SMP(SMP) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company's top line grew by over 12% in Q4 and over 22% for the year, with a 4% increase excluding the Nissens acquisition [4][20] - Consolidated sales increased by 12.2% in Q4, and adjusted EBITDA increased to 9.7% of net sales [20] - Non-GAAP diluted earnings per share rose by 19.1% in Q4 and 26.8% for the full year [21] Business Line Data and Key Metrics Changes - Vehicle Control sales were up 3.3% in Q4, with a decline in wire sets impacting overall performance [14][5] - Temperature Control segment saw net sales increase by 5.9% in Q4, with full-year sales up more than 12% [16][6] - Nissens Automotive contributed $64 million in Q4 and $305 million for the year, with mid-single-digit increases in local currency [9][18] - Engineered Solutions segment sales increased by 6.3% in Q4, with adjusted EBITDA up 9.6% [19] Market Data and Key Metrics Changes - Nissens performed well in Eastern and Southern Europe, outperforming other regions despite a general market softening [9] - The North American aftermarket continues to show stability and resilience, with non-discretionary product categories less impacted by consumer sentiment [28] Company Strategy and Development Direction - The company is focused on diversifying its business with new product categories and geographic expansion, particularly through the Nissens acquisition [28][29] - There is an emphasis on seeking synergies between Nissens and existing operations, including cross-selling opportunities and cost savings [10][40] - The company aims to maintain a leverage ratio of 2x EBITDA by the end of 2026 [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued momentum despite a challenging economic environment, citing strong performance and structural advantages [28] - The outlook for 2026 anticipates low to mid-single-digit sales growth, driven by stable market conditions [23][24] - Management noted ongoing complexities in the supply chain but believes the company can navigate these challenges effectively [30] Other Important Information - The company identified a material weakness in internal controls over financial reporting at the Nissens segment, but this did not result in errors in financial statements [19] - Cash generated from operations for the full year was $57.4 million, down from the previous year due to increased inventory [21] Q&A Session Summary Question: Vehicle Control sell-through performance - Management confirmed that sell-through was consistent throughout the year, with mid-single-digit growth [34] Question: Growth in Vehicle Control outside of wire - Management highlighted growth opportunities in various categories, including conventional engines and safety-related products [36] Question: Synergies from Nissens acquisition - Management discussed ongoing initiatives to identify gaps in product categories and expand offerings, with a focus on cost savings [40] Question: Timing of remediation for internal control issues - Management stated that progress is being made on remediation efforts and will provide updates as necessary [43] Question: Retail inventory in Temperature Control products - Management indicated that retail inventories are up slightly but in line with sales growth, ensuring readiness for the cooling season [49] Question: Private label opportunities in Europe - Management acknowledged existing private label programs and expressed willingness to capitalize on successful partnerships [52] Question: Tariff outcomes and potential rebates - Management noted uncertainty regarding tariff refunds and indicated that they are monitoring the situation closely [53]