Financial Data and Key Metrics Changes - The first quarter of 2024 saw net sales of 71.6 million, down 1.1% [32][33] - Adjusted EBITDA for Vehicle Control was 10.4% of net sales, down from last year, while Temperature Control's adjusted EBITDA improved to 4.7%, up 0.1 points from last year [32][33] - Consolidated SG&A expenses were 19.5% of net sales, with a total increase of 1.1 million in start-up costs for a new distribution center [46][50] Business Line Data and Key Metrics Changes - Vehicle Control experienced a rebound in sales after a soft fourth quarter, with solid demand across all categories, despite a challenging comparison to a strong Q1 2023 [30][32] - Engineered Solutions segment sales increased by 4.5%, achieving a single-quarter record, driven by strong demand and new business wins [35][48] - Temperature Control's preseason ordering patterns varied slightly compared to last year, indicating that Q1 results are not indicative of the full year [33][25] Market Data and Key Metrics Changes - The overall market showed signs of returning to normal demand after a strong previous year, with some volatility in customer and market channel mix [30][31] - The aftermarket is stabilizing with low single-digit growth, driven by an aging car park and stable miles driven [63] Company Strategy and Development Direction - The company is focusing on expanding its distribution capacity with a new 575,000 square foot facility in Shawnee, Kansas, to improve service and mitigate risks [36][37] - There is an emphasis on maintaining a healthy pipeline of opportunities and gaining traction as a capable supplier across various products and technologies [31][36] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in maintaining profitability due to inflationary pressures but remains optimistic about long-term growth prospects [34][58] - The company expects full-year 2024 sales to show flat to low single-digit percentage growth, with adjusted EBITDA anticipated to be in the range of 9% to 9.5% [53][54] Other Important Information - The company is experiencing product cost inflation, particularly in labor costs in Mexico and Europe, impacting gross margins [41][54] - Cash used in operations for Q1 was 20.4 million last year, reflecting a return to normal inventory levels [50][52] Q&A Session Summary Question: What is the outlook for the Engineered Solutions segment? - Management indicated that growth in Engineered Solutions is driven by new awards with existing customers and a focus on maintaining a full funnel of opportunities [69] Question: How is the company addressing labor cost inflation? - The company is actively working with customers to share experiences regarding cost inflation and is exploring pricing strategies, although the competitive market makes pricing adjustments challenging [70] Question: What are the expectations for the aftermarket segment? - The aftermarket is expected to stabilize with low single-digit growth, supported by an aging vehicle fleet and stable driving patterns [63]
SMP(SMP) - 2024 Q1 - Earnings Call Transcript