Stoneridge(US:SRI)2023-05-06 19:43Financial Performance - Adjusted sales for Q1 2023 were $232.2 million, representing an 18.1% increase compared to Q1 2022, driven by strong demand in commercial vehicle markets [9][19] - Adjusted gross margin was 18.5%, with an adjusted operating margin of negative 1.5%, and adjusted EPS was negative $0.25 [9][41] - Revenue growth was supported by strong performance in February and March, offsetting challenges faced in January due to supply chain constraints and reduced demand in China [34][41] Business Line Performance - Control Devices segment reported sales of $86.7 million, a 2% increase year-over-year, primarily due to higher sales in North America [53] - Electronics segment saw sales of approximately $141 million, a 30% increase compared to Q1 2022, driven by strong performance in commercial vehicle markets [57] - Stoneridge Brazil's sales totaled $14.3 million, an 18.4% increase year-over-year, mainly due to higher local OEM sales [65] Market Performance - Strong demand in commercial vehicle end markets contributed significantly to revenue growth, while European off-highway markets faced material constraints [19][57] - The company experienced reduced demand in China early in the quarter due to COVID-19 impacts [19] Company Strategy and Industry Competition - The company is focused on long-term profitable growth initiatives and improving gross margin profiles while managing SG&A and engineering costs [11][25] - New program launches, including the MirrorEye platform and the Corvette E-Ray drive unit clutch actuator, are expected to drive future growth [12][27][37] - The company is implementing a platform-based approach to streamline operations and improve economies of scale [23][40] Management Commentary on Operating Environment and Future Outlook - Management expects strong revenue growth throughout 2023, with ongoing price negotiations expected to provide relief from inflationary pressures [4][35] - The company reaffirmed its full-year guidance for 2023, anticipating adjusted sales of approximately $975 million and breakeven adjusted EPS [5][36] - Management acknowledged the challenges posed by inflation and material costs but emphasized efforts to improve manufacturing execution and cost recovery [10][31] Other Important Information - The company announced a leadership change with the departure of the Chief Strategy Officer, and a succession plan is in place [13][14] - The company filed over 25 patent applications, showcasing its commitment to innovation and technology development [16] Q&A Session Summary Question: Pricing negotiations and visibility on pricing tailwind - Management indicated ongoing negotiations with customers regarding pricing adjustments due to inflationary pressures, with good visibility on expected outcomes [67][82] Question: MirrorEye revenue expectations - The majority of MirrorEye revenue recognized in Q1 was from the first OEM program in Europe, with expectations for continued ramp-up in the second half of the year [70][72] Question: Interest expense and free cash flow outlook - Management expects interest expense to rise due to increased working capital needs but anticipates improved cash flow as the year progresses [73][75]