Standard Motor Products at Midwest Ideas: Strategic Expansion into Europe

On Tuesday, 26 August 2025, Standard Motor Products (NYSE:SMP) presented its strategic initiatives at the 16th Annual Midwest Ideas Conference. The company emphasized its focus on the aftermarket industry and highlighted its recent European expansion through the acquisition of Nissens. While SMP showcased its growth prospects and stable business model, challenges such as increased net debt were also addressed.

Key Takeaways

• SMP’s acquisition of Nissens has expanded its European market presence, contributing to a 26% increase in first-half sales.
• The company aims to reduce its leverage ratio to under 2.0x by 2026, despite a current net debt increase.
• Strategic priorities include capital investments, dividend payments, and debt reduction, with share repurchases currently paused.
• SMP’s revenue diversification now includes 71% from the U.S., nearly 20% from Europe, and 11% from the rest of the world.

Financial Results

• Sales Performance:

- 2024 revenue reached $1.5 billion, with the Nissens acquisition adding $277 million in pro forma revenue.

- First-half sales increased by just under 26%, driven by the Nissens acquisition and a 5% growth in the legacy business.

• Geographic Diversification:

- U.S. accounts for 71% of revenue, Europe just under 20%, and the rest of the world 11%.

• Capital Expenditure:

- Investment in a new distribution center in Shawnee, Kansas, ranges from $25 million to $30 million.

- Normalized CapEx is expected to be between $30 million and $35 million going forward.

• Debt Management:

- Net debt was 3.7x levered at the end of 2024, reducing to 3.2x by the end of Q2 2025.

- SMP targets a leverage ratio of under 2.0x by 2026.

Operational Updates

• Nissens Acquisition:

- Closed in November, adding $277 million in pro forma revenue.

- Expected cost synergies range from $8 million to $12 million within 24 months.

• North American Aftermarket:

- SMP manages 80,000 SKUs and trains 60,000 technicians annually.

- The car park size is 296 million cars, with an average car age of 12.3 years.

• European Aftermarket:

- The car park size is 280 million cars, with an average car age of just over 12 years.

- Growth rate is projected in the mid to high single digits.

Future Outlook

• Debt Reduction:

- SMP is focused on reducing its leverage ratio to under 2.0x by 2026.

• Sales Growth:

- The company anticipates reaching $2 billion in sales organically within a few years.

• Capital Allocation:

- Priorities include CapEx, dividend payments, debt reduction, and opportunistic M&A.

- Share repurchases are currently paused.

Q&A Highlights

• Nissens Acquisition:

- Acquired from private equity firm Excel, which owned 75% of Nissens.

- SMP considers the acquisition strategically sound due to attractive multiples and growth opportunities.

• Future Strategy:

- Focus on debt reduction in the near term, with openness to opportunistic mergers and acquisitions.

For a detailed understanding of Standard Motor Products’ strategic directions and financial performance, readers are encouraged to refer to the full transcript.

Full transcript - 16th Annual Midwest Ideas Conference:

Operator: Good morning. Our next presenting company is Standard Motor Products, trades on the New York Stock Exchange under the ticker SMP. As the name suggests, they are a manufacturer and distributor of auto parts. The company had some good results here in the past couple of weeks. They’ll be certainly here to speak on that.

Starting off will be Tony Cristello, VP of IR and Corp Development. And with him is Nathan Iles, the company’s CFO. Tony? Great.

Tony Cristello, VP of IR and Corp Development, Standard Motor Products: Well, good morning, and thanks, everyone, for taking time to listen to our presentation. Forward looking statements, I’m not going to read through them all, but just making sure that everyone gets to see this page or our corporate counsel will be upset. So Standard Motor Products, over a 100 year old company focusing in the aftermarket space. Been around since 1919, dollars 1,500,000,000.0 company in revenue. And we really operate in three different segments.

The North American aftermarket, which is comprised of our vehicle control side, we’ll talk a little bit about that and our temp control side. Our European aftermarket, which we’ve recently made an acquisition this past November, really expanded that and broke that segment out. And then a smaller piece, about 17% of our business, which is non aftermarket called Engineered Solutions. And that really focuses on just really small, nichey, customized product that mimics and matches what we sell in the aftermarket, but it’s not to aftermarket customers, it’s to commercial, ag, heavy duty equipment and some light vehicle. If you think about our business and the thesis and how we operate, aftermarket for those of you that don’t know is really, really steady business, right?

It’s driven by the number of cars on the road. It’s driven by the average age of the vehicles on the road. And those trends right now are very, very favorable when you think about the average age of a vehicle of 12, 13 years old. And one of the things about our business that we really think is beneficial to us as well is we don’t sell much into the what’s considered the do it yourself side of the business, right? It’s not very discretionary.

Much of what we sell is break fail and you got to fix it. And your car doesn’t work unless you don’t. Anytime you get the check engine light on, it’s probably a part that we will sell on a replacement side. Most of what we sell the product into is the traditional retail channel and we sell into the WDs who then sell to your professional installer, your garage. The average age of the vehicles that we service anywhere from six to twelve years depending on the product type.

So we’re not on an OE type warranty replacement, but it’s usually the second or third owner of the vehicle that’s using that and it’s typically going to be an installer that’s putting that part on because of the complexity of it. When you think about our business model, we just made that acquisition in this past November, closed on Nissens. We’ll talk a little bit about that. But it gives us a really good diversification outside of our traditional North American aftermarket, the European aftermarket, very similar dynamics, very similar size. The one difference is it’s not as developed from the standpoint of you don’t have O’Reilly’s of the world or AutoZone’s of the world or Advances of the world or GP.

You got more of a traditional aftermarket over there that’s not driven by some of the dynamics that are over here. It’s growing, it’s catching up, low single digit historical growth over there as well. So very steady marketplace, very comparable to what we see over here. The engineered solutions side of our business, again, another way that we diversified our business from the standpoint of looking outside of the traditional aftermarket, what are some ways we could grow and be able to expand from geography, expand from customer base. And it’s really unique.

We’re not trying to provide hundreds of thousands of part runs. These are small, nichey, five ten thousand type customers that look for specialized solutions to some of their products. And the last piece is because of the stability in the industry in which we operate, we’ve had pretty consistent financial performance. Cash flow has been pretty good. Capital allocation really includes the dividend that we pay on a regular basis as well as return to shareholders.

And we just did the largest acquisition in the company’s history with Nissens this past year, and we’re looking to continue to deliver. When you think about the expansion of the aftermarket and Nissens recently, it was a, you know, company moving opportunity, right. It allowed us to get into Europe, a new geography. In Europe, on its standalone, you think Europe, but it’s lots of different countries, right? And in order to go into that marketplace and take advantage of it, it’s really difficult to go one country at a time.

So this acquisition provided us with an opportunity to sort of had critical mass all at once. The business is continuing to grow at a faster pace than what we see here simply because they’re continuing to take market share. They operate with branded product in terms of the Nissens brand and they continue to do very good at growing and introducing new products. We’ll talk a little bit about sort of what their business model is. But you think about the pro form a business and here you see it added about $277,000,000 on a pro form a basis last year.

So really happy with that piece of the business and we look forward to a lot of the growth opportunity it provides us. So why did we grow into Europe? When you think about it, S and P is the leading supplier for vehicle control and temp control S. Nissens is the leading supplier for temp control products, thermal management products in Europe.

And they have a small, small piece of what we do on the vehicle control side over there as well. So this is an opportunity to go to market, allow us to be a full line supplier and allow them to take advantage of what we can bring to the table as well as some of the cross selling opportunities and some of the opportunities to expand. It gave us a new customer base, gave us new geography. And the other thing is when we look at the opportunities between buying power, freight savings, some of those things, we talked about 8,000,000 to $12,000,000 of cost synergies that we’ll get in the first twenty four months. So we think that’s going to be a really good opportunity.

What we haven’t categorized is any of the growth synergies. It takes a while to get those up and going. But as we talked about, our vehicle control side is a very small piece of their business in Europe. But now we have a footprint and a platform that provides some opportunities there as well as their small, small piece of business in The U. S.

And so we think we can help them as they grow some of their business here in this U. S. In aftermarket. When you think about our footprint, one of the things that does set us apart as well from some of our competitors, much of what we manufacture is in The U. S, in North America and Canada.

And so we’re not heavily reliant on products coming out of Asia. We do have a footprint there. But if you think about our North America sales in the context of tariffs, over half are from North America, about 25% is out of China and the rest of the world coming out of Europe. One of the things that we think that this positions us better is we have more tariff avoidance from the standpoint of the compliance, USMCA compliance. A lot of competition out there is much higher percentages coming out of China.

So we think we’re positioned well coming out of that from a tariff scenario. When you think about the markets that we participate in, again, the North America aftermarket, that’s about two thirds of our revenue from 2024. The Nissans piece is about 16% of the business from 2024 on a pro form a basis. And then engineered solutions is about 17% of the business. And so we think there’s growth opportunities across all of those segments.

We think that when we look at the opportunities, the North American aftermarket, very steady, very solid growth over the long term. The European aftermarket, again, new market for us with Nissans, but we think that that’s going to present a very good opportunity here in the future in the coming years. And the engineered solutions piece, new customers, different type of customer base provides us with a little bit of diversification from our core businesses.

Nathan Iles, CFO, Standard Motor Products: All right. Good morning. So I’m going to take us through some of the segments in a little bit deeper dive and then finish up with some of the financial metrics and maybe touch on Q2 and first half of the year just with some comments and open it up for Q and A. So first, North American aftermarket. Tony covered a little bit of this, so diving in a little bit deeper, contains our vehicle control and temp control segments.

We have about 80,000 SKUs across these two segments, And really, what we’re we’re doing here is going to our customers full line, all makes, all models. So if you think about a coil on plug, a sensor, actuator, whatever the part is, you know, we have the offering in our in our catalog for every car on the road. It’s really important for our customers to be able to have access to those parts. The aftermarket is all really about forward deployment of inventory to be able to fix cars when they come into the bay to have the parts available. So that’s what we’re offering to the customers.

And then we wrap services around it. So category management services, helping customers figure out which parts on which shelves and which zip codes. We provide a lot of training to technicians to create brand awareness and sort of some stickiness to our brand. We train about 60,000 technicians every year. And then a lot of marketing services as well, just making sure that folks know where they can find our parts and how to get them.

Think about key market drivers. Again, Tony touched on a little bit of it, but the market tends to grow very nice and slowly. You get low single digit growth every year. And that’s really because you have this car park that’s very large and stable, two ninety six million cars. You get some that move out of that car park, some that move in each year, and you get that low single digit growth.

And the other nice tailwind that we have is the average age of a car continues to get older. So about 12.3 years old now. When I started in the industry ten years ago, that number was under ten years, so you get this really nice slow progression. As cars get older, they need more repair work. Bottom left of the of the page just gives a little bit of history on on sales.

You can see in the pie chart, vehicle control, about two thirds of this North American aftermarket temp control, one third. And while sales can be a little bit lumpy in any given year, there’s some weather patterns in the temp control segment. Customers can change their ordering patterns over time, but you do get this very nice long term steady low single digit growth that I mentioned. So from 2021 to 2024, growing from just over $1,000,000,000 to now $1,140,000,000 in 2024. Customer examples are on the right, I would just say, again, as Tony pointed out, we have some very large stable customers in this market, and they’ve been great partners, symbiotic relationships, and we continue to grow together over time.

European aftermarket. So start with the top right because there’s a lot of similar dynamics. The car park is actually very similar in size, 280,000,000 cars, and the average age of the car is just about the same, just over twelve years. And that really creates the dynamic that allows for that same slow, low single digit growth. The thing that’s different about Nissans is that they’ve actually been able to take share and do better than that low single digit growth over the last probably ten years or so.

And it’s largely because if you look on that top left hand side, the Nissans brand is very well known. So they’ve been able to put new products in that box, wrap the name around it and see very good market growth and market penetration wherever they enter with new products. And so that’s really taken them up from a market growth of low single digits to something that’s more mid to high single digits. I think year to date, they’re roughly 8% growth year over year, and that’s really what they were from ’23 to ’24 as well. They do have a couple of other brands that help them compete.

AVA is the second line, not private label, but is a nice second line name for them. And then the Highway brand lets them take some of the products into the commercial segment, just like we do with engineered solutions on global basis. Sales split for Nissans there in the pie chart, engine efficiency, cooling, and air conditioning, very nice mix. This is really what made the acquisition interesting for us, direct overlap with our products in North America. So air conditioning fits right in with temp control.

Engine efficiency, while a different name is really largely vehicle control products. And those two things together will provide for a nice revenue synergy opportunity as we look at combining product catalogs. And then finally, just to touch on here, customers, you can see some of the names here, LKQ, many of you might know. I would just point out the Alliance Automotive Group is actually under the genuine parts umbrella now that has the NAPA brand in North America. And then Enercar is a very large customer in Poland.

But there’s no single customer here that’s greater than 15% of sales. So it’s really, besides geographic diversification, nice diversification from a customer perspective as well. Last, let me touch on engineered solutions before going into financial highlights. So this is really all about taking the products that we were selling into the aftermarket for one hundred years and finding a different outlet for those products. So there’s bullet points top left, but easier to look at the pie chart there on the bottom left, a very nice mix between commercial vehicle, construction, agriculture, light vehicle and all other being marine lawn and garden, hydraulics, that sort of thing.

And so I think the thing to point out as far as those markets go, we tend not to over index the light vehicle. I think most folks know that tends to be a tough market. So we kind of sell what makes sense for us to sell there. But then we are able to win business with other customers in those other spaces that have longer contracts, some better pricing dynamics, better margin dynamics. Revenue in the segment has grown from $237,000,000 to $285,000,000 Some of that is due to acquisitions that we made in the 2021 time period, but we were seeing growth here of around 5% before we got into a little bit of a down cycle.

And the nice thing here is that because this is a growth area for us, a place where we can win and get on new platforms, while many of these end markets have experienced a bit of a down cycle in the last eighteen months or longer, Our sales stayed flat in 2024, and we’ve had a little bit of softness in the first half, but not as much as you see in other markets. So very consistent and steady business for us. Right. Then just in terms of financial overview and give you an idea of where we stand now on the top line, maybe in a little bit longer term look at sales. So North American aftermarket on the left hand side in the dark blue has grown from under $1,000,000,000 in 2020 to now well over $1,100,000,000 Again, some of that long term low single digit growth you see coming through.

And then engineered solutions in the gray box continuing to grow nicely as we kind of built out that segment. And then Nissin is coming in the European aftermarket bucket in 2024 close in 2024, full year sales in 2025. And then you can see what this did for us from a diversification perspective and geography. We have 71% now in U. S, that number was much bigger in the past, just under 20% now in Europe and then about 11% in the rest of the world.

From a free cash flow, CapEx, net debt perspective, on the left hand side, you can see our free cash flow. It’s a little bit lumpy, probably like many companies was in the supply chain, I guess, call it, crisis back in 2022, 2023. We actually used a lot of cash in 2022 to make sure we had enough inventory on our shelves to satisfy our customers, and then we kind of recouped all of that investment in 2023 and continue to have good, strong free cash flow. 2024 was a little bit less than run rate because we have invested in a new DC in Shawnee, Kansas. The distribution center formally opened in June, and we’re building it out now, shipping more and more product out of it each day.

So there’s been about a 25,000,000 to $30,000,000 investment there that you can see falls on the CapEx side right in the middle of the page. And so as we normalize CapEx, we’ll get back into a kind of 30,000,000 to $35,000,000 range going forward. And then finally, net debt, you can see that we’ve kind of maintained a low leverage profile over time. We always said we’d kind of lever up to do a great acquisition, and that’s what we did in 2024. So we ended 2024 at 3.7 times levered.

That’s a little bit of a misnomer because that only included two months of EBITDA for Nissans. And so that number on a pro form a basis was much lower, and we actually came out of the second quarter now at 3.2 times and headed to likely under three by the 2025. And then capital allocation priorities, just to run through these so folks know where we stand. We’re always looking at CapEx investments. We’ll continue to do those.

We have a dividend program that we’ve run for many years and make small increases to each year with board approval. And then right now, we’re kind of in a debt pay down mode just as we look to unlever coming out of the Nissens acquisition. But that said, we’re always kind of keeping abreast of M and A opportunities. So you never know what’s going to come up. There are certainly very small investments we could make to add on a product line here or there.

So just make sure we’re staying aware of what’s out there. And then we have done a fair amount of share repurchases in the past, but we kind of put that on pause as we look at paying down our debt in the near term. So kind of the core pillars of capital allocation. And then finally, just wrap it up by coming back to what Tony showed, like leading global automotive aftermarket parts company, stable markets now with a little bit of a growth flavor to it with the Nissans acquisition in Europe and demonstrated consistent financial performance. So we’ve had a great couple of years, had a great first half of this year, seeing all of our segments grow.

I think we’re up just a little flavor on the first half. Sales were up just a little bit under 26%. A lot of that is obviously Nissans, but the legacy business grew at just under 5% for the first half of the year. Vehicle control, temp control, doing very nicely. And we’ve turned in really record earnings, both on the back of the acquisition and improvements in North America.

So with that, I’ll stop. I know I have a little bit of time for Q and A, and happy to take questions if there are any.

Unidentified speaker: Yep. Who is the seller of the European business?

Nathan Iles, CFO, Standard Motor Products: So it’s a private equity firm named Excel in Denmark. So they Were

Unidentified speaker: they kinda like for sellers, they don’t want it, like, you know,

Nathan Iles, CFO, Standard Motor Products: non core or what was the thought? No. So so the Nissans family started the Nissans business about a hundred years ago. And in 2018, they sold 75% of it to Xcel as kind of a first step out, and they retained 25%. And so then Excel held it for the normal holding period and then sold a 100% of it to us last Yeah.

Unidentified speaker: I mean, because historically, buying some of these businesses in Europe last few years from almost a forced seller, some of the ones out of Europe has been great purchases. Yeah. So

Nathan Iles, CFO, Standard Motor Products: Yeah. No.

Tony Cristello, VP of IR and Corp Development, Standard Motor Products: That’s kind of how it

Unidentified speaker: fits in your pocket as well.

Nathan Iles, CFO, Standard Motor Products: Yeah. And and and I think, you know, as we looked at it, multiples were more attractive even though it wasn’t maybe a forced sell. You know, debt’s a little cheaper in Europe as well. So, you know, it lines up pretty well for

Unidentified speaker: us. Yep.

Nathan Iles, CFO, Standard Motor Products: Alright. Guys, easy crowd today.

Unidentified speaker: Alright. I’ll I’ll keep going. Okay. So in like three, five years, you obviously, you just took off some debt to buy the state in Europe. Where do see yourself in five years?

Are you going to pay that down? Or are you finding leverage level? Or what’s your fault?

Nathan Iles, CFO, Standard Motor Products: Yes. So we’re going to paint it. So the target we came out with when we closed was going to get under two times by the 2026. So I think we’re well on our way there. And you saw on the other page, we kind of lived in the, call it, zero to 1.5 times for a lot of years.

So I think we’ll get under two, very comfortable there. And if there’s another opportunity that we can lever up and take advantage of, we’ll certainly do that. I think from a just natural growth perspective, we’ll be a couple of billion dollar, 2,000,000,000 in sales in a couple of years just organically with continued profit improvements. So I think we’ve got a, you know, good road ahead.

Unidentified speaker: Alright. Alright.

Nathan Iles, CFO, Standard Motor Products: K. Thank you all for your time.

Tony Cristello, VP of IR and Corp Development, Standard Motor Products: Thanks, everyone. Alright.

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