Good day, everyone, and welcome to the Standard Motor Products Third Quarter 2025 Earnings Call. Please note, today's call will be recorded. It is now my pleasure to turn the conference over to Tony Cristello, Vice President of Investor Relations. Please go ahead.

Thank you, Nicky. Good morning, everyone, and thank you for joining us on Standard Motor Products third 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 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 third quarter earnings call. Overall, we are quite pleased with our results as the strong momentum from the first half has largely continued. From a top-line perspective, we posted growth of nearly 25%. And while the majority of this growth was from the addition of our newly acquired Nissens business, the legacy business was up nearly 4%. Due to the strength of our first 3 quarters, we have decided to increase our top line expectations as well as to tighten our EBITDA guidance to the upper end of our previous range, and Nathan will provide the details. I'll now review each business separately, starting with the North American aftermarket, which is comprised of 2 operating segments, Vehicle Control and Temperature Control. Vehicle Control sales were down 1.6% against a difficult comparison as last year's third quarter increased 5%. Looking closer, 2 of the 3 product lines were essentially flat, while all of the back slide was in our wire set business, which is a product category in secular decline. Generally speaking, there will always be some volatility quarter-to-quarter based on customer order patterns, timing of pipelines and so on. And so we believe a key metric is customer POS as it reflects true market demand for our products. POS for vehicle control continued the positive trend that has shown all year and was up mid-single digits in the quarter for our large accounts. This reflects the nondiscretionary and heavily DIFM nature of our categories and the brand acceptance by the professional shops making the purchasing decisions. Turning to our Temperature Control division. Robust sales continued up nearly 15% over last year. Year-to-date, the segment is now up more than 13% against 1 of the hottest on record. The air conditioning season seems to be elongating, starting earlier and ending later. This year, several of our customers anticipated this and got their preseason orders on their shelves ahead of the season and this began their replenishment cycle sooner and they never lost a beat. I do also believe that our customers are gaining share as they do well with our recognized brands. And generally speaking, across both of our aftermarket segments, we continue to enjoy strong partnerships with our customers and strong brand penetration with the professional installers. Next, I'll speak about our newest aftermarket segment, Nissens Automotive, which has been a part of SMP since last November. Sales remained strong in the quarter, contributing nearly $85 million in revenue as they continue to outperform in their markets. We believe their ongoing success is based on many of the same reasons why we do well here. First, they share many of the same nondiscretionary categories, which tend to remain stable in difficult economic times, but moreover, their strong brand recognition, well-received go-to-market strategy and consistent execution has allowed them to grow market share and expand into new categories. On the integration front, we continue to work together in developing meaningful synergies. We began our efforts focused on cost savings and are on track to achieve our previously stated targets, and we are now seeking growth opportunities through cross-selling our complementary categories on both sides of the ocean. And while we are just getting started, we see a lot of potential. Next, I'll address our non-aftermarket segment, Engineered Solutions. After a few quarters of sagging sales, demand has flattened out, and we ended our quarter down a modest 0.3%. We have always known and discussed that this business has grown to be more cyclical than the aftermarket and while we can expect some volatility period to period, we believe that the longer-term trends are favorable as we continue to see a robust pipeline of new business opportunities, and we believe that it provides a nice complement to our aftermarket business, with valuable synergies. Lastly, let me speak briefly about the current tariff landscape. And while difficult to fully project, we believe that we have entered a more stable environment. In the third quarter, our tariff-related expenses were largely offset by pricing and going forward, we expect this to continue. While we are still awaiting certain trade agreements to be finalized, we believe that our diverse global footprint will continue to provide us with a competitive advantage. As previously stated, about half of what we sell in the U.S. is produced in North America and is largely tariff-free. The balance is roughly split between China and lower-tariff regions such as Europe. We, therefore, believe our exposure is less than many with tariff inflation in the quarter in the low single digits. It's worth reiterating that as most of our products are nondiscretionary and as product decisions are typically made by professional repair facilities, they are relatively price inelastic at the end consumer as our sell-through confirms. So when you put all these moving pieces together, we are very pleased with the quarter's financial results and with our ability to execute on our initiatives during complex times. Let me hand this over to Nathan, who will provide the details.

All right. Thank you, Eric. 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 look at the consolidated results for both the quarter and year so far. I'll then cover some key 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 $197.7 million in Q3 were down 1.6%, while being up against a difficult comparison from a year ago when the segment grew 5.2%. That said, the decline was driven by wire products, which remain in secular decline, and we were pleased to see the engine category, in particular, hold up well against 7.3% growth last year. While the quarter showed a decline in sales, it's important to note that our sales were up 2.9% for the first 9 months in this segment. Vehicle Controls adjusted EBITDA in the third quarter was lower than last year at 10.3%. Adjusted EBITDA was driven by lower sales volumes and gross margin rate compression from passing through tariffs at cost as well as some higher distribution expenses as we transition into our new warehouse. While there was some timing that impacted sales and expenses in the quarter, it's important to note that adjusted EBITDA for the first 9 months is 10.9%, and right in line with last year, when allowing for the rate compression impact of tariffs. Turning to Temperature Control. Net sales in the quarter for that segment of $144.7 million were up 14.8% for the reasons Eric noted before. Temperature Controls adjusted EBITDA increased in Q3 to 19.7% due to higher sales volumes that led to a higher gross margin rate, which more than offset pressure from tariff costs as well as improved operating expenses as a percent of sales for the quarter. Next, I'll touch on Nissens. In our third full quarter of ownership, Nissens added $84.5 million of net sales and $14.2 million of adjusted EBITDA. The business is performing well and again, was in line with our earlier estimate of mid-teens EBITDA percent coming in at 16.8% for the quarter. Nissens continues to grow its sales across Europe and has also benefited from some favorable currency translation movements. Sales for our Engineered Solutions segment in the quarter were down 0.3%, but we were pleased to see declines level off as we lap market softness that began in Q3 of last year. Adjusted EBITDA for Engineered Solutions in the quarter of 10.2% was down from last year, but continues to be in a steady and consistent range. This was the result of lower sales volume, unfavorable mix and some impact from tariff costs that lowered the gross margin rate. To summarize and put it all together across the 4 segments for Q3, consolidated sales increased 24.9% and adjusted EBITDA increased to 12.4% of net sales and non-GAAP diluted earnings per share were up 6.3%, with all metrics being helped by our acquisition of Nissens, among the other things I already noted. For the first 9 months, our sales have increased 25.5% over last year and 4% excluding Nissens, helped by strong sales in both our North America and aftermarket segments. After 3 strong quarters of performance, our adjusted EBITDA is up 170 basis points, and our non-GAAP diluted earnings per share increased 27.8%. Turning now to cash flows. Cash generated from operations for the first 9 months of $85.7 million was up $7.5 million from last year. As always, the third quarter is when we generate much of our cash given the seasonality in the business, and it was nice to see higher earnings and good working capital management resulted in an increase despite paying higher cash costs per payers. Investing activities show capital expenditures of $29.3 million, which includes $9.6 million of investment related to our new distribution center. CapEx was slightly lower than last year as capital spending related to the new DC is nearing completion. Financing activities show payments of $20.4 million of dividends as well as a repayment of debt. Now we repaid $47 million on our credit agreement during the third quarter. And with that, our net debt stood at $502.3 million. We finished the quarter with a leverage ratio of 2.6x adjusted EBITDA and are on track to get to our target of 2x 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. As we noted in our release this morning, our updated outlook includes higher tariff costs and offsetting impacts as they stand today. We are raising our sales guidance for the full year to be an increase over last year in the low to mid-20% range, which is above our prior range of low 20% increases. We're also pleased to update our outlook for the adjusted EBITDA margin and tighten it to be in a range of 10.5% to 11% of net sales. Note this guidance updates. This updated guidance reflects the robust sales performance we've seen for the first 9 months of the year and higher overall margins. To wrap-up, we're very pleased with our sales and earnings growth in the first 9 months of 2025 allowing us to raise our outlook for the full year. We continue to execute on many initiatives, including the integration of Nissens and expect to realize increasing benefits from that initiative in 2026. Thank you for your time. I'll turn the call back to Eric for some final comments.

Well, thank you, Nathan. And in closing, let me just spend a moment discussing how we're dealing with the current economic environment. Even in the face of a challenging economic environment, we have enjoyed several consecutive quarters of strong performance. The largest part of our business, the North American aftermarket continues to demonstrate this resilience. It's a highly stable market with solid foundations; the addressable market expands with a growing and aging car park. Within this attractive space, nondiscretionary product lines tend to do better as motorists are unable to defer repairs, and that's even more pronounced in DIFM categories like ours, and our value proposition continues to resonate. We provide full-line coverage of professional-grade products and brands that technicians trust, and our relationship with our trading partners is strong. Our recent geographic expansion with the acquisition of Nissens is exceeding our expectations. They enjoy many of the same benefits I just described for us here, both in terms of market dynamics and their place in it. And the more we work together, the more impressed we are with their team, with their capabilities, and with our ability to identify opportunities. And so we remain very bullish about the future. And that concludes our prepared remarks. With this, we'll turn it over to the moderator and open it up for questions.

We'll take our first question from Scott Stember with ROTH Capital.

Some of your customers have been giving the indication that they're seeing some elasticity issues mainly in the DIY side of the business, I guess, just given the inflation and tariffs and so forth. It doesn't sound at least that you're seeing that at this point? Just wanted to confirm that.

Yes, that's a fair statement, Scott. And as I said in the prepared remarks, we're seeing our sell-through at these customers continuing in a positive range and within Vehicle Control, we are in the mid-single digits in the quarter and Temperature Control was even higher than that. So to your point, where I think we're seeing the impact of tougher economic times is in the product categories that consumers have the ability to defer or forgo altogether. And our categories for the most part, are not like that, the break-fix, the car is down and the repairs required. So it's a fair statement if that is what we're seeing.

Got it. And then moving over to Europe, Nissens sounds like pro forma they had very nice growth in the quarter. It also has been some commentary about some weakness in Europe from some competitors and customers. Just trying to get a sense of the European market and also how well Nissens did in the quarter?

And very similar story over there, which is that its product category by product category and ours being similar to here being nondiscretionary are outperforming in general. And we very much believe that we have been able to gain share over there through a combination of executing on existing product categories, but also as they continue to expand into newer ones and getting penetration in some of the newer categories. I do think it is perhaps worth pointing out to a degree some differences in regions within Europe, where we tend to have more of our volume focused. I mean, we're paying Europe for sure, but we do have some more of our volume more towards the east and southeast of the continent, where demand has really continued to be quite robust.

Got it. And then last question before I jump back in the queue. The OpEx numbers were a little higher. And I think that the mentioned sounds as if the transition over to Shawnee in Kansas might have had a little bit to do with that. Just trying to get a sense of what we should be looking at for in SG&A or an OpEx number going forward for the next few quarters?

Yes. Yes. Thanks, Scott. So I think there are 2 ways. 1, looking at the consolidated operating expenses. This is really the kind of the last full quarter where we're going to have Nissens coming in with really no comparison against last year. So Nissens business added about $24 million of OpEx. And so just as you think about modeling, need to include their expenses going forward. And then there were some higher expenses in the Vehicle Control segment. I think as you pointed out, some of that, as I mentioned, was just due to transition and timing of transition to the new warehouse in Shawnee, Kansas. Just note that on a 9-month basis, the operating expenditures are a little bit more in line. So that kind of points out the timing aspect of some of those moves.

We will move next with Bret Jordan from Jefferies.

On that growth in Temperature Control, is that market share gain where customers are opting for your North American product over what they might have been buying previously?

We are experiencing a combination of various positive factors, particularly with a sales increase expected through 2024, following a strong previous year in terms of temperature. This summer was cooler than last, and we believe there are several reasons behind this trend. First, the season has kicked off earlier and will extend later, which means we are seeing sales last longer than before. We truly believe that we are gaining market share, partly because our customers have been able to maintain their inventory levels due to our capabilities. Our brands continue to be popular and in demand within the repair market, and industry data supports our belief that we are indeed gaining market share.

Okay. And then 1 more question around this elasticity or inelasticity in the segment. Did you see any shift in POS cadence as the quarter progressed? I mean some of your large customers have called out the end of the third quarter being weaker for them. Did you see that in your POS? Or is your category relatively more immune?

Within Temperature Control, there has been some movement month-to-month, but nothing significant. Vehicle Control remains quite stable. Temperature Control may be influenced a bit by weather. August performed the best, but overall the quarter saw mid to upper single figures, so nothing dramatic occurred during that time.

We do have a follow-up from Scott Stember with ROTH Capital.

Back to Nissens questions about the synergies or cross-pollination or top line opportunities. Maybe just give us an update on some of the bigger ones like with NAPA being able to translate some business over there for Nissens? And then are there any other synergies or sales opportunities that have popped up that you didn't realize previously.

Well, first, I will speak to what the opportunity is related to product line expansion. As we've been saying, while we both play in a lot of the same product categories, we do have some that one is stronger than the other or perhaps that one doesn't have at all and the other does. So those are the areas that we're looking at now is how do we expand each other's product offerings. Sometimes it's as simple as filling holes. We have compressors that they don't have. They have compressors that we don't have. But the more exciting area is to say here's an entire subcategory that we think we can accelerate the other company launching. That's what we've been working on towards the second half of this year is preparing more specifically in Europe, a couple of product categories to get launched over there. And so, it will take a little while before you start to see any revenue impact because there's a lot of work that goes into the launch and then it's about getting any customer traction. But we do see some very nice potential. Similarly here in the U.S., they are in some thermal categories that we think we should be able to do well in, and we're in the process now of building some of those lines out. In terms of customer penetration, I'm not going to go into any specifics on the cross-selling to each other's customers. But we do enjoy some ability to do that, where we do have customers to introduce each other to, and that's really both sides of the ocean. So we feel good about that. We see some of the global distributors interested in having global suppliers, and now we can fulfill that objective of theirs. So again, early days on any of these things, Scott, but we do see that there's some nice potential.

Thank you. And this will conclude our Q&A session. I will now turn the call back to Tony Cristello for closing remarks.

We want to thank everyone for participating in our conference call today. We understand there was 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. We hope you have a great day. Thank you.

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