Standard Motor Products, Inc.

Good day, everyone, and welcome to the Standard Motor Products first quarter 2022 earnings call. To enter full screen mode, hover over the slide and click the full screen icon in the center of the viewer. To exit full screen mode, click the X in the upper right-hand corner of the screen. If you require technical assistance during today's event, you can reference the help link at the top of your screen. Please note today's call will be 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. Please go ahead.

Thank you, Chloe. Good morning, everyone, and thank you for joining us on Standard Motor Products' first quarter 2022 earnings call. I'm Tony Cristello, Vice President of Investor Relations, and with me today are Larry Sills, Chairman of the Board, Sills, President and CEO, Jim Burke, Chief Operating Officer, and Nathan Iles, Chief Financial Officer. On our call today, Eric will provide an overview of our performance in the quarter, followed by Jim, who will give an update on the operations and supply chain. Nathan will discuss our financial results and outlook, and Larry will offer some comments on recent board changes. Eric will then provide some concluding remarks and open the call up for Q&A. Before we begin this morning, I'd like to remind you that some of the material that we'll be discussing today may include forward looking statements regarding our business and expected financial results. When we use words like anticipate, believe, estimate, or expect, these are generally forward looking statements. Although we believe that the expectations reflected in these forward looking statements are reasonable, They are based on information currently available to us and certain assumptions made by us, and we cannot assure you that they will prove correct. You should also read our filings with the Securities and Exchange Commission for a discussion of the risks and uncertainties that could cause our actual results to differ from our forward-looking statements. I'll now turn the call over to Eric Sills, our CEO.

Well, thank you, Tony, and good morning, everybody, and welcome to our first quarter earnings call. I'd like to begin, as I always do, by thanking all of the SMP employees worldwide. We continue to operate in an environment of challenges and surprises, and I believe our employees have demonstrated their ability to overcome all that is thrown at them. I could not be more proud of our people. Overall, we are very pleased with our performance, as we have now posted our seventh consecutive record sales quarter. We were up nearly 17% versus last year, with both divisions showing gains. Let me review each segment, beginning with engine management. Engine management sales were up nearly 13% in the quarter, with various moving pieces behind the numbers. The majority of the growth is attributed to sales from acquisitions made in the last year. But in addition, we did see benefits of new business awards, ongoing market strength, and a modest bump from pricing actions as we seek to address inflation. Moving to temperature control, we experienced outsized performance, surpassing last year's sales by 30%. The strong ongoing demand we experienced all last year has continued. Preseason orders were strong. We enjoyed some new business from various customers. Here, too, we saw the benefits of pricing. All this being said, as we always caution, the first quarter in temperature control is a low period in this highly seasonal business. And while all indicators are favorable, it does tend to come down to how hot and how long the summer is, and we are going up against one of the longest, hottest summers on record. Next, I'll briefly discuss margins, though Jim and Nathan will delve deeper. Along with the rest of the world, we have been experiencing elevated costs in just about every input, raw materials, labor, transportation, interest rates, and so on. The industry has been receptive to passing it through, but there is always a lag, and the cost increases keep coming. We have, however, also made up some of this headwind through improved fixed cost leverage from elevated sales. So as you look to the bottom line, our earnings per share remain very strong, and while they are slightly off last year's numbers, those were an anomaly, as Nathan will explain, and we believe we are off to a solid start to the year. So let me talk for a bit about what we've been seeing in the market, focusing on engine management as temperature control is still largely off-season. POS was positive throughout the quarter and remains well ahead of historical levels, but we are now up against very high comps as last year's second quarter numbers were very strong. And we are now starting to see some modest softening, especially in wire and cable, which after two years of abnormal growth is now returning to its secular decline due to where it is in its life cycle. Meanwhile, our non-aftermarket business has remained strong, and we are very excited about the strategic thrust. This business focuses on selling custom engineered products into niche end markets such as heavy duty, construction, agricultural equipment, power sports, and others. As you recall, last year we made three acquisitions with combined annualized volumes of $100 million, and when added to our existing business in this space, we now enjoy about $300 million in sales. We are now in the process of amalgamating all the pieces so that we can begin to truly take advantage of the combined strength and pursue cross-selling opportunities. We are beginning to see some of the fruits in the form of new business wins, though it is important to note that these new contracts often take some time to show revenue. One area we are particularly excited about is our joint venture manufacturing electric compressors for electric vehicles. We are now able to leverage the JV's technologies along with the strengths from elsewhere in the company and are landing contracts globally for electric vehicles. And while overall this business is still small, the growth trajectory is excellent. At this point, I'll hand it over to Jim to review our operations.