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Date

Feb. 26, 2026, 11 a.m. ET

Call participants

  • Chief Executive Officer — Eric Sills
  • Chief Financial Officer — Nathan R. Iles

Takeaways

  • Consolidated net sales -- Increased 12.2%, primarily driven by the Nissens acquisition and growth across all core segments.
  • Nissens segment sales -- Contributed $64 million during the quarter and $305 million for the year, with mid-single-digit percentage growth in local currency.
  • North American vehicle control net sales -- Rose 3.3% year over year to $193.7 million, even with a difficult comparison.
  • Engine and electrical & safety categories (vehicle control) -- Grew a combined 6.3% versus the prior year, offsetting declines in wire sets.
  • Wire sets (vehicle control subcategory) -- Experienced a 27% to 10% drop in sales, reducing this category to less than 10% of vehicle control segment sales.
  • Temperature control net sales -- Increased 5.9% to $61.5 million for the quarter, with annual sales up more than 12%.
  • Adjusted EBITDA margin (consolidated) -- Increased to 9.7% of net sales for the quarter, reflecting both increased volume and margin expansion.
  • Vehicle control adjusted EBITDA margin -- Remained flat at 11.1%, as volume growth was offset by gross margin compression from tariff pass-through and higher distribution expenses.
  • Temperature control adjusted EBITDA margin -- Reached 13% in the quarter; on a full-year basis, margin was 15.7%.
  • Nissens adjusted EBITDA margin -- Was 10.1% for the quarter and 15.9% for the full year.
  • Engineered solutions segment sales -- Grew 6.3% in the quarter, marking a return to growth after previous softness.
  • Non-GAAP diluted EPS -- Increased 19.1% in the quarter due to higher sales and operating performance.
  • Full-year 2025 non-GAAP diluted EPS -- Up 26.8%, supported by sales growth and EBITDA improvement.
  • Cash generated from operations -- Was $57.4 million for the year, declining by $19.3 million due to inventory increases for season preparation and higher tariff costs.
  • Leverage ratio -- Ended the quarter at 2.7x EBITDA, with the company on track to reach a 2.0x target in 2026.
  • 2026 sales growth outlook -- Management expects low- to mid-single-digit percentage growth, not incorporating the impact of possible U.S. tariff changes.
  • 2026 adjusted EBITDA margin guidance -- Provided as a range of 11%-12% of net sales, reflecting margin benefits and ongoing compression from tariff pass-through.
  • Total operating expenses (2026) -- Anticipated to be $106 million-$114 million per quarter, including factoring costs.
  • Interest expense (2026) -- Projected to be approximately $30 million for the year.
  • Depreciation and amortization (2026) -- Expected to increase to $45 million-$50 million owing to full-year impact from new distribution centers.
  • Income tax rate (2026) -- Forecasted at 27.5%-28%, subject to seasonal variability.
  • Material weakness disclosure -- CFO Nathan R. Iles stated, "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."
  • Synergy run-rate (Nissens acquisition) -- CEO Eric Sills said, "We would have a run-rate of $8 million to $12 million in savings by 2026 ... We believe we are ahead of that."
  • Product demand nature -- Management emphasized most products are "non-discretionary and largely DIFM," supporting stability across cycles.

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Risks

  • CFO Nathan R. Iles disclosed, "we identified a material weakness in internal controls in our Nissens segment over financial reporting related to its general information technology controls."
  • Cash flow from operations decreased by $19.3 million, mainly due to higher inventories as well as higher tariff costs during the year.
  • Management noted continued margin compression in 2026 guidance, tied to "passing through tariffs at cost," which may affect profitability.
  • Wire set sales declined substantially, described as a "category in secular decline" and contributing less to total segment sales.

Summary

Standard Motor Products (SMP 1.41%) closed the year with consolidated sales and adjusted EBITDA growth, driven mainly by contributions from the Nissens acquisition and operational improvements across its major business segments. Although vehicle control and temperature control segments faced mixed subcategory performance, overall margins saw improvement due to successful pricing and cost initiatives. Management highlighted operational resilience in both core and European markets, launching several cross-selling programs and advancing efficiency efforts post-acquisition. Nissens integration yielded new product introductions and early synergy realization above initial expectations, supporting the company's multi-year growth outlook. Amid these gains, the company acknowledged a material weakness in Nissens' internal controls and guided for continued—but moderating—growth with some margin pressure in 2026.

  • CFO Nathan R. Iles affirmed the 2026 outlook excludes the effect of U.S. tariff changes, creating external forecasting uncertainty.
  • CEO Eric Sills described aftermarket demand as "relatively price inelastic at the end consumer," underpinned by professional repair channel dynamics.
  • Inventory growth supported channel readiness for seasonal demand, affecting cash flow as the company managed larger stock and tariff impacts.
  • Recent new category launches for Nissens in Europe and North America—such as ignition coils—expanded addressable markets for both the legacy and acquired businesses.
  • Management indicated further operating leverage is expected as synergy targets are met and business integration advances.

Industry glossary

  • DIFM: "Do It For Me"—refers to services or products primarily installed or sold through professional repair channels, not end consumers.
  • USMCA: United States-Mexico-Canada Agreement—trade agreement impacting tariff exemption eligibility for certain North American goods.
  • POS: Point of sale—refers to end-customer retail sales reported by distributors or channel partners.
  • Section 301 tariffs: U.S. import tariffs, particularly on goods from China, affecting raw material or component costs for manufacturers.

Full Conference Call Transcript

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 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 number, 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% year-over-year, with several key contributing factors. First, our products are non-discretionary and largely DIFM, and so in general, this 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 subcategory of wire sets, you will note a 27% to 10% drop-off in the quarter, bringing the entire wire set category down to less than 10% of Vehicle Control. Wire sets are a category in secular decline.

As such, certain customers chose to reset their shelves in the second half, rightsizing 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 AC kit program, where we have all you need to do the repair included in a prepacked kit.

Over the last several years, we have seen increased adoption of our kits, which tend to consist of the replacement of several system components. Not only does this increase the ticket as more of the related parts get included, but it also leads to an air conditioning repair done right. Technicians love its simplicity, and it tends to end with a happier end customer as the repairs are more successful. Now, let us think about our newest segment, and this is automotive, Nissens, 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, we attribute Nissens’ continued strength 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 through a combination of new category placements, increased share of wallet with existing customers, cross-selling, adding coverage in new categories on both sides of the ocean, leveraging our increased purchasing power on freight and logistics, insourcing as appropriate, and enhanced pull-through by the workshops who seek best cost on sourced products. We are also deeply engaged in seeking synergies. 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, which can be subject to more volatility than the aftermarket, as it will rise and fall with demand 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. Although the full year was down slightly, Q4 was up about 6% over the previous year, and we see it as a strong complement to our core business, and it provides a healthy contribution to our bottom line. 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, the momentum is stable. Finally, let me speak briefly about the current tariff landscape and its impact on our business. Over the past several months, we had entered a more stable environment. Obviously, there have been recent developments where certain tariffs are eliminated and new ones take effect. We are digesting the rules as they are released. The new rules allow continued exemption for USMCA-compliant goods, which is a significant part of our offer.

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. 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 $193,700,000 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 and 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 $61,500,000 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, it is a low point in the year for sales volume, and so I would also highlight full-year adjusted EBITDA came in at 15.7% for this segment. 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 profit is generally lower than other quarters, partly reflecting an additional month of results in 2025.

Keep in mind that Nissens’ business is seasonal given their offering of Temperature Control products, but we also saw 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 with both the technical solution and compensating controls. We are doing a thorough review of all our numbers and 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 $57,400,000 was down $19,300,000 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 $27,300,000 of dividends, as well as $27,700,000 of borrowings on our credit agreement. Note that we repaid $51,400,000 on our credit from Q2 through Q4, and with that, our net debt stood at $546,700,000 at quarter-end. 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 we will continue to invest generally in our business.

We expect interest expense on outstanding debt to be about $30,000,000 for the full year and depreciation and amortization to increase to $45,000,000 to $50,000,000 as we will have a full year of depreciation on distribution center investments across the year. In connection with our adjusted EBITDA outlook, we anticipate total operating expenses inclusive of factoring will be approximately $106,000,000 to $114,000,000 each quarter in 2026. Our income tax rate is expected to be 27.5% to 28%, but does have some variability with seasonality in the business. Finally, as noted, there is a seasonal aspect to our business with regard to Temperature 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. We operate in strong and stable markets and are outperforming due to a combination of structural advantages, customer relationships, and execution, all with the focus on seeking complementary attributes. Within our legacy business, the North American aftermarket, we have made great strides in diversifying our business with new product categories where we believe we excel. Within it, we are in great non-discretionary product categories that are less impacted by consumer sentiment.

The industry itself continues to demonstrate its stability and resilience in the face of turbulent times. 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. 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.

Operator: Thank you. If you would like to ask a question, please press star then one on your keypad. 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: Great question, and that is one of the reasons why we 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 continue to see growth, our Vehicle Control offering is extremely broad, spans 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. It is an evolving category. It is a growing category.

In the aftermarket, nothing moves very quickly, as you know, but we are seeing opportunities for growth across both conventional technologies and some of the newer ones.

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

Eric Sills: Since you started by asking about the growth opportunities, let me respond to that. We both sell 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 Nissens 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. For example, within Europe, we launched in December a line of ignition coils. 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 expanded some of their air conditioning subcategories that they were not in on both sides of the ocean. Now it is about getting out there in the market, getting shelf placement with the distributors, getting traction, and then seeing the value that it brings. We are excited about the potential. This is really one of the things we came into this acquisition thinking: 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 really all year long, as you have looked at commonizing vendors, beefing up those vendors, and figuring out where there are cost-type synergies. Where are you right now?

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 bring strengths to the table.

Scott Stember: Got it. If I could just squeeze one last one in about the timing of the remediation of the internal control issue in Europe. With both the technical solution and compensating controls, how are you doing and what innings are we in?

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.

Scott Stember: Okay. Fair enough. Thank you.

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 in the first quarter or 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 really very strong. This year, we think it is going to be more normalized. We are also seeing that customers’ inventories are up slightly, but they are tracking with how much their sales are up, and they are in line with 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: we have one more value-oriented brand, and one that is more dedicated to commercial vehicles called Highway. 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 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. If you are asking about refunds from the Section 301 tariffs, I think it is still very unclear how that is going to play out. If there is an opportunity for refunds or rebates, we will certainly avail ourselves of that, but I think that it is still very unclear.

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

Eric Sills: Okay. 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.