Standard Motor Products (SMP) 27 Oct 232023 Q3 Earnings call transcript

To all sites on hold. We appreciate your patience and ask that you please continue to stand by. Thank you.

Good day, everyone, and welcome to the Standard Motor Products Third Quarter 2023 Earnings call webcast. [Operator Instructions] Please note, today's call will be recorded, and I will be standing by should you need any assistance. pleasure the my Mr. over now is to conference turn to It Cristello. Tony Please go ahead, sir.

Good and our Sills, Burke, XXXX morning, joining Cory. me Chairman; President you, Thank everyone, Jim And Relations. Eric Standard I'm Cristello with Products Sills, of Call. and Investor us are thank Officer; Motor Third Emeritus; Conference Chief Quarter Larry Operating Earnings today Tony Vice Chairman on for will Chief you CEO financial Niles, our Officer. in give Nathan an and Financial up of update results on our Eric Nathan and our Eric call will overview remarks concluding for annual the On some and performance an discuss call quarter, the Q&A. guidance. today, then provide open will with

to like generally these remind be words business we I'd morning, like you that some and When believe, the statements this expect, begin today expected estimate we discussing are regarding of we'll use forward-looking anticipate, include statements. material may forward-looking our results. that financial Before or

we us prove Although based available that cannot will expectations currently you forward-looking these made information on they in to are assure reflected reasonable, certain us, statements and are assumptions they by we that correct. and believe the

our the Securities now turn discussion the should also read that our statements. I'll Exchange actual from CEO. forward-looking Sills, our filings the results Commission call for our You to a risks cause and with of could uncertainties and to Eric differ over

Tony, call. results. you, and everyone, welcome earnings our Overall, thank Well, with quarter morning, our pleased and to good we're third

of a even saw record were single up and a in interest nice we headwinds. in sales setting increase a earnings rate for Our slightly, the face quarter,

X/X pay outstanding flow us to strong of continue improvement, we down to show cash our Additionally, debt. allowing about

This segment so X% Vehicle was two quarter. a me settle. it starting X.X% against difficult vehicle comparison. a year posted to flat notable with first also nearly a growth, There control. which aftermarket ago, drivers. in quarter essentially year-to-date control the down was were record I'll address speak and the each Let was other

that continue the the the year in was as business, After recognize SMP of ongoing by should the will back an they in and diminish announced mentioned revenue, of a run, long the a see on months bounce take to earlier release, historic we customers. therefore, impact the while no few inventories, We acquired as handful a potentially ago to bankruptcy the business but which First, the this business of we existing over absorb believe a acquired in the half levels, year. could that customer we and locations expect drag time.

this saw noise. flex the customers adjust Secondly, of amount These therefore pipeline quarter-to-quarter third create their of can to a quarter over of bit and than year-to-year year. greater and XXXX as a planograms tend

demand. POS customer last at end-user of true look always an we in Importantly, indicator year. aggregate, customers as And our large of ahead remained

it turn Now the to X.X%. know, year's got summer. up back XXXX spring, me us to hot quite to and country a within season, across all-time temperature us were throughout point X.X%, to to the so most the a a third let of especially quarter bringing compared and control. But as slow start for record the remains of and a allowing sales. post an to last Sales X-month we cool entered down when very quarter experienced you Due

accounts very Solutions X.X% wins. and new were business of the speak non-aftermarket business manufacturers I'll up this Engineered benefit to on from is and pleased various reflecting strong a Engineered globally. the end going. which selling how is equipment vehicles and Solutions our combination segment, in markets We're business Sales our focused Next, demand quarter, to of of across with generally key

and combination as are of built blue-chip is have program a supplier a accounts, limit. and and capable great sky believe geographies a gaining the we products, traction the markets with We diverse to end

profitability. to Turning

an customer our able X.X% see of rent efforts gains, significant this combination both cover very rising all our as elevated well from We to and strong factoring and now increases, affecting pleased cost remaining through posting these materials, programs have we versus so But EPS proud largely of borrowing. as regard. persists last of are initiatives, on across the labor, in increase of with I'm interest impact been year. costs a rates to people's Inflation and

let bit it. So behind dive it who a turn over will with to Nathan numbers into me what's that, deeper and Iles, the

Thank you, right. Eric. All

in Solutions segment, up drive sales in other Control over noted along actions, with increases both with were profit improvement the As operating Temp our in which the third last quarter Engineered before, year. and helped

progress We levels. our make inventory great to also continue reducing

As months the I'll full nine first XXXX. we and give some for year color financial items provide these for well go more as the the on numbers, drivers our key an update other on outlook quarter and through as

Control our at looking segment. First, Vehicle

the on that with net decrease customer see a can of X.X% pipeline which this orders, by well or last million was not driven impact You the bankrupt some in as the recur sales $XXX.X did comparison year, as QX versus year. down the slide difficult customer

excluding demand X.X%, as with a nine as growth in impacts, for showing bankruptcy customer our orders. the lower the the decline were well QX impact as and first But the for seen continued products favorable pipeline we've slightly year vehicle For these the control, months so of result of down sales sell-through. both far by

year. XX.X% from for and of controlled periods adjusted XX.X% quarter was EBITDA for the months, X net the first down Vehicle both sales last with

a nice and lowering the the a the the This was quarter at overcame vehicle saw in and nine months. first pricing for points cost which savings of lower drivers, expansion X.X and expansion and X.X impact control inflation rate margin of gross inventory. for points production result initiatives, Looking in of the we

leverage lower a of in improvement by a more as expense lower margin costs result higher combination operating the gross factoring sales. However, was offset than of and

point controls quarter cost headwinds out programs so outpaced both vehicle I the lot of for While the is we've far. a year made and improvements offsetting factoring year-over-year, gross our as faced progress the of recently adjusted that EBITDA we the would down margin rising

Turning as million down was quarter ahead the that were $XXX.X mostly selling to slightly we've start sales season. slow the to in months were we while last X% for by XX.X% Control, net Control saw strong two up X.X%, driven quarter was a EBITDA, QX year for Temperature the nine by in offset in been of segment things sales adjusted sales first primarily. of sales and net the of and Temperature

margin equity combination investments in initiatives the joint performance but quarter. higher our with combined falls the sales the in rate ventures overcame strong two of second, First, operating other to and these third China, things cost the the which The customer of in our the line in of factoring improved quarter. profit gross improve programs below

the higher of down than controlled far was a EBITDA X.X% Temp costs factoring gross this sales first months margin last of for year. from offset rate as year nine net adjusted more so by was slightly higher

related actions Looking in rate, at partly it was pricing the impact lower savings by on levels. but offset more and lowering inventory to production benefited detail, margin gross the cost

to rates this higher gross well some while as this sales. leverage interest on as in margin by more factoring lower segment, improved So offset lower than costs programs was to points X.X due by SG&A

the the for leverage X.X% for of growth at quarter of strong sales improvement million Engineered that so sales $XXX.X both year. and customer last were first of and X%, nine months, And in $XX.X segment which from Looking X were and increase result The million adjusted and up the far better the the rate up Solutions we Solutions, points months and was was higher in see sales the for Solutions good in year. wins. new quarter given the improved an SG&A to Adjusted Engineered at X.X X.X year points and to pleased result XX.X% the in business quarter were channel of our for gross from Engineered sales EBITDA EBITDA as XX.X% margin for increase of first mix, a continue strong up last demand sales. and for came

quarter were up offset the flat growth aftermarket the in segment. results. in in sales of X.X% small consolidated by was And to Solutions sales Engineered Net Solutions. nine Engineered and basically due Turning for to declines as Control sales higher the our first months, intent were

consolidated for gross quarter in and overcame headwinds other for gross margin nine the nine that initiatives both our improved the dollar rate results to Our increase quarter first first months, margin to months a X.X% due respectively. and X.X% of

shown factoring Regarding sales quarter the separately on were of in cost line SG&A, Expenses of are net stage, the well the year. with last XX.X% and which of programs, in controlled excluding customer

an higher quarter of improved were Consolidated segments drove at income operating the Looking offset of per This adjusted factoring in higher earnings sales margin also as share million bottom and last was of across line. XX.X% rate than costs. year quarter. in $X higher the in all EBITDA $X.XX X.X% gross the an increase and

first has per and far. in for factoring the so EBITDA also consolidated diluted operating resulted offset gross as margin really income months, year share For higher were costs adjusted down improvements and by nine in lower earnings partly the

this in However, down interest first months, work our costs, headwinds increase rates. highlights in $X.X offset is nine the while after the a I of we've would is million to absorbing factoring done also point million the which $XX.X operating that profit out rising

QX item at September here this flows. is the area. million, we down down $XXX.X to from from cash last to focus reductions $XX.X now finished last as on our inventory December Turning balance year year sheet which million $XX.X key million continue and level, in and The

nine from by reflects last the of the cash statement improvement flow flow cash with million million nine inventory in months improvement $XXX.X $XX.X as Our generated $XXX.X from to first driven in during operations cash year, first of the cash compared million months. used

including million $XX.X of Our progress credit a operating improved in made the $XX.X quarter. made paying our repayments by facilities down financing result cash as million a in flows, significant activities of shows worth

$XX.X paid first X dividends also of million the during We months.

the year. of December with at borrowings X.Xx lower last than $XXX.X year, of million lower a last September quarter ratio the leverage Our finished than and we QX were end and both of much

to for Before on full the profit year I finish, expectations an update give our and XXXX. sales I want

Regarding as strengthening outlook that the costs recently Mexican expenses weaker to current Kansas, to distribution peso dollar of U.S. year facilities our warehouse $XX the expansion factoring $XX of in million new using largely to EBITDA low control quarter. last the given versus will This unchanged last fact we year that includes and now be performance 'XX date temp expect expected show our and top X.X% line is estimate sales to estimate noted from year. a versus additional full against our is million while and to last lower full the percentage for some to rates, Adjusted finished. sales the approximately season performance single-digit sales, still in flat Shane, growth related year.

our and efforts wrap Engineered call saw, all continued In and Thank to and EBITDA, Solutions higher members on now significant as adjusted $X action amortization we million Eric income be your in in the we that interest segment. well rate our Temp quarter, each about on quarter given expense these with tax in you and achieving as appreciate the and higher segments turn of overall to margin for average depreciation flow I'll Control interest our our we the and results. XXXX. we back our to to attention. our with And line Ramp-up, outstanding rate improved of expect gross up. were sales all rates. we cash pleased key the Further, across expenses improvement much be expect debt very

you, Thank Nathan.

The noise there park quarterly the let basic to demographics We of show its aging, And record be growth miles So rebounded. close, quarter-to-quarter, just strong with sales American while earnings. showed how favorable. the remain and always as stability North our pleased results. to driven as growing reiterate remain some car aftermarket we fundamentals is were and and their market posted me [indiscernible]. continues can in

Technology but with nothing new to surely and positioned are feel shifts about it. we coming, evolve there's well that,

So we our future really feel quite here. good about

journey. are a our stage obviously in different As for of Solutions, Engineered we

past have we are known. the aftermarket, we business in hitting in getting the we While strat. few cohesive is just a But global the years established here, in creating made its moves well clearly are

strengthening We host more a in that a continue will surely seeing to open of receive are opportunities and customer end products doors. markets relationships across and clearly

talented And I'm our there, with I tackling grateful team all say, immensely we out of best as are the to and [indiscernible]. always

And prepared remarks. we'll it questions. At up point, this so our concludes that open for

back it to turn So I'll you.

And from Imbro line we'll Stephens. the question with take our first Daniel of

you implies think kind Eric, backdrop. a are seeing of maybe aggregate level. start -- In a deferrals you I'll large group, where that are up that trends that customers at sales higher repair are are if or industry? in this still thinking see customers, in you change participants industry I your Are positive in mentioned seeing in you lot any outlook? changing the from of volume trends terms more anything of a you purview curious or Some noting how

we're a are low a ongoing But we what in So I specifically, to seeing movement has the -- think any fair to growth -- temperature that our lot not related. single-digit question. would a within They're weather. that's control failure. general, deferred And kind of is obviously, that, of the of are say speaking always on, control, trends as that it categories relates vehicle I so maintenance hard back basically industry long-term low lot we're has single-digit maintenance to that and seen really

be to tend And so car able very your to really, you do products, well. our needs not

in see looking that, stable from market any by necessarily other the impacts because categories we're addressable don't we and at being which economic theoretically trends, could So strong. really

there couple That's I domestic segment. exposure. potential disruption Maybe segment a maybe impressive from when Nathan, Or growth you Results Solutions is strike was then, vehicle had UAW thinking how know light the embedded margin you in anything were strong there? Is there sustainable? Understood. Engineered mid-teens it the some on great. margin fourth there, look we ongoing quarter? And guide? the First, in at anomalous any the about EBITDA and profit are really the performance,

a solutions, end relates relatively I specifically in of other vehicle seeing so as our and engineered light it with It's certainly, about service even right many now, to portion you're impact. we So any sales, we're small Engineered and Solutions think overall asking what markets.

We really appears a it's nominal now very result strike that least it with seen itself. have as impact of Ford, this at resolving and

And and been have so any short impact term. really minor would

really we anything that. expect of So don't out

expect the for base just in have quarter-to-quarter the market out, this Engineered in diverse business. just in of because customers we customer is And do said to So like that very some the diverse. changes I'd segment on point Solutions, before, we of mix margin the

I basis, this the to business before, where on settles just versus nine showed a lot you improved which as margin driven mix a an XX.X% of of closer on there long-term really, by last I And basis. and remarked for months improvement gross would out the year. a so point was segment, the probably customer long-term to numbers

[indiscernible]. aftermarket Engineered we is that that an adjusted think I believe So would still comparable on Solutions versus basis EBITDA the

Great. And me, helpful. for the maybe the EBITDA last Nathan on That's on one guide margin outlook.

X.X%. I think XQ Obviously, stronger you was maintained that. it at than

us are guidance. the understand of you should we aware be help can headwinds about you in kind what keeping So the thought outlook, coming that the as that of quarter maybe maybe fourth

Yes.

remarks headwinds quarter. new the little the So as that us peso a well the is out just the fourth around in costs least around the still bit incremental that the from some the in I as warehouse at against FX of pointed Mexican

come QX a bit a end, EBIT that obviously, anyway. adjusted I a around business the the season But profit quarter swing stronger the think is temp always and out is lower that is other than QX. control the as to thing your comes will an point, of fourth to quarter bit the guide

So that's what's the expectation. inside

will Jefferies. next Jordan I from take with line our of the question Bret

close to pretty Patrick maybe about Are is guys be as thinking more head Brett. are levels some we Buckley back we into 'XX. How there? or This optimal inventory on for you work to done

on our shows? to inventory or referring our you Are on inventory shelves sitting customer

I would helpful. be Yes, both suppose

What is on So inventory speak customers' speak to rational Jim very we're to the can seeing shelves. our and really customer ours. I'll inventories stable

a their it that want quarter-to-quarter, really work them. we there is But period. they closely and bit basically, be, little going period where shows to to of inventory it always have with to flexing You're

So intentions we good have are. their pretty visibility what into

really customer nothing to note So on shows.

pleased This is we with Jim the had very We're recent and that year-to-date. quarter inventory the performance in really Burke.

start going the to So this down forward, we point, in Temperature out we Control capital took significant of At the business. in. build inventories working

probably get neutral. the reasonable say and point build there. control about we this significant But bit little at changes. no will for forward, Maybe to ready But you get vehicle be season of look there. should a next we'll from I'd start relatively So benefit a levels,

And the helpful. sounds quarter, like end spring. momentum summer it at How have That's picked the throughout then you it. the QX? more colder up towards Got expecting you as look into progressed much cadence after how things the heat. tailwind are And from guys

wouldn't was it point so throughout this recover from start. the much which, what said, quarter, at October. season the summer -- into to the yes, slow summer I But It too over. happens really weeks third a as the really Well, largely us we in few strong read of allowed is

Our with [Operator next Scott of question Roth comes line Instructions] MKM. from the Stember

Congrats quarter. on the .

Thank you.

starting have cover about your obviously, Are see environment you what's lot industry that? mean, have any But -- put right factoring I costs. but to on Some of of a pricing now? raws, been potential view price disinflation. players the talking guys increases and price to you through

our partly commodity Yes. We're it driven. really not categories, they are seeing in not because

And so we've the costs overall come have down. that not seen

costs have down. come not Our

So much. we're not really seeing

that You we some our we are. believe as obviously seeing and to distributors strategies price things. . anything their parts, And talked in nondiscretionary hearing, categories hard to are pricing the really you what failure But sensitive is said, not different as they're industry. we're not

it. Got to back strike. And the UAW

is Engineered the about benefit but vehicle you there in potential aftermarket any for seen haven't side? already Solutions, in control, if talked You it

seen no. impact. the question. great We not That's is also short answer And a really any have

staff as of it, carbon. reading the information. the distribution But is have that this, have they of and their stocked and operate anticipated it they those are had been anything a ahead we parts partial that and public things not really not One are reading, not they of are about parts they saying I'm kind continued of zero, to we're at that's up

had no, has impact any really it really. on whole channel So not our

And a top Is little guide loss? bit lower. control Or to is it. Got vehicle line is there pertaining really for anything else? the and the then that customer

No.

And somewhat volatile. really I can the think that's fourth it. be quarter

as know, and end is the you As be control over, adjustments. season largely could there

we're slightly -- we also taking so conservative view after looking where it just months. are we on And are at a and nine where

really yes, So [indiscernible] that's

have the bankruptcy, that have sales what quarter? And given to you this might think do then last lastly, control quarter, for impact the vehicle you I or

is -- acquired It's to show numbers able specific able Yes. the piece prior we're situation. to because a some we getting provide rough were to zero-revenue-type

Now just other really been and in that it's businesses. other within what to the been customers that by dynamics it acquired lost mix accounts, the different across distributed of kind gets because impact of is and all as several their different it's

we're that. really but impact softness going they we really that point well, specify to that rationalize what yes, just unable at know and is So this with some is, there as overall forward as

And remarks. further the to this to call appears be for any over the at there I'll . no back questions speakers time. hand closing

great Thank We be today. and And a our lot you we we everyone information our you, follow-up call presented, our information in answer a we'll want of participating any you. or happy understand press to on contact is have. and website. corporate conference available to Thank for you hope thank release there's day. have may questions

conference. you you Thank concludes disconnect. This participation, may your now for today's and