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    SMP
    Earnings call· Jun 2026(Q2 FY26)

    STANDARD MOTOR PRODUCTS Q2 FY26 earnings call SMP

    Aug 4, 2026 Source

    Executive summary

    Standard Motor Products Q2 FY26 — Record Adjusted EBITDA and Strong Cash Flow

    Standard Motor Products delivered a strong second quarter, marked by record adjusted EBITDA and robust operating cash flow, despite some segment-specific headwinds and a challenging macro environment. The company is actively diversifying its business through new product categories and geographies, exemplified by a new joint venture, while navigating ongoing tariff impacts and inflationary pressures. Management remains bullish on future prospects, leveraging structural advantages and strong customer relationships.

    Highlights

    5

    • Consolidated adjusted sales grew nearly 7% in Q2 FY26, and nearly 8% year-to-date, excluding tariff refund accounting impact.

    • Generated record-setting $63.5 million in adjusted EBITDA in Q2 FY26, representing 12.1% of net sales.

    • Strong operating cash flows of $58.3 million for the first 6 months, an improvement of $64.2 million year-over-year, driven by inventory reduction.

    • Temperature Control segment sales increased nearly 16% in Q2 FY26, and Nissens Automotive sales grew nearly 5% (2.3% local currency).

    • Net debt reduced to $510.2 million, with leverage ratio at 2.5x EBITDA, on track for 2x by year-end 2026.

    Concerns

    4

    • Vehicle Control sales were down slightly in Q2 FY26 due to customer order patterns and a significant decline in the wire set business.

    • Engineered Solutions segment faces more challenging comparisons in H2 FY26, expecting sales growth rate to slow.

    • Full-year sales growth guidance of low to mid-single digits is lower than H1 performance due to lapped tariff pricing and difficult comparisons.

    • Continued margin compression from passing through tariffs at cost and elevated distribution costs from new warehouse ramp-up.

    Guidance & targets

    6
    CategoryTargetConfidence
    Full-year 2026 Sales Growth
    low to mid-single-digit percentage range
    high materiality
    High
    Full-year 2026 Adjusted EBITDA Margin
    11% to 12%
    high materiality
    High
    Full-year 2026 Interest Expense
    about $30 million
    medium materiality
    High
    Full-year 2026 Income Tax Rate
    27.5% to 28%
    medium materiality
    High
    Full-year 2026 Depreciation and Amortization
    $45 million to $50 million
    medium materiality
    High
    Leverage Ratio Target
    2x EBITDA
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Vehicle Control
    Sales were down slightly due to customer order patterns and secular decline in wire set business. YTD sales up 4.7%. Adjusted EBITDA lower due to elevated distribution costs, higher freight, and general SG&A inflation.
    Engine Management product categories sales: upWire set business: off significantlyCustomer POS: up (low single digits, more pricing-driven)
    		$198.6 million-1.6%—8.6%
    Temperature Control
    Strong quarter due to timing of preseason orders shifting into Q2. Good sales volumes led to higher gross margin rate and improved operating expenses. YTD sales up nearly 10%.
    		$152 million15.7%—18.2%
    Nissens Automotive (European aftermarket)
    Sales growth reflects currency conversion impact and continued local currency growth. Adjusted EBITDA higher due to gross margin improvements and SG&A expenses. Currency transaction losses stabilized in Q2.
    Local currency sales growth: 2.3%Engine efficiency products: sizable growth (turbos, engine management)Air conditioning sales: impacted by late summer start
    		—4.8%—19%
    Engineered Solutions
    Strong demand continued with growth across most markets. Q2 marked the last quarter of easier comparisons, expecting sales growth to slow in H2. Adjusted EBITDA down due to inflationary headwinds on gross margin, partly offset by operating expense leverage.
    		—16.8%—9.7%

    Operational metrics

    11
    Consolidated Net Sales Growth (adjusted)
    nearly 8%YoY
    YTD FY26

    adjusted for accounting treatment of tariff refunds

    Cash Generated from Operations
    $58.3 million$64.2 million better than last year
    first 6 months FY26

    driven by a significant reduction in inventory levels and timing of tariff refunds

    Capital Expenditures
    $14.9 millionlower than last year
    first 6 months FY26

    capital spending related to new DC is complete

    Dividends Paid
    $14.7 million
    first 6 months FY26
    Credit Agreement Repayments
    $24 million
    first 6 months FY26
    Net Debt
    $510.2 milliondown significantly from Q2 last year
    Q2 FY26 end
    Wire Set Business Secular Decline
    mid-single digits
    each year

    customers adjusting stocking positions accordingly

    Temperature Control Strong Comps
    almost 15%
    Q3 FY25

    going up against very strong comps in Q3 FY26

    Nissens Local Currency Sales Growth
    2.3%
    Q2 FY26

    even against a difficult comparison with robust orders in H1 last year

    Engineered Solutions Comparison Cycle
    more difficult comparisons
    H2 FY26

    Q2 marked the last quarter of easier comparisons given market cycles

    Tariff Pass-through Timing Offset
    90 to 120 days
    ongoing

    timing offset for passing tariffs through dollar for dollar

    Industry KPIs

    6
    MetricValueDetails
    EPS$1.40USD
    Revenuenearly 7%%
    Inventorysignificant reduction
    Operating margin12.1%%
    Adjusted EBITDA ebita$63.5 millionUSD
    Tariff impact mitigationnominal reduction

    Product announcements

    2
    ProductTypeDetails
    Ignition Coilslaunch
    AC Hoseslaunch

    Deals & partnerships

    1
    TechstrongAcquired 50% of Techstrong's Thailand operation focused on sensor manufacturing to support Vehicle Control segment.50%

    Joint venture agreement with long-standing partner Techstrong to acquire 50% of their Thailand operation for sensor manufacturing.

    Risks & headwinds

    5
    Secular decline in wire set product categoryongoing

    dropping by mid-single digits each year

    Mitigation: Customers adjusting stocking positions; company diversifying business with new categories.

    Challenging comparisons for Engineered Solutions segmentsecond half of this year

    Q2 marked the last quarter of easier comparisons

    Mitigation: Expect sales growth rate for this segment will slow.

    Margin compression from tariffs and elevated distribution costsfull year 2026

    Adjusted EBITDA margin outlook of 11% to 12% reflects this

    Mitigation: Ramping up new warehouse in Shawnee, Kansas.

    Geopolitical conflict and inflationary impactsongoing

    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 customers' supply chain financing programs.

    Mitigation: Strong track record of navigating challenges with robust and resilient supply chains and favorable manufacturing footprint.

    Unseasonably cool and wet weather impacting seasonal salesQ2 FY26

    May and parts of June were unseasonably cool and wet across much of the country

    Mitigation: More favorable weather patterns have since kicked in; individual quarters less important than full year for seasonal category.

    What to watch in Q3 FY26

    5

    Leverage ratio

    by the end of 2026
    Current2.5x EBITDA
    Target2x EBITDA

    Why it matters

    Achievement of this target indicates strong financial health and debt reduction progress.

    We finished the quarter with a leverage ratio of 2.5x EBITDA and believe we are on track to get to our stated target of 2x by the end of 2026.

    Q&A highlights

    4

    What is the go-forward net tariff landscape after IEEPA refunds and new tariffs? How will potential givebacks to customers be reflected in guidance?

    The IEEPA tariffs were replaced by Section 122 and then Section 301 tariffs, resulting in a nominal net reduction in total tariff exposure. The company's approach remains to pass tariffs through dollar-for-dollar with a 90-120 day offset. While specific customer discussions are ongoing, the company expects to share these refunds with customers, consistent with their philosophy of passing tariffs along.

    “It all nets to a very nominal reduction in our total tariff exposure. So as we have been saying really since tariffs became a topic back in 2018, our approach has been to pass these through dollar for dollar and make changes as they occur, albeit with a timing offset of, say, 90 to 120 days.”

    asked by Scott Stember · answered by Eric Sills

    2 min read5 chapters

    Detailed Narrative

    01

    Tariff Impact and Accounting

    The company received refunds in Q2 FY26 for previously paid IEEPA tariffs, which impacted both sales and cost of goods sold. Management discusses results on a non-GAAP basis, excluding this accounting impact. The overall net tariff landscape has seen a nominal reduction due to replacement tariffs (Section 122, then Section 301). The company's strategy remains to pass these tariffs through dollar-for-dollar to customers with a 90-120 day offset, and they expect to share the IEEPA refunds with customers.

    02

    Operational Leadership Transition

    Jim Burke, Chief Operating Officer, stepped down after over 40 years of service but will continue as an Executive Adviser and Board member. Sunil Bhandari has joined as the new Chief Operations Officer, responsible for all global operations including manufacturing, distribution, engineering, procurement, and supply chain. Sunil brings 25 years of global business and operations leadership, including 14 years at Eaton Corporation.

    03

    Strategic Investments and Diversification

    Standard Motor Products entered a joint venture with its long-standing partner, Techstrong, acquiring a 50% stake in their Thailand operation focused on sensor manufacturing. This investment reinforces the company's commitment to basic manufacturing, enhances supply chain control, and establishes a low-cost manufacturing base outside China. The company is also leveraging synergies with Nissens Automotive to launch new product categories in Europe, such as ignition coils and AC hoses, accelerating market entry.

    04

    Market Dynamics and Segment Performance

    The North American aftermarket continues to demonstrate stability and resilience, with SMP outperforming by focusing on repair professionals with quality products. Nissens Automotive, the European aftermarket business, is exceeding expectations, providing business diversity and generating meaningful synergies. The Engineered Solutions segment is experiencing a rebound and serves as a strong complement to the core business, with management remaining bullish on its future.

    05

    Weather Impact on Seasonal Categories

    Temperature Control sales were significantly influenced by the timing of📎 preseason orders shifting into Q2 and unseasonably cool and wet weather in May and early June across much of the country. Similarly, Nissens' air conditioning sales in Europe were impacted by a late start to summer. However, both regions have since experienced more favorable, hotter weather patterns, leading to a rebound in POS for these seasonal products.

    AI-generated summary of the company’s earnings call. Not investment advice.