.7 million, down 1.6% against a tough comparison; YTD up 2.9%. Adjusted EBITDA in Q3 was 10.3%, with YTD at 10.9%. Sales down due to wire set decline, but POS for large accounts up mid-single digits.
• North American aftermarket (Temperature Control): Net sales in Q3 were $144.7 million, up 14.8%; YTD up over 13%. Adjusted EBITDA in Q3 was 19.7%.
• Nissens Automotive: Added $84.5 million net sales and $14.2 million adjusted EBITDA in Q3. EBITDA for the quarter was 16.8%.
• Engineered Solutions: Net sales in Q3 down 0.3%. Adjusted EBITDA in Q3 was 10.2%, in a steady range.

Guidance

• Raised top-line expectations.
• Tightened EBITDA guidance to upper end of previous range.
• Full-year 2025 sales guidance increased to low to mid-20% range.
• Adjusted EBITDA margin guidance tightened to 10.5%-11% of net sales.

Risks

• Tariff uncertainties impacting results.
• Volatility in Vehicle Control due to customer order patterns.
• Economic conditions affecting consumer discretionary spending on certain product categories.

Question and Answer

Q: Some of your customers have been giving the indication that they're seeing some elasticity issues mainly in the DIY side of the business. It doesn't sound at least that you're seeing that at this point? Just wanted to confirm that.

A: Yes, sell-through at these customers continuing in a positive range and within Vehicle Control, we are in the mid-single digits in the quarter and Temperature Control was even higher than that. Our categories for the most part are not like that, the break fix, the car is down and the repairs required.

Q: Moving over to Europe, Nissens sounds like pro forma they had very nice growth in the quarter. It also has been some commentary about some weakness in Europe from some competitors and customers. Just trying to get a sense of the European market and also how well Nissens did in the quarter?

A: Very similar story over there, which is that its product category by product category and ours being similar to here being nondiscretionary are outperforming in general. And we very much believe that we have been able to gain share over there through a combination of executing on existing product categories, but also to -- as they continue to expand into newer ones and getting penetration in some of the newer categories.

Q: The OpEx numbers were a little higher. And I think that the mentioned sounds as if the transition over to Shawnee in Kansas, might have had a little bit to do with that. Just trying to get a sense of what we should be looking at for in SG&A or an OpEx number going forward for the next few quarters?

A: Yes. I think there are 2 ways. 1, looking at the consolidated operating expenses. This is really the kind of the last full quarter, where we're going to have Nissens coming in with really no comparison against last year. So Nissens business added about $24 million of OpEx. And so just as you think about modeling, need to include their expenses going forward. And then there were some higher expenses in the Vehicle Control segment. I think as you pointed out, some of that, as I mentioned, was just due to transition and timing of transition to the new warehouse in Shawnee, Kansas. Just note that on a 9-month basis, the operating expenditures are a little bit more in line. So that kind of points out the timing aspect of some of those moves.

Q: On that growth in Temperature Control, is that market share gain where customers are opting for your North American product over what they might have been buying previously?

A: We see a bunch of different tailwinds really combining because certainly, having this sort of a sales lift over 2024, which was such a strong year from a temperature standpoint, it was a very -- it was less hot this summer than last summer, we're led to believe that there are several things going on. 1 is, and as I mentioned in the prepared remarks, the season started earlier. It's ending later. And so it's just we're seeing sales penetration lasting that many more months than it used to. But we very much do believe that we're gaining share. And it's partly because we think our customers have been able to maintain in-stocks because of our ability to keep them at that level. And our brands continue to be well received and requested within the repair base and so we do believe and we see this in some of the industry data that we have been able to gain share.