Stoneridge(US:SRI)2021-11-01 11:41Financial Data and Key Metrics Changes - Third quarter sales were $182 million with an adjusted gross margin of 20.2, resulting in an adjusted operating loss of $6.9 million and an adjusted EPS of negative $0.27 [8][12] - Total incremental costs exceeded $11 million in the quarter, with approximately $5 million or 44% offset [9][17] - Adjusted sales excluding divested product lines were approximately $179 million, a decrease of 5.6% compared to the prior quarter [24] Business Line Data and Key Metrics Changes - Control devices third quarter adjusted sales were approximately $85 million, flat relative to the prior quarter, with adjusted operating income of $3 million [26] - Electronics third quarter sales were approximately $84 million, a decrease of 13.8% versus the second quarter, primarily due to OEM production shutdowns [27] - Stoneridge Brazil's third quarter sales increased by $1.4 million or approximately 9% relative to the second quarter, driven by higher demand in OEM product lines [28] Market Data and Key Metrics Changes - The weighted average end market experienced a decline of 7.4% relative to the second quarter, while the company’s sales decline was 5.6% quarter-over-quarter [14] - Fourth quarter production is forecasted to grow by 8.2% according to IHS and LMC, although the company adjusted its guidance based on current customer orders [20][29] Company Strategy and Development Direction - The company is focused on launching its MirrorEye platform and expanding retrofit programs, with significant progress in both OEM and retrofit markets [10][21] - Full year revenue guidance has been reduced to $740 million to $750 million due to limited component availability [12][24] - The company remains committed to long-term profitable growth and efficient capital deployment to drive shareholder value [13][32] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing supply chain challenges impacting material availability, production schedules, and costs [7][22] - The company expects to continue improving its ability to offset incremental costs and is optimistic about future production stability [17][71] - Management remains confident in achieving mid-teen EBITDA margins in the long term despite recent disruptions [40][41] Other Important Information - The appointment of Matt Horvath as Chief Financial Officer was announced, emphasizing his role in advancing the company's strategic objectives [13] - The company is actively negotiating with customers to recover costs related to supply chain disruptions and inflationary pressures [50][51] Q&A Session Summary Question: Supply chain cost mitigation efforts - Management noted that the percentage of costs offset has improved and expects this trend to continue into the next year [39] Question: Long-term EBITDA margin expectations - Management affirmed that the vision for achieving mid-teen EBITDA margins remains intact, although the timeline has been extended due to recent challenges [40][41] Question: Price increases and recovery strategies - Management discussed ongoing negotiations with customers to recover costs and the importance of transparency in these discussions [50][51] Question: Retrofit programs for MirrorEye - Management clarified that both traditional retrofits and pre-wired orders are being pursued, with demand for retrofits increasing due to supply chain constraints [52] Question: Performance in Brazil - Management highlighted the strong performance of Stoneridge Brazil despite macroeconomic challenges, with expectations for continued growth [53] Question: Market projections for Q4 and 2022 - Management expressed skepticism about IHS and LMC projections, indicating a more cautious outlook based on customer orders [61][62]