Standard Motor Products, Inc.

Good day, everyone, and welcome to the Standard Motor Products second 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. and it is now my pleasure to turn the conference over to Tony Cristello, VP Investor Relations. Please go ahead.

Thank you, Chris. Good morning, everyone, and thank you for joining us on Standard Motor Products' second quarter 2022 earnings conference call. I'm Tony Cristello, Vice President of Investor Relations, and with me today are Larry Sills, Chairman of the Board, Eric 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 Eric will then provide some concluding remarks and open up the call 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.

Thank you, Tony, and good morning, everyone, and welcome to our second quarter earnings call. I'd like to begin, as I always do, by thanking all of our SMP employees worldwide. We continue to operate in a challenging and complex environment with more unprecedented influences than ever, and our people rise to the task every day, and I could not be more proud. Overall, we were pleased with our top-line numbers in the second quarter, marking eight consecutive quarters of record-breaking sales. We were up 5.1% over last year's record period, with both divisions showing gains. Let me review each segment, beginning with engine management. Engine Management sales were up 3.7% against last year's second quarter, which itself was up nearly 35% from the previous year. The majority of the growth is attributed to sales from acquisitions made in the last year, along with the benefits of pricing actions. Our aftermarket customer POS remained positive throughout the quarter, even when compared to outsized growth last year. This excludes our wire and cable product category, which after two years of abnormal growth has now returned to its secular decline due to where it is in its life cycle. But beyond looking at absolute POS information, we also receive industry data that shows that our brands are outperforming in like-for-like product categories. This reflects the downstream share growth our customers have achieved due to our joint efforts at the streets. Temperature control continued at a solid pace. Sales in the quarter were up 7.5% versus last year, which surpassed the second quarter of 2020 by 47%. But the warm weather came early and strong. We enjoyed some new business from various customers, and here, too, we saw the benefits of pricing. Looking at the balance of the season, although we were going up against the hottest on record last year and trying to predict the weather as a fool's errand, the heat has continued with no end in sight. Customer POS has remained robust, and so we're feeling pretty good about ongoing demand streams. So let me talk for a bit about what we've been seeing in the market and how we're thinking about the future. I'll start with our aftermarket business, which makes up nearly three-quarters of our total revenue. Looking at the overall backdrop, most trends are favorable. The vehicle fleet is aging. The lack of new vehicle availability is causing motorists to repair and maintain the vehicles they have. Thank you. Thank you. Thank you. and we believe that our strategy, which focuses on the do it for me market, continues to be very well received by our customers. Additionally, our lesser reliance on the Far East for our supply of goods is a major advantage over some of our competitors. It has allowed us to ship at higher levels than many and has helped our customers better serve their end consumers. So while there will always be challenges, the marketplace and our position within it are in good shape. Meanwhile, our specialized non-aftermarket businesses remain strong, and we are very excited about this strategic thrust. This business focuses on selling custom-engineered products into niche on-highway and off-highway end markets, such as heavy-duty, construction and agricultural equipment, power sports, etc. We've been investing in its growth, and with our recent acquisition activity in this space, we now enjoy a run rate of about $300 million in sales. Not only is it diverse in end markets, it is diverse geographically with strong sales in Europe and Asia as well as in North America. We are now in the process of integrating all the pieces so that we can begin to truly take advantage of the combined strengths and pursue cross-selling opportunities. And this is beginning to bear fruit, and as we look to the future, we see boundless opportunities. 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, and so on. The industry has largely been receptive to passing it through, but there is always a lag and the cost increases keep coming. The latest challenge making the headlines is the increase in interest rates, which affect our receivables factoring programs with our larger accounts. We are working diligently to continue adjusting for these costs, with more pricing phased in over the second half of the year, but they will impact our bottom line for the immediate future. At this point, I'll hand it over to Jim to review the details.