SMP(SMP) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a nearly 25% increase in sales for the first quarter of 2025, with a 5% increase when excluding the recent Nissens acquisition [5][6] - EBITDA increased by $20 million, with a 350 basis point lift in EBITDA margin [6] - Consolidated net sales increased by 24.7%, and adjusted EBITDA rose to 10.4% of net sales, with non-GAAP diluted earnings per share up 80% compared to last year [25][29] Business Line Data and Key Metrics Changes - Vehicle Control Segment: Sales increased by 3.7% to $192.3 million, with adjusted EBITDA rising to 11.6%, up 120 basis points from last year [22] - Temperature Control Segment: Sales increased by 24.1% to $88.9 million, with adjusted EBITDA at 10.6% [22] - Engineered Solutions Segment: Sales decreased by 11.2%, but adjusted EBITDA improved to 9.7% due to a favorable customer and product mix [23][24] - Nissens Automotive: Contributed $66.2 million in net sales and $11.5 million in adjusted EBITDA, exceeding expectations with a 17.3% EBITDA margin [24] Market Data and Key Metrics Changes - The U.S. now represents about 70% of total sales, down from 90% a few years ago, indicating increased geographic diversification [19] - The company noted that the aftermarket industry tends to outperform during economic downturns, as consumers delay new car purchases and maintain existing vehicles [31] Company Strategy and Development Direction - The company is focused on leveraging its North American manufacturing footprint to mitigate tariff impacts and maintain competitive pricing [15][17] - There is an emphasis on operational excellence and cost reduction programs to enhance resilience in a challenging economic environment [32][33] - The integration of Nissens is expected to yield significant synergies and expand product offerings [14][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the uncertain economic climate, citing structural advantages and a resilient aftermarket industry [30][31] - The company affirmed its guidance for mid-teens percentage growth in net sales for 2025, despite tariff-related uncertainties [28][29] Other Important Information - Cash used in operations increased to $60.2 million due to higher accounts receivable and inventory balances related to sales growth [25] - The company is actively engaged in tariff mitigation efforts, including working with suppliers to reduce costs and relocating to lower tariff regions [18] Q&A Session Summary Question: POS and Vehicle Control performance - Management confirmed that POS in Vehicle Control was up in the low single digits during the quarter, indicating a positive trend [38][39] Question: Impact of tariffs on imported auto parts - Management indicated that recent tariff relief announcements appear to be more focused on automakers, with minimal expected impact on the company [40] Question: Nissens' growth and integration - Nissens is performing well and continues to grow, with integration efforts ongoing but no immediate financial impact expected [41][42] Question: Competitive positioning in the tariff environment - Management believes their North American footprint provides a structural advantage over competitors, particularly in the current tariff landscape [48][49] Question: European aftermarket trends - Management noted that hard failure items in Europe are outperforming, and Nissens is well-positioned to take advantage of these trends [50] Question: Outlook for Q2 orders and inventory management - Management does not believe there was a significant pull forward in orders due to tariffs, and preseason orders for Temperature Control were front-loaded this year [51][52] Question: Retailers' response to tariff pricing - Management is in communication with retailers and believes that a fair negotiation process will allow for passing through tariff costs [53][54] Question: Status of facility move and associated costs - The facility move is ongoing, with costs in line with previous estimates, and updates on synergies will be provided as operations ramp up [65][66]