STANDARD MOTOR PRODUCTS, INC. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Acknowledged employee efforts and noted overall 3.3% revenue increase Y/Y and nearly 6% YTD growth, with profitability rebounding (adjusted diluted EPS up over 15% Y/Y).
• Vehicle Control: Sales up 5% Q3, 3% YTD; customers investing in assortments and footprint expansion.
• Temperature Control: Strong Q3 demand, with sales up nearly 2% Y/Y and YTD up nearly 10%; fourth quarter is typically the lowest sales quarter.
• Engineered Solutions: Up nearly 1% Q3 against tough comp, facing market softness but offset by new business wins; some end markets showing slowdown.
• Acquisition: Completed regulatory approval for acquiring Nissens Automotive; synergies expected in growth, cost reduction, and collaboration.

Segment Performance

• Vehicle Control: Q3 net sales were $200.9 million, up 5.2% from last year, and YTD up 2.8%. Adjusted diluted EBITDA for Q3 was 13.2%, while YTD it was 11.4%. Revenue growth driven by solid demand and new business wins.
• Temperature Control: Q3 net sales were $126 million, up 1.9%, and YTD up 9.9%. Adjusted diluted EBITDA for Q3 was 14.7%, and YTD it was 11.7%. Strong demand due to favorable weather patterns.
• Engineered Solutions: Q3 sales were up 0.8%, and YTD up 3.8%. Adjusted diluted EBITDA for Q3 was 11.9%, but YTD it was down. Sales growth supported by new business wins despite some end-market production slowdowns.

Guidance

• Full-year 2024 sales expected low to mid-single-digit percentage growth.
• Adjusted EBITDA expected in range of 9% to 9.5%.
• Factoring expenses projected at $48 million to $50 million.
• New distribution center costs in 2024 estimated at $7 million to $8 million.
• Interest expense expected to be about $10 million, income tax rate 25%.
• 2024 outlook does not include impact from Nissens acquisition.

Risks

• Elevated costs across various inputs.
• Market softness in Engineered Solutions segment due to customer production slowdowns.
• Potential impact of external factors on financial results differing from forward-looking statements.

Question and Answer

Q: Within Vehicle Control, about customers and POS; A: Evolutionary expansion of customers' footprint, small delta between their sell-through and purchases from Standard Motor Products.

Q: Temperature Control inventory; A: Customer inventory matched sell-through, ended in good position as season started early and continued into third quarter.

Q: Engineered Solutions, commercial vehicle and Q4 outlook; A: Lumpiness in end markets, softness in construction and agricultural equipment; facing tough comp in Q4 due to last year's strong quarter.

Q: 2025 modeling; A: No 2025 guidance, watching interest rates and their impact on factoring and other costs.

Q: Nissens in Europe; A: Directional, Nissens over-indexed in temperature-related products, more info to be shared post-acquisition closing