Standard Motor Products 17th Annual Midwest IDEAS Conference

Tony? Perfect. Thanks. Hi, good morning, everyone.

Apologize. Our CFO unfortunately got called into a meeting, so you're stuck with me. Let's see here. Make sure I- Left or right See if I can advance these slides here.

Not sure. Is this just supposed to click? Ah, there we go. Got it. Try the remote. Yeah. Okay, perfect.

Yeah, no problem. A little bit about us. Standard Motor Products, a 107-year-old company, listed on the stock exchange almost 50 years ago. We operate in three main segments, a North American aftermarket segment, a European segment, which comes as a result of a recent acquisition we made, and then our Engineered Solutions segment. Just under $2 billion in revenue, $200 million or so in adjusted EBITDA, and 6,000 people on a global basis. North American aftermarket's almost two-thirds of our business, and then the aftermarket in Europe is just under 20%, and Engineered Solutions is the balance. When you think about our company, who are we, what do we do? We sell replacement parts to fix cars, for about 75% of our business. Those parts end up at your garage via our customers, which is AutoZone, O'Reilly, NAPA, parts distributors, warehouse distributors.

When you think about the aftermarket, age of vehicles are almost 13 years old, miles driven continue to be pretty steady. Complexity of cars continues to go up. We've essentially become a partner, working with our customers to make sure we have these replacement parts on the road for the vehicles when they fail. When you think about what we did with Nissens, and I'll talk about this further in the presentation, that was a $300-plus million company that we bought in Europe at the end of 2024. They're also in the aftermarket business. So they're very aligned with the existing categories that we have. They gave us a really nice footprint for growth and expansion as well. The Engineered Solutions piece, which is 15% or so of our business, is non-aftermarket.

Again, that's not light vehicle in the sense, or OE in the sense of we're supplying a million parts to GM or Ford or Chrysler. A third of the business would be considered light vehicle. Two-thirds of that business is more of Cat or Deere or Polaris or companies that are looking for smaller, unique manufacturing that allows us to leverage what we have in some of our existing facilities, but also gives them a much more of a specialized product as well. The last piece is, we pay a dividend. We continue to look at ways from a capital allocation standpoint, whether it's M&A, share repurchase, and those type of things, to continue to find ways to deliver value to shareholders. So, a little bit about the expansion of our aftermarket business, and you can see here the light blue was Nissens.

End of November, we made that acquisition, about a $300 million business. You can see that what it did for us from an accretion standpoint, a growth standpoint. They're in 17 locations across Europe, and they were very good for us from a growth and cross-sell, and we'll talk a little bit about that as well here in a second. When you think about Standard Motor, leading provider to our customers of aftermarket parts, top five in all the categories that we sell to our customers. Nissens is also a leading European supplier. So they operate in a thermal space, which is also what we have. That's a little bit less of our business on the aftermarket.

If you think about our aftermarket, two-thirds of it is what would be called Vehicle Control, and the other third is Temperature Control. For Nissens, they are heavily weighted towards the Temperature Control with a lighter piece of the Vehicle Control. This just gives a natural opportunity for us to help them expand and grow backfill catalogs, and give new product introductions. When we made the acquisition, a couple of things that we talked about were, one, the opportunities for cross-selling. The second piece was our ability to get $8 million-$12 million in cost synergies. We did not quantify what the gross synergies would be, but we think those are going to be pretty significant as we move out and down the road.

The third piece is we are a basic manufacturer in about 60%, 65% of what we sell. They manufacture only 20%, 25% of what they sell. They have a lot of good sourcing and distribution experience that we think will help us as well, and help improve performances across both segments. Our manufacturing footprint, and everyone asks about this because tariffs seems to be a topic every day, even if you do not want it to be. Over 50%, somewhere between 55% and 60% of our North American sales are manufactured in Mexico. Why that is important for us is we source components, we bring the components into Mexico, but we do so much of changing of the product that much of what we sell falls under what is called USMCA compliance. There is no tariff necessarily attached on what we are selling back into the U.S.

Not to say we do not have tariff exposure, but we think we probably have less given our footprint. The European facilities, we have got a big facility that we manufacture coils in Poland, and then Slovakia came with the acquisition of Nissens. In Asia, is primarily our joint ventures. We have got three joint ventures in China. We have also introduced a new one recently in Thailand, where we think we are going to get some benefits because this is the first Vehicle Control segment. They are going to be making sensors for us in Thailand, and we think that is going to be a really good opportunity for us. The other JVs right now are focused on the Temperature Control side of the business.

If you think about it from a revenue standpoint, these are the three segments, just over two-thirds comes from our North American aftermarket. This of 25 revenue, 17% was Nissens, which is our European aftermarket. Then 15% was the Engineered Solutions piece. Europe grows at a little bit faster pace than what our North American aftermarket grows. That is just them being able to take share in new products and those type of things. When you think about the North American aftermarket, what do we sell? The two segments we have, one is Vehicle Control, and that is selling things like fuel injection, coils, sensors, wires, things that for the most part are non-discretionary.

If you get bad sensors, you get bad coils, you get things that break, your check engine light comes on, most of the time this is going to be a non-discretionary or break-fix type of repair. The consumer a lot of times can't do the. It's not wiper blades, it's not an oil change. Even brakes now has become quite a commodity type product. So one, it's a bit more non-discretionary is how we think about our business. The second piece is almost 300 million cars on the road, average age 13 years, and that continues to grow. It continues to grow because I don't know how many drove a car when they were younger and the floorboards started to rust, and you had to get rid of that car. Cars don't rust anymore. Right?

The technology of the engines and the drive trains has gotten a lot better as well. So we still continue to believe that you're going to have a longer life out of these vehicles because they're just built better. Now with that, the complexity of the cars is higher, and so that's going to drive more business to the professional installer in the garage. So who are our customers? O'Reilly, AutoZone, NAPA. These are all big parts distributors across the U.S. Have good relationships with all of them. For the most part, we have a very high share with all of them as well. Good relationships, and continue to be. We do more than just sell them parts, right? So we do training classes for them.