Stoneridge(SRI) - 2025 Q1 - Quarterly Report

PART I Financial Statements Q1 2025 net loss was $7.2 million, with total assets at $657.4 million and positive operating cash flow Condensed Consolidated Statements of Operations (Q1 2025 vs Q1 2024) | (in thousands, except per share data) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net sales | $217,890 | $239,157 | | Cost of goods sold | $171,593 | $190,800 | | Operating (loss) income | $(3,225) | $331 | | Net loss | $(7,196) | $(6,126) | | Diluted loss per share | $(0.26) | $(0.22) | Condensed Consolidated Balance Sheets (As of March 31, 2025) | (in thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $418,021 | $387,514 | | Total assets | $657,359 | $621,556 | | Total current liabilities | $175,164 | $149,972 | | Revolving credit facility | $203,186 | $201,577 | | Total liabilities | $404,263 | $376,296 | | Total shareholders' equity | $253,096 | $245,260 | Condensed Consolidated Statements of Cash Flows (Q1 2025 vs Q1 2024) | (in thousands) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $10,897 | $9,109 | | Net cash used for investing activities | $(5,988) | $(5,714) | | Net cash (used for) provided by financing activities | $(787) | $5,388 | | Net change in cash and cash equivalents | $7,277 | $7,599 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, Q1 2025 revenue decrease, credit facility amendment, realignment costs, and a €29.3 million warranty claim Revenue by Reportable Segment (Q1 2025 vs Q1 2024) | (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Control Devices | $68,833 | $77,158 | | Electronics | $134,783 | $149,783 | | Stoneridge Brazil | $14,274 | $12,216 | | Total net sales | $217,890 | $239,157 | - In February 2025, the company amended its credit agreement for covenant relief, increasing the maximum leverage ratio to 6.00 for Q1 2025 and temporarily reducing or waiving the minimum interest coverage ratio[57] - The company incurred $2.8 million in business realignment charges in Q1 2025, primarily for severance costs related to operational efficiency initiatives and executive separation[77][78] - A customer initiated arbitration demanding €29.3 million ($31.7 million) for warranty claims on a PM sensor product line, which the company is vigorously defending and does not deem a material loss probable[74] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Net sales declined 8.9% in Q1 2025, gross margin improved to 21.2%, and liquidity is supported by cash and credit facility amendment Results of Operations Q1 2025 net sales fell 8.9% to $217.9 million, driven by segment declines, while Stoneridge Brazil grew 16.8%, resulting in a $3.2 million operating loss Net Sales by Segment (Q1 2025 vs Q1 2024) | (in thousands) | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Control Devices | $68,833 | $77,158 | $(8,325) | (10.8)% | | Electronics | $134,783 | $149,783 | $(15,000) | (10.0)% | | Stoneridge Brazil | $14,274 | $12,216 | $2,058 | 16.8% | | Total net sales | $217,890 | $239,157 | $(21,267) | (8.9)% | Operating (Loss) Income by Segment (Q1 2025 vs Q1 2024) | (in thousands) | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Control Devices | $1,165 | $2,164 | $(999) | (46.2)% | | Electronics | $5,505 | $7,089 | $(1,584) | (22.3)% | | Stoneridge Brazil | $585 | $204 | $381 | 186.8% | | Unallocated corporate | $(10,480) | $(9,126) | $(1,354) | (14.8)% | | Total operating (loss) income | $(3,225) | $331 | $(3,556) | (1074.3)% | - Gross margin increased to 21.2% in Q1 2025 from 20.2% in Q1 2024, primarily due to lower material costs as a percentage of sales, including favorable foreign exchange variances[129] - SG&A expenses increased by $1.3 million, primarily due to higher business realignment costs and professional services, partially offset by lower incentive compensation[132] Liquidity and Capital Resources Liquidity is from operations, cash, and a $275.0 million credit facility, with $79.1 million cash and an amended facility providing covenant relief - As of March 31, 2025, the company had a cash balance of $79.1 million and $71.8 million of undrawn commitments, totaling over $150.9 million in available liquidity[152] - The company amended its Credit Facility in February 2025, providing covenant relief through December 31, 2025, including increasing the maximum leverage ratio to 6.00 for Q1 2025 and waiving the minimum interest coverage ratio for Q4 2024[145] Summary of Cash Flows (Q1 2025 vs Q1 2024) | (in thousands) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $10,897 | $9,109 | | Net cash used for investing activities | $(5,988) | $(5,714) | | Net cash (used for) provided by financing activities | $(787) | $5,388 | Quantitative and Qualitative Disclosures About Market Risk No material changes occurred to the company's market risk disclosures from the 2024 Form 10-K - There have been no material changes to the Company's market risk disclosures from those previously presented in the 2024 Form 10-K[160] Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2025, with no material changes to internal control - Management, including the PEO and PFO, concluded that the Company's disclosure controls and procedures were effective as of March 31, 2025[161] - No changes occurred in the Company's internal control over financial reporting during Q1 2025 that materially affected, or are reasonably likely to materially affect, these controls[162] PART II Legal Proceedings The company faces various legal actions, including Brazil contingencies and warranty claims, but expects no material adverse effect - The company is subject to various legal actions but does not expect them to have a material adverse effect on its business or financial position[164] - Specific legal risks include civil, labor, and tax contingencies in Brazil, as well as product liability and warranty claims, with potential recall participation if defects are found[164] Risk Factors No material changes occurred to the risk factors previously disclosed in the 2024 Form 10-K - No material changes have occurred with respect to risk factors previously disclosed in the Company's 2024 Form 10-K[165] Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2025, the company repurchased 41,004 Common Shares from employees for tax withholding obligations Common Share Repurchases (Q1 2025) | Period | Total number of shares purchased | Average price paid per share | | :--- | :--- | :--- | | 1/1/25-1/31/25 | 649 | $6.27 | | 2/1/25-2/28/25 | 7,122 | $5.62 | | 3/1/25-3/31/25 | 33,233 | $5.47 | | Total | 41,004 | N/A | - The repurchased shares were delivered by employees as payment for withholding taxes due upon vesting of equity awards and were not part of a publicly announced repurchase plan[166] Other Information No director or officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements in Q1 2025 - No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended March 31, 2025[170] Exhibits Key exhibits include a Separation Agreement, Credit Agreement amendment, and CEO/CFO Sarbanes-Oxley certifications - Key exhibits filed with the report include a Separation Agreement, an amendment to the company's Credit Agreement, and CEO/CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act[171]