Standard Motor Products Reports Q2 2026 Results: Full Earnings Call Transcript

Standard Motor Products (NYSE: SMP ) released second-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

5 million in adjusted EBITDA. Vehicle Control segment sales declined due to a reduction in wire set purchases, while Temperature Control sales rose by nearly 16% due to timing shifts in preseason orders. Nissens Automotive, the company's European aftermarket business, saw a 5% sales growth, bolstered by engine efficiency products despite a late start to the European summer. The Engineered Solutions segment experienced a 17% sales increase, although future growth is expected to slow due to tougher year-over-year comparisons.

Standard Motor Products entered a joint venture with Textrol in Thailand to enhance sensor manufacturing capabilities, emphasizing supply chain control and reduced dependency on China. The company maintained its 2026 guidance of low- to mid-single-digit sales growth and adjusted EBITDA margins between 11% and 12%, noting potential impacts from tariffs, Middle East conflicts, and interest rates. Management highlighted strategic leadership changes and the synergies from the Nissens acquisition, including new category launches in Europe and a focus on diversifying business operations. Full Transcript OPERATOR Hello and welcome everyone.

Joining today's Standard Motor Products second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question-and-answer session. To register to ask a question at any time, press star one on your telephone keypad.

Please note this call is being recorded, and we are standing by should you need any assistance. It is now my pleasure to turn the meeting over to Tony Cristello, Vice President of Investor Relations. Please go ahead. Tony Cristello, Vice President of Investor Relations and Corporate Development Well, thank you and good morning everyone.

Thank you for joining us on Standard Motor Products' second quarter 2026 earnings conference call. With me today are Eric Sills, Chairman and Chief Executive 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 and A.

Before we begin this morning, I'd like to remind you that some of the material 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. Eric Sills, CEO Thank you, Tony, and good morning everyone. Welcome to our second quarter earnings call.

Overall, we were quite pleased with our performance in the quarter as our top line grew by nearly 7% when adjusting for the accounting treatment of tariff refunds received in the period, which Nathan will explain further in his remarks, and year to date, we are now up nearly 8%. 5 million in adjusted EBITDA in the quarter along with strong operating cash flows. I'll walk through each operating segment separately, and please note that all future mentions of sales throughout my remarks are also adjusted for the tariff refunds. Vehicle Control sales were down slightly in the quarter.

Much of this was related to customer order patterns, which can vary quarter to quarter based on timing of pipeline orders and other dynamics. Importantly, customer POS was up in the quarter, demonstrating that this was more related to typical flexing of their purchasing patterns. Additionally, when looking at the product categories within the segment, our wire set business was off significantly, making up most of the quarter's shortfall. As we've previously explained, this is a category in secular decline, dropping by mid-single digits each year, and our customers have therefore been adjusting their stocking positions accordingly and thus slowed purchases in the quarter.

Year to date the segment remains up nearly 5% as pipeline orders generated a very strong first quarter. Our other North American aftermarket segment, Temperature Control, had a very strong quarter with adjusted sales up nearly 16%. As discussed on our first quarter call, the first half of the year is significantly impacted by the timing of preseason orders, and 2026 was shifted more into the second quarter. This more than offset the slower start to the selling season, as May and parts of June were unseasonably cool and wet across much of the country.

Year to date we remain up nearly 10%, but as we've always said about this seasonal category, individual quarters are less important than the full year, and while a more favorable weather pattern has kicked in across much of the country, we are going up against very strong comps, as we were up almost 15% in last year's third quarter. Next I'll speak about Nissens Automotive, our European aftermarket business. Sales in the quarter were up nearly 5%, which was roughly split between actual growth in local currency and the impact of stronger currency conversion.

In looking at the product categories, we are very pleased with the sizable growth in engine efficiency products driven by items such as turbos and other engine management, where we are clearly gaining shelf space. The soft spot was within air conditioning, which was impacted by a late start to the European summer. , Europe has since set all records for heat, and we feel good about our recovery for our AC products. Lastly, as previously discussed, we recently launched two new categories in Europe, leveraging the synergies with our legacy business.

And while it is early days without much impact yet on our numbers, we are pleased with our momentum. Next let me speak to our non-aftermarket segment, Engineered Solutions. The strong demand experienced in the first quarter continued, with second quarter sales up nearly 17%, bringing year to date growth to nearly 15%. As a reminder, 2025 was a tale of two halves, a soft first half followed by a rebound, and while that rebound has continued, the second half of this year is going against more challenging comps.

Finally, as announced a few weeks ago, we are pleased to have entered into a joint venture agreement with our long-standing partner Textrol, where we acquired 50% of their Thailand operation focused on sensor manufacturing to support our Vehicle Control segment. We see this as an excellent strategic investment hitting on several key pillars. It reinforces our commitment to being a basic manufacturer of core products, it provides additional control of our supply chain, and it launches a low-cost manufacturing operation on which to build that de-risks us from China.

Before handing it over to Nathan to provide details, I would like to mention recent leadership changes previously announced. After well over 40 years of dedicated service, Jim Burke has elected to step down as Chief Operating Officer. Over these years, the contributions that Jim has made are far too numerous to count, and I consider him a major part of our company's success. Jim is staying on as Executive Advisor and remains a member of our board, so I look forward to continuing to work closely with him.

At the same time, we announced that Sunil Bhandari has joined us as Chief Operating Officer with responsibility for all of our operations globally, including manufacturing, distribution, engineering, procurement, and supply chain. Sunil brings with him 25 years of global business and operations leadership, including the last 14 years at Eaton Corporation, and a strong record of driving operational execution. I look forward to seeing all that Sunil can do for us. So now let me hand this over to Nathan.

Nathan Iles, Chief Financial Officer All right, thank you Eric and good morning everyone. As we go through the numbers, I'll first give some color on the results for the quarter by segment and at the consolidated level, and then I'll cover some balance sheet and cash flow metrics and finish with an update on our financial outlook for the full year of 2026. Before I talk about our second quarter results, I would like to note that we received refunds in Q2 for amounts previously paid under the IEPA tariff regime.

As per our normal practice of treating tariffs as a pass-through cost, accounting for these tariffs impacted both our sales and cost of goods sold during the quarter. I'll be discussing our results on a non-GAAP basis and excluding the impact of accounting for tariff refunds. 6% as we saw a continued secular decline in our wire sets category during the quarter. 7% for the segment.

6% in the second quarter was lower than last year. While we've seen some improvement in our gross margin rate, our operating expenses as a percent of sales increased as a result of some elevated distribution costs related to ramping up our new warehouse in Shawnee, Kansas, some higher freight expense, and general inflation in SG&A costs. 7% for the reasons Eric noted before. 2% as good sales volumes led to a higher gross margin rate and operating expenses improved as well.

3% in local currency. Even though we were up against a difficult comparison where last year had very robust orders in the first half of the year, adjusted EBITDA for Nissens of 19% of net sales in Q2 was higher than last year, mainly as a result of improvements in gross margin rate and SG&A expenses. It's important to note that while we had some currency transaction losses that impacted this segment in the first quarter, we saw those stabilize in Q2, helping the segment return to normal profit levels. 8%, and we were pleased to see growth across most markets.

The second quarter marked the last quarter of easier comparisons given market cycles, and we expect the sales growth rate for this segment will slow through the remainder of the year. 7% was down from last year as gross margin was lower due to inflationary headwinds but partly offset by improved operating expense leverage on higher sales. 4 million better than last year. 40 in the quarter.

2 million better than last year, driven by a significant reduction in inventory levels in the first half of the year as well as timing of tariff refunds received. We were pleased to see the improvement in inventory after coming into the year with some higher balances to support our sales growth this year. 9 million, which is lower than last year. 7 million of dividends as well as $24 million in repayment on our credit agreement.

2 million, down significantly from Q2 last year. 5 times EBITDA and believe we are on track to get to our stated 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 2026, which is unchanged from before. We expect sales growth 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.

This range is lower than the growth we saw through the first half of the year, but keep in mind we've now lapped tariff pricing that went into effect last year. S. to euro rate stabilizes. Our outlook for adjusted EBITDA margin is a range of 11% to 12% and reflects margin benefits from sales growth but also continued margin compression from passing through tariffs at cost and elevated distribution costs as we ramp up our new warehouse.

As we noted in our release this morning and the slide notes, our outlook does not include the impact of ongoing changes in the tariff environment, inflationary impacts from the conflict in the Middle East, or changes in interest rates on our customers' supply chain financing programs. 5% to 28%, and depreciation and amortization to increase to $45 to $50 million as we'll have a full year of depreciation on distribution center investments and also continue to invest in our business generally. To wrap up, we're very pleased with how our year has started with strong sales growth and good profitability. We thank everyone in the company for helping us turn in these results.

Thank you for your time. I'll turn the call back to Eric for some final comments. Eric Sills, CEO Thank you, Nathan. In closing, let me spend a moment discussing how we are viewing things for the back balance of the year and beyond.

Even in the face of a challenging environment, we have enjoyed several consecutive quarters of solid performance. We operate in strong and stable markets and believe we are outperforming due to a combination of structural advantages, customer relationships, and execution. We've made great strides in diversifying our business with new product categories, geographies, and end markets, all with a focus on seeking complementary benefits. We're certainly in the midst of complicated times.

It remains unknown what impact the conflict in the Middle East will have either on cost or potentially on supply chain disruption. But we have a strong track record of navigating these challenges with robust and resilient supply chains and a favorable manufacturing footprint. Within our legacy business, North American aftermarket, we believe we excel. The industry itself continues to demonstrate its stability and resilience in the face of turbulent times.

And within it, we believe we tend to outperform with a business model that targets repair professionals with quality products and brands they trust. Nissens is a fantastic new leg to our stool and is exceeding our expectations. They're a great company in their own right and, as part of Standard Motor Products, they provide great business diversity while being similar enough to generate meaningful synergies both to the top and bottom line. Our Engineered Solutions business continues its rebound and is a strong complement to our core business.

And so we remain very bullish about our future. And that concludes our prepared remarks. We'll now turn it back over to the moderator to open it up for questions. OPERATOR Thank you.

If you'd like to ask a question, press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star one to ask a question. We'll take our first question from Scott Stember with Roth Capital Partners.

Please go ahead. Your line is open. Scott Stember, Analyst at Roth Capital Partners Good morning. Thanks for taking my questions and congrats, Jim, on the retirement.

You will be missed. So just quick questions on the tariffs. Now that you received your IEPA refund, those are gone, but we have some replacement with 301s. What does the go-forward net tariff landscape look for you?

Is there some improvement? And then the other question is whether it's related to the IEPA and any lower pricing environment. How should we look at potential givebacks to customers within guidance and how we should look at that being reflected in the numbers? Eric Sills, CEO Very good.

Thank you, Scott. And thank you for the kind remarks about Jim. I'm sure he appreciates it, and I'm sure he'd still love to go have a beer with you at some point. All right, we'll tackle the first part of your question about the ongoing tariff regime.