Standard Motor Products, Inc. (NYSE:SMP) Q4 2025 Earnings Call Transcript

Standard Motor Products, Inc. (NYSE:SMP) Q4 2025 Earnings Call Transcript February 26, 2026

Standard Motor Products, Inc. misses on earnings expectations. Reported EPS is $-1.2679 EPS, expectations were $0.45.

Operator: If you need assistance at any time, good day, everyone, and welcome to the Standard Motor Products, Inc. fourth quarter 2025 earnings call. All participants are in a listen-only mode during the question-and-answer session. Please note today’s call will be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the call over to Anthony Cristello, Vice President of Investor Relations. Please go ahead.

Anthony Cristello: Thank you, Chloe, and good morning, everyone, and thank you for joining us on Standard Motor Products, Inc.’s fourth 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 R. 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 would like to remind you that some of the material that we will be discussing today may include forward-looking statements regarding our business and expected financial results.

When we use words like “believe,” “estimate,” or “expect,” these are general forward-looking statements. Although we believe that the statements are reasonable, they are based on information currently available to us and certain assumptions made by management, and we cannot assure you that they will be 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 the forward-looking statements reflected in these remarks.

Eric Sills: Thank you, Anthony, and good morning, everyone. We are pleased with our results. The strong performance we have been experiencing continued into the fourth quarter, putting a cap on a solid year with good momentum heading into 2026. Our top line grew by over 12% in the quarter and over 22% for the year, and while much of this was from our Nissens acquisition consummated in late 2024, excluding Nissens we are up about 4% for the quarter and the year. Strong sales performance combined with various internal initiatives generated a favorable bottom line, both in terms of earnings growth and EBITDA margin expansion. All of our segments performed well. Let me go through them, starting with North American Vehicle Control.

Sales were up a very strong 3.3% against a difficult comparison from the previous year, with several key contributing factors. First, our products are non-discretionary and largely DIFM, and so in general, the category outperforms in uncertain economic times. On top of that, we believe our customers’ success with our well-regarded spread is evidenced by their strong sell-through, and their POS was up in the mid-single digits throughout the year. As you look at the subcategories, you will note that the wire sets are a category in secular decline. Wire sets saw a 27% to 10% drop-off in the quarter, bringing the entire representable percent of the segment down to less than 10% of Vehicle Control. As such, certain customers chose to reset their shelves in the second half, right-sizing their inventories for this mature category.

It is important to note that their wire set POS for this period was only down in the mid-single digits, which is more reflective of ongoing demand. Lastly, our sales in the segment benefited in the back half of the year as we began to pass through our tariffs at cost. Turning to Temperature Control, robust sales continued, up nearly 6% over a very difficult comp, though the fourth quarter is the smallest in this heat-related business. In a seasonal category like this, the cadence across orders can vary year to year, so the key measure is full-year sales, and for the full year, the segment was up more than 12%. So what is driving this? As we described on the last call, the air conditioning season seems to be elongating, starting earlier and ending later.

Customers are recognizing this and getting their inventory in place ahead of the season to be able to take advantage of early demand. We also believe a key driver is the success of our A/C kit program, where we have all you need to do the repair included in a pre-packed kit. Over the last several years, we have seen increased adoption of our kits, which consist of the replacement of several system components. Not only does this increase the ticket due to more of the related parts getting included, but it also leads to an air conditioning repair done right, and it tends to end with a happier end customer as the repairs are more successful. Lastly, think about our newest segment—Nissens Automotive—which has been a part of Standard Motor Products, Inc.

since November 2024. We completed our first full calendar year of ownership, and we are delighted with its performance, both in and of itself and as a complement to our other businesses and the synergies it creates. Sales remained strong, contributing $64 million in the quarter and $305 million for the year, with mid-single digit increases from 2024 in local currency. While there are reports from others with business in Europe of a general softening of the market, Nissens continues to excel. We attribute this to three primary dynamics. First, we participate in many of the same non-discretionary categories as in the U.S., which tend to remain stable in difficult economic times. Second, we enjoy strong sales in Eastern and Southern Europe, which have been outperforming other parts of the continent.

But most importantly, we are gaining share. Our preliminary focus was on savings and enhanced pull-through by the workshops that seek best cost on sourced products. We are also deeply engaged in seeking synergies—insourcing as appropriate, leveraging our increased purchasing power on freight and logistics, and so on. We are also focused on cross-selling, adding coverage in new categories on both sides of the ocean. And while these initiatives can take time to show in the numbers, they represent exciting opportunities. Lastly, I will speak to our non-aftermarket segment, Engineered Solutions. It operates out of the same plants producing the same product types. It enhances our quality capabilities and access to new technologies. It provides an OE pedigree to leverage in the aftermarket, and while we can expect the segment to be more cyclical than the aftermarket, it can be subject to more volatility than the aftermarket, as it will rise and fall with demands for new vehicles and equipment across our different end markets.

Halfway through 2024, business started to drop off, leading to several consecutive quarters of sluggish demand. I believe this trend reversed mid-2025, and we have experienced sequential improvement. Q4 was up about 6% over the previous year, and although the full year was down slightly, the momentum is stable. Over the past several months, we had entered a more stable environment. Finally, let me speak briefly about the current tariff landscape and its impact on our business. In the fourth quarter, our tariff-related costs were essentially offset by price. Obviously, there have been recent changes where certain tariffs are eliminated and new ones take effect. We are digesting the rules, but we have developed processes and methodologies with our customers that allow for this flexing, and we plan to continue to operate from a successful playbook.

Further, we believe that our diverse global footprint will continue to provide us with a competitive advantage. The new rules allow continued exemption for USMCA-compliant goods, which is a significant part of our offer. It is worth reiterating that most of our products are non-discretionary, 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. I will now turn the call over to Nathan Iles for the quarter’s financial results.

Nathan R. Iles: Alright. Thank you, Eric. Good morning, everyone. As we go through the numbers, I will 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. I will then cover some key cash flow metrics and finish with an update on our financial outlook for the full year of 2026. First, looking at our Vehicle Control segment, you can see on the slide that net sales of $193.7 million in Q4 were up 3.3% while being up against a difficult comparison from a year ago when the segment grew 4.9%. While we continue to see a decline in sales of wire, as Eric noted, we were pleased to see the engine, electrical, and safety categories grow a combined 6.3% versus Q4 last year.

Vehicle Control’s adjusted EBITDA in the fourth quarter was even with last year at 11.1%. Adjusted EBITDA margin was flat as higher sales volume was offset by some gross margin rate compression from passing through tariffs at cost, as well as some higher distribution expenses as we transition into our new warehouse. Turning to Temperature Control, net sales in the quarter for that segment of $61.5 million were up 5.9% for the reasons Eric said. Temperature Control’s adjusted EBITDA increased in Q4 to 13%, due to higher sales volumes that led to a higher gross margin rate, as well as improved operating expenses as a percent of sales for the quarter. While adjusted EBITDA was very good in the fourth quarter, keep in mind that the fourth quarter profit is generally lower than other quarters, as it is a low point in the year for sales volume.

Next, let me touch on Nissens. This fourth quarter was the first time we have year-over-year results, as we acquired the business on 11/01/2024, and so the fourth quarter was up from last year, partly reflecting an additional month of results in 2025, but also continued strength in the segment. Adjusted EBITDA for Nissens increased to 10.1% of net sales in Q4, and the full-year adjusted EBITDA margin of 15.9% was in line with expectations. As this was our first full year of ownership of Nissens, this was the first year we needed to assess the internal control environment of this formerly private business according to Sarbanes-Oxley requirements. As noted in our 10-K filed earlier today, we disclosed that we identified a material weakness in internal controls in our Nissens segment over financial reporting related to its general information technology controls.

We are expeditiously taking action to remediate controls as we do a thorough review of all our numbers, and we received a clean opinion from KPMG. Turning to Engineered Solutions, sales in that segment in the quarter were up 6.3%, and we were pleased to see growth return to the segment as we lap market softness that began in the second half of last year. Adjusted EBITDA for Engineered Solutions in the quarter was up from last year, as higher sales led to better gross margin and operating expense leverage. While we did incur some one-time costs related to winding down certain customer programs in the quarter, these were adjusted for non-GAAP reporting. Let me just say we had a great quarter and year. We were pleased to see both the top and bottom line increase in this segment.

Consolidated sales increased 12.2%, and adjusted EBITDA increased to 9.7% of net sales in the quarter. Further, non-GAAP diluted earnings per share were up 19.1% as a result of higher sales and the strength of operating performance. For the full year of 2025, our sales increased 22.4% over last year, and 4% excluding Nissens, helped by strong sales in both our North American aftermarket segments. Our adjusted EBITDA was up 160 basis points, and our non-GAAP diluted earnings per share increased 26.8%. We were pleased to see our top line coming right in line with prior expectations, while our bottom line came in above the range previously provided. Turning now to cash flows, cash generated from operations for the full year of $57.4 million was down $19.3 million from last year.

Our cash flow was lower in 2025 mainly due to an increase in inventory during Q4 as our business continues to grow and we prepared for the upcoming selling season. Note that part of the increase in inventory is also due to higher tariff costs during the year. CapEx is slightly lower than last year as capital spending related to the DC is nearing completion. Financing activity shows payments of $27.3 million of dividends, as well as $27.7 million of borrowings on our credit agreement. Note that we repaid $51.4 million on our credit from Q2 through Q4, and with that, our net debt stood at $546.7 million. We finished the quarter with a leverage ratio of 2.7 times EBITDA, and believe we are on track to get to our target of 2.0 times by 2026. Before I finish, I want to give an update on our sales and profit expectations for the full year of 2026.

Before I do, let me note that our 2026 outlook does not take into account changes in U.S. tariffs on imported goods. We follow changes closely, but things change continuously, creating uncertainty in the market. Whatever the impact is on our business, we will continue to offset our costs with a dollar-for-dollar pass-through in pricing. We expect sales growth in 2026 to be in the low- to mid-single-digit percentage range, driven by continued momentum in North America and Europe and more stable market conditions in our Engineered Solutions segment. Our outlook for adjusted EBITDA margin is a range of 11% to 12% of net sales and reflects margin benefits of sales growth, but also some continued margin compression from passing through tariffs at cost, and continued investment in our business.

Regarding operating expenses, keep in mind these expenses are incurred more ratably across the year and as such will fluctuate with seasonality in the business. In connection with our adjusted EBITDA outlook, we anticipate total operating expenses inclusive of factoring will be approximately $106 million to $114 million each quarter in 2026. We expect interest expense on outstanding debt to be about $30 million for the full year and depreciation and amortization to increase to $45 million to $50 million, as we will have a full year of depreciation on distribution center investments. Finally, as noted, there is a seasonal aspect to our business with regard to Temp Control products we sell in North America and Europe. Our preseason can span across Q1 and Q2 with some variability between quarters, and given we saw a large amount of growth in Q1 last year in these products, we will be going up against a difficult comparison in Q1 2026, so it is important to look at the first half of the year in total regarding cadence of sales.

To wrap up, we are very pleased with our sales and earnings growth in 2025 and that we can share expectations for further growth in 2026. We continue to execute on many initiatives, including integration of Nissens, and expect to realize increasing benefits from that in 2026. Thank you for your time. I will turn the call back to Eric for some final comments.

Eric Sills: Thank you, Nathan. In closing, let me just spend a moment discussing how we are viewing things in 2026 and beyond. Even in the face of a challenging economic environment, we have enjoyed several consecutive quarters of strong performance and believe that this momentum will continue. Within our legacy business, the North American aftermarket, we operate in strong and stable markets and are outperforming due to a combination of structural advantages, customer relationships, and execution. We target the repair professionals with quality products and brands they trust, and these are the folks making the purchasing decisions, creating pull-through to our channel partners. And we nurture our customer relationships with a program they value and with the execution they rely on.

We have made great strides in diversifying our business with new product categories, all with the focus on seeking complementary attributes. Our recent geographic expansion with the acquisition of Nissens is exceeding our expectations. They continue to impress us as terrific operators with strong relationships with their customers. 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 we are impressed with their team, their capabilities, and our ability to identify opportunities. Our Engineered Solutions business is on the rebound, and while it can be volatile, it is a strong complement to our core business and generates favorable returns.

We continue to gain traction with blue-chip customers around the world, leveraging the breadth of our offering and our capabilities. And as we become known, doors are opening for us. And while we continue to see supply chain complexity, we feel that we can navigate it better than most, and so we remain very bullish about the future. We will now open for questions.

Q&A Session

Operator: Thank you. If you would like to ask a question, please press star one. Our first question comes from Scott Stember with Roth Capital. Your line is open.

Scott Stember: Thank you, gentlemen, and congrats on the very impressive results.

Eric Sills: Thank you, Scott.

Scott Stember: Eric, in Vehicle Control, in the release it says that your filter or POS was essentially in line with what you had seen through the first three quarters. Does that assume that you were up low- to mid-single digits at sell-through?

Eric Sills: Yes, that is correct. And if I was unclear on that, I apologize. The POS was pretty consistent really all year long for the big players, which was in the mid-single digits.

Scott Stember: Okay. And very strong growth in the business outside of wire. Maybe just talk about some of that. I know you have been much more focused on increasing your portfolio of products earlier in their life cycle and with more complexity in electronics. Maybe just talk about how that is coming about.

Eric Sills: Yes, great question. And that is one of the reasons why we do break the subcategories out the way that we do. We have carved out the wire business to show that it does perform differently just where it is in its life cycle. To the other areas where we do continue to see growth, our Vehicle Control offering is extremely broad, expands many, many categories whether it is addressing conventional engines or safety-related products or other electrical products around the vehicle, and what we are seeing is a proliferation of not only SKU opportunities but also replacement rates on some of the newer technologies. So it is an evolving category. It is a growing category. In the aftermarket, nothing moves very quickly, as you know.

Scott Stember: Can you talk about cross-selling, new customers introducing to each other, and, I guess, cross-pollination of products? Some of these initiatives?

Eric Sills: In the aftermarket, nothing moves very quickly, as you know. But what we are seeing is that there continues to be opportunities for growth across both conventional technologies and some of the newer ones. Since you started by asking about the growth opportunities, let me respond to that. We have a lot in common product categories. So, for example, we both sell air conditioning compressors. What we did over the course of 2025 was to look first at where we saw gaps for us to expand their North American coverage with what we already had, and some opportunities where they had some SKUs that made sense for us to add. But the bigger area that we are excited about is identifying entire categories that one was in and the other was not, and so we added several of these in 2025 for the Nissens offering, some in Nissens Europe and some in Nissens North America, really capitalizing on product strength that Standard Motor Products, Inc.

brought to the table. Ignition coils is a really great category here. It is one we are very strong as a manufacturer of. We manufacture them all in Poland, which is a great selling point in Europe for Europe. We launched in December a line of ignition coils. Now it is about getting out there in the market, getting traction—getting some shelf placement with the distributors—so really 2025 was a year of putting the programs in place. We expanded some of their air conditioning subcategories that they were not in on both sides of the ocean. We are excited about the potential. This is really one of the things we came into this acquisition thinking—that while we have a lot of common categories to seek synergies, we also have these complementary categories to add and seek growth.

Scott Stember: Got it. And then one more on the cost side of things, and this is the area you have been talking about all year long, as you have looked at commonizing vendors, beefing up those vendors, and figuring out where there are cost-type synergies. You had talked about an $8 million to $12 million run-rate savings by 2026. Are you still comfortable with that? And then a follow-up on the timing of the remediation of the internal control issue in Europe, with both the technical solution and compensating controls.

Eric Sills: We came into this saying that we would have a run rate of $8 million to $12 million in savings by 2026. We are very comfortable with that. We believe we are ahead of that. It is important to note this does not all hit the Nissens P&L. This gets spread across the entire enterprise P&L because, as we have seen, the savings can benefit both sides as we each benefit the other in what we bring to the table.

Nathan R. Iles: Yep. And, Scott, like I said, we are working on it. I believe we are making very good progress, and we will update you as soon as we can on that front.

Eric Sills: Thank you, Scott.

Operator: We will take our next question from Bret Jordan with Jefferies. Your line is open.

Bret Jordan: Hey. Good morning, guys.

Eric Sills: Good morning, Bret.

Bret Jordan: You talked about a tough comp in Temperature Control in the first quarter, but could you maybe give us some color as to the cooling season?

Eric Sills: What we are seeing is ongoing good preseason order requirements across the customer base. As Nathan pointed out, this can hit the first quarter, it can hit in the second quarter. A lot depends on when we ship. It usually ends up being right at that crossover point. Last year, we did a lot of them in the first quarter. That is why you saw last year’s Q1 was really very strong. This year, we think it is going to be more normalized. Inventories are up slightly, but they are really tracking with how much their sales are up, so they are prepared versus previous years in terms of readiness for the season.

Bret Jordan: A couple of the large parts distributors in Europe are talking about private label programs that they are emphasizing. Can you be a private label supplier via Nissens and pick up share if they gain share with private label?

Eric Sills: Certainly. We do a little bit of private label there today. We really have been emphasizing our brands, and the majority of our sales there—about 80% or so of our sales in Europe—are under the Nissens brand. We have two other brands: AVA and one that is more dedicated to commercial vehicles called Highway. So each has its positioning within the space depending on customer need. But we do see private labeling as something that is a successful partnership when it works well for both partners, and so if we see opportunities there, we will certainly capitalize on those and pick up share if they gain share with private label.

Bret Jordan: And then, obviously, you get good visibility on tariff outcomes here. Is there any opportunity for tariff rebate collection, or are you just not as exposed to some of that Asian import product?

Eric Sills: We are in the same boat as everybody else. I think that is still very unclear. If you are asking about refunds from the AIPA tariffs, I think it is still very unclear how that is going to play out. If there is an opportunity, we will certainly avail ourselves of that, but I think we are aligned with what we are hearing in the broader market.

Operator: And once more for your questions, that is star one. We will pause just a moment. At this time, there are no further questions in the queue. I would now like to close the Q&A session.

Eric Sills: We want to thank everyone for participating in our conference call today. There was a lot of information presented, and we will be happy to answer any follow-up questions you may have. Our contact information is available with Investor Relations.