Good day, everyone, and welcome to the Standard Motor Products Fourth Quarter 2024 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. Please note this call is being recorded. It is now my pleasure to turn the conference over to Tony Cristello, Vice President of Investor Relations. Please go ahead.

Thanks, Nikki, and good morning, everyone, and thank you for joining us on Standard Motor Products' Fourth 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 Iles, 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 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 fourth quarter earnings call. It's good to be with you today. Overall, we are pleased with our performance in the quarter, making for a solid finish to a strong year. Top line showed growth overall, not including the contribution of our new acquisition, which I'll discuss shortly. And we saw the trend of an improving bottom line continue with adjusted diluted earnings per share up 27% in the quarter and 8.6% for the full year. Let me discuss each segment separately as each has its own story. Our vehicle control business in the quarter increased by 4.9% over last year, allowing us to post a 3.3% increase on the full year, setting a high watermark for the segment. We believe we benefited from a product offering that's largely non-discretionary in nature as these types of categories tend to outperform in difficult economic conditions. And as our products are mostly professionally installed, we believe that our reputation for high quality has technicians seeking them out in the marketplace. Lastly, we are seeing an incremental ongoing investment in inventory by the larger distributors as they add locations and increase store assortments, recognizing that the best forward deployed inventory wins in the marketplace, and we expect this trend to continue. Our Temperature Control division continued the strong trend it has been enjoying all year. Sales were up 30% in the quarter, though the fourth quarter is always the smallest in the seasonal category. But for the full year, we were up 12.5%, far and away the best year for the segment. In addition to the non-discretionary nature of the products discussed in vehicle control, this category is also highly weather-dependent and 2024 set all records. It got hot across the country early and stayed that way all year. With such outsized demand, we are very pleased with our distribution and operation folks who were able to keep up throughout, and we thank them. Within our Engineered Solutions segment, although our full year sales were up slightly over the prior year, we did experience softness in the quarter. As you know, this segment provides parts to new vehicle and equipment production across various end markets. As we discussed in our third quarter call, certain of our customers began to slow their production schedules as their demand softened, which in turn dampened their purchases from their parts suppliers like us. It's important to note that our volume reduction is solely due to these slowdowns. We have not lost any business. And as we have always said, this segment can be more volatile than the aftermarket, but still has great potential and a long-term trajectory of growth. We are a small player in a vast global marketplace. And as we are getting known as a capable player, we are gaining new business awards. As such, we remain very bullish on the segment and truly believe that while it can be temporarily impacted by the cyclical nature of the market, it has a tremendous future. Lastly, I'll speak about our newest piece, Nissens Automotive. Having cleared all regulatory hurdles, we consummated the deal on November 1. And for the two months that it was part of Standard Motor Products (SMP), it performed as expected, recognizing that these are typically low months for a business that's semi-seasonal. First, let me remind you a bit about the business. Nissens is a leading aftermarket player in Europe and goes to market with a similar strategy as SMP with overlapping product categories and complementary strengths. They are largely in thermal management systems, both air conditioning and powertrain cooling, and in the last few years have made strong inroads in categories that fall within our vehicle control portfolio. They have a strong record of growth, both through market share gains and expansion of their offerings and generate mid-teen EBITDA. We are now heavily engaged in integrating the business, seeking the benefits that the combination of our two companies provides. On the cost reduction front, we have teams working closely together to seek best cost across a host of inputs. The biggest areas for savings are product cost, identifying supplier consolidation and leverage, make versus buy opportunities and so on, but there are many other areas of savings as well. As we stated at the time of the acquisition, we are targeting $8 million to $12 million in run rate cost reduction synergies within 24 months and remain very confident in that number. As we look to help each other, these improvements will be reflected across all segments, not just Nissens. From a product offering standpoint, we have begun fleshing out each other's catalogs. In addition to filling holes in common product groups, we are identifying complementary product categories to add on either side of the ocean. And lastly, from a commercial standpoint, we have begun discussions with each other's accounts to identify potential opportunities, and these discussions are going quite well. We're still in the early days, but are more bullish than ever. The two teams are well aligned, partnering to make both companies stronger and the enthusiasm is contagious. So we look forward to keeping you abreast of our success. So with that, I will turn it over to Nathan, who will provide more details.

All right. Thank you, Eric, and good morning, everyone. As we go through the numbers, I'll first give some color on the results for the quarter by segment and then summarize results for the full year at a consolidated level. I'll cover some key balance sheet and cash flow metrics and finish with an update on our financial outlook for the full year of 2025. First, looking at our Vehicle Control segment, you can see on the slide that net sales of $187.4 million in Q4 were up 4.9%, with the increase driven by solid demand for our products. Vehicle Control's adjusted EBITDA in the fourth quarter was down from last year, driven by a lower gross margin rate, but partly offset by better leverage of operating expenses. The gross margin rate was impacted by higher cost inputs as well as some different product mix. But given higher sales, our gross margin dollars increased over Q4 last year. The improved operating expense leverage was also the result of higher sales volume, and we were pleased to see factoring costs decline as a percent of sales as interest rates are slightly lower than last year. Turning to Temperature Control, net sales in the quarter for that segment of $58 million were up 30%. The fourth quarter benefited from another year of favorable weather pattern that started early in the season and continued through the summer with demand staying elevated into the fourth quarter. Temperature Control's adjusted EBITDA increased in Q4 to 9.5% as higher sales volumes led to higher gross margin rates and improved operating expenses as a percent of sales for the quarter. Sales for our Engineered Solutions segment in the quarter were down 7.9% and were impacted by slowing customer production schedules as they react to softness across various markets. We've noted the markets we serve can cause lumpiness in our sales in a given quarter, but we were pleased to see our sales for the full year increase 1% as new business wins with both existing and new customers offset some of the market softness. Adjusted EBITDA for Engineered Solutions in the quarter of 8.5% was up from last year as we saw a better mix of products sold, which improved the gross margin rate and operating expenses remained well under control. Last but not least, for operating segments, let me talk about Nissens Automotive. We closed on the acquisition of the business on November 1, as Eric noted, and have included two months of sales and profit in our results. Nissens added $35.7 million of net sales in the quarter and $3.2 million of adjusted EBITDA. The business is performing as expected, but I should point out that it does have a seasonality aspect to it, similar to our Temperature Control segment, given the nature of certain products. As you know from being familiar with the seasonal business, the fourth quarter can be and usually is different from a full year. So timing of our acquisition coincided with the slowest months of the year in November and December. We expect sales volume and EBITDA to pick up as we go through 2025, in line with prior expectations, which is that Nissens is about a $260 million business in sales annually with mid-teens EBITDA. One other point regarding Nissens' gross margin and SG&A expenses: you'll notice a different profit profile than our other segments. As this is more of a distribution business than manufacturing, we'll see higher gross margins, but also some higher distribution expenses and SG&A that when combined will result in an adjusted EBITDA in the mid-teens range for the full year, as I noted. Putting the results all together across the four segments for Q4, consolidated sales increased 18.1% and adjusted EBITDA increased to 8.4% of net sales, while non-GAAP diluted earnings per share were up 27% versus last year. Turning to our full year consolidated results, you'll see we turned in a solid overall performance. Net sales were up 7.8% and when excluding Nissens, were up 5.1%, with sales up across all segments. Our gross margin rate increased to 29.1% on the strength of our Temperature Control business and the addition of Nissens. While consolidated SG&A expenses, excluding factoring, were up for the year, the year contained additional costs related to the Nissens business and start-up of our new distribution center. Excluding $14.2 million of Nissens' SG&A and $4.6 million of distribution center start-up costs, SG&A as a percent of sales would have been 18%, showing improved performance on higher sales volume. On the bottom line, sales growth, margin improvement and well-controlled operating expenses helped us achieve an 8.6% increase in non-GAAP diluted earnings per share for the year. Turning now to the balance sheet, accounts receivable were $210.7 million at the end of the year, higher than last year due to the addition of Nissens' receivables of about $38 million and higher Q4 sales from the legacy business. Inventory levels finished the year at $624.9 million, up from last year, mainly due to the addition of Nissens' inventory of $92 million and also higher levels needed to satisfy increased sales volumes. Our cash flow statement reflects cash generated in operations for the year of $76.7 million as compared to cash generated of $144.3 million last year. Please note that cash generated in operations last year was aided by a reduction in inventory balances that did not recur this year after we brought inventory levels back down to normal. Our investing activities showed capital expenditures increasing this year to $44 million, but that includes $20.6 million of investment related to our Shawnee distribution center. Financing activities showed payment of $25.3 million of dividends and $10.4 million of share repurchases as well as borrowings for the year of $392.6 million, which were used primarily to fund our acquisition of Nissens. Our net debt of $517.9 million at the end of Q4 was higher than last year after borrowing funds for the acquisition. We finished Q4 with a leverage ratio of 3.7 times EBIT. But keep in mind, this includes just two months of results from Nissens and pro forma for 12 months would mean leverage was actually under 3 times EBIT. While we may see a slight uptick in leverage in the first half of 2025 due to seasonal working capital needs, we expect our leverage ratio to improve as we add EBITDA from Nissens into the ratio and pay down debt in 2025. We continue to target leverage of less than 2 times EBITDA by the end of 2026. Before I finish, I want to give an update on our sales and profit expectations for the full year of 2025. Regarding our top line sales, we expect to see percentage growth in the mid-teens for the full year, which reflects growth from the addition of Nissens Automotive and continuing favorable North American aftermarket dynamics, but also a slight headwind from the sale of our ACI product line, which was about 50 basis points of consolidated 2024 sales, and softness in Engineered Solutions, which are currently soft as end markets remain lower and customers reduced production to work through inventory. We expect our adjusted EBITDA for 2025 to be in a range of 10% to 11%, and that includes growth from Nissens Automotive as we'll have 12 months of results versus two months in 2024. In connection with our adjusted EBITDA outlook, we expect interest expense on outstanding debt to be about $32 million for the full year, our income tax rate to be 27% and depreciation and amortization to increase to $40 million to $45 million as we amortize Nissens' intangibles and place distribution center investments in service. Regarding operating expenses, keep in mind these expenses are incurred more ratably across the year, but do have some variability with sales and as such will fluctuate with seasonality in the business. We anticipate total operating expenses, inclusive of factoring and additional Nissens expenses, will be approximately $97 million to $103 million each quarter in 2025. Finally, please note that our 2025 outlook does not include any impact from the recently announced and potential tariff actions. The U.S. government continues to announce potential actions, but things change constantly, creating uncertainty in the market. Whatever the impact is on our business, we plan to address higher costs by passing them through in price dollar for dollar. To wrap up, we were very pleased with our sales growth in both the quarter and full year of 2024 as well as our earnings growth. Given our results, we were pleased to raise our quarterly dividend to $0.31 per share, an increase of almost 7%, continuing the trend of increases over many years. We're also happy to have the Nissens team on board and are looking forward to working together, creating exciting opportunities for 2025 and beyond. Thank you for your attention. I'll turn the call back to Eric for some final comments.

Thank you, Nathan. So to close, let me just spend a minute on how we're thinking about the future. Needless to say, we are in complex times, making things difficult to predict. But overall, we believe that our business largely resides in the safe harbor. The aftermarket, which represents over 80% of our business, tends to be highly resilient in times of instability. As people across the globe feel a sense of uncertainty, they tend to resist major purchases. The car park tends to age during these cycles and motorists have no choice but to make the necessary repairs to keep their cars operational. We've seen this to be the case here in North America and with our exposure in Europe with Nissens, we expect similar dynamics. We're also heading into a period of uncertainty related to tariffs. Only time will tell which get implemented and to what extent. And as such, as Nathan said, we have not accounted for them in our 2025 outlook. But with history as our guide, we anticipate the ability to pass these through at cost. And as we have largely some non-discretionary repair items, we would not expect any disruption of demand. Meanwhile, if tariffs increase the cost of new cars, we would expect that to dampen new car sales and thus benefit the aftermarket further. Our Engineered Solutions business can experience different trends. Certain end markets and customers will perform well, while others may see temporary contraction. And while we are experiencing some near-term headwinds, we expect the long-term trend for us to be favorable as our new business awards take shape. Meanwhile, we continue to implement many initiatives to make us a stronger and more diversified global company, and we have the best group of people to make it all happen. And so we do feel very good about the future. That concludes our prepared remarks. At this point, we will open it up for your questions.

We'll take our first question from Bret Jordan with Jefferies. Please go ahead. Your line is open.

Hi, good morning, guys.

Good morning, Bret.

Could you talk about how you see Nissens' contribution to your guided growth for 2025? Are there synergies in the North American business from adding that product to the portfolio?

Yeah, Bret, thanks for the question. As we look at 2025, and I think we've said some of this before when we signed the deal last summer, we expect some of the cost synergies to roll through in terms of just looking at product cost across the different portfolios. But in terms of revenue synergies, it will probably take a bit longer to come, and that will be further out. And to remind you, Eric mentioned that the synergy target we were looking at was more around product costs than the revenue synergies themselves.

And to add to that, because it is largely about product cost reductions, there can be a timing lag before it hits the P&L as you have vendor lead times and it has to go through the balance sheet and so on. So while we're getting a lot of the decisions made and making nice progress, there is an offset in timing. So we don't expect a tremendous amount of it to hit, certainly not in the near term, but hopefully, we'll see some towards more the end of the year.

Okay. And can you just talk about the sort of POS data at the customer level versus your sell-in? Obviously a very strong Temperature Control. Could you talk about customer inventory levels there? And do you see any of that being purchasing ahead of potential tariffs given a lot of that product comes from Mexico? Or is it really aligned with what the underlying demand is?

So just to be clear, you're obviously asking about the North American aftermarket business. And what we've seen with POS and related inventory, I'll talk about the two divisions separately. Vehicle Control: what we saw in the quarter was basically flat POS from the big guys. And so as you saw our sell-in being slightly higher than that, that was really what I was referring to as this ongoing inventory expansion as they're adding hundreds of stores and broadening their assortments. And again, those trends we would expect to continue. On the Temperature Control side, what we saw was strong POS in the fourth quarter, but not quite as big as the 30% growth we saw in sell-in. That was a bit of a rebuild of their inventory because it had been such a strong selling season throughout that that was the beginnings of them preparing for 2025. And as we look at the preseason orders continuing right now, we see it as roughly comparable to the last few years. As it relates to whether there is a pull forward of any purchases ahead of the potential impact of tariffs, we're not seeing that per se. We think that the purchasing is still pretty rational.

Okay. And then one last question. How do you see inflation excluding tariffs? What would you think same-SKU inflation looks like in 2025 versus 2024?

Yeah. Let me take it from the cost side, Bret. We see inflation across the markets just as everyone else is seeing. We expect to offset that with price where we can. But I think the inflationary environment is largely back to normal, sans tariffs.

Most of your customers have been talking about 1% as their expectation. Is that aligned with where you're thinking?

So that's reasonable. It will be in that very low single-digit range.

Okay, great. Thank you.

Thank you. Our next question comes from Scott Stember with ROTH MKM. Please go ahead. Your line is open.

Good morning, guys.

Hey, Scott.

Regarding tariffs, I know this is obviously a hot topic and nobody knows what's going to happen. But could you remind us where your exposure versus all the regions are — Mexico, Canada, China and Europe — so we have an idea of how things could unfold if things accelerate on that front?

Sure. I'm not going to get into specific details, but as you know, we're a global company. We have manufacturing across multiple continents here in North America as well as a significant amount in Europe and in Asia, and we have a global supply base. So as we think about both the announced and potential future tariffs, we see exposure throughout, but not necessarily overly concentrated in any particular area. And even then, a lot of the details are still being developed in terms of how tariffs are even going to be accounted for in places like Mexico. So we're staying nimble on it while we pay very close attention to the announcements that are being made. And as we said in the prepared remarks, the intent will be to pass them through. There may be a bit of a timing offset as the tariffs get announced and we then have to work it through our inventory. But the plan is, as we did in 2018 to accommodate it, we'll work with our suppliers as well to say how can we share in some of the pain, but to largely pass it through.

Got it. That's helpful. With the new addition of Nissens, maybe just go through the three individual segments — air conditioning, engine cooling and engine efficiency. Remind us what each one is doing and how each is performing, I guess, from a sales perspective. I know this is the first quarter, but just give a sense of how each segment is performing on a year-over-year basis, if you could.

Sure. First, in terms of the split between the three categories, engine cooling is the largest of the three, and it has various product types in it, but the single biggest needle mover within it is radiators, which is a very big and healthy business over in Europe. Air conditioning is the second biggest category, roughly a third of the volume. That's very much a similar offering to our Temperature Control division. The last being what they call engine efficiency, which is what we would call vehicle control. This is a newer business for them. And so it's one that they have been adding; rather than going wide like our vehicle control, it's subcategory by subcategory. They began with turbos where they've done very well, then moved to EGR valves, and now are getting to electronic throttle bodies. They're looking subcategory by subcategory where they believe they have something to sell and where the market has an opening. It's been very impressive to us, their ability to launch these and gain scale in that subsegment where they were largely unheard of not more than five years ago. All three categories are performing well and as expected. The air conditioning one is the most seasonal of the three, so right now it's in the off-season, but there's every expectation that it will perform as ours does, rising and falling a bit with the weather. They are a significant market share player in Europe and are doing very well with their legacy categories and now with their engine efficiency additions as well.

Got it. Very helpful. And then last question, just give an update on the new facility and movements over in Kansas.

We're progressing very well there. The automation installation is underway. As a reminder, we're expanding our capacity. We're within a few miles of our existing Edwardsville, Kansas distribution center, but we're putting product in from Vehicle Control, Temperature Control and then moving the wire operations from our Edwardsville facility, which gives us much more risk avoidance than we have there today. The automation is going in. We believe by the end of 2025 we'll be prepared to move the final pieces in, and then we'll be scheduled to put the existing Edwardsville facility, which we own, on the market, and then we plan to exit that hopefully early 2026.

Okay, that's all for me. Thank you.

Thanks, Scott.

We will move next with Carolina Jolly with Gabelli. Please go ahead. Your line is open.

Hi, good morning. Thanks for taking my call. With your guidance of mid-teen growth, excluding the contribution from Nissens, can you talk a little about some of the puts and takes of that growth? Are you expecting growth in your underlying Vehicle Control business?

Good morning, Carolina. We typically don't give guidance at the segment level, but Nissens is obviously the majority of that mid-teens growth just in that it's new business for us. As we look at the basic market trends within our other three segments, on the Vehicle Control side we had a good year last year. Trends, it's early days, but as of now trends seem to be continuing along those lines and the market remains healthy for this non-discretionary category. On the Temperature Control side, we start with the absence of the ACI window lift business that we sold last year, which is a few percentage points backwards just to start with, and we're going up against a very strong season. We have expectations that it will get hot again, but it's going to rise and fall a little bit depending on when it gets hot and how hot it gets. Engineered Solutions is starting the year as it ended last year. So you could say all three of these segments' trends have continued coming out of the fourth quarter. But it can be lumpier, and we hope to see some bounce back in certain end markets. It's difficult to predict, but we're assuming that we may see some level of softness as those end markets continue on their trajectory. So overall, we think our legacy business continues to be healthy as a whole.

Perfect. And just a quick follow-up on the guidance: within the 10% to 11% EBITDA forecast, there are some costs attributed to Shawnee that aren't being adjusted out, but you would expect those to improve in 2026 once there's no duplicate of costs. Is that correct to think about?

Yes, that's correct. We continue to have some of those start-up type costs in the numbers, and we're not going to adjust them out. But we think it's still a couple of million dollars in 2025, and then those will come out in 2026.

Great, thank you.

Thank you. Our next question comes from Robert Smith with the Center for Performance Investing. Please go ahead. Your line is open.

Thanks, good morning. I know you're opportunistic, but is it fair to say that at this point you would not be too interested or aggressive in further acquisitions until you pay down some of your debt?

Hi, Robert. Yeah, that's a fair assessment. Our intent is to pay down debt levels. As Nathan noted, on a pro forma basis we're near 3x today, and by the end of 2026 we expect to reduce leverage materially. With that said, we always stay abreast of what's in the market. Nothing to announce nor do we have any immediate plans. Our near-term intent is to pay down debt and maintain our dividend.

By the way, thanks for the dividend increase. Could you describe how you're examining potential efficiencies from artificial intelligence and perhaps who you're working with? I know it's early stage, but how are you approaching this?

We are looking at where the potential applications can be — whether it makes us a more efficient company or helps with our product offering or future operations. We're looking at it similar to many other companies: what tools can be relatively easily deployed to yield a benefit? We have a handful of initiatives underway. Some of them, for example, are within our demand planning. That is predictive analytics, which has become much more sophisticated in its algorithms, and we continue to deploy that sort of artificial intelligence to make us a better company. So a lot of different small pieces, no giant advancements to announce, but we're working on sensible applications.

Are you working with any particular company or program at this present time?

We work with various third parties, but none that I would feel comfortable advertising.

Okay, understood. Thanks so much. Good luck.

Thank you, Robert.

And there appear to be no further questions at this time. I will turn the call back to our presenters for any closing or additional remarks.

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

This does conclude today's program. Thank you for your participation. You may disconnect at any time.