Standard Motor Products, Inc.

Good day, everyone, and welcome to the Standard Motor Products Second Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question and answer session, and you may register to ask a question at any time by pressing star 1 on your telephone keypad. You may withdraw yourself from the queue by pressing star 2. Please note that 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, Vice President of Investor Relations. Please go ahead.

Thanks, Savannah, and good morning, everyone. Thank you for joining us on Standard Motor Products' second quarter 2024 earnings conference call. With me today are Larry Sills, Chairman Emeritus, Eric Sills, Chairman and Chief Executive Officer, Jim Burke, Chief Operating Officer, and Nathan Isles, Chief Financial Officer. On our call today, Eric will give an overview of our performance in the quarter, and Nathan will then discuss our financial results. 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 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, everyone, and welcome to our second quarter earnings call. It's good to be with you today. I'd like to start, as I always do, by recognizing all the S&P employees around the world that make us who we are. I really could not be more proud of what they are able to accomplish. All right, overall, we're quite pleased with our quarter. Sales were up 10%, which is an all-time record for us, and we saw it in each of our three operating segments, though certainly highlighted in temperature control, which I'll get to in a minute. But let me start with vehicle control, the largest of those segments. In general, we were pleased. After a flattish Q1, the second quarter was up 2.7% over last year, showing some nice sequential momentum quarter over quarter, bringing our year-to-date numbers to being up by 1.6%. We've benefited from some awarded business not present last year, as well as generally favorable trends as vehicle control products are largely non-discretionary in nature. Moving to temperature control, it was a heck of a quarter as we saw a tremendous surge due to extended heat across much of the country. Sales for the quarter were up 28% against last year, though it's always worthwhile to point out that seasonal cadence can change year to year. Last year started slow with a soft second quarter, but then the third quarter saw a solid improvement, so we are facing a tougher comparison going forward. That said, year-to-date we were up nearly 16%, and the heat has continued through July, which bodes well for a solid full year for the segment. I'd like to say how proud I am of our operations people. They were able to keep up with this elevated demand, taking care of our customers with on-time deliveries. Can't thank them enough. I'd like to shift now to talking about our non-aftermarket business, our engineered solution segment. This relatively new segment continues to perform to our expectations. Sales were up about 6% in the quarter and 5% on the year. And as there will always be some lumpiness due to the basic dynamics of the different end markets, the general trend has absolutely been favorable. as we continue our success landing new business and ramping up production, expanding programs with existing customers, and generally getting known in the space as a capable, high-quality supplier. I'd like to now spend a few moments on profitability, though Nathan will go into greater detail. We are pleased to see a recovery in earnings in the quarter, though we know we still have work to do. We're proud of what we've accomplished in controlling our costs and passing through pricing, but overall we recognize that there is room for improvement. We continue to face pressures in cost of goods, both in elevated material costs and in wages, and customer factoring programs remain a significant headwind. To help combat this, we instituted in the quarter an early retirement program for qualified salaried employees in North America. We are quite pleased with the level of participation. We thank our new and soon-to-be retirees for their countless contributions to our success and wish them well. The savings associated with this will be approximately $10 million annualized once fully realized, which will happen in phases over the next year. Next, I'd like to speak for a moment about our exciting recent announcement. On July 10th, we announced that we had signed a definitive agreement to acquire Nissan's automotive. I won't repeat all the details. We welcome you to review the transcript of our investor call along with presentation material provided, but here are the highlights. Nissan is a leading supplier to the European aftermarket of engine cooling and air conditioning components, along with a growing line of what they call engine efficiency products, which would fall into our vehicle control category. With sales of around $260 million and EBITDA margins in the mid-teens, they represent an immediate significant leap forward for S&P into new markets with highly complementary products. We need to complete customary regulatory approvals, which we expect will take a few months, but once consummated, we are eager to get started on pursuing the numerous benefits we anticipate as we work together with their team. We see these benefits falling into three main areas. First, growth through cross-selling. We are in many similar product categories, but with differing strengths. As we leverage that, we can expand our offerings on both sides of the ocean. Second, we anticipate cost reduction synergies as we combine our purchasing power, seek best cost, pursue insourcing, freight consolidation, and so on. And third, we believe that by joining forces, we can become a stronger company and therefore a better supplier to our customers. We can accelerate product launches, tackle new technologies faster, and pursue numerous other means of collaboration. Some more to come on Nessun's, but needless to say, we're excited. With that, I'll turn it over to Nathan to review the numbers with some additional color.