Good day, everyone, and welcome to the Standard Motor Products' Third Quarter 2024 Earnings Call. [Operator Instructions] Please note today's call will be recorded [Operator Instructions]. It is now my pleasure to turn the conference over to Tony Cristello, Vice President of Investor Relations. Please go ahead.

Thank you, Britney, and good morning, everyone, and thank you for joining us on Standard Motor Products Third Quarter 2024 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 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'd like to remind you that some of the material that 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.

Well, thank you, Tony, and good morning, everyone, and welcome to our third quarter earnings call. I'd like to start by thanking all of our employees around the world, recognizing them for the outstanding efforts in driving our company forward. They continue to do a fantastic job for us. Overall, we are very pleased with the quarter posting a 3.3% increase over last year's record-setting quarter, putting us up almost 6% year-to-date. And this included revenue gains in all 3 operating segments, which I'll discuss in greater detail. We are also pleased with the ongoing rebound of our profitability. Adjusted diluted EPS was up over 15% from last year's third quarter, and we are now nicely ahead on a year-to-date basis. While we continue to face elevated costs across a host of inputs, we were able to overcome some of it through our various cost reduction initiatives. Let me discuss the segments starting with Vehicle Control. Sales were up 5% in the quarter against a relatively easy comparison and up 3% on a year-to-date basis. Our customers continue to invest in our lines as they enhance their assortments, expand their footprint and recognize the benefits of strong stocking positions in this largely nondiscretionary category. Turning to Temperature Control. We are pleased to see continued strong demand in the quarter. I think it's always helpful to remind people of the sales cadence of this highly seasonal category as it can vary substantially year-to-year. 2023 had a slow start, but then in the third quarter, it got quite hot across the country, and we had a record-setting period. This year, it got hot earlier, and we were up 16% at the half. We knew the third quarter comp would be difficult, so we are quite pleased to see sales remain robust, allowing…

All right. Thank you, Eric, and good morning, everyone. As we go through the numbers, I'll first give some color on [results] by segment in the consolidated level, then cover some key balance sheet and cash flow metrics and finally provide a brief update on our financial outlook for the full year of 2024. First, looking at our Vehicle Control segment, you can see on the slide that net sales of $200.9 million in Q3 were up 5.2% and for the first 9 months are now up 2.8% with the increase driven by solid demand for our products and new business wins. Vehicle Controls adjusted EBITDA of 13.2% for the third quarter is up from last year, driven by a higher gross margin rate and better leverage of operating expenses. The gross margin rate was helped by higher sales and favorable cost absorption and operating expense leverage also benefited from the higher sales volume. Vehicle Control's adjusted EBITDA of 11.4% for the first 9 months is down from last year, mainly as a result of higher operating and factoring expenses. SG&A expenses increased mainly due to inflationary increases, which I'll touch more on later and factoring expenses increased due to higher sales and timing of cash collections. Turning to Temperature Control. Net sales in the quarter for that segment of $126 million were up 1.9%. And for the year so far, sales are now up 9.9% as we had another year of favorable weather patterns that started early in the season and continued into the third quarter, helping the segment turn in higher sales against a difficult comparison. Temperature Control's adjusted EBITDA increased in Q3 to 14.7% and for the first 9 months increased to 11.7% as higher sales volumes led to higher gross margin rates and improved operating expenses…

All right. Thank you, Nathan. So to close, let me just spend a moment on how we're thinking about the future. There's obviously a great deal of external factors at play right now that it can impact things in ways that are difficult to predict, yet the markets that we are in have always demonstrated their resilience. The North American aftermarket has proven time and again that it does well both in good times and in bad and during difficult economic times, while discretionary products can come under pressure, our products are largely nondiscretionary repair items that consumers must purchase to keep their vehicles operating safely. We recognized that certain Engineered Solutions end markets can demonstrate some volatility yet we have demonstrated that our strength here is in gaining market share in this enormous global market where our new business awards can absorb temporary downturns. And as we have repeatedly said, while we can expect some lumpiness along the way, we believe the long-term trends to be very favorable. And lastly, we believe that Nissens is truly a game changer for us for all the reasons described earlier. So again, while anything can happen quarter-to-quarter, the future is certainly bright. So that concludes our prepared remarks. At this point, we'll turn it over to the moderator, and we'll open it up for your questions.

[Operator Instructions] And we'll take our first question from Scott Stember with ROTH MKM.

Within Vehicle Control, two of your bigger customers had been reporting sluggish DIFM or professional business still up, but just sluggish and you guys put up a really good number. Just trying to get a sense of what you guys are seeing? What's the POS was for the quarter in Vehicle Control? And just in general, how you're viewing the outlook there heading into the end of the year and into next year?

Sure. So yes, some of the [indiscernible] customers have been speaking about what their market has looked like. And they are tending to say that DIFM nondiscretionary product is outperforming and those are obviously the categories that we're in. They're seeing more pressure on front room product and retail and DIY. The POS that we've seen through the quarter has been pretty consistent with what we've seen for the year, which has been relatively flattish. So as we look at our sales exceeding that or their purchases from us exceeding that, what that really reflects is this kind of slow evolutionary expansion of their footprint, of their assortment as they look to have the best inventory forward deployed. So it's not necessarily a stocking change that they're doing. It's just it's evolutionary, building out new stores and putting more inventory into each individual store. So that's that small delta between their sell-through and their purchases from us.

Got it. And Temperature Control, if my memory serves me correct, we had a longer-than-expected summer, which went into some of the fall months and you had some strong demand and inventories, I think we're in really good shape heading into the off-season. How are we looking at this year inventories and Temperature Control?

Yes. So this year, we've actually come out of the -- I assume you're referring to customer inventory or our inventory? Customer inventory?

Customer Inventory.

Sorry, you broke up -- customer, okay. So what we see is actually last year, what happened was because the season started out slow and then they basically did their entire season's worth of sales in the third quarter, they came out of last year healthy, but a little bit light. This year, as that had been the trend coming into the quarter, both them and us we're able to maintain that throughout the period. And so they ended -- so sell-in basically match sell-through and they came out in a good position.

Got it. And then lastly, on Engineered Solutions, the commercial vehicle had a really strong quarter. It looks like some of the other areas were a little flattish to down. Maybe just talk about commercial vehicle and then your comments about things -- it sounds like incrementally softening potentially in the fourth quarter?

Well, first, in terms of the different end markets. And as you look at our quarterly results across those 4 subsegments that we report in, there's a fair amount of movement among them. And so I would say that this quarter is just kind of more of the same as there's always going to be a little bit of lumpiness across these different end markets. And -- but the area where you are seeing probably a little bit more softness is in construction, agricultural equipment, and you know who some of the big players are and what they're reporting. So that's what you're seeing across the different subsegments. I wouldn't spend too much time worrying about what happens in any given quarter across them. Overall, what we're seeing is that their production schedules are continuing to be a little bit softer than historic and that can create a headwind for us, and we're navigating through that. And as we've said, the long term, it tends to take care of itself. We're going up against a very strong comp of last year's fourth quarter.

Got it. If I could just squeeze one more in here. Looking out to '25, I know you guys are not providing any guidance, but a lot of moving pieces and even not including Nissens in the mix. So we have -- interest rates are coming down a bit, which should help on the factoring side, and you should have some carryover costs for the new DC. So just trying to get a sense of things we should maybe be thinking about for next year from a modeling perspective?

Yes. Scott, to your point, we’re not providing any guidance on ‘25 at this point. I think in terms of items you’re looking at, those are the right things to focus on. I would just point out on interest rates, we continue to follow that like everyone does. And while rates, I think, started to come down a bit, in the middle of the third quarter, they went back up as expectations change. So we’re still watching that 360-day rate to see what will happen [ in ] 12 to 15 months.

[Operator Instructions] And it appears we have no further questions at this time. I'll turn the program back over to Tony Cristello for any additional -- I apologize, we do have a question from Carolina Jolly with Gabelli.

Just wanted to talk -- I know that there's been some conversations around some softening in Europe. Have you been able to work with the Nissens team as the deal is closing to just -- to best work with that team and in that market?

So let me start with the caveat that we haven’t closed this deal yet, and so anything I can share with you is really getting more directional than specific. But I think it’s important to note, in general, and you see it here with everything we know about the North American aftermarket that they’re going talk in generalities across a whole host of different product categories and across all the different countries in the region. And Nissens is similar to SMP’s business in that it is largely nondiscretionary, but it is a little bit over-indexed towards temperature-related product. And in Europe, there too, they had a very strong summer, which has favorable impact on their potential business. So again, as we said, we’re going to start sharing a lot more information with them once they are truly part of SMP, which we hope is soon. And so more to come on that.

And we have no further questions on the queue at this time. I will turn the program back over to Tony Cristello for any additional or closing remarks.

Okay. Thank you. I want to thank everyone for participating in our call today. I understand there’s a lot of information presented and we’ll be happy to answer any follow-up questions you may have. Our contact information is available on our press release or Investor Relations website. And I hope everyone has a great day. Thank you.

Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful day.