SRI - Earnings call transcript Q3 2017

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Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Stoneridge Third Quarter 2017 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. to host like Mr. today’s now would introduce for your presentation, I Horvath. Matt Sir, please begin.

Matthew Horvath

Good thank on section and Presentations. everyone us Thank evening the was morning Great. you. Investors SEC the and site well our our yesterday at quarter. filed in with as is to third & you Web The under presentation, release posted Webcast accompanying and as XX-Q, our discuss joining for www.stoneridge.com

Officer; and me President Executive Joining today's and Officer. Financial Jon call Krakowiak, our DeGaynor, Bob on are Chief our Chief

Before we certain forward-looking begin, I inform you need statements. statements that to be today may

Forward-looking statements results and or are historical future include in include nature statements that plans. our information concerning not

are differ we and to assumptions, upon risks reasonable understand materially. and are Although statements you results actual subject that uncertainties believe may based that such should these statements

Forward-Looking uncertainties and Additional may differ with found results about factors information Commission such Exchange could under the cause actual XX-Q to that heading in Statements. filed Securities our be and the

call, up have a that, ask we finished remarks, then call turn the we appendix for During Bob questions the to will will measures would non-GAAP Jon. I their questions. Jon of to these single to I that open your measures. formal comparable financial keep reconciliation to With After see will you financial non-GAAP GAAP the referring today's and most Please a directly to measures. also be the certain follow-up. over call

Jonathan DeGaynor

quarter quarter strong Yesterday morning, which and financial Matt, released results another the everyone. good we of in Thanks, our for we delivered evening, third performance.

highlighted in exhibited in I for Page strong of additional in China discuss the Devices which Control exceeded by detail on segments growth Each expectations begin me later call. X. continued Let top the line growth, will quarter. our

up driven was information certain driver ramp programs. of by Orlaco segment the Electronics strong well system at as as performance Our

growth margin Finally, continued its line expansion. success top both financial and PST through

recognize quarter. during events of our to In supplier We at host our highlight want excellence couple to occurred addition strong to to that a were inaugural partners. Summit the by financial important happy headquarters our Supplier I performance, our

an play as substantially to five technology over [Technical Stoneridge’s as powertrains goal IHS. axle our will to in actuation vehicle our electrified conventional forecasted power suppliers next Our in help years Park-By-Wire seamlessly transition markets integral according to The are well role the future. to grow the Difficulty] from the customers

to products one examples are Our enabled solutions of its the leveraging that and products are actuation exciting future. drivetrain is the axle actuation how the many develop of expertise in Stoneridge new drivetrain systems

X. to Moving Slide

we better portfolio product strategic growth period revenue the a continues product There of industry relative more accelerate in as in in than year-to-date market. XXXX. by is evolve China. to geographies the particularly other addressing It’s our example regions are evidenced Our in growth portfolio of for than opportunities the to to by that XX% no growth megatrends local relevant our same

regulations region. continue to growth believe legislation our and and emissions strong emission enforcement, As evaporative will in drive in systems exhaust continue to this tighten both we

content growth are systems our produced we increasingly for information as globally, leading to Additionally, becoming seeing locally are driver products. complex

strategy needs. a growth for This awarded engineering to to a XXXX our the above-market continued will recent be Asia-for-Asia in local China by are both China in compound confident business platform commitment to has well trends, local markets backlog XX% rate from suppliers which to continuing demands and world-class focus provide on Chinese includes capabilities as Our than more XXXX. that our By will continued regional market growth. intended growth manufacturing through address we Stoneridge performance market as driven of annual serve strong

I’m during quarter. pleased X. our the Turning achievements to Page with

continuous improvement we commitments with As a team, on deliver all to an leadership on continue organization and focus our areas. a in

an that driving achieve of our to is investment Xx on which, evolution growth Xx underlying help in our will product focus us of with industry portfolio of strategic commitment our megatrends our markets. geographies, combined Our

that, We Bob strong discuss in will it continue With through to over turn execute on our results I’ll to long-term shareholder our drive financial strategy to more performance. financial and detail. value

Robert Krakowiak

and Jon, you, good everyone. Thank morning,

Turning Control XXX increase income bottom increase margin approximately relative view by the in which remainder million was sales third sales Electronics to year-to-date $XX.X of of income increase operating of X% an XX.X when quarter-over-quarter, XX% to sales, to breakeven. performance considering or an with performance morning, income of quarter profit This gross million, revised of X.X quarter an roughly is is same quarter the million of points period the guidance increase which million for of sales to by net XX%, XXXX. in increase adjusted year. relative XXXX. $X.X period were sales, X% million Slide third same or or $XXX.X with over segment XXX XX. resulting in sales. increasing of net of resulting XX% adjusted Devices sales Net an X.X% of of specifically, XX% a by and of operating this are we million line operating relative XXXX on driven of increased X.X% adjusted by the of XX.X million X.X% performance third by XX.X% XX%, financial PST’s of resulting in representing our gross sales the XXXX. Strong of $X.X the XXXX in of increased adjusted year the was our revised increased net operating QX More of basis over in million or income XX.X providing million last

midpoint Devices XXXX, by XX% despite year-to-date the quarter-over-quarter reduction relative revenue in of period as same sales XX Control by $X.XX. quarter our $XX.X Control relative production Devices specific of has key ranges increasing both of and to the our production of million increasing increased Control U.S. addition light-vehicle X.X% EPS approximately are the third narrowing quarter-to-quarter our by metrics, to to in guidance well has the X% last Devices. midpoint sales declined as summarizes the we while year. in by financial by adjusted improvement both for U.S. XX.X%. guidance metrics Year-to-date, to increased period the the In Page

last Devices platforms, crossover to and while primary market than American SUV platforms half As of are and more light-truck the is passenger Control discussed car exposure we to quarter, North end outperforming market. light-truck exposure that that passenger car is

many As platforms. on suspension existing we and earlier, Jon just products actuation supply and our the discussed light that trucks of some SUV crossover are products axel

addition supply, growth be emission the segment can our Control systems to of in Devices we and to advanced products. platforms which to actuation In to growth content sensing the strength related the attributed

XX expectations X% improved by as operating market operating in quarter by the is in and performance. points revenue operating top the adjusted in increased margin financial Year-to-date, an of this increased in both Control XXXX. first quarter of both Year-to-date, a underlying points step in Electronics of segment’s margin percentage XXXX, of as the relative a line basis Orlaco Devices accelerating growth the Electronics leading sensing has quarter of by we substantial the sales the XX Electronics for overhead Adjusted as a to million. income relative Jon increased $XX.X growth of result has up or well and to driven million. Additionally, year in outperform continuous continues reported of relative Orlaco value in increase by quarter. reduced acquisition by electronics to our outpaces the relatively XX this income has sales. income increased bottom as our the through time-over-time segment, to and $XX improvement XXXX, liability third fair emission in again China, our performance that earn-out to the strong as quarter as to by highlights XX% basis line third primarily operating third improved same Page market increased legacy mentioned growth revenue period the deliver performance of operating sizable XX% growth in increased by the and our XX% in operations. continues earlier, segment.

and has increased perform to as to driving by information new financial XXXX operating continues Year-to-date, and the quarter in by income favorable XXX same XXXX. platform existing growth. third with product points increased reduced overhead to strong a basis period material has by operating sales the launches well result relative by points mix, XX% driver during led the costs. XXX continued deliver the percentage operating to a increased quarter. XX% business a legacy by and which remains product reduced strong for a system of of adjusted in Our of Adjusted performance income product basis relative as quarter Electronics increased portfolio operating direct continues growth margin margin

XX% delivering XXXX trend has XX% quarter Turning and to over year-to-date. improvement its XX. Page the PST growth third of continued revenue

strong exhibited with Our historically local business markets. light-vehicle sales the and correlation in has motorcycle

see these the markets in We markets, stability positive top is cautiously are will indicators in to which We growth PST. that continue. line at underlying optimistic remain beginning driving

improved improvement in X.X% PST XXXX, improvement margin adjusted third strong income points quarter operating margin the quarter. million. resulting percentage to compared margin. of the continues drive In breakeven operating $X.X has year-to-date in addition to to from line operating top in XX.X period XXXX Adjusted growth, current improved Adjusted leadership in same with of in the

by our local of have generated which external to we the utilizing been reduce reduced since flow debt million of beginning more than the XX% XXXX. are We has cash at PST debt. $X.X Currently,

We growth our to flexibility but external expect local, debt cash in to to improve leverage opportunities. also generated improve reduce profile not to continue strategically by invest PST’s to utilize PST to PST’s the only

by generate performance encouraged are the cash. segment’s pleased and ability of We the PST to with

full current to for increase the LMC reduced commercial we XX. said, quarter XXXX. in production sales current be a midpoint and million view of views vehicles Moving implying are have suggesting of in It guidance passenger expectations our morning, outlook revising to and of last to quarter. This million $XXX.X European sales midpoint-to-midpoint for that been our noted guidance are levels relative up reflecting year cars midpoint for outperformance and should we $XX.X U.S. a that this EPS. our of the and forecasts are increasing our IHS That remainder Slide

to outperform bottom and the the expect driving performance. markets We expansion underlying drive throughout our top margin and business both continue line growth in to

year expect $X.XX EPS close of also $X.XX expectations the of the financial full up Overall, As to we increasing we for reflect remainder fiscal guidance our for by the such, outperformance to performance XXXX. quarter to year. and in our business midpoint both strong a to the sales addition XXXX continued current are our guidance, strong revising across

Moving XX. to with quarter we to reiterate pleased performance. that third our Slide want closing, are In I

billion. profitability relative of top quartile peer achieve and to position growth drive performance automotive each to $X continue group revenue across suppliers financial with Stoneridge our as we We below segment to

our and XXXX sales increased remainder strong performance revised our to-date year have guidance for full considering We and XXXX. for view our the EPS of

in our are will and commitments, segment each that at creation confident Thank today. you continue we deliver for shareholders. to our joining profitable We growth us value resulting for on

open Now, to I call would questions. up for like any the

Operator

[Operator Instructions].

from comes Colley Our Brian the first Stephens, of question comment Inc. from or line

open. Your line is

Brian Colley

guys. Hi, Good morning.

Jonathan DeGaynor

Good morning, Brian.

Robert Krakowiak

Brian. morning, Good

Brian Colley

So improvement. should as be thinking you across business year guys you most where margin moving the kind and wondering just this about forward see was if room the about improvement solid you for margins pretty look seeing we could I we talk into are XXXX of and how

Robert Krakowiak

you for is Bob. thank question. Brian, This the

we will Bank Conference providing see some of where January. terms the guidance Deutsche going, we in at be In margin

across time, margin say performance in of absolutely we’re focused board I’m said all company, organization the continue categories achieved So going we’ve to enhancement building all this on the if at at say seeing that continuous margin an not we’re the and relative we’ve in look that’s we along to really change improvement. the point it to is that specifically we’re you what the that but And anything leading. will

it on side the it the within seeing and car seeing we’re sourcing, programs within We’re manufacturing, on revenue productivity improved quality. side,

on And was impacted impacted we front, in the some startup go had During some us. that – We ago. over third through startup then some That the you’ll million. that had ERP we SG&A warranty settlement see over had Q, that so you product produced that we third North us the $X.X an XX a from the addition during had America, little we a quarter quarter had quarter. the when we in to during that years costs one-timers

where in you SG&A adjusted that, so the large during quarter movement of our compensation In see slight the the the the we’ve because but average the of positive addition a movement is. rate line and in really indicative price the run for incentive that’s uptick share – not in quarter,

of that. kind number a of one-timers that impacted We in have quarter the that during

Brian Colley

the I looks at And kind exactly on wondering information the helpful. that was there? of That’s looking in you elaborate if like interesting. Great. then just what systems I and that on commentary could what was thought China, driver is, just your opportunity

Jonathan DeGaynor

Thanks, you’re from to seeing on the Brian. It’s the we’re really seeing side really a is maturation truck to vehicle What as commercial passenger going side going they’re commercial of when as did Chinese with market the from going Jon. – what well both have vehicles vehicle. car they commercial expect a they our the

the that the engine in manufacturers So more that as global level market. and greater Devices on both creates level really opportunities the to Control a driver the toward world-class the happen, OEs standard. help deliver is then for us of becoming on as that as product and And the of we interface, there side side performance of Electronics more the well really vehicle see

Brian Colley

the I Great. time. appreciate

Jonathan DeGaynor

Brian. Thanks,

Robert Krakowiak

Brian. Thanks,

Operator

Thank you.

question from the from line of Horn FBR. B. Van or next comment Riley Christopher comes Our

line is Your open.

Christopher Van Horn

for Thanks morning. call. my Good taking

Jonathan DeGaynor

morning, Chris. Good

Robert Krakowiak

Chris. morning, Good

Christopher Van Horn

I on Shift-by-Wire and looked some was like that get maybe quarter category hoping and for product? what’s the to going the in pipeline the on commentary what during product

Jonathan DeGaynor

don’t talked we product obviously break before. to categories you as Chris, out we’ve the

down light it between our comes mix customers’ their and cars Some end to of passenger trucks.

than than trucks that that just regard than car total and that. And with to of quarter, But that more in again, unforeseen represent SUVs to that less passenger of passenger and car of mix. And So nothing half American everybody, is impacts XX% North remind us. our sales. less was XX%, the

So as they’re but Shift-by-Wire may market [ph] the trucks to versus our doing us. passenger an regard for light car, and rate opportunity impact exposure moves what decides with it the tape for it’s

Robert Krakowiak

in of gone for rate. the thing period important like is at the been thing the I add to both of everyone I’d where we’ve from programs launch that’s our rate know and is the launch, run to XX that for Shift-by-Wire this running of we’ve One full terms perspective Chris, think the to Bob. that impact full months one run past

in in revenue a impact result growth not a terms the haven’t Shift-by-Wire that the programs where full So annualization. the seen seen of our of quarter, That’s we occurred. in it’s during we’ve already

to important it’s out. that think I So point

Jonathan DeGaynor

But just in. I’ll back jump

a As just platform investors we’ve Shift-by-Wire not other couple before, things. is It talked for to our a really programs. of becomes

and that trust with Park-by-Wire the systems electrified mentioned that the we’re customers that of had we selling transition really are other and the activities them or built high-performance on Shift-by-Wire we drivetrains actuation with our we’ve built high-quality, actuation So to the conventional a as some from viable, axel our that solution. today the we’ve provide with like that success more drivetrains, customers the have other the we some of can

So Shift-by-Wire is platform a future really programs. for

Christopher Van Horn

truck margins dwell production you’ve for Thanks expansion production vehicle might are the but there. content obviously I imagined that, And little Okay, cuts on cuts CUV or these be margin in margin had then or some some the are per not great. and higher SUV and business. lower to color maybe significant actual benefitting car, of from because a passenger cutting hard on too bit a a

I’m if off me tell base there. Just

Jonathan DeGaynor

For us, of really as one versus Chris, don’t other. we sort a see mix that that the benefit

improvement margin plants focus driven in ramp it’s continuous really – and our margin our improvement improvement Our really chain. all we and certain by as up in driven the of the by expansion expansion of products, talk our our about, supply beyond is our

about performance, engineering, our an chain as mix-related not improvements to So It’s organization our a within within that this drive the total supply us. is happening activity. that within that’s not something our about inorganically organic execution

Christopher Van Horn

you don’t mind. then one follow just And on, if Okay.

view of of you’ll on expansion content imagine your kind of an or that of kind will, vehicles? of be this to vehicle content. the higher that’s advantage if electric able incumbent electric space margin type offerings competitors more race, you do in guys of or getting I kind the of Is to in get, becoming you With these this have

Jonathan DeGaynor

you we the perspective and hard of our customers And Certainly competitors. answer with that awards the would have Shift-by-Wire. solidify to back I successful that helps goes very a we to capable work quality from won it show capabilities gave say to we’ve our what the customers and and with from you to demonstrate that. very launch So I regard Shift-by-Wire

the to have. further what solutions doing get trying working their sure upstream is we’re as So with activity needs we’re they development to drivetrain our anticipate with make providing the that customers advanced that that

customers, closer from further getting them. has Stoneridge having ready and which it’s it’s our but is customers go upfront those the part that organization that solutions through transformation the need to more well development yes, it’s the to is technology, gone So being perspective positioned upfront of for the and further before

Christopher Van Horn

Okay, great. the Thanks for time.

Jonathan DeGaynor

Thanks, Chris.

Operator

you. Instructions]. Thank [Operator

Irina Our line from of comment KeyBanc. comes next or the from question Hodakovsky

open. Your line is

Irina Hodakovsky

Good everyone. morning, Thanks.

Jonathan DeGaynor

Good morning, Irina.

Robert Krakowiak

morning, Irina. Good

Irina Hodakovsky

you for operations. question A guys on PST

in perhaps just I’m that that automotive you bit. a your up. is covered We been know good, demand You talk market’s that the doing outlook opening remarks there. about going wondering quite if can

to company’s what average. is now you believe momentum; higher then However, to positive in outlook margins this company were than would from momentum historically do average, be And follow that that the up expect the expect rest economic higher terms of play do that a Would of is driving employment? margins to that, contribution business the to you there than not the any and or out? if reason PST the conditions, as think continue, you

Jonathan DeGaynor

and your lot over my a able to outlook the really here question. tenure PST talk to it’s Irina, nice obviously a conversations for thanks PST source the good and be to entire for it’s growth you morning of been PST. again and of about future of

that correlated a is growth with it vehicle [ph] commercial car, business, so expansions, novice or and remind be space. that aftermarket while the there to an is highly motorcycle just market service everybody our the So revenue pass primarily

America Brazil So expect economy we to really with that. see and start the to as grow in of South improve, we in all

So that’s piece number one.

Secondly, that the last efficiency have the we years growth. see margin really drive over overall expansion driven drive much line months and cost to cutting line faster improvements XX we margin give the the us and particularly top over in ability the two the and been PST drive as last top than

confident forward see continue that to quarter-over-quarter that continue the So year-over-year we’re progress and you very in you’ll QX, going future. to PST’s here see you’ll and see shown in

Robert Krakowiak

really conversation Irina, transitioned I are to that add is is which in big improvements we significant has the – the about will values that of to from the improvement assumed what building but we’re add we doing opportunities significant just with contributor summary, PST And would PST to in PST the feel amount again, to Brazil, a fixed, company. in at macroeconomic continue we a looking – very continuous PST culture again on significant here the environment haven’t we’re PST. becoming have

So we’re that. very excited about

Irina Hodakovsky

gentlemen. you, Thank

Jonathan DeGaynor

Thanks, Irina.

Robert Krakowiak

Thanks, Irina.

Operator

time. turn over for showing additional conference to queue like I’m Mr. back questions closing the the any to would you. audio in like no DeGaynor remarks. Thank at to I this

Jonathan DeGaynor

today’s you in much. for thank very And call. all Thanks participating

and want I that available available the webcast. remind Tuesday, In on investor to will of continue Conference profitable our will strong to new New closing, can Just via assure committed be at focused company’s deployment everyone through you which driving that X, York be results, value business shareholder our in our next capital. operating event Stephens November

beyond. our very Thanks that actions confident in XXXX much. result are in success will and We continued

Operator

gentlemen, thank program. for today's you participating in and the conference. This Ladies concludes

You have day. a may wonderful now disconnect. Everyone,

Stoneridge (SRI) 2 Nov 172017 Q3 Earnings call transcript