SRI - Earnings call transcript Q4 2017

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Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Stoneridge Fourth Quarter 2017 Conference Call. At this time, all participants are in a listen-only mode.

Following management’s prepared remarks, we will host a question-and-answer session, and our instructions will be given at that time. [Operator Instructions] As a reminder, this conference call maybe recorded. pleasure the my Mr. over now is to conference turn to It Horvath. Matt Sir, you may begin.

Matt Horvath

Brian. everyone. posted section and Presentations. Good for you, yesterday the presentation Thank Great. morning, Investors the with website to The and SEC our at was results. in filed joining and And & discuss fourth our year under quarter is Webcast full evening release accompanying on us you thank 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

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

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

Jon DeGaynor

our Truck recognition to event. Annual morning, of their Germany Supplier the of XXXX This good have accept and am Stoneridge to Stuttgart, behalf privilege by Key award Awards where and given three Matt, Thanks, on from I one the is Daimler all Supplier honor performance, strong you night at happy join everyone. last are today providing discuss I from a to concluding will quarter in successful very results. year help quarter We world. technical compelling ensure of and financial for of another the delivered customer review year the This and success we fourth full company. their that morning regions solutions key a we

begin Stoneridge. XXXX on a Let tremendous page was me three. year for

through itself during changes gone long-term a and changes team in of These helped have We amount year of our to accelerate the the our Orlaco. strategy. solidify from significant acquisition leadership transformation

XX.X% awarded business almost XXXX backlog to our Additionally, increased by billion. in $X.X

Our customers deliver the beyond. solutions believe segments providing for long-term lay that growth. foundation commitment to profitable continue our recognize XXXX in to I to high growth and across quality the world are that stable will all well-positioned

year. provide detail me the Let financial for additional some performance regarding our

an an XX.X% of gross million $X.XX. in Our year of was the of XXXX sales translating margin margin adjusted X.X%. resulted EPS $XXX to adjusted Adjusted operating for

on utilizing be XXXX, represents found and our are information For This adjusted XXXX been made Detail reported XXXX This revenue of our margin website. EPS per tax financial the sales, appendix improved growth by full morning adjustments on we of presentation also guidance for our XXXX comparison can XX.X%. that’s year growth our our hosted share. EPS to $X.XX. rate earnings to XX% of purposes in issuing

on performance periods. improvement both strong our financial key later additional the in summarizes Page of across in expect in to Bob XXXX and provide the will our four continue We detail each quarter-to-quarter metrics this year-over-year discussion. segments. in guidance

sales. in the adjusted margin period by margin In XX% same the EBITDA by XXXX. XX.X% addition and growth to I profitability by basis Sales double-digit points the improving quarter in improved of strong while XXX XXXX, the adjusted revenue fourth highlight of of increased XX% resulting quarter annual quarter want to EBITDA a to of results, another in relative increased over

per with our Resulting both earnings basis share basis in a quarter to points, gross We increases and XXX margins fourth in respectively. XXX adjusted operating of points of continue see $X.XX. improvements and

through expansion efficiency margin clear. to and operational continuous continue results focus improvement and on are the We

to the over last five. years. three tremendous Stoneridge transformation a Turning page undergone has

XX team either are the of transformation have the none the places direct reports undergoing. past, foundation roles, are having leadership in As we new organizational in or laid that to discussed for we my in the new company

Our season leadership know looks team to collaboratively can of professionals is and that transform comprised what good work Stoneridge. like

based are This transformation efficiency, best segment support improvement, of leaders management functional are deliver team growth. has strategies building by the sustainable continues on world-class Our the by our the growth business of performance material us driving consistent and profitable culture we prepared cost organization organization leaders. robust helped focused financial right savings, a drive to to for a system driven talent operational development, financial

solid of move to quartile we value to will performance to relative peers, top As foundation forward our a continue capable ensure delivering toward financial shareholders. goal of our we our

As growth. will inorganic and Bob deployment continue to on through opportunities capital will focus to shortly growth we available our of drive organic discuss

advance competency. to core existing are We building XXXX to as growth technologies midpoint six, will EBITDA margin in product a as expect focused our markets, an to our come of XXX achieve be the well of On to midpoint to critical of strategic financial sales our basis X%, on from The that and points served growth addition few there XXXX keys development goals. of XX%. our ability guidance of improvement segment suggests of success expansion each page

guidance, exposures by This car passenger underlying as approximately annual compares compound our at to from same vehicle As we XXXX growth XXXX three we compound weighted have annual revenue XXXX. to rate X% commercial applying markets. markets global the underlying business and to our in on the our XX.X% period grow of rate the times to our two an defined previously, over the to we Based markets are times growth midpoint expect discussed cycle. over

product half (X:XX) and in [ph] actuation the sensing by our grow, line our highlighted of expect in to XXXX. continue We segments soot first of Europe sensor to launch

which the year. XX% for in and Devices growth revenue XXXX North ramp certain of XXXX, the market additional This XXXX of programs We mind half after Control forecasted comes passenger flat a important the relatively of relative is year-over-year approximately Park-by-Wire reductions for to a to the Control segment. prior in the It keep for expect American remain will in to growth reduction as car Shift-by-Wire in of in to second that revenue to discounts Devices drive up result X%. of

expected costs. due revenue costs plan in efficiencies, operating for and of growth We we have disclosed resulting considered expect it and the Control ramp Despite in improved previously down flat reduced our Devices segment operational quality related and income Shift-by-Wire this primarily to improved in relatively overhead and backlog. for

markets and growth commercial America XXXX. Regarding vehicle Europe to experience segment, our in North Electronic are in forecasted

launches well continued for retrofit, expect our products OE that Electronics. as by in XXXX In will be being portfolio for and particular, MirrorEye awarded of Orlaco. to year customers number will a commercialization strong programs product important in across as of subsequent have relates launch topline an contribute our for it grow We our should both to factors performance years. as These XXXX

Additionally, we of facets support continue this segment. in engineering to business growth and our on efficiency the focus to

Finally, in XXXX. PST transformational year a had has

We drive to leverage expect appear that in growth continued fixed this success for topline XXXX. Macroeconomic should and segment. providing be performance factors cost stabilizing

our both improve strong we moderate to and to base local we expect fix our support segments Considering to performance PST commercial and our our leveraging bottomline in Brazil. continue portfolio topline of to in the cost leverage, vehicle for success in XXXX. are contribute and continue XXXX economic poised to improvement, Each financial financial in beyond. to product as robust growth our to drive capabilities look are also business position, to customers OE and they track we and trace expand Additionally,

to Turning page seven.

represent We expect Asia for provide Stoneridge. major the the and markets growing world. significant India for growth particular, to vehicle two China opportunities in fastest In

As positioned continue to opportunities feel segments, passenger the in take both are region. well customers and to in commercial advantage technologies of local vehicle we the demand advanced we car growth

with to serves India. markets, Specifically, we in market and joint customers opportunity primarily equity statements, which tremendous joint our park the car earnings that reported unconsolidated of vehicle XX% serve and OEM venture motorcycle to we India, our passenger we and sensors in Minda. electronics in own for The providing commercial a is as financial our see venture growth

are solutions vehicles, increasing expect As our through information intelligent in driver we demanding higher demand for systems. customers tech their growth

create India will and Additionally, systems. enacted XXXX, emission April more additional stringent more in complex emission standards which will in for requirements be

help we XXXX growth have as joint Our take of upcoming to our advantage regulations China, the the previously, to rate achieve customers from requirements In business is our well-positioned compound MSIL discussed over backlog venture, annual XX% XXXX. to legislation. new a awarded the under implies of

capacity manufacturing support business for in allow and in awards record in will support which To growth short a in-house our expanded and in growth our facility China, increase of only as testing. manufacturing well-positioned customer would XXXX facility well short, the China. evaluating capabilities, facility demand, growth that Additionally, we beyond This and act for a changes. continued demand would This local are for engineering level to we Asia, XXXX. for increasing to not our our medium-term expand year options as but of are recognize needs, R&D new a new was growth sustainable as for region. in both product as In result to product and support and catalyst regulatory

achievements eight. with page pleased XXXX. our to in I’m Turning

inorganic to business As are we our an such opportunities growth growth in core to and improvement with as expand commitment and driven areas. have business the profitable our geographies. we organization sustainable Not base consistent our leadership delivered expansion to only results continuous our served we team all to Orlaco continuing in of but

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

Bob Krakowiak

Thank you, Jon.

or operating XX% PST’s operating XX.X% or XXXX income adjusted of XXXX. is This which income or by X.X% we fourth XX% net of Strong bottomline sales points in million, fourth were of in Turning X.X% net basis income of in income increased an million by of guidance quarter an relative increased to $X quarter million operating sales. of the quarter-over-quarter of margin gross driven providing with relative million resulting same adjusted last period Electronics million $XX.X by an period X%, XX% sales by XXX resulting X% last sales, increase quarter increase sales the morning the XX% of of in performance an More operating $XX.X specifically, of sales Devices on increased of XX% $X.X Net resulting versus our the of year. over the of sales, increase of same to or performance. fourth approximately Adjusted of $XX.X Control adjusted slide million XXXX. profit sales was to of increase are fourth financial to XXXX. increase XX. in a $X.X X.X% quarter gross of relative of million XXX.X million net increasing represented the year. million $XXX.X by $XX.X

topline in expect launches due by and well as segment, Electronics We growth to strong Control continued as product continued Devices performance our PST.

We are X.X% of XXXX approximately XXXX. increase midpoint million, revenue a $XXX to guiding an of versus

operating expect improvement we year previously, performance. this continued discussed As through margin improved

guiding a operating income relative of adjusted of year. margin are XXXX. of a We XXX to XXXX Similarly, of guiding we adjusted X.X% gross improvement sales, are versus basis points an to last XX.X% midpoint X.X% to midpoint

In versus which our $X.XX. basis points of U.S. in we does to In midpoint XXXX adjusted positive EBITDA comparable Tax addition, to include expected $X.XX, improvement our performance of midpoint XXXX, impact margin XX% it’s guidance Reform the a a XXX EPS expansion and resulted XXXX, are last continued an in margin and year. topline not guiding adjusted of of

to Devices reduce by to XXXX in increased both and inclusive and expansion summarizes year-over-year XX%, EPS $X.XX. in our key financial Reform actuation metrics periods specific our to Tax XXXX. effective $X.XX our Tax China. in U.S. XX%, revenue the Reform the of XX% to rate In of sensing resulting U.S. Control driven strong adjusted quarter-to-quarter guidance the relative Devices performance products fourth in tax X% XX and Page improvement Devices. expect of XXXX increased sales by by quarter to Control in continued Control We

China. the the highlighted Looking expected as line U.S. Growth soot certain down offset of to in outside our continued largely in XXXX, platforms be well we sensor the Europe, by [ph] on by product as lines, in of (XX:XX) in strong launch performance Shift-by-Wire later this volume expect ramp continued will growth year.

margin to as as and awarded increased growth Devices global Park-by-Wire going products previously, will that content discussed well and Control XXXX to are XX% increased quarter we basis actuation points provide topline in of relative systems advanced to programs products. and operating continue number continued by the of income penetration XXXX, operating XXX Adjusted fourth growth XXXX. a of the quarter through and As sensor by in

and related a XX% operating has the slightly For has operating increased This margin is as year, result increased to reduced basis the overhead percentage of income XX relative financial design of topline strong to development increased expenses full development. performance. launch points continuous sales by activities Devices by and XXXX. and by Control performance leading strong to the offset through and planned improvement deliver bottomline continues product growth

legacy relatively our XX% outperform or of expectations an we sales while flat beyond. substantial income quarter million. adjusted improved increase by fourth million relative by both to again forward, continued Electronics continues operating which brings and by as earn-out well liability of a revenue fair expect growth and revenues time into Electronics we expected. first earn-out total Electronic reported relatively XXXX sizable the year-over-year. Orlaco value Control highlight Devices strong in as Orlaco operations. XXXX, year expect performance in both $XX the maximum earlier payout of Looking the Page operating in over quarter, our up electronics sales in than quarter segment, XX close driven in margin in XXXX, very of increased and the momentum step our improvement to increased our the $XX.X to in our the a liability acquisition XXXX, we XX% as time the of fourth

Our legacy vehicle business during performance the strong continues volumes to topline perform with well quarter. commercial driving

portfolio. to our Electronics Europe XXXX growth that deliver to drive expect continue North a are vehicle throughout We robust market as increases segment America commercial forecast our will suggesting and in product volume in

of of addition revenue this relative to retrofit later aftermarket In increased basis in quarter XXX operating margin addition, by operating the and adjusted strong performance the Orlaco and year. XX% Adjusted increased MirrorEye we XXXX. in income by by anticipate continued points the quarter fourth

to and development and mix large across cost a which MirrorEye increased For as product growth portfolio the XXXX, this product continues in percentage to and XX% XXXX year, margin margins. product continue direct a and a as of operating solid reduced performance our financial deliver we improve incur of by margins favorable material above result by by strong to overhead relative we income deliver expect costs, reduced sales increased Electronics points will the design to underlying XXX operating will while basis cost led Electronics related portfolio to year. continue

has by XX% increased trace a in revenue stabilization, as our Quarter-over-quarter Turning revenue ended page successful had PST well to XX. PST by very X%, driven growth. year growth and business. XXXX. in with macroeconomic PST as XXXX track

our expect remain of in in in improvement improved of improved XXX growth margin revenue last in operating in In region margins, points to bottomline than cautiously topline $X optimistic improvement million $X.X resulting operating a in basis addition current continues to relative XXXX to million performance. income leverage of XXXX, growth, PST resulting operating to over strong the drive relative X.X% same to year. doubled in more We X.X% from income. period adjusted additional adjusted Adjusted macroeconomic operating into to and in the XXXX quarter conditions margin the PST

Additionally, PST in capabilities globally. to for drive by local as capabilities margin expand. utilize in for leveraging paying PST market penetration other to as and opportunities driving our down expansion, and debt Brazil increase to well to we growing, at drive products profitability our explore segments, opportunities growth to to development product opportunities looking PST’s is continue

momentum that continue forward performance this We will in performance year. we to segment’s and are carry the pleased XXXX with drive

Reform We the our the more to negative offset of has transition Reform as resulted XX. the that deferred taxes in impact negative rate one-time tax slide rate a benefits tax significant million a than resulting related tax generally XX.X%. rate recognized net and tax fourth Tax XX.X% XXXX Tax $X.X our impact Turning quarter the fourth of on tax U.S. in the year in to full one-time in in substantial a by quarter liabilities, quarter. impact on were benefit of tax

XX.X%. annual of our impact the rate Excluding rate quarter of tax in Reform an resulting XX.X% Tax was fourth

expect will U.S. the we forward earnings earnings in of Looking reduction due the company to increase tax U.S. our the generated significant rate. primarily and the Tax corporate potential of the Reform

between tax U.S. expect we to previously, considering impact Reform. XXXX mentioned our and briefly I XX% of rate As Tax the be XX%

page XX. to Turning

our to Our balance leverage us XXXX term. sheet, success X in EBITDA continue reducing financial allows net our improve below adjusted to

cash our our utilize free shareholders. to drive debt looking we outstanding opportunities continuously we profile for strong to available flow our deploy As capital to offset to are our return

addition to As we customer strategic past or use expanding to long-term us our have the acquisitions to strategy, discussed accelerate you through through in the base. geographic continued opportunities should investigate technologies, expect of our expansion

to investment to future inorganic our investment that to we growth and growth. capital will drive base in pursuing In utilize in through business our opportunities activities organic continue XXXX, available will growth development in addition drive

XX. Turning to page

previously, XXXX are As I guidance performance. financial our on this discussed morning we providing

improvement midpoint We the of XXXX of same $X.XX prior EPS year. the U.S. in to adjusted or Tax expect XX% considering last of impact tax rate Reform

We expect provide growth Tax lead of to XX% last guidance adjusted year, is margins EPS XXXX resulting of additional the will to midpoint tailwind which throughout business P&L. $X share, year. well to the our improvement to as earnings in the for potential our expansion relative Reform per Topline continues as throughout of improvement an

adjusted points year. to margin implies are XX.X%, year operating last guidance and margin an midpoint metrics basis adjusted improvement for of both margin over the We expansion in points XXX XX% gross of XXX for XXXX. adjusted of of guiding Midpoint X.X% a basis for EBITDA versus

XXXX performance each strong segments of expect improve and another to expect to Stoneridge. our contribute our We for year

our of key are want closing quarter, XX. that for reiterate strong we pleased fourth the to slide financial with in performance as our all I we to Moving results In delivered metrics.

drive performance. growth, margin suggests guidance continued topline expansion strong XXXX EPS to with coupled adjusted Our

the positive Tax in the business year. have expect improvement in XXXX on earnings impact will to Reform underlying a addition this we the In

available is will the remain questions. the We We utilize to growth of at forefront Stoneridge and the that, open and value focus that the shareholder committed return. for we to our capital call will business accelerate do. everything shareholders driving I drive will of

Operator

of the [Operator first And sir. will from Instructions] with Riley line Christopher our B. you, come Thank Horn question FBR. Van

now Your line open. is

Christopher Van Horn

Good quarter. and my for morning. the congrats on taking Thanks questions

Jon DeGaynor

Good morning, Chris.

Bob Krakowiak

Chris. morning, Good

Christopher Van Horn

want So cost was really mix if margins is give volumes, -- in for to the of, margins you increase ask your profile, margin in sense continued what what’s in you could a are this about what and I in continued us volume maybe reductions fashion driving brought just it do profile? higher looking seeing and opportunity as plants? move, certainly not you to similar then, see these you And maybe out, but that move mix --

Jon DeGaynor

excuse will thanks will, for step to let and mix I We I voice, in of opportunities Chris both the in. do I with question. it the to will see my and try best the with my And answer plants. performance Bob

are we multiple these talked us have with Stoneridge higher do to more additional smart products margin. what product calls We really opportunity transform and more those the have technology times and to things sell trying and has in the to value-added about the gives products, more portfolio

the on and you plants driving the execution improvement growth. really performance confident growth tell costs. you and drive that on launches we can the XXXX importantly will more on which see just drive and line Secondly, the is XXXX guidance our is to cost our into question are we in of is topline I forward? on results and but continuous within efficiencies. results for based have new that on continue we do driving third, base also the our take going What had our the supply see fixed it driving we we to chain between bottomline both supply with time to the that think spins that and and out then focus And XXXX answer then it growth

So one-off. this isn’t the

here about it. talking it been data been show the think as continuous and year-over-year and improvement regard have to We with as long I the quarter-over-quarter I’ve

Bob Krakowiak

continues call Jon talk I at will that we about environment Stoneridge really improvement. Yeah. culture the every buildings the just add what said, around the quarter to on about I are and it

in Chris, of a see just around results you going quarter-over-quarter we continuing is are in improvement at that just the to everything So, in as underlying performance improvement an to our the business just driving P&L base do and what look and seeing positive to well. addition to an growth really expand are that see continue the going as of -- we that to to are we the smart with are electronics more product going we as that see we with the the in benefit products portfolio and

Christopher Van Horn

Okay. the point for MirrorEye And there. and Great. follow-up sounds an and to for the of in update wanted might Thanks see just my for timing like the retrofit and highlights this both the what mentioned you is be color saying on pipeline on us I what’s could opportunities some the category around pipeline for if Thanks. XXXX OEM inflection are product you side. their MirrorEye? then capturing customers it and going the on the of

Jon DeGaynor

Yeah.

Let try me me that. to -- let Chris answer

What as really First, partner talk feedback just OE right. a in MirrorEye been get XXXX about positive, we the it applications, us to about product and we OE timeline timeline us short in for from from from been a think as fleet from been feedback fleets have -- we fleet our to we is we with perspective tremendous. our on as is the well are has try the U.S. the but to been is responses that’s incredibly have of still seeing to implementation refine nothing partners, that marketplace both the XXXX, trials some continue a allowed

a working there are with our stages We final that about customers about. talk to to actively that with we regard multiple to Nothing awards, key we working right the huge talk have a but what revenue. Stuttgart And more with pull it’s the they and it’s I activities. that opportunity the to tool economy tell here have our are more space. for vehicles nothing the tool that in to processes, for into day commercial discussions retrofit can expand during start but of more to vehicle yet we customers to fleet yesterday it’s really the make initial get smart. just not opportunity see trials play But really their are them a MirrorEye to is the It trying to as be the it’s you and fuel a we technology some this every make solely help But as to safety as us in smarter, products with. to customer now learn create see play, field so good won’t in a

Bob Krakowiak

to I MirrorEye, would on Yeah. what add now I miles have it’s two we mean, just Jon said, on free things system. so gone trials important X.X the on to million note a over MirrorEye right

been we with So have our fleets.

We million partner think, we a and you any to full million opportunity people belt it’s -- with market a important with estimate I the we understand, to to this mention, $XXX want look on when improvements have under X.X and that our time. I rate at is haven’t we miles for been our thing the at other into them already MirrorEye system. make in at our really while point of we the the and to respect run opportunity And a backlog, about continue that Chris, incorporated have backlog for OE

Christopher Van Horn

very Thank much. Okay. you

Operator

today. concludes This question-and-answer session you. our for Thank

remarks. Jon it’s comments So the to pleasure Officer over and Chief Mr. conference DeGaynor, my closing now Sir? Executive to back some hand

Jon DeGaynor

and that company new capital. driving our everybody of value profitable strong thank committed operating to I to assure in is of and members business you investors for can focused participating deployment today’s our just call. through results, organization our want all of available our shareholder I today,

beyond again We in result look that are and actions to continue and our very confident soon. will we XXXX to success forward you in to talking

Operator

you This thank conclude today’s your have disconnect. gentlemen, day. on all wonderful does and program a participation and Ladies for Everybody conference. you our may

Stoneridge (SRI) 1 Mar 182017 Q4 Earnings call transcript