SRI - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Stoneridge Third Quarter 2019 Conference Call. At this time all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator instructions]

I would like to hand the conference over Matt Horvath, your speaker for today. you. Thank begin. may you Sir,

Matt Horvath

SEC right. Investor Thank for results. and you at with morning, release on is our Web under you. us to webcasts Good site the filed joining was quarter in accompanying everyone, evening discuss and and posted the thank www.stoneridge.com presentation All yesterday section our The presentations. third and

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

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

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

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

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

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

With that, I'll turn to Jon. the call over

Jon DeGaynor

Thanks, Matt, and morning, good everyone.

quarter strike, In reduced X. GM seen year. by and continued throughout and and reduced we the have volumes, quarter, specifically, on revenue by and quarter the operating to million performance third headwinds begin to currency continue costs million. reduced of improvements, income continued the expect the offset through the impacts $X.X $X.X financial More me operational Page the Let to remainder in the during we production drive macroeconomic

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

the revenue peak commercialization start rate, our of which significant to to of penetration progress XX% OEM of we a award, estimated to continued in is in annual second received at MirrorEye. a production million XXXX. quarter, This make with XX% We $XX be

Additionally, our to early I'll that later regarding systems announce new a next vehicle prewiring provide start to I'm in major we the OEM MirrorEye additional commercial year. global pleased detail expect developments call.

progress work and to our goals to to with overall addition both In portfolio with MirrorEye, continue the performance. financial aligns we're we targeted ensure like that making long-term product our systems strategic our

this an strategic the We of the and update and we will have electronics, our switches our provide plans on business completed morning, review for within controls business.

Finally, actions headwinds. the guidance this in updating the conditions, midpoint full-year macroeconomic a to we offset later these EPS as detail provide Bob will our regarding have well our additional reflect in remainder morning the of quarter third are of $X.XX we call. put current to performance for place adjusted and guidance market financial to as XXXX and

metrics Page relative the X quarter our key XXXX. of financial summarizes third to

impact the comparable the period. the with services transition benefit associated and and from that be metrics of both we the year from the comparison purposes, removed revenue transition quarter margin to agreed last the we includes Before of year. This financial any detail, we discuss quarter have this should estimated noted in with earlier business manufacturing divested over it for the acquirer this the

the the end the production in end in of was key of declines strike unexpected at the impact by our as as well negatively in impacted quarter. of GM quarter some Revenue third markets, the

ramp programs shift-by-wire continued legacy Our in the quarter third down as to well.

end-market by contraction core quarter-over-quarter during reductions, versus the our Excluding X.X% strike the portfolio impact period. the and increased of X.X% GM program of same shift-by-wire sales

the XX XXX these approximately basis profitability, to income quarter reduction basis XXX In margin tariff approximately points. by expenses total, factors drove component operating margin by reduced electronic by gross Several declined in basis while costs including the and elevated million declined continued in or factors quarter-over-quarter shortages. operating related adjusted adjusted points, currency, external Quarter-over-quarter, points. $X.X

We environment. remain chain the align our strategies supply current to for committed business

to reduce our component-related continued have We electronic costs.

purposes, in incremental For the quarter of comparison we first $X.X approximately year, million. the of expenses incurred

incremental This quarter, two we these approximately expenses reducing incurred XX% costs $X.X of almost quarters. in million, by

the costs incremental are expect $X We fourth forecasting continued in million. less than improvement and of quarter

incurred of $X.X incremental million we component-related have electronic costs. Year-to-date,

expect costs, in we visibility million these as As have current discussed continued year. versus reduction we least $X previously, we have next to year at savings in the

expected was higher to related and part products quarter. our to factors, facility. manufacturing new external a to our software than of In this we to expediting few Juarez quarter due in the at during implementation related addition planning specific lines costs issue experienced This product

We issue, reduced quarter. and in have seeing already are these contained rates for the we fourth the run expenses

quarter, adjusted operating we third which to points. basis approximately incurred approximately additional impacted adversely our the by During margin of costs issues, these $X.X XX million related

completion the facilities of on software of this and electronics major all control be system. With ERP the devices will same the implementation,

to on drive going to forward. margin operational efficiency performance continue We focus

Page to X. Turning

passenger As have I relative production year provided our end declines key in to as More forecasted North expectations. of in seen, of in as couple Europe, updated commercial XX% Each guidance, our reductions our remainder represents market. in vehicle markets prior sales markets we for previously, well to for in the see, declines mentioned to relative a of continue specifically, the approximately year. significant of forecasts and car volumes American the sharp the are suggesting volumes previously these

by X.X% respectively. our During X.X% the third quarter, prior declined to these and markets expectations relative

Looking is the North expectations. commercial expected down be and car passenger production to forecasted decline, America forward, fourth vehicle X% European production X.X% continue decline to relative in is as prior production to quarter to forecasts

in guidance. production over was As expected reduced be million, a to quarter quarter fourth result while revenue $X of revenue our approximately reduced the decline volumes, by forecasted versus $X third is million by prior

an are revenue in approximately on $XX production operating $X.XX income the of of to translates expecting half reduced share. strike the we million forecast, summary, unfavorable excluding to impact of in over the impact X, second of million an per Page reduction or to This expected the Turning have $X year. in GM

the production quarter. which an revenue guidance In of strike, continued for by the in reduction the EPS in the results by our and net million year, the our impact the addition strike. impact fourth middle $X.XX adverse quarter, income of $X.X a to guidance strike operating into during remainder $XXX,XXX. the million. reduced forecast GM strike began quarter reduce the which updated fourth the by operating In by the in in had third of is revenue GM volumes, which a GM the consider third million and The September, reduction to income as Included total, a the forecasted of result in $X.X is quarter, the quarter and $X million $X.X to reduction almost revenue in and

and prior Finally, is continue second the which prior guidance. by will million relative $X.X quarters, expected to operating reduce revenue reduced and quarter million of EPS the by have million the currency expectations. Based as particularly $X.XX third-quarter currency foreign by currency income fourth the $X in continued million $X total, In to prior we by by in versus in reduce discussed we by our half revenue income unfavorable to $XXX,XXX. and operating Europe, revenue year impact in experience $X on we estimate that of forecasts, exchange rates, current

factors, costs Based in external prior external million response the the EPS expecting the on respectively quarter, during to took In these production aggressive are offset factors, year to and of $XX.X reduced our and reduce headwinds second forecast. and we third revenue guidance. we of actions half $X.XX the versus the

to strike reduced impact more and the volumes offset difficult continued We the GM offset the be impact this the able That currency production headwinds year. expect said, to of in to materially short-term. adverse of are

by midpoint a As we second factors reducing $X.XX the the are adjusted this our to of for in morning half year. of these guidance account result, the EPS

company, committed growth strategy. financial without headwinds external working our sacrificing a performance offset we or ensure As future strong are to long-term continued to to

are we market ensure financial difficult environment. As have even other to properly a conditions both measures to eliminate review continue and current in for a and cost-cutting structured actions cost macroeconomic mid-term drive result, and unnecessary to that short we performance implemented

we actions X continued to Page financial the portfolio one to institute drive performance. order plan in that outlines of

and As been we've or alternatives body for segment. products These This operating electronics previously, XX% switches portfolio approximately electronics technical over solutions potential just revenue, a $XX as currently the future the evaluating than evaluated drive of opportunities within at have that targets. corporate strategic revenue, we be product other for will we a improvements. million include future strategic business discussed will the margin our ECUs future provides for of represents of system-based our our financial the fit, $XX solutions and vehicle and that to control applications. controls for customers million total products commercial for portfolio lower build basis and determined that We significantly portfolio valuable competencies We growth.

the evaluated plan plan deploy required to for manufacture phases move To retain As maintain that going our a China. the next such, the potential the cost facility two the beginning We to we expect and will generate portfolio returns the that financial to and they it allow structures ensure forward. us we grow structure, to assets we business move year. manufacturing and fully competitive to products owned portfolio with in in engineering the

completion points of will that the by customers, the XXX our This completion result we portfolio, with revenue balance markets mid-XXXX. is in move a a planned our which consolidated begin needs expected complete, second in Once planned phase, to majority basis The leadership's by to points mid-XXXX with performance. company. margin the for basis financial the first planned in XX our is for end and improvement to ability of of comprises phase in a targeted XXXX, a testament decision trends estimate the to

footprint We and our evaluate serve continue to portfolio product our better global to utilize customers. our

also margin structural costs to will continue reduce We profile. our our improve to

applications, update factory. to morning both I retrofit an Page prewiring MirrorEye as new some the want developments from for well related to turning X, to provide the OEM and on this Finally, vehicles our as progress

an announced MirrorEye annual with award our of based rate XX% revenue the During a quarter, and production penetration a XXXX. we million on OEM peak to $XX in estimated XX% start-up second

one decisions expect we over mentioned As OEM was this sourcing three next the decision we of previously, year. have

camera success mirror global to with for installed leading will system years continued global come. Our the MirrorEye OEM customers that ensures be OEM

with technology our benefit work to MirrorEye continue our customers their our and OEMs system. to and global show We them the of display

one a As being are work, of proudly of on demonstration trucks. we customer Freightliner's that featured result

refine fleet fleet the of owners. fleet tremendous with to platform evaluations to a our through global retrofit evaluations needs provide system addition and continue we to drivers In our expand to progress meet OEMs, we're our program. making These the

the downtime product improve to by the to addition of In system system the reduce installation. working caused refining continuously are offering, and robustness the we

partnering are system, believe the reduces downtime, prewire not reduces greatly be programs utilize the be to large the up to specific of OEMs able We of year. system integration the to before the will should a MirrorEye expect competitor's will which prewired ramp with prewire meaning install in be that available accelerate introduce for early to late to option system, our global penetration The this one option a the product customer and end they the OEM that system. next option We complexity option XXXX.

the the we for announced how that commercial quarter, transformational achievement This important XXXX MirrorEye. been and industry. have MirrorEye for significant named finalist for validates the during Award a Automotive vehicle Pace that News is further will a Finally, be we

significant some Despite X. financial team's respond I'm drive to with ability continued Page strong to and headwinds, performance. the macroeconomic rapidly pleased Turning

to We the and with aligned with growth fleets actions future footprint to and company for needs. forward in our position continues to move appropriate customers' MirrorEye profitable portfolio take continue the OEMs. order

morning long-term market our expect execute the and we system. discussed to strategy, capabilities continuous We to and will the overall prewire that activity shareholder Stoneridge, path improvement of drive value. penetration At this refine we our the will continue accelerate deliver to on

over to I'll With results discuss to that, Bob in turn detail. it our more financial

Bob Krakowiak

Jon. you, Thank

X% million, in relative XX. to the lines $XXX.X quarter divested the were Slide quarter while third decrease excluding XXXX. million, product of $XXX.X of a Sales to were sales, third Turning

operating $XX.X income six of excluding $XX.X Excluding was Resulting half or was the quarter million, or specifically, XX.X% million XXXX. product adjusted sales. which sales. of of operating to a control $XX.X devices' was in third lines, percent excluding equal million adjusted More sales, divested approximately product divested of lines lines, divested income, and product

adjusted adjusted sales operating decreased Electronics million $XX sales. million in sales of sales. or of resulting $X.X PST X%, $XXX,XXX by of operating million of or $XX.X of resulted income income of X% X% in

are we are the unfavorable pressure gross forecasted reduced a and basis margin XXX GM our to revising a million. the As our we Due and our have of production revenue points. currency to expectations, forecasts, by forecasting margin continued of rates reduced midpoint full-year result strike, midpoint of gross guidance guidance revenue $XXX.X reduced

offset margin by With only margin that continued and said, reduced gross we of midpoint expect cost-cutting the the adjusted to operating measures, partially therefore, through XX.X reduced our points. basis have

a tax current by environment. expecting the are the we position the rate a our quarter of midpoint adjusted our result we reduced the Finally, such, as tax tax in of reduced of U.S. have continued points. And evaluation to fourth as relative rate tax XXX basis full-year

the of forecasts year, $X.XX. reduction the I in in cost more for are measures drivers the discuss and our reducing continued call. the our and currency, EPS guidance effective detail later updated impact adjusted and the $X.XX we to by strike, adjustments offset of XXXX production midpoint more GM guidance partially will our rate reduced Due a tax full-year expected of to by

our XX control financial divested lines. key excluding the of summarizes devices, Page for metrics the product impact

Excluding GM in the the growth Emission continued impact particularly well in products, our strike as down actuation portfolio due China, of programs, as of control core X.X% non- legacy shift-by-wire our devices our by to ramp grew shift-by-wire the Sensing products. and

increased same $XXX,XXX. $X.X decreased quarter to million million operating by by period were approximately additional related $XXX,XXX tariff Adjusted to expenses the Compared tariff of XXXX, quarter margin XXXX, expediting last of primarily relative third able second and of to relative the expenses reduce to $X.X of we year. costs the driven

the issues costs expediting The As the to were were costs quarter. Jon our related addressed specific in Juarez that lines drove few a the facility. additional increased discussed, during

quarter issue a the We some one. a fourth we in residual are be run expect reduced this although to already expect for seeing expenses rate we do and impact, those recurring not

by tariff reduced increased during on X.X% million sales Control continuous strike in costs operating throughout expansion devices product approximately expediting quarter. the growth quarter. expenses the margin focusing portfolio reduced income while In $X.X GM the additional GM or the strike approximately by and Finally, $XXX,XXX improvement. income through total, operating delivering is of the operating

as segment in summarizes Page electronics XX as quarter-over-quarter XX the months. performance, over last our well

of volumes points of $X.X sales million vehicle declined reduced unfavorable XXXX margin XXXX. to increases the to the in operating quarter, operating income the currency, Adjusted due $X.X component European XXX year. million adjusted of the relative well to declined third in to decreased production by Cost electronics During $X approximately related to primarily quarter reduced by and related basis electronics the million commercial the comparable operating a shortages market. compared the to quarter period third relative as and currency headwind impact by as income prior of XX%

volume reduce overhead adversely to quarter. in inability the changes margin during also impacted to costs the production in the Additionally, short-term response

are headwinds Europe, As volumes, structural and related Jon in on we outlined previously, continued reducing costs. expect to particularly focused production

and $X.X conditions points. decline by adjusted Turning in alarm macroeconomic declined Revenue adverse audio by business. in PST million, quarter, had margin operating XX. resulting challenging basis a to declines of aftermarket XXX driven and primarily Page our

for We of focused year. as developing the product launching expect continued as in-region the half volatility in remainder for next remain the the on Longer capabilities growth and expansion, OE segment year. our Brazil Brazil OE in first term, margin position early as to we new begin of we

implied provided we $X.XX third quarter, XX. adjusted the to of an year range the half Turning Last to second an Page outlook the $X.XX of approximately that quarter. for for EPS

The to negatively production negative quarter continued reduced the contributed which of reduced and expenses, contributed impacted as a impact $X.XX and SG&A were of approximately volumes factors third by $X.XX. engineering-related we experienced strike, headwinds currency performance. quarter, to number well EPS the a offsetting quarter, $X.XX as that During GM unexpected reduced our which favorable approximately tax Partially the rate, those quarter. the

as second quarter the of the software During as related vision certain we and third products. in quarter well were development to and safety XXXX. costs the capitalized incurred our These first quarter, primarily expenses

share to for adjusted for $X.XX expenses approximately expenses. per $X.XX prior of have capitalization the guidance. earnings year-to-date in the added our The in only adjusted of which of updated we our third EPS, quarter capitalization accounted quarters Our quarter includes

of capitalize expect costs to to As we more going continue of a forward. migrate a software to higher model, development we percentage software-based

we necessary to Finally, of structure reduced to to cost business in SG&A the response forward. right-size production going took actions volumes, reduce the

future long-term We will conditions continue to for financial strategy the deliver company market to success. but continued ensure that we drive respond position to our not changing also only strong performance, and

we we guidance, of Relative full-year previously of management. forecasted half actions the On production updating the forecasting as XX, impact $X.XX the continued Page second are currency our $X.XX reduced guidance conditions, $X.XX current from the as by provided of headwind are in volumes reflect to from to strike, our to taken related and unfavorable well year. GM market

we are of forecasting external our unexpected to total, In $X.XX relative headwinds prior guidance.

were quick cost team, were the As help respond offset management quarters aggressive expected we reduction took to production a headwinds. when reduced actions the third fourth to and and in forecasts

We expect in year-to-date to of the rate. conditions, expenses and response headwinds $X.XX offset engineering $X.XX reduction market a reduced of cost effective measures to capitalized through tax

due of year. movements as GM strike, we the the timing these to do unfavorable to externalities duration offset uncertainty expect as relative able to well not and to remainder the be currency Conversely, forecasts, of the continued surrounding for the

impact such, reducing estimated approximately is by the of strike of we currency. As GM to are the of the midpoint our equal the impact which guidance $X.XX, and

to delivering the factors actions focus market control financial our offset taking and a strong swift through performance impacting any marketplace. externalities management within and to effective As remain in continuously we on team, committed We the the condition.

long-term pleased position shareholder value driving like we as response forefront for all to would and our Stoneridge I is continue to committed team's significant success. to strategic focus the reiterate with the closing, in we initiatives. XX, that headwinds, our remains at to Slide of of are to external company Moving that

call questions. that, to With I the open will up your

Operator

from line And comes of your question Stephens. Justin [Operator the first instructions] Long with

Justin Long

Thanks.

Jon DeGaynor

have think I Justin. may Justin? lost we

Operator

And his open. line is

Jon DeGaynor

Okay.

Justin Long

Hey, guys. me? Can you hear

Jon DeGaynor

Yes.

Justin Long

Okay.

Sorry morning happened. for and not about questions. good I'm But sure thanks what the taking that.

Jon DeGaynor

morning. Good

Justin Long

year giving the the start fourth to you're wanted I you XXXX? also your next in maybe second then, on some but I weighted that. markets the morning. comment end see could next and And average as quarter, outperform can around about what to year. look end-market maybe add guidance, in into drive what with commentary not Good And know commentary expectation ability and the production you half and XXXX

Jon DeGaynor

happy year, you about What in IHS X, Justin, and I'm fourth quarter, all Sure, quarter with projections. outlined respect on that. next to of so we use talk really of summary our to terms in LMC see Page the that third we for

correct. are You

markets, We it's are guidance year. projections not car percent. our is you going you to so end tell IHS a various around what next the look at you provide and IHS North if down of I can tenth But, America a look LMC about if the specific at right now, pass for data,

to changes goes end car for vehicle XXX. XXXX. which our outlook XX.X obviously, the to what basis current gone million. And pull projection; about quarter together It then markets, XXX, has basically various Europe from for from year significant America million we projection the XXX commercial goes XX%. North first a the was is passenger is was in from to quarter, down next use our so XX.X units XXX million is China -- it in third

a obviously, of -- other as well. number of there's factors number a there's But

the end You've way the think onto awards that then XXXX. obviously you'd retrofit add to business about opportunity, basically our And and got price-downs, currency, then that's new MirrorEye market.

Bob Krakowiak

our in question all the that a as whole retrofit ability in segments, XXXX, to we've a happening business which well of isn't which got series in launches well XXXX and regard things, on outperform, couple XXXX of our with as three are of of our Justin, any the opportunity, as to is as backlog.

outperform, see in headwinds some So certainly, you growth, significant to should us the give but we've which markets. content got the is what base ability

Jon DeGaynor

of a we which $XX that for about got launch, program Yes. of in primary Justin, system million and park-by-wire annual revenue annual a have the that's peak million; XXXX, programs annual program driver $XX the launches revenue revenue and with information XXXX our And peak what's launch program, is we've telematics million. talked $XX peak global we as MirrorEye And then next million, of a of the $XX annual XXXX of late terms peak launching, well. year a then for two is with next which year, in revenue

Justin Long

the Okay. call, XXXX the have in those revenue That's EBITDA margins. of helpful. this guidance Are production forecasts there seeing still billion based current for the but targets and you that and And I targets XX.X% don't of environment current that think couple do out on mentioned the on years? $X achievable you we're next

Jon DeGaynor

Yes.

right our in going our -- we're outlook. Justin, of So through through process our updating basically, now terms

perspective, the weeks So we're haven't going -- next have in process. just commenting on our through We'll not just the and information more several we finished our XXXX. from haven't we

have said information versus So additional what any I we've before. don't

Justin Long

awards Okay. are other that And quick OE I expecting. I two on guess last you're know MirrorEye. one there

previously, those may think those the occurring timing one year sometime the XXXX. this awards all? had talked the end Has and you of before changed early one other around I in at of be about

Jon DeGaynor

No.

Justin Long

Okay.

Jon DeGaynor

the still it see We same way.

Justin Long

Well, Thank I enough. appreciate you. time. Easy Okay. the

Jon DeGaynor

Thank Justin. you,

Operator

the of B. FBR. line Riley question with And your from Chris Horn Van comes next

Chris Van Horn

morning. call. Thanks Good for taking my

Jon DeGaynor

Good morning, Chris.

Chris Van Horn

about wanted kind switches to upside of ask basis additional the that to that, that a to or XXX basis potential get mentioned average the and I XX end does electronics to is use you just the goal? or you moving closer -- points points margin kind from margin, I company think And of from China.

Jon DeGaynor

look So at what points if you basis the we X,XXX the entire it, on about, is talked Chris, company. that

have these about are these top-quartile -- financial all when to business, actions What how of I'd the sort the that of actions to that performance of talk the that it sort magnitude tells financial to of say we much for business. changes size performance, places. is revenue take you the we sort it at look you if So you getting that are of in

and at we judgments performance, an product make drive one and of of look we to on how example the every lines it. our here's So

Chris Van Horn

Okay. Got it.

quantify to of it seeing you all your to continues ramp if that quantification increase Now be that. earlier able moving MirrorEye, fleet kind said considerably you to and the year, up at evaluations those since kind of have evolved of you the could are how you evaluation. Would in disclose

Jon DeGaynor

a of couple now utilizing but on we MirrorEye, mean, more I last Chris. perspective, approaching on our call, miles things, the have mileage from in of the tested Well, about talked X system. fleets as field number million now overall we MirrorEye -- fleets an just the we're we have almost right

So trucks as you're in that technology. seeing pretty field the number exponentially growing more our are evaluating

Chris Van Horn

Okay. XX% it And for it like to can it up have level, But that to that you option it OEMs prewire kind you've what the think as adoption? XX% retrofit a clarify interesting, of driven you cited kind you follow sounds raise so is that do me just the do take they there. to are of and in see been sounds those, a going hopes when before, more prewire in or decision rate on terms similar that like the may might that, possibly, there's of in

Bob Krakowiak

a This pulling be CMS they install responding to it. So a rate and to take are an to is understand, situation are one need isn't this the OEs effectively, system that and you option able the Chris, to thing fleets then. saying want

pull are them system. that to a as fleet OEs fleets CMS the So what I step are our we strong install to generating the pushing trials the it that view it very make think it easier what and view for is we as

Jon DeGaynor

that I proposition this are factory is relative seeing Yes. to their technology that fleets testament say, they're importance would conversations their the the partners MirrorEye in in to wire the with OEs I harness their a it's vehicles with think the value vehicles. that fact are the important the Chris, and installing the that of at OE our having

Chris Van Horn

Okay.

as you move revenue to the the additional And wiring, they're you -- to an go be just decide effectively they forward? so they're MirrorEye, for pay if and then component that'll going with

Jon DeGaynor

how interior Yes. that installation split, We're activities is install require be an of truck about the the talking which much, that to much not efficient. will getting more in way about the makes but a that done revenue is would up the it think it's post-factory opening of the factory, of

Chris Van Horn

so your you time Thank for guys. much Okay.

Operator

your And next of with Stember CL comes King. line Scott question from the

Scott Stember

Good morning, guys.

Jon DeGaynor

Good morning.

Scott Stember

losing your business Could GM? expectations recapturing the the back potentially of year you in about you talk with half anticipate of the that

Jon DeGaynor

that, question. I'm to for Sure, happy do the Thanks Scott.

is this have obviously. looking time we great So something a that spent of at, deal

one to the decrementals, mention, us, anytime for that's things a obviously on of goes incur you maintain speaking, you your generally it's of because customers because So strike, largely labor challenging your higher important one when direct labor on also you ramp-up the those a want labor of get and the has once volume sure settled. abruptness you fallout specific lines, smooth and given make disagreement the to that been

a the drag So, that quarter be fourth. in to bit of us the was continue a during drag for a and

There this answer the much pretty platforms to is, nonstop. will depends, that are it obviously So GM Scott, right? certain running

ability pretty to running up they much were limited basically, order ramp and because more their capacity. So was full at

not be, the were a were line a to of shifts catch-up running number basically number -- the truck production a and of it's depending going there's the So the running, they at example, number strike. the of at because full products for prior upon product to

So time. volume up car that some running pass over some There's on other to SUV, the and at opportunity weren't some capacity. limited. they of to on of platforms, other But make of an platforms up full their make platforms, is the relatively ability CUB

Scott Stember

in see, talking shift-by-wire, we've what with the a start shift-by-wire? while know I lost regards this been we And do replace guess, park-by-wire park-by-wire I we've and meaningfully is for it. Got start to about When to coming to on.

Bob Krakowiak

of rate and and It's at start XXXX, ramp-up on throughout so run into really, basis, of year a XXXX production XXXX. end a the this

Scott Stember

on the or a feedback. than to were say track... won't the out back last the MirrorEye, guys expected, you retrofits there still was -- you And Are as getting know pushed we Okay. pushing MirrorEye were out, but I all doing later -- we pushed had necessary on I for quarter, reason or

Bob Krakowiak

Yes.

Scott Stember

guys definitely it right. on better prewiring And while are an nice side. talked All about the opportunity on you to -- OEM one margins here, installation, how the and accretive is lastly And retrofit have the you,

could see were if or about door, speak, a to and... you situation, than start to margin expected initially we back you for talk could so the prewiring potential OEM-award situation So, the on better margin how OEM a business lot coming MirrorEye through to types -- guys net-net through how of the be

Bob Krakowiak

think don't the to And think Yes. way about it. I that's necessarily

retrofit XXXX, prewire, fleet is at considerations I install risk of think the the barriers, you planning one it this from the to reduces the reduces It as accelerate it downtime. takes in the one look they an or us what away. gives the do have, would that the ability the perspective; of

we And retrofits support as it an doing prewire. of the at accelerate opportunity OE the with an look so to

Scott Stember

now. All for That's Thanks. all right. I have

Jon DeGaynor

Thanks, Scott.

Operator

question Research. final your with Prestopino Gary Barrington the And comes from of line

Gary Prestopino

Yes. everyone. Good morning,

Jon DeGaynor

morning, Gary. Good

Gary Prestopino

Hey, your decision as the the customers costs that doing. less what hey, switch and the they And or of couldn't churn to viable of control came and keep there's or -- a division portfolio? said, your a to the like you on were or fact like thinking your it we business, your down product, you you that of back you make doing, we heard potential was get electronics it what part we're you're find the no, more jettisoning here, based to buyer, product

Bob Krakowiak

that find It between fact a the had wasn't what as into a It conversations buyer. we we somewhere there profile was in customers, that went was we growth is saw deeper couldn't it's business. Gary, that and evaluation, we with those the to as two.

additive and continued in the impact Suzhou, trends ability to we and the competencies have And this capability with in didn't the even of Secondly, facility do had forward. product needs weren't ago a our to new as see, what the make in the when capacity we to facility, as are move new going have the that see space, launch the core the there the years or it. you we with year ago, when we a two

Gary Prestopino

the What's the my run right, on OEM. you And signed start? then, revenue your there, one? you it program, is annual MirrorEye and second Okay. with just refresh this does Could that when rate memory an first

Jon DeGaynor

million one and is the annual peak Yeah, XXXX. of launch at revenue the will end it $XX of first

Gary Prestopino

program I is in once really say, effectively close heard from fleet competitive Okay. out that it that did announced, prewire this correct? a And product you then, that rewires, does you've coming Jon, a

Jon DeGaynor

couple so things. Well, of a

First, legal FMCSA exemption, and ones retrofit only we're off with the a where it's the truck. the to pull the do mirrors

block the answer actually a no, competitive do already, open that it question people does wiring in it's the system. So ask is a the threat. is you a that Stoneridge-specific many prewire, And if because there's

Gary Prestopino

you Thank great. That's much. very Okay.

Bob Krakowiak

Gary. Thanks,

Operator

question the Our Glenn Buckingham Research. Chin of from next with comes line

Glenn Chin

question. Good Thanks for morning, gentlemen. the taking

Bob Krakowiak

Glenn. morning, Good

Glenn Chin

might comment Just the cars chatter public soliciting a regulatory question passenger the commercial regulatory quick or us replace around not what regulatory they be or should and permit or vehicles with be timing cameras share supposedly is far be mirrors for both There's that, of path NHTSA may process that, to on you whether as what as wheels or around to in environment. news What motion. both as the cameras those. like? can like, the might

Jon DeGaynor

this is the in for Show work They're it's activity has various that and in the will in timing DOT the was earlier best we to as activity fleets vehicle. support that comment. believe on a OEs. something conversations This both about American to way for Vehicle and week the OEs, this and commercial NHTSA. organizations and support of, car associations various comment industry approach Commercial I difficult. something seeking partnership industry at be gone with what's pass we'll but not obviously, North with the with Stoneridge Predicting both at had and with is well for regulatory down as NHTSA

Glenn Chin

is much or it it And what from process as much know different exemption? you far as -- the path the do All Jon. right. new the Thanks, more exemption? getting legislation was from FMCSA is much different then the Is

Jon DeGaynor

more to guess Glenn, is, My it. there's probably

extensive you experience. a regulations part it's with not this. an of regulation, start do talking work that's And to we about vehicle As opposed the area why we have with be to honest, reason retrofit as where OEs let's

Glenn Chin

retrofit so typical option, will it that built, prewire will fleets, into it cheaper it doing make this be with downtime. savings overall it other truck -- the when is instead But cost then the install will of to it it option? And than translate Okay. reduces inherently for downtime to

Jon DeGaynor

faster. definition, do Well, it'll it would so be the expensive less because be install faster, by it to be would

You time It's down. the don't do wiring you that have truck at the done. when to take already

Glenn Chin

Okay.

Jon DeGaynor

away one, thing the is, to fleets equipment. of important many think here more comfort take I piece a it will give trucks because again, are production

they're it any about a you So do what a downtime a change they're on do from perspective. could about any durability a make what standpoint; change from time worried worried could truck,

So, in risk. the fact wired perceived advance that that reduces it's

reduce the to if The drive if with signal. make install the -- in we going the partnership level OE to And additional that's second can that is thing thing third efficient, the it's send the can more the we fact comfort. an of is, certainly

Glenn Chin

good. That's you. Very me. Thank Okay. for it

Jon DeGaynor

Thanks, Glenn.

Operator

the And as Instructions] with from Long [Operator a Justin from question your line Stephens. follow-up next comes

Justin Long

you follow-up. your of I might I a a modeling to together from me wanted weighted into it piece that on year? couple help circle earlier, year. average on to your to digits back rate the that Bob, taking then, about next for for answer Thanks of also be kind fair markets tax wanted next And if XXXX down ask markets I expectations the will that just things end perspective say is high XXXX. single end gave

Bob Krakowiak

of in I'm guidance comment So terms through But Justin, transparent process we we're use. to going we're it. obviously next very going year, not our for on so what

that that's we for basis. know basis pass and regular the on for we and a we vehicle car use provide for LMC guidance use the IHS You that commercial

Bank the give various Deutsche conference, at and we you exposures every percentages. So, our end-market year the

than of our data. Now, average the back based We we of granular LMC more a so weighted here's on terms do envelope market something to the IHS- in at level the for by by up platform. it region. quarters up several pretty amount lot been generally detail substantial build now. speaking, has more by our We build market underlying a that. outperforming And the a detail, of We exposure obviously much platform it go

as just percentages. multiplying as So simple it's by end markets taking those the and not

together. This appropriate now. comment in middle go it, the be plan terms normal So it's given to And is fact that it the putting a the of go wouldn't it on through me process for we right a that time of that we we're it in through.

Justin Long

for Okay. That's year, then thoughts? next any enough. rate the tax fair And initial on

Bob Krakowiak

is our Yes. Justin. it's the a this still tax and tax We're benefit been side. same, The is year. going for on continue We've tax rate And going them through still the look through to shareholders. we to that, the found opportunities team --

to continue year, and position we'll will taxes a early be on more do later year. some We in that to provide the guidance next in

Justin Long

in Okay. sheet And the I balance of guess cash. just shape, good amount deployment. a last is question is generating pretty Obviously, still good capital on

you like capital So, maybe stand terms buybacks and could versus right you just talk what where toward acquisitions pipeline that of in now? about allocation acquisition looks

Jon DeGaynor

Sure.

are going repurchase that's program. we a still $XX So, share program repurchase through still a outstanding, share million

at that's So our in company now right this capital is of at in cash structure where strong stand you with we're our We counterparty. look right at with a really leverage given now still process profile. levels, times, our terms all a flow if

the looking well. we continue we're in space in as So, And that. obviously, to evaluate very really for M&A us, active

Justin, I are pretty our We're occasions, really portfolio. this space, still on several and valuations the about in as talked like you high have seeing so, we

another and extremely do out we And something know that that going to So, not we're have go well. to nothing this there there's do. we like and have don't

looking capital the And we repurchases. second share are that the businesses to the us Orlaco. don't geographic diversification. has those, to or Those we an that And shareholders. that And for we find Orlaco did we'll we're just absolute of in pay So, via types like customer grand-slam with did right back we're want been return what transactions looking give the at. our either extent for do price, we quarter and similar

Justin Long

Okay, great. the Thanks again time. for

Bob Krakowiak

Thanks, Justin.

Operator

queue, Jon are would there to over now remarks. no As like to further I call closing turn in for back the calls DeGaynor

Jon DeGaynor

for Thank all call. you participation your in today's

strong In management to company deployment drive will financial will effectively can through value manage and and variables you of XXXX drive is I for to We're strong the to and This will actions assure continued business our and respond confident success continue to team available balance control operating you. results, Thank in focused continue we profitable the committed that performance. resources. and can that of our beyond. our new that impact closing, shareholder efficiently result

Operator

this gentlemen, conference conclude today's Ladies does call. and

day. You may great now disconnect. Thank you. And have a

Stoneridge (SRI) 3 Nov 192019 Q3 Earnings call transcript