Standard Motor Products, Inc.

Good day everyone and welcome to the Standard Motor Products first quarter 2025 earnings call. At this time all participants are in a listen only mode. Later you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star 1 on your telephone keypad. you may withdraw yourself from the queue by pressing star 2. 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, Vice President of Investor Relations. Please go ahead.

Thank you, Chloe, and good morning, everyone. Thank you for joining us on Standard Motor Products' first quarter 2025 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 that they will prove correct. You should also read our filings with the Security 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, and welcome to our first quarter earnings call. It's good to be with you today. I'll start my prepared remarks reflecting on our performance in the quarter and will then turn my attention to the current business climate, how we're viewing it, and how we are responding. Overall, we are very pleased with our performance in the quarter as both the top and bottom lines exceeded our expectations. For sales, we were up nearly 25%, and while much of the growth was due to the inclusion of our recent Nissans acquisition, excluding Nissans, sales were up nearly 5%, so we feel the year is off to a good start. We also had strong results in terms of profitability. Similar to the sales story, while the Nissan's business provided some of the expansion, our other segments also showed strong gains. We generated a $20 million increase in EBITDA and a 350 basis point lift in EBITDA margin. Let me discuss each business separately in terms of our performance, how we view the basic dynamics in the space, and how we differentiate ourselves to capitalize on our strengths. I'll start with the North American aftermarket, the largest part of our business, comprised of two operating segments, vehicle control and temperature control. Both of these segments set all-time records for first quarter sales. For vehicle control, sales increased 3.7% in the quarter, continuing the growth trend we've been enjoying for the last several periods. We believe this is due to a combination of market dynamics and now a relative strength in the marketplace. All of the macro trends continue to be favorable. The car park is growing and aging, and as times get economically challenging, consumers tend to delay new car purchases and instead maintain the ones they have. Car owners may forgo discretionary purchases or delay maintenance work, but the majority of what we sell are hard failure products, which are non-discretionary in nature and typically cannot be deferred. Additionally, most of our products are professionally installed, and technicians stick with the brands they trust. Therefore, not only has demand remained strong from our customers, Importantly, they are reporting positive sell-through of our products in the quarter as well. Our other aftermarket segment, temperature control, is off to a very strong start. We exited last year with robust numbers, and that trend has continued, with sales in the quarter up 24% over last year. We see a few drivers here. First off, the segment enjoys the same macro tailwinds described in vehicle control. Stable addressable market, non-discretionary products, and strong brand equity. As such, the quarter was marked by solid customer sell-through, with customer POS up high single digits over last year. But as a seasonal business, the beginning of the year tends to be driven by preparation for the upcoming season. We therefore received preseason orders from the majority of our customer base, and this year we saw a lot of those ship in the first quarter. But as you know, the segment's success is determined by the selling season, which typically begins towards the end of the second quarter, so we look forward to a long, hot summer. Next, let me discuss our Engineered Solutions segment, where we serve various global end markets with products for new vehicle and equipment production. The softness from the last year has continued, and sales were down 11.2%. As opposed to the aftermarket, this segment can be more impacted by cyclical trends, and as some of our customers are experiencing downturns in their end markets, they are reducing their production schedules and thus their purchases from us. Importantly, while the top line was down, the customer and product mix has been favorable, and therefore the segment profits were up from last year. So how do we view this business and our position within it? We believe that while there can be volatility quarter to quarter, the longer term trends are favorable. The markets are global, large, and diverse, and we are starting from a small base. We are now gaining market exposure as a highly capable producer with a broad portfolio of products, which is leading to new business awards. Therefore, the future for engineered solutions remains bright, both in its own right and as an excellent complement to the aftermarket. Lastly, I'll speak about our newest part of our company, Nissin's. This was the first full quarter of ownership, and we are delighted with how it performed. Both sales and profits exceeded our expectations. Nissin's has a strong position in the market for many of the same reasons as described here in North America. They have a broad offering of professional-grade products with a brand that is well-known and well-regarded, and as Europe is a highly DIFM market, Nissan does very well. Importantly, the more we work with the Nissan's team, the more we know that we are a perfect fit together. We see complementary go-to-market strategies, product portfolios, and cultural alignment. We have global customers that we either share or are introducing to each other. We are finding excellent means of collaboration, leading to significant synergies, all while providing business and geographic diversification. We see a great future together and look forward to keeping you abreast of our integration status. Okay, having given a rundown of the quarter, I'd like to now spend a few moments talking about the current business environment, how we are thinking about the potential impacts, and what we believe differentiates us in a way that will provide a competitive advantage. The topic on everyone's mind, obviously, is tariffs. Needless to say, we are in a fluid situation, so it's impossible to state with certainty how it will play out. But as things currently stand, we believe that our commitment to being a basic manufacturer with a concentration in North America gives us a level of production and an advantage over other players. A few decades ago, when the aftermarket began seeking low-cost regions, most companies chose China. We chose Mexico. Fast forward to today, over half of our sales in the United States comes from product manufactured in North America, mostly Mexico, but also the US and a bit in Canada. As our Mexican and Canadian products are USMCA compliant, they remain tariff free. And while we do incur some tariffs on components used in our US production, it is nominal in terms of our total cost structure. And while the balance of our products are imported from elsewhere, only about a quarter of all US sales are from China, with the rest being from Europe and other lower tariff countries. We are currently heavily engaged in our mitigation efforts. From a cost containment perspective, we are working upstream with our suppliers to reduce prices and to relocate to lower tariff regions, and we are leveraging our footprint to optimize our supply chain, including deferring imports into the U.S. until the products are needed. But most of our tariff recovery is through pricing action. While we do believe that our tariff exposure will be lower than many, it is our full intent to pass them through to our customers at our cost as we have in the past. Lastly, going back to the notion of our products being non-discretionary, they tend to be price inelastic, meaning we would not anticipate any degradation in demand. It's also worth reminding you that due to our two newer segments, Engineered Solutions and Nissans, we have seen nice geographic diversification. The US now represents about 70% of our sales, down from about 90% a few short years ago. So again, while we are in a complex and challenging business environment, we feel good about our position relative to others and in our ability to navigate it. With that, I will turn it over to Nathan to review the numbers.