SRI - Earnings call transcript Q2 2021

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Operator

Welcome to the Stoneridge Second Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event's being recorded. I would now like to hand the conference over to Kelly Harvey, Director of Investor Relations. miss. ahead go Please

Kelly Harvey

posted And quarter for accompanying results. the under and filed everyone. in at discuss Investors the presentation us our with section is evening yesterday second The & SEC our thank morning, website joining stoneridge.com Presentations. you Webcasts to was on Good release and

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

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

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

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

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

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

Jon DeGaynor

good and Kelly, Thanks everyone. morning,

pandemic. from mix, new global awards, the drive cost, cost we product and to to continue position and manufacturing and our the Despite shifts. supply unusual continuous profitable continue improvement and profitability. impacted production careful In the growth we challenges quarter, earnings in Page long-term our as second logistics rate, me experienced to X. resulting headwinds, jurisdictional on tax expenses availability company Let control business begin navigate through for through facilities material labor these chain even schedules, This availability,

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

total, provide unfavorably in relative review a impacted Our results performance will our significantly of quarter quarter the $XX EPS second to drivers adjusted was expectations. quarter call. in impacted headwinds, performance in our I second prior more detailed later by which the on approximately by external the

make During we OEM retrofit MirrorEye with our the quarter, continued launches to preparing progress expanding for platform, programs. our and

agreement the bus resonate in other we end Additionally, bus is and Europe. market, OEM to including major units we and an year-to-date, MirrorEye MirrorEye markets, supply XXXX the the a value of MirrorEye to sold have applications beginning with technology where over in bus of signed recently our

In addition, cash we facility continued were our that to the The sale cash of of our Massachusetts use capital $XX.X we net our global facility revolving down our further balance, quarter pay to footprint this drive credit the the sheet completing strengthening proceeds growth. future used million. Canton, transformation additional proceeds balance from of creating during transaction by for can and

market we are and full adjusting guidance this conditions current morning, on based Finally, forecasts. year our

range. provided performance strong end previously see and revenue the our to of to high continue guiding our We

resulting prior supply in headwinds these XXXX sensor quarter divested end the relative Additionally, adjusted financial call. we some for and production EPS next our excluding prior tax XXXX to weighted help metrics current all Page to continue discuss and based X later we we results, our to I relative offset guidance impact to continued growth on end substantial to expect average expect challenges negatively line will the we continue business suggest summarizes soot the in are taking to key actions rate of chain periods. expectations. XX% That to impact year, growth into as on outperform forecasts, at our production expect top do said our significant markets the our markets.

we During the schedules, volatility experienced end vehicle our OEM market. in significant in quarter, primarily passenger production

and and were vehicle offset resulted continued our markets. in revenue, line headwinds these performance commercial strong by However, in This the quarter. in adjusted with off-highway prior approximately

we quarter, labor costs, volatility relative shortages, and basis quarter. contributed margin the component the unfavorable to of and respectively, unfavorable These the XXX material to gross incremental continued margin experience During impacts and mix. of product second declines and points adjusted operating to logistics factors first an XXX

$X.X which quarter incremental first These versus the $X.X approximately quarter. $X.X points prior related relative previously reduced million, The to expected, XX chain margin included higher and gross was costs costs quarter. basis of the incremental and second million than million operating by supply increase

slightly first by planned to offset a This During the incentive annual were expenses operating program quarter, of to the due to engineering launches. expenses support partially reduction was incremental compensation unfavorable, compared costs. second quarter primarily program

We support consideration ensuring continue advanced managing program and engineering SG&A focus we while structured current to critical costs of and conditions, are development. on to in that continue in to market technology invest launches

external to limit costs. also the earnings remainder share. we will high will adjusted related headwinds of that controllable facilities the year, additional at our to expect X second per execute summarizes the and of continue expect for drivers we we that factors Page a While level quarter

inefficiencies, quarter. mentioned our by chain costs, mix, the impact in This on product other includes related costs headwind our $X.XX earlier, effective negatively performance COVID of I factors costs during variable second resulting tax As impacted and quarter unfavorable incremental and external was resulting incremental the supply rate.

our as more rates in than required production overtime drove costs, higher direct volatility previously labor wage we we direct customers to expected. labor continued Finally, run were schedules incur and incremental

external approximately program expense, As a offset the forecast, we current result of quarter. annual our by $X.XX during our reduced headwinds incentive which

generations, an features impacted the expand we recognized $X.XX. we both also previous trials which functionality primarily customers. by to volumes, related approximately to retrofit Fleet the as our that continue MirrorEye system charge address greatest and been value have develop end to critical obsolescence the inventory results and MirrorEye to drive we quarter proposition as During

fleet video from to was partners common For requests example, our one recording. of the most integrate

utilizing the changes the of no accommodate some design were retrofit result as requests, hardware longer made to required components system a the systems. older we of obsolete of some As they to to of and the were MirrorEye

and functionality these now expect charges to improvements production. as MirrorEye to inventory we With we do continue additional not ramp incorporated, up features

to the move are be second challenging. as supply supply impacting financial situation gain update incremental and committed operating impacted remainder this quarter. to business, offsets controls of offset customers. In of updated our take dynamic to as half detail later to in offset the chain on that costs the and disruptions the chain like such global recognize costs that basis to take I'd and more taking financial actions for continue as of continuing actions view to Slide forward are our disruptions the year, approximately to year, to our impact for offset I Turing these of much as results the like current view this our guidance and become We to we have is we in headwinds. we the is these in costs XXXX our detailed current call. necessary continue of that Bob These incrementally the specific possible. inventory We situation the stress will more disruptions that during summary, discuss will of more control some and the the would a our favorably actions the the X, support to provide adjustments while

working state. continue sharing overall price to We look chain costs premium the efficiencies in to developing quarter. these costs. have recover supply to the product costs we production and of within of supply second when has also chain chain conjunction designs during continue other significant these normalized more increases incur the developing shortages, a review continue negotiate labor and volatility suppliers resulted fully And markets increases to our to we're customers. to freight going to schedules. these forward. combat with our and To market with a better costs flow and strategy strategies In our our who actions and we Supply OEM incremental return product. These customers material This shortages long-term significant offset optimize for inefficiencies incremental in impacts resulted operating and include a actively

approximately to almost from quarter, million example, during for supply increased the million to date, $X For or we conditions, expectations double, $X passing on last current our million $X.X market the full second million were million through of as year have $X.X incurred $X.X we incremental $X incurred Based updated million chain $XX.X in year. in costs. costs full to for To incremental in quarter. of the have quarter successful the costs we million net already of for the

to monitor ensure we any disruptions. the continue to OEM on chain customers impact and supply effectively efficiently and respond our global We the

our for of XXXX. the production volumes, the current As recent LMC it for Slide relates end IHS most XXXX outlines information and X remainder markets and to OEM

calls, year. of previous As passenger we the in during expect in for production half to schedules of with the and more significant the our strong, year, impact continue off-highway vehicle reduced our a vehicle and in Production second have quarter. remain commercial markets which customers we the discussed first balance the

current of XXXX. been adjusted and production supply Looking the and the for chain forecast forward, levels year the expectation have for into remainder issues related of continued

the the high the are revenue our decline will car X.X% primarily or markets. and a later As XXXX year full results provide a and guiding performance forecasts have call. chain outperform in our result relative due will weighted commercial Despite end end underlying the production have of to revenue global the markets Bob forecasts first the to This details vehicle call. continued declined that our improved. this our have in forecasted disruptions, provided our previously passenger on further stable as the for remained of half supply of average product last approximately our relatively while decline, portfolio guidance, forecasts year guidance to continue to in in expectation we of of our

weighted by are markets North expect to are in That demand approximately forward as American where expected LMC average our to continue by approximately North the to IHS Looking compared vehicle be respectively. forecasting to XX% to to grow XXXX, grow our at American car and X%, and expected growth expected markets end is XXXX. and passenger is XX% strengthen led markets market that commercial European will be growth XX%. we end to

in company. to end our We markets for which XXXX growth expect the to imply outperform continue significant underlying

related take and to we With we our growth next continue to efficiency year. to of advantage the the take forecasted cost positioned operating are actions structure

many Page in technology in power vehicle to Class by This end shows buses install Europe to of markets systems on all existing and our MirrorEye with as approximately XXX to have orders began manufacturer Pre-Wire supply signed in in value for in and we in programs and across accepting improve with XXXX major a progress X applications installed that make orders our over to approximately in momentum QX. the expect end safety X, proposition our of starting market Turning of have Year-to-date the MirrorEye for outside continue additional commercial markets are traction and those to XXX true we multiple going MirrorEye is gain MirrorEye to XXXX. we to already to This in announcing momentum gain forward. July. XXXX Overall, end efficiency bus traditional well agreement are translating Similarly, continue orders buses we MirrorEye's we the of an units, of have morning, applications. QX. OEM approximately

and are of orders of US Pre-Wire acceptance work who other is of This is growth indication across momentum progression attention to also the OEMs with of total The to technology momentum. by fleets applications. small. gaining suggests the us continue increasing growing Pre-Wire develop good a While the orders the and still relatively

year programs take early OEM first this Finally, and million peak are to $XX revenue expected These of can two programs XX% estimated MirrorEye annual XXXX. launch our at comprise rates. later

encouraged are they able programs, systems generated officially until more the OEM excitement activities of related we platforms. for OEMs to specifically the their are amount speak launched by to new by begin the While their system our MirrorEye on after not we as partners marketing

from on installed customers end significant MirrorEye the to value trucks continue their directly factory. will select in the and to have believe applications their that MirrorEye We see

in continues Turning our several class XXX support platform. The to Page our were quarter, Stoneridge's largest build XX in momentum to connectivity launched and program proud key Electronics system. information their second beyond to is and segment as we new first its configurable award exemplified a truck the launches areas advanced gauge assistance PACCAR MirrorEye model and business digital inch fully system with display driver diagnostics, In significant driver system, X, by product customization digital the a as new features. enables in they

this at feature our annual going program quarter, we million OEM. European conventional awards Tachograph of truck Peterbilt second estimated revenue. first In of were the forward. display every $XX Class This a X will X Additionally, the peak Stoneridge's one platform largest in is SMART with history awarded

air customers and the generation requirements, most changing extending Our efficiently software to trucks. the regulatory on and platform next tachograph enables of sure over our life to the the their technology updates current making have their customers respond

with provides Our and platform makes add flexible drive more forward. to and an the to time features us functionality consistent analysis platform and opportunity going

to expect program aligned We regulations European launch XXXX requiring the advanced new on tachographs. in features with

growth With the for business and such Electronics SMART launches Tachograph our our segment significant of business forward. set new up the X previously winning continued as awarded is program, success going

vehicle. customers' the E-Transit vehicles to In win platforms fall. Turning third launch to programs enables programs Maverick to to the add two business quarter, program additional the and technologies will our electrification we the advanced supports last the to Park-by-Wire Slide and Devices throughout on of Ford of and launch launch the XX, business our Mach-E continues Control

Following programs, an those up program an for we truck on platform XXXX. electrified in will additional light Park-by-Wire launch

revenue SUV a total with we our annual Geely in Auto's new $XX million These next Stoneridge. comprise Shift-by-Wire launched Finally, July in of generation XXXX. of the awards China of programs peak for

powertrains launching example their Oshkosh as overall of the powertrains announced the they from Trucks partnership becoming E-Transit year Electrified earlier an the was vehicles. current was with Postal as fleet this electrified are replacement XXXX. future modernize awards morning, to Actuation shift and combustion we And standard applications, are As Ford drive the on traditional it business States customers that our a United platform of as internal Ford the for in Service selected support XXXX our providing they to the of two transition growth. within to global are efficiency. line we all electrified powertrain proud powertrains from additional that and product detail based This will in platforms

award four The supporting Front success next our first Axle continues truck a by SUV $XX million on product peak and Disconnect our annual with four light revenue generation platforms. applications

product road conditions. million operate traction harshest ensure where at performance specific Smartbar our they the a award traverse is more Smartbar our to of rough applicable terrain times. end demands second was to planes enables wheels for their annual require as all maximum market The $XX in revenue peak on new, different off to vehicles

in capabilities to to our of product development roadmaps the and advantage continue technology We this our expand refine actuation to and growth segment. take continued electromechanical

this line a Tow Finally, we're and morning SUV truck award light new announcing and Trailer our product on multiple electrified platforms.

fully the tow Our trailers. dash advanced connection from facilitates trailer on the technologies a enables the trailer which connection cockpit, camera digitized to advanced

our as performance At I'll financial our growth we significant refining Bob to maintain and stable detail. turn priorities continue we in We it to our profitable has electronic long-term technologies continuously strategic and impact challenging continue that driving value. results remain on prepare of we drive on beyond. expansion cascading to that, to global discuss things open And to We Stoneridge, the continued impact business in execute customers advanced to and to chains. to to doors supply strong the committed can with the control the quarter will pandemic strategy, face respond capabilities to to second deliver which continuous had that will the financial our the opportunities. We'll delivering XX, growth improvement challenging more XXXX global and and on the new effectively Page environment. capabilities, expect of for shareholder summary, help our on long-term we and Turing focus over continue as was improving our our it in a efficiently for and

Bob Krakowiak

Thanks Jon.

is reduction margin in were was Turning $X.X adjusted excluding best XXX by lines margin Slide Adjusted second in second basis of negatively the sales quarter. operating the negative $XXX million, primarily during product The points operating declined the supply or XX an sales, quarter. approximately the impacting basis best to or prior line versus the chain quarter. quarter lines of XX, million due related approximately the performance to of incremental prior which in $X.X million, was which with product X.X% headwinds, points excluding loss,

had as slides. performance the expenses primarily first on In our additional addition, quarter to quarter, planned the launches. a provide for support segment for the and higher a program incremental of segment second each result on subsequent will I expenses engineering versus the detail of brief of discussion operating expectations XXXX remainder

disruptions earnings and and we expectations headwind year, adjusted of EPS $X.XX cost the supply increases. offset remainder relative full the in year reduce and the in relative includes expectations. of EPS material expect that supply our the high strong XXXX our expect second on quarter, call, EPS our an morning, discussed to performance year are price both to and full supply to XX incremental full related continued premiums for year of prior a full due tax related by mix are guiding unfavorable freight that of of an guidance. Jon costs continued our cost the the to expectation quarter we related our the to will will creating prior expectations. Including for the unusual provided This sharing production Despite adjusted we XXXX to our reducing of as rate full this previously summarizes As during as half current the revenue midpoint based earlier revenue $X.XX in higher for forecasts. income and first well chain to we expenses $X.XX jurisdictional current primarily Page guidance chain by Similarly, guidance drivers end our the to year by impact $X.XX costs performance, $X.XX $X.XX, create the continued chain adjusted for year. our

will effective significantly an be implying guidance. million tax $X to rate million, We expect $X.X tax prior expense our that exceeds our approximately XXXX total that

more expect supply level. drivers outlined quarter performance the in and Jon costs We XXXX, as in incremental full will our return considered QX, rate Similar tax the that the earnings expense net a chain for tax other in to to incurred year normalize previously expenses we normalized have in our guidance.

Finally, incremental the with program expect number significant approximately to SG&A. D&D expenses next while new to quarters, launches several the the primarily expect to reductions offset related incremental over we of supporting we

perspective full anticipate to result, we a give a EPS while to of we our revenue expenses on the incremental revenue. earnings we $X.XX remainder of $X.XX. and year, is expect to As related year as XXXX the to continued supply chain cadence grow To continue for year adjusted the expected progress through be

We expect partially stronger in resulting breakeven. third third quarter for expense, tax offset operating performance quarter an EPS by or be elevated in slightly adjusted the to above continued the at

updated our of based we the emphasize is guidance suggests slightly for year full with the quarter. adjusted year. be fourth and weighted our that will guidance these the revenue assumptions also the quarter forecasts, production on to Our want expect weighted performance of that remainder view performance recognizing to in continued fourth EPS I market the second significantly current to conditions half volatility

modest of we not We current cost guidance, included with have given updated amount feel sharing also appropriate in but a guaranteed, and is conditions. our as the which the customers suppliers

operating is external $XX impacted sales excluding Devices' to points million, costs by fixed income XXX primarily sales, passenger due chain unfavorable performance our due result which as Control to XX.X% We lower factors the take due adjusted as shutdown of work leverage to XXXX. quarter metrics adjusted the of soot second first a the a or financial that decline supply quarter, XX in was operating Page volatility quarter of divested operating Control business the in Adjusted of sales. decreased of $X adjusted versus versus vehicle the offset during key excluding XXXX first were continue for we result related Devices. production summarizes position to sensor production primarily into specific and the million divested issues. X.X% business OEM move Adjusted market the approximately quarter, our basis advantage as schedules. best ourselves to growth to future the income, to the on sales a have quarter

The and quarter material, This basis or of due issues, chain to points. or was related approximately of with quarter consistent impact points. included the costs second increased net supply first $X million global XXX approximately chain million labor expediting related XXX $X the basis supply

continue the our in As footprint call, portfolio opportunities. and to product with align future discussed to transform earlier manufacturing we growth

million. we cash quarter, completed second Canton, Massachusetts for proceeds net facility of the the $XX.X During sale the of

earlier Also vehicle in on balance, our the awarded were discussed to programs net cash in proceeds several facility additional this discussed later several platforms, this and As earlier previously call, we year resulting in used on reduced down successfully revolving call, pay programs transaction the electrified with debt. XXXX. credit the from launching Park-by-Wire launched

trailer announced today, earlier Control multiple enabled including an several our our Actuation Devices new we an for advanced business addition, that products, customers. awards wins for for the In connector award segment, in advanced and technologies

We expect as continue chain global supply headwinds, the gross continue business. to to issues expand impact margin

incremental headwinds costs We to of Adjusted material negotiations and Page specific quarter result or versus as chain $X.X relative million of quarter. during to second increase basis or basis to compared with cost offset the XXX points margin $X.X with which these due approximately continuing the million, supply financial Control quarter, the margin first by focus operating a Devices and first million, by income an our XX the expediting XXX Electronics. decreased quarter basis take XXX of growth of on costs X.X% to expansion. continued first metrics to Electronics' impacted points points leveraging suppliers headwinds, $XX growth. advantage XXXX. issues, primarily existing quarter approximately key to our well drive revenue expand summarizes are positioned were and Despite remains to future we customers as structure our sales

call, earlier charge discussed $XXX,XXX. we obsolescence as recognized addition, the an of In inventory on

in as of product. connectivity end in X growth continued earlier of our well our in As markets, our as traditional the both new call, product opportunities we SMART with product capabilities our future expansion programs, through discussed wins Tachograph provide of our markets portfolio think up us and ramp end the MirrorEye Electronics the will

As investment in support engineering future, resources our future we to and in invest we to technology these developments program launches. continue require incremental

have engineering to advantage increase we and limit footprint take resources a efficient use to of and initiatives capabilities to implement incremental capacity. of our engineering while continued We ensure existing global costs

in expect programs, to part revenue strong continue driven recently this launched digital growth cluster the half that PACCAR, by XXXX up second We of in ramp year. including the launched of instrument the earlier

headwinds issues We as continue growth to to expect continue global supply margin chain impact the business.

We offset continue with growth customers investment suppliers externalities to in metrics key impact our Stoneridge specific income Brazil. and mix Page XX our Operating of to summarizes work financial with to expected and possible. costs, engineering unfavorable to where despite related continued these the the revenue and chain financial necessary resources. is headwinds, improve product supply

foreign OEM Brazil's in aftermarket second Excluding higher of $X due relative quarter million, rate Stoneridge lines. sales the to $XXX,XXX demand increased exchange to quarter or our primarily favorable by and of impact product XXXX, first the XX% approximately

costs to million in During primarily the quarter, adjusted SG&A and by and due $X.X lower margin the higher operating fixed XXXX, to costs improved compared sales. breakeven of leverage quarter first

quarter second Brazil challenging. macroeconomic our Although strong, performance financial in conditions remain was

electronics of growth segment. the business continue will local our and up drive business support to resources utilize engineering our the on focused remain We for local to ramp global OEM to

XX adjusted month $XX quarter, approximately debt by approximately decreased EBITDA. debt times net XX, trailing $XX Page resulting net of in the in second or million to million X.X Turning

credit the use facility. balance revolving and the to earlier available low of capital. remains due the as call, facility of proceeds leverage sale from significant primarily discussed the the debt reduction was reduction the well the net positioned in a cash in relatively Stoneridge with of Canton of As result

throughout will position everything challenging in we to conditions. closing, external continue will growing focus result our business of growth. power the company committed the and that the the remains to Moving significant year and the take the of open content strategic profitable a backlog and opportunities, shareholder both advantage drive significant With result a to our I within of And will of all of am macroeconomic offset macroeconomically our our questions. for I incremental as similarly, do at to to as up value, growth initiatives. Slide we to portfolio costs of XX, that driving we to that, of confident forefront Stoneridge for the expect call remainder awards future is continue

Operator

session. Gary with Barrington We ahead. [Operator will question-and-answer now comes Prestopino begin Instructions] Gary, Research. go first question The Please, the from

Gary Prestopino

everyone. morning, good Hey,

Jon DeGaynor

morning Gary. Good

Bob Krakowiak

Good Gary. morning

Gary Prestopino

pay some reduction the for normalizes to you're increases price everything having through that do as to Are having like inputs supply chain. you chain the to deal you guys of you of about supply on in What prices comment step on of I'd are I we those There's transitory see now? what going embedded the that of up anticipate kind a inflation. Or is some of lot hold? you're should some maybe snapback issues. the that? in versus these mean to talk with thinking right

Jon DeGaynor

the inflation short-term well as overall We we both. think crisis I based answer Gary, is see as see activities.

very some time So we've from supply a an and normalize some recovery just of will with impact. aspects there's - having work of working of of both perspective. cost our permanent. be to driving level and talked And our with chain we're said, of permanent. why of with the And the we is we as transitory, that the see that increases. of we million Because supply year, as will forecasting work and the what some - it pricing the X lag impact, as this over on more those it's we're do it call, we're that that for a customers why chain real it more some seen is offset with It's and efficiencies will XX our it as already customers impact it's as well where during the both conversations our million where transparent we of suppliers about stabilize

Bob Krakowiak

us, Bob. Yeah, price. is we from and that. want we On Gary, respect announcing we're some to price getting new let telling for to industry before. us calls We're the seeing increases they're This things and suppliers dramatic the with me product, here's just add components, basically that the haven't seen

So of possibly and But out not with the prices in do our recover as to all try those us much we those can on much doing the the run having types do, conversations can. we are and customers are issues. obviously, expecting types short we and going of assured there's things that shareholders rest

Gary Prestopino

the what doing Okay. of was longer the terms you you adjusted basis. at as this then, EBITDA that company basis margin to term some well XXXX I on as mean, position a the still think comfortable, of by expense targets And product given I in XX% of are it internally a you're year, set what beginning

Bob Krakowiak

we way be So that these price to is the terms result we're lots of still be of Gary, in the seeing. what increases, is that going of we're - I historic needs still a the assessing as work middle right impact inflation overall of respond to the done are obviously, in the there's increases to to that and the that company

next from been growing what the continue negotiations tell the we done weighted perspective, we're say organization the planning suppliers about respect our position, So as more around to But result not begin I by we're with a annual markets to process market to our long-term XX%. once our that's on commenting will about the we the work And expect grow commercial through foreseeable be you, be and on future, year and guidance, all our are business XXXX by pricing the average a - new that. with revenue above positive a for side, in great end expecting of talked go for we'll for sales over to at we better awards. our to able

Gary Prestopino

jump doing, you maybe they're how point. I'll got with what these were this fleet then some fleet well, then comment lastly, units going - trials you've on of what Could you're these trials from and doing of you units that number here and off. of and how potential at number Okay,

Jon DeGaynor

to announcements But major In setting the market. said, expansion stage we're down we and developed Gary, about, don't worked, expand previous to and So talk is originally our through trails, we've as broader flowing to with continue seeing it's have we and fleet calls, talked we as today. - leaders safety that's whom the we're what fleet this, any about you we the seeing

fleets So midsize us seeing some with of more interest. these we're to coming

OEs and about we're Product also we What hearing it fleets is probably industry out so significant who of talked our are it or with fleets. how interest, whether I their we're they've a are working National are most a heard Carriers the script interest events, we to we've from with talking and feedback the at in at the important large the OEs the have from - they wanting and on to fleet's midsize because very positive other trucks. the leaders regard it, Association, to and had thing, level it And in the about to are the seen getting a it's figure where seeing that

sense for it we you gives want our to fleets seeing that and So that also have they us a about specific working midsize announcements remember, we're fleets. consortia expand OE. can't we major expansion We any working But have that about don't OE, coming Pre-Wire So trucks feel just it other going, really OEs that's it whole that going. where level much regard trials. Pre-Wired. safety of talked they fleets you a they their we're continue other basis, series get from we're good in we trucks? their with with expansion, when there's just specific interest And a with how we is say, to the Pre-Wire fleet on month-over-month do the the that's as one of with as And had

Gary Prestopino

very you thank much. Okay,

Bob Krakowiak

Gary. Thanks

Jon DeGaynor

question. Thanks. Thank your for you

Operator

Our question Long Stephens. ahead. comes Justin, from next go with Please, Justin

Justin Long

morning. Thanks good and

Bob Krakowiak

Justin. morning Good

Kelly Harvey

Good morning.

Justin Long

does issues the like it pronounced well more has Stoneridge chain very lot are to been a versus known. But other seem supply of there. impact suppliers the out lot So a the

can tricky know talk might why the long reasons terms this some lasts? I a be of So case? in And of how you question. about the this it's

could given XXXX? next linger You've guidance, thoughts the into these any challenges about second if year half but and

Jon DeGaynor

thanks on majority our portfolio as these of Stoneridge stage news Justin for products, to talked calls, us question. your them. the product good it news the products - that So the future, the have where to about, of for chip is of sets it transformation bad many the exposes smart a in And, the we

vehicle pass that the end markets the were in way. commercial both markets so in And then exposed and car end

us. one internal to that's So piece number that's

situation that's We the are have of of end we time. to is is know shareholders. given view. have the side. Secondly, future. from customer that supply we the because the there's exposure year. from on impact balanced regard to situation, regard with we why getting all the impact, of feedback our specific manufacturers lasts, we at little chip conservative that manufacturers long duty term, we and buy the and points continue with our do - balanced are of least in through the we where partners We address our getting for all our going redesign in doing of do the this to different tightness see the duty not light - have chain we What end we exposure the the I bit we're all their corrective some of them say actively total provided. standpoint, only a can what look with make near across This with are would additional and not What others speak And best in at from with OEs. completely the light And that to to guidance we market we but and view OEs and exposure that the OEs a what actions permanent our the how is of working with OE chip that all we're - the

Justin Long

as to maybe margins, And look average that we one I gave thanks, about forward wanted Okay, will to for markets Jon. be your end next you the is XXXX, incremental XX%. Bob, weighted color ask up

for You expect framework. your that set chain it D&D XXXX, above maybe to albeit headwinds, long-term supply to could just think outgrow as framework, margins that even meaningfully elevated the that. above incremental be I and cost, stage seems But about

wanted that some just So, would the something to next if get tailwinds statement, could your or you agree year. thoughts there's offset of that in if around with the that,

Bob Krakowiak

Yeah.

right really of going now XXXX middle the supply with for on of chain in it's me Justin, current kind the on appropriate to comment what's situation. So - not

with normal is we'll those - a like. So not the right to what say to and to conversations more planning it's have going to we going when what having - our and if possibly rest us But and do that And allow say soon as with given right as that I that. we impact something we - I line come prefer talk the just about that our about to of company time looks be we're something now, now in in But middle to issue. having the would it's our we're right have lot out process supply the margin customers through that, the - we're when now's the can. it's this feel suppliers go and have really now. assured not down profile what the to sight going like of that back at long-term we'll conversations of a where chain how to be to get to better impact's And

Justin Long

guidance, we year view get that normalize. comment, a made That the and and the understood should next is was for do in as the rate the just surprise tax the rate. quarter lastly, we you maybe business? you Okay, into but tax normalized What on

Bob Krakowiak

Yeah.

think the let important. let little So me thanks Justin for me expound a tax bit the upon - just question. rate it's because And I

our just talked seen jurisdictions imagine and growth. world our where little the we remarks. forward headwinds do impact all not we that evenly to with launches support the about you new the we've occurred bit in incremental the expenses, the it's moving and of quarter, future But the the supply we're a the on The that can program of in with business. incremental chain, So efforts engineering throughout prepared all

kind losses you get valuation we don't have to in including certain really of and as incremental even tax some earnings of in the some lower benefit going you relatively pretax have result - then allowance that's jurisdictions, any you tax expenses of any where net tax kind from benefit, tax don't that that. well, jurisdictions recognize certain and jurisdictions strong So so higher in

that despite a So it the in tax of is expect the to XXXX looking pretax of year. net return rate We to through to tax result do the unusual continue normalized that given which tax XX.X% loss, a is a We're earnings negative the XX.X% the impact for and trend beyond. will the obviously rate. quarter remainder which to expense range and forward range. looking we've We're the to this at before,

Justin Long

helpful. That's great. I time. the Okay, appreciate

Bob Krakowiak

Justin. Thanks

Jon DeGaynor

Justin. Thanks

Operator

CL go comes ahead. Stember Mr. question with next Stember, Our Scott Please, from King.

Scott Stember

Good thanks taking morning, my for guys, and questions.

Kelly Harvey

Good morning.

Bob Krakowiak

Good morning Scott.

Jon DeGaynor

Good morning Scott.

Scott Stember

little Electronics Maybe a talk about bit.

I to to and just the some to when start segment. maybe Primarily, getting some or of the plus little back, the to costs for to that I If were the add launches breakeven year, timeline half bit. product first guess, that can hit talk year, this back and of floating you other Can about around guess, for you're we the the for a I supply maybe obsolescence chain abate or guess minus charge, issues? profitability still see you in the

Jon DeGaynor

Yeah.

Scott, of are the the things it's the how these in well of frustration one many greatest headwinds. spite of question. have for So sources think thank we in I organization is And that going

our with we've If our about with number as also advanced instrument the at and have overwhelmed development activities the that gets Electronics look and well you it on rotation we as is the of you the turbulence. progress chain capabilities. plants our the on progress programs between the many times the about look just supply going at look right talked what and between at we've times, clusters, of launches But in now - MirrorEye the many with launches, talked what

of business as ramps programs ramp the a we're is MirrorEye you that's now that positioned ramp right talked right and and growth things inventory absolutely up profitability. happen all business like up, and and disruptions the see So like the well and cluster other as up, chain you positioned you what things completely is and great seeing great for the SMART instrument supply programs those things this back about, X add PACCAR

Scott Stember

guidance and much? how none in sharing, guaranteed. year? Bob, the is you for and this guess, I okay of cost is with it, any regards really that in the talked and about there Have you of you any put to of Got remainder did how if the But

Bob Krakowiak

you Yeah. question. much so Scott, for the thank

put haven't We year. for of balance the - with very respect the guidance the much in to

we're absolutely our had mentioned, increases saw million also with we $X the the of We have that active we in - quarter. of X Jon customers, during as discussions million

quickly, those have increases moving with overall, But we're a recovery we we're responding, in before, around we're a the in respect Scott, said terms from of having that that supply guidance the I on in the we've much the perspective included numbers provided. basis seeing not to with as conversations customers daily to chain. So our relative

Scott Stember

guidance? retrofits of MirrorEye, Got it and nicely. then that is us Pre-Wire's and seems just give of see total lastly XXXX? Can It be How just made on you MirrorEye would you've an estimate here related the like and much more to accelerating seem you revenues traction that in your some for

Jon DeGaynor

out that's And didn't for seeing fleets set we're of accelerating. We couple opportunity, in seeing an couple bus originally small that when sort that's retrofits, that right about these we've pull the remember, in is we midsize the the opportunities necessarily are - now. relatively guidance we're systems the what we're midsize XXXX So talked seeing which the What expect talked of numbers expansion, of about XXXX opportunity we're MirrorEye fleets Scott an the we our guidance. accelerating. to here seeing are

what So how we're about this really safety positive trickling what leading doing safety doing, and fleets what and are Pre-Wire's the down. results that's

change of does done marketplace does it the doesn't change on in there get also fleets, trucks, MirrorEye retrofit to thing the interest ability constraints think - availability regard it from to important And change those new I the it trucks. is but when note the they is trucks. often the an there's new with can when that

put constrained are their fleets that to new there when their trucks in get new that know MirrorEye are truck. want So and service, can retrofit that a by trucks with we they

regard see we impacts our what help they to to that be can pole what us is only supply there, interest constraint our end continue we retrofitted. the the impacts talk demand seeing now, see so expanding. and that about what what that performance standpoint, and will but earlier we and chain from can with there, us customers we talked we you? the see not access about Did So get we're the sense? a it financial markets make trucks to Does Right

Scott Stember

the forgot Yeah, be was what would it I number. gave to of next you was. for I relatively does. you Yeah. Also, full But a that year. it it number obviously, quarter, the last But expect immaterial. material a guess for year, lot

Jon DeGaynor

retrofit our a MirrorEye fleet also again, is with activity services platform. critical of but Yeah, portion developing this

OEs a for I So So create forward. OE safety is providing more we're fleet activity true that going for programs and what way do provide the going in forward? pull look the services also - to way a how it the a we platform at as retrofit as

about and it talk next as talked additional market rate we when see drive the programs and we more about take XX% take end into also year XX%. a OE year the So we the more and this market rate, through launching early that of poll, beyond should the awareness are retrofit at

activities, hard into on there's sides way make very synergy those that we and XXXX. the between synergy with will sure to there's that So both work that it opportunities create work and OEs

Scott Stember

all Thanks, That's have. I guys.

Bob Krakowiak

Thanks Scott.

Jon DeGaynor

Thanks Scott. Thanks for your questions.

Operator

Jon conference any DeGaynor back the our would session. remarks. closing for turn This I question-and-answer to concludes like over to

Jon DeGaynor

you strong in results, drive In assure our deployment to is Yes, company focused and shareholder business your profitable available I our thank committed of operating want participation I everybody closing, through can resources. value today's new that continuing for call. to to

management respond and success drive and we continue control effectively to manage will for all will performance. the you efficiently and impact Our beyond. and XXXX our continued variables to result We're confident strong here. that will we being team can in actions that Thank financial for

Operator

for you attending presentation. The conference Thank has now today's concluded.

disconnect. may You now

Stoneridge (SRI) 8 Aug 212021 Q2 Earnings call transcript