Stoneridge(US:SRI)2024-08-04 09:18Financial Performance Highlights - The second quarter sales were $237.1 million, approximately in line with first quarter sales when excluding foreign currency impact [7][21] - Gross margin improved by 250 basis points to 22.7%, adjusted operating margin increased by 210 basis points to 2.3%, and adjusted EBITDA margin improved by 410 basis points to 6.8% [4][8][21] - Adjusted operating income was $5.4 million, and adjusted EPS was $0.17, reflecting a $0.39 improvement versus the first quarter [21][22] Business Line Performance - Control Devices segment reported second quarter sales of $80.9 million, a 3.7% increase driven by higher sales in North American passenger vehicles and China commercial vehicles [22][23] - Electronics segment's sales were just under $156 million, with lower sales in European commercial vehicles offset by higher sales in European off-highway and North American commercial vehicle markets [24] - Stoneridge Brazil's sales improved by 2% in the second quarter, aligning with global growth initiatives [25] Market Data and Key Indicators - The company anticipates a reduction in OEM production volumes due to macroeconomic pressures, which is expected to reduce full-year revenue by approximately $18 million [27][28] - Unfavorable foreign currency is expected to impact guidance by approximately $12 million, but this is not expected to materially affect earnings [26][28] Company Strategy and Industry Competition - The company is focused on executing program launches, particularly the MirrorEye system with Volvo and Peterbilt, which is expected to drive strong growth [5][12] - A partnership with Volvo Bus for connected services and AI fuel advice is part of the strategy to expand technology platforms and drive long-term growth [6][14] - The company is leveraging its global footprint to maximize capabilities and output while focusing on operational excellence and cost control [35] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the MirrorEye program's take rates, citing positive customer feedback and expectations to meet or exceed initial targets [41][42] - The company is preparing for potential volatility in the second half of the year but remains focused on improving operational performance and mitigating external pressures [30][40] Other Important Information - Natalia Noblet was appointed as President of Electronics, effective September 1, 2024, bringing over 20 years of experience in the automotive and commercial vehicle sectors [9][10] - The company has developed several advanced products, including the MirrorEye system, and continues to invest in AI technology to enhance product offerings [15][19] Q&A Session Summary Question: What is the outlook for cost improvements and progression through the second half? - Management indicated significant progress on material costs and operational excellence, expecting continued improvements throughout the year [38][39] Question: How are the MirrorEye take rates performing compared to earlier expectations? - Management is optimistic about the take rates, noting positive customer feedback and potential for exceeding initial targets [40][41] Question: Can you clarify the reduced guidance across business segments? - The reduction in guidance is primarily due to OEM production volume forecasts and includes potential volatility in the MirrorEye program [44][48] Question: Is the Volvo Bus pilot the first for the AI-based fuel advice system? - Yes, the Volvo Bus pilot is the first, and early results have been promising [51][52] Question: How does the AI-based fuel advice system work? - The system analyzes driver behavior and various attributes to improve fuel economy and driver performance [56][58]