Stoneridge(US:SRI)2025-05-01 14:02Financial Data and Key Metrics Changes - The company reported first quarter sales of $217.9 million, which was approximately in line with expectations [15] - Adjusted EBITDA for the first quarter was $7.6 million, reflecting an improvement of $1.6 million or 80 basis points compared to the fourth quarter [10][15] - Adjusted gross margin improved by 210 basis points, contributing to overall margin expansion [4][9] - Free cash flow increased to approximately $4.9 million, up by $1.5 million compared to the first quarter of the prior year [5][24] Business Line Data and Key Metrics Changes - MirrorEye revenue increased by 24% compared to the fourth quarter of 2024, driven by strong sales in the bus market and ramp-up of OEM programs [4][20] - Control Devices first quarter sales were $69.9 million, a 10.6% increase relative to the fourth quarter, primarily due to higher production volumes for North American passenger vehicle customers [18] - Electronics first quarter sales were $140.5 million, slightly lower than the previous quarter, but MirrorEye and SMART II Tachograph set records for quarterly sales [20][22] - Stoneridge Brazil's first quarter sales totaled $14.4 million, representing a 16% growth, driven by a 60% increase in local OEM sales [22][23] Market Data and Key Metrics Changes - The company experienced minimal direct impact from tariffs in the first quarter, with approximately 91% of product sales from Mexico exempt from tariffs due to USMCA certification [11][12] - The company noted that while there is uncertainty in consumer demand and production volumes due to tariffs, they are well-positioned to mitigate these impacts [13][14] Company Strategy and Development Direction - The company is maintaining its full-year guidance based on first quarter outperformance and expects continued progress on material cost improvement initiatives [8][16] - There is a focus on operational excellence, inventory reduction, and cash performance to drive earnings and shareholder value [7][26] - The company is strategically expanding its local OEM business in Brazil to unlock global opportunities [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating global trade policies and mitigating tariff impacts on performance [26] - The company anticipates continued expansion of MirrorEye sales in the second half of the year, offsetting production volume headwinds [17] - Management remains focused on quality improvements and operational execution to drive strong contribution margins [26] Other Important Information - The company achieved a $2.5 million reduction in quality-related costs compared to the previous quarter, indicating improved operational efficiency [5][51] - The company is committed to maintaining a targeted compliance net debt to EBITDA leverage ratio of 2 to 2.5 times by the end of the year [24][25] Q&A Session Summary Question: Can you unpack the momentum in Electronics, particularly for MirrorEye and Smart2? - Management noted significant traction from the launch with Volvo in Europe and expects continued sales growth as new programs ramp up in North America [32] Question: What are you hearing from auto customers regarding demand impacts from tariffs? - Management indicated robust orders in the first quarter, with no significant short-term impacts on demand yet observed [36] Question: How sustainable are the improvements in inventory management as the industry grows? - Management believes there is still room for improvement in inventory turns and expects to maintain these improvements even as revenue grows [41] Question: Can you address the quality-related costs and their impact moving forward? - Management reported significant progress in reducing quality-related expenses and emphasized the importance of built-in quality processes [52] Question: Is production of MirrorEye and Tachograph products affected by tariffs? - Management confirmed that both products are produced in Europe, thus avoiding tariff issues [57][59] Question: Has the outlook for MirrorEye revenue changed? - Management stated there has been no change in the outlook, with good momentum observed in existing programs [60] Question: What is the status of the connected trailer suite of products? - Management reported positive progress and expects some evaluation by customers towards the end of 2025 [62] Question: How do current production forecasts align with your expectations for 2025? - Management feels comfortable that they can maintain guidance within the broad range of production forecasts despite current volatility [65]