SRI - Earnings call transcript Q2 2022

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Operator

Good day, and thank you for staying by. Welcome to the Stoneridge Second Quarter 2022 Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a Q&A session. [Operator instructions]. today's being that advised be conference recorded. is Please hand over Director to would Investor now speaker conference to like Harvey, I your the today, Relations. of Kelly Please go ahead.

Kelly Harvey

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

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

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

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

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

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

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

Jon DeGaynor

morning, good and Kelly, Thanks, everyone.

our this Before period. to Stoneridge for to team with and the dedication we specific the customers thank challenging want recognize their and begin during the I to the of results continued quarter, company

challenges, through production chain rising disruptions, costs. volatility, ongoing quarter, we Turning to Page supply In X. continued including to material and navigate second macroeconomic the

structure, significant recovery focused responding cost During we European material, continuing exposures. our also on customers fluctuating currency related experienced cost to actions. We suppliers and to managing with to production our on securing and engage foreign currency schedules, the primarily headwinds, quarter,

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

quarter currency headwinds Second previous net EPS of expectations. by approximately versus impacted was adjusted $X.XX foreign performance

We a of chain-related the pricing actions supply of through costs material offset pass-through incremental and continued and large portion to costs.

approximately incremental year-to-date year. offset of have costs to last We XX% relative

Additionally, spot to more we offsetting through in our than spot customers, continue majority buys $XX million pass quarter. the the of purchases in OEM to

on ongoing regarding We will other continue cost expect to will increases growth long-term profitable drive the growth. customers focused that price macroeconomic evaluate discussions our recovery and and conditions, initiatives remain We with actions.

by conditions, despite $XX second updating models. end on leverage than fixed slower lower our We're lowering guidance quarter adjusted midpoint well year we our to material to performance. and customer continued our to will continued as continues rates in and customer we suggest exceed continued production our Europe MirrorEye quarter, launch the During platform, take make rates the rise production in program OEM more to available, as million market are reflect current This Europe, retrofit morning, our as sales guidance shift to continue programs. on we to of truck progress expansion readily strong with Take margin expectations, production first forecasts expectations. market prior reflect and these updating in becomes new to sales focusing Therefore, reduced cost to expected volumes are improvement reflect expectations customer continued demand. full

Additionally, and interest we to incremental expense. ongoing tax non-operating related expect headwinds

prior relative detail reducing guidance this full will on adjusted provide financial to are our quarter. result, key in the summarizes our additional $X.XX. year morning to EPS midpoint we a As call. guidance negative our of a year later metrics Page Matt the full X

our continued markets, continued offset production end in part volatility. strong saw commercial quarter, the customer vehicle by off-highway During performance we in and

program, as incremental MirrorEye ramp-up continued of higher pricing during the quarter. contributed to actions, In addition, well programs, sales first as OEM new the the including

impacted Second million. $X.X unfavorably by quarter by were currency foreign approximately sales

currency QX, of an the relative revenue adjusted to foreign we impact X% growth experienced Excluding quarter-to-quarter. of approximately

Excluding by basis the of to gross relative declined the XXX foreign second first quarter currency, margin points quarter’s impact adjusted XXXX. of

we non-recurring incremental quarter, expenses incurred do these related will basis the our XX by gross inventory Within margin impacted our that items. gross points. margin adjustments specific profile to be We expect that not approximately by rate impacted run

careful combined and revenue that expanded to and will drive the second taken supply X costs on improvement year, provides creating costs performance, in an and XXXX. expect rate We our strong a with to of margins, Material incremental gross XXXX. in rise. costs chain-related actions the Slide operating update continued half operating cost in run into growth continue control, offset

place customers agreements these to supply with and portion will chain offset continue said, That on we have material additional costs. headwinds to of going forward. costs, that face large a necessary in strategies However, pricing and expect actions be we

previous incremental we the chain the able were experienced chain markets Overall, cost availability. and to externalities Excluding recoveries, XX% primarily and to as costs, continue offset in remain material drive overall the We we the is expect actions. net by buys increases risk customers, there limit of continued costs neutral versus passed impact of of expectations. recognize supply our year-to-date, approximately to increased material through material our price material supply recovery driven costs spot to

to suppliers our place our to work ease. in to to as incremental strengthen issues continue continue margin, chain and actions supply with not only recover, but customers gross put We costs,

X. Page to Turning

July Vice announced quarter, Senior returned X. for we Chain, President Supply the our has During to of company role Heigel, Integrated a consulting Kevin that the effective

Sal Orsini in the announced experience and the around the Sal XX years our team, quality be Since our in global chain will executing Archie strategy through supplier strategy. my including focused Current Global Europe, lead and in As Pacific, join company's Of world, aspects industries, and organization, procurement Asia to joining Operations, all Nimmer, to XXXX, lead and of integral global on Officer, objectives chain to Operations. management Archie Sal procurement supply supply than continue globally the and an leading organizations global staff. strategic while operations aerospace shaping automotive the excellence a Operations Vice more Operations, of will Nimmer, Procurement of company on our the Archie organization. Vice brings lead living execute on the President Mexico. our drive President Global will with a Archie operational current company. we our our played continuing for organization, global result, as Stoneridge to role appointment Chief continue focus of procurement has to in

from XXXX. the note It production, to take be such, program take forward, constraining not as and XX%. customer on margins from overall issues still model That is XX% has new only an we late as first into strong do constraints drive contribution transitioning old our important take to a expand. OEM Turning expect take OE rate certain due continues rate to on that are Based take been to Page to percentage, partner, to rates existing said, averaging thereon, the X, OEM supply model a MirrorEye program in heading expand the going model and components, the discussions our XXXX, strong we also that rates to is recognized year. a the tailwind vehicle for limited is approximately production but significant with rate million result, rate take first applied $X to Based subside, million $XX expect sales. demand will production. overall OEM are to least be sales forecasting launched continues estimating approximately volume, that the only new MirrorEye in in as Year-to-date, also continue is on Europe market as program with greater have in we MirrorEye in XXXX. supply chain revenue our in and chain as upside next to than potential at has and we This in

that based initial we addition, strong the This believe potential take will rates potential. future on program, take launches estimates. the upside program optimistic for OEM future system. exceed revenue for In rates the prior the of take for performance We to current and indicators earnings drive has rates significant the are are

our resources effort we current to every to plan. continue and the and drive battled to have the in strategic been to performance continue long-term on will and of challenging years expand necessary have our The two business MirrorEye’s accelerate invest all day our channels. for We successes adoption industry, through make and against our last progress

Slide progress, X, I step to to think to it’s the despite have take and Moving our we a moment continue on face. important and to challenges reflect expect to macroeconomic back

we significant product we compound vehicle product supports technologies and safety, growth five-year underlying investment growth backlog years, of mega significant effectively platforms several XXXX. billion. with company's in have of Through $X.X This including trends, forward, the have Over awarded topline the portfolio moving and to by business those annual that alignment advanced drivers, of in industry expectation continued the with transformed built align with billion intelligence. outgrowth, market aligned electrification, a growth This and X%. a exceeds revenue $X.X represents rate robust last

by with our growth drivetrain portfolio as We trains of expected drive have our that forward, developed agnostic industry also XX% more the be power while XXXX. aligning will this trajectory is to our product than portfolio

coupled margin that of performance with structure will significant focus optimization, and expect on cost level growth, our this We continued expansion. operational drive

to of We going XX% with EBITDA and XXXX. our XX.X%, historical of forward, at performance, XX% aligned expect margins margins XX% to up driving by contribution least

and increases of incremental XXXX. significant faced operations Our costs, stabilization, strategy, successful to and the actions since despite cost headwinds price well margin material efficient pass-through chain as contributed have we through have recovery as early supply macroeconomic

capabilities, and performance technology company. this transformation global accelerate the bring will and about strict We savings, growth allocation resources, platforms cost of of creating to through financial the

and has of on facilitate existing positioned growth focus Our expand MirrorEye programs, continued to retrofit platform well opportunities. incremental us drive awards, the

We have to now MirrorEye starting the an off. are and invested are at point in where a our engineering of platform, we resources pay investments significant inflection amount

Devices much of portfolio segment markets, the financial a years, been financial with it drive to have is to over the the ultimately we fixate to outperform sustainable While With it expansion, strategic detail. and our powertrain execute that continue because important Matt said, over impact segment our several centered has several that, growth the of MirrorEye, significantly deliver performance. discussion growth. in on it's significant remember to they've And to end Control electrification, Stoneridge and our has transformed on profitable on last years, through on our easy our and shareholder plan margin growth. over to faced our challenges I'll positions long-term more discuss product significant that That macroeconomic significantly results been we that aligned for expected has substantial the positions a long-term turn value had last

Matt Horvath

Thanks, Jon.

impact $X.X inventory million an by important second material It rise. adjusted million, the for sales. were to expenses million. of by margin operating versus impact approximately well as continue decline operating right-size corresponding and recoveries $XXX that prior XX, gross approximately which margin, relative the with of negative accounted in This as Adjusted $X.X to primarily quarter price was of the continue of quarter or to negative The costs XXX sales These the related X.X% Slide the within the to quarter. incremental specific approximately they continued points is current due Turning incremental foreign of material actions as as we is million, basis decreased pricing X.X% our loss both were align as prior cost costs, as note sales, market impact dilute $X.X and reduced conditions. adjusted non-recurring quarter. adjustments to in are performance currency offset expenses, of these the incremental to to structure expenses amplified is increase

guidance in current to are call, quarter earlier conditions. we impacted foreign discussed year performance, headwinds, primarily reflect the by XXXX adjusting well our as Jon currency which As second as was market full

slower reducing by end demand. in forecasts, revenue material $XX improvement primarily driven market reflect or by midpoint million are X.X% shortages, our despite customer adjusted production We expected to strong guidance continued than

leverage points gross offset reflect margin cost sales We operating on reduced basis XX expectations, fixed reduced basis XX by cost structure. are to by by reduced margin reducing points and

of our of Page some we drivers headwinds, more FX basis share XX and of I in expense, negative to EPS margin relative XX this interest discuss call. of $X.XX. Additionally, the guidance our on a This There second to in resulting items first we results adjusted guidance $X.XX, drivers EBITDA expect the will of impacted reduction to tax the in of key expense. call. several detail and midpoint incremental reduction per the quarter in a that adjusted guidance specific adjusted a significant summarizes points, adjusted quarter earnings expectations operating during performance outlined quarter. later were

As we other customer discussed within continued in and chain and limitations production component resulted second production schedules. and quarter. manufacturing previously, efficiencies to quarter we supply continued volatility in This impacting the experience costs availability to the incremental due

detail impact periods. of the previously, costs recoveries, with prior the rising prior Jon in line significant portion incremental well of expectations, As to the within our continue relatively were quarter, we discussed as as costs a related both in material in price with costs to as quarter, offset

continue and recover our run suppliers costs negotiations We to in to margin to our engage supply and normal. return gross rate customers as chains improve

the inventory During included expect reflect quarter rate. reducing will issues adjustments to experienced balances that gross current million. these run to adjustments We specific margin forecasts. approximately we do impact non-recurring amounted that inventory These $X.X not our

was quarter, offset our Offsetting margin negatively continue during our hedge SG&A market operating offset quarter, entities. cost well expenses, one-time XX.X%. performance and in total, engineering the by unfavorable recognizing spending, monitor net a investment primarily the conditions. carefully these to structure the versus foreign portion the quarter, with as reduce current prior quarter significantly, $X.X by will headwinds our been the performance negative expectations, million our impacted these negative as in spend align of impact approximately and of Excluding We reductions foreign $X.XX in large have in unwinding would impact. we and approximately European monetizing benefit. of of impacts approximately In FX-related positions approximately resulting as cost More gross currency net second currency, headwinds

the In to adjusted for This market call. we earnings and going lower second markets look currency relative advantage monitor forward, to conditions to quarter expectations reduce currency of financial to was volatility on per our opportunities take performance. global continue were on exposures share summary, possible XX than was and of China. the driven in primarily will program approximately shutdowns continued where We of offset performance, which impact carefully were outlined COVID-related our customer Control approximately was FX Control the our first $X.XX operating million, with OEM $XX and of headwinds. first $X.XX quarter our production to This $X.XX schedules, the Devices. financial by ramp-ups, Devices in to specific Page key volatility quarter. summarizes actuation due metrics line by continued in sales

ease passenger X.X% benefit sales. We Operating in quarter, XXX $X.X adjusted approximately customers. versus first production continue margin quarter Operating favorable improves quarters China, the of growth the decreased costs. subsequent the by expect for basis as points revenue Control for timing for of and first of North by lockdowns American as key the material in the SG&A was in XXXX, million driven well higher Devices, as or car to primarily our quarter, recognized a income

financial XX incremental execute our the foreign MirrorEye of OEM and points and Devices we operating the offset off-highway of the margin our to the of Page improved continued to sequentially by $XXX as primarily currency ramp-up higher first second and digital million, to $X.X quarter. of the material quarter. adjusted currency impact as costs advantage take Electronics the foreign XXX of facilities. of year, We specific information one-time the end to increase customer $X.X performance in sales primarily improve versus and of million, spend, key markets, to net driver unfavorable X% systems, volume favorable million, relative inflation, as spend. negatively our offset which previously of quarter remainder program. and engineering was costs well discussed approximately forecast were the driven excluding incremental unfavorable and prior expect sales, in commercial metrics sales first and vehicle throughout excluding favorable and by impacted loss, inventory approximately manufacturing impacted operational million, expansion approximately our our Control SG&A summarizes the growth of quarter, due Revenue reimbursements, This and The our drive $X.X was Operating to adjustments initiatives on basis due an by higher timing Electronics. of

several is previously. actions, and growth to of expenses to recovery the strong as fixed with first programs, we Operating income across ramp-up to margin strong expect program, as revenue in and Jon as including continue with XXXX, as markets, to We leverage expected demand launch well large strong OEM end with ensure MirrorEye our continue cost improve operating carefully control discussed gross revenue our stabilize cost growth. our

approximately Stoneridge We that our declined by Stoneridge summarizes the Electronics sequentially, spend. or $X.X remain first typical as revenue favorable XXXX. currency costs of financial run headwinds. expect operating $XXX,XXX, of challenges Despite OEM efficient of million continue XXXX. remain quarter, $XXX,XXX, to focused economic by operating quarter summarizes to expectations flat Brazil, due excluding Page relatively compared in into higher metrics the rate of of will second to specific EPS. primarily business, We the the and of relative margin ramp-up creating expect on heading SG&A of sales, quarter full currency to D&D impact XX XX XXXX margins XXXX, to increased our expand for primarily Page to a in Brazil's seasonality. slightly strong of Brazil. income, key to first foreign due to to impact offset the foreign and approximately Adjusted favorable relative year we continued the X.X% macroeconomic variable $XXX,XXX, adjusted sales management local impact excluding and

which We expectations. midpoint $X.XX prior guidance our relative reducing a of to the EPS represents adjusted negative $X.XX, are to reduction

$X.XX primarily FX underperformed discussed headwinds. the second driven quarter our As previously, prior of expectations, by

continued Despite of create global logistics reduce the by material adjusted or capabilities. to production customers, schedules production dynamics, year guidance of revenue continue the will a strong and expect to volatile remainder the availability customer production range for $XX million. X.X% $XXX approximately million we We million our reducing our to and by are $XXX midpoint forecast

We as expect subside a volume strong into challenges XXXX. tailwind material

in expectations. the on material the approximately with in our have expect expect by keep that we increases, XX% to taken, $X.XX will will headwinds our based reduction material in cost revenue We we decremental second line impact adjusted XX%. actions prior EPS take, expectations half to of cost Despite continue margins pricing continued of the contribution and to

remainder As are moderately we interest a resulting in the expense $X.XX forecasting rise, for rates continue headwind. interest incremental of the year, to

US headwind of mix are related forecasted the We expectations tax due resulting $XXX,XXX second total, of non-operating to in remainder the revenue for expense expenses. expect $X.XX operations, year. expected incremental In headwinds and a approximately of on geographical and earnings, foreign our half expecting tax incremental to we reduced

We expect reductions on continued based with run current to portion operating those to offset in structure and conditions. rate a our cost of expenses headwinds align market

majority impact previously ramp-up the expected. have to We the volumes been slower expect production reduction the will as quarter, than of third

We quarter, rate third a breakeven to earnings quarter top significant a expect improvement both fourth and perspective, bottom-line into in and performance share, be XXXX. a per strong we as the with approximately run from head

Moving control, ability. our of macroeconomic headwinds XX, focus that to within best the costs our we to controlling and slide are continue on to offsetting

and to stabilize schedules We year. the revenue, efficiently supply expect of incremental respond throughout continued to remainder advantage to execute continue and production chain the of as the headwinds, take

the and at I forefront is earlier of the that, committed value, initiatives. questions. As all the Jon remains of will call shareholder strategic call, discussed in open driving up for our Stoneridge that focus to With

Operator

from Justin Long question first comes Stephens. Our Instructions] of [Operator

now is line Your open.

Justin Long

morning. and Thanks, good

back Could and helpful are Matt. pretty cadence So, through ramp to EPS to get the revenue the moving color on in you your big share and was that third cadence It start in EBITDA of I expectations a the half? for the guidance, what guess then fourth. in with breakeven the the I wanted

Matt Horvath

a That's of our the and ramp of Obviously, expect we significant end production strong public Good around limitations Yes, half. only also second not Justin. we do aligned but in with, forecast that see, demand. market question, comments the course. customers' easing material really several

the to mid-single-digit then from to kind an would would contribute stuff kind the - greater think in cost we run third given inventory and aligned fact margin high or from impact bit by little the the than and third actions close - talked contribution rate. second always translate So, revenue progression, that see aligned as of to if at which at high year, that high XX% with about the quarter, we ramping the end reduction again that the third, second as faster. you with you revenue and digits, you margins, remainder to up about that's a fact taken be to as look stronger to single end third the the close revenue, the the the FX our of And EBITDA if continue that as historical our we to we've we're - in some expecting fourth. our incremental expect at revenue ramp the significant ramps quarter, for that, range of we that year, an end to second to guidance, incremental exit get of reasonable the Justin the - we look That's of end high of expect of aligned, quarter of some kind the to

close from EBITDA third, to end So, we to third, stronger the mid-single second third XX% from and ramping the of revenue continued with margin the the kind by of the progression in fourth, digit to expect to year.

Justin Long

a taking that's EPS I significant about back for the year? move quarter of can high guess, year as of fourth an good just from rate margins. I Okay. midpoint I fourth that perspective, I to it's talk EBITDA to you rate in is the helpful. visibility your this point If high the that implied close as quarter your starting into quarter, fourth XX% a into about think That's we exit kind the a run guidance? digit, a this and guidance, XXXX, implied swing. kind at from single And of And mean, next of just $X.XX. level,

Matt Horvath

Yes.

timing and you of little get bit in fourth of quarter, a reimbursements we Justin, some the have So, engineering when seasonality always expenses. the

get that perspective with the a in from strong. get that you earnings couple bit over margins a are of always really relatively topline, little fourth on the contribution When benefit quarter. ramp-up some time period of short an we strong you So,

So, off-highway, that that and continued to a things do we a demand in easing From the earnings about, fourth into to extremely we're we continuing your to we quarter. really XXXX. are see take the with get demand certainly, it's accelerate as in When seeing and we about strong our strong, the not really the from of to get but ramp-up fourth heading expect we answer has from street to think run end OEM a you those MirrorEye question only And aftermarket. perspective visibility, a markets, strong material to reasonable expect quarter an markets. even into - we couple think further perspective. some markets, like the rate Orlaco When you accelerate we as continue talked potential that to availability on

continued good the have into demand. strong we So, visibility

I say, of easing, second bit material a gives gives year. - some as limitations the a the more that should that little half of little some we credibility head into easing, demand seeing are which material which We demand

year. we note One good quarter, leading of we to spot that in should suggests seeing get of availability. from continue indicator is, second seeing are as be buys the material to on we easing first material the And here, things that the which buys reduced Justin, a I second would half the seem spot

really seeing we're strong demand. So,

strong publicly extremely are about customers demand. talking Our

is you think upside it an the So, going about closely. into things should second previously perspective, about And volume. we said, ramp earnings obviously material MirrorEye think the follow strong half perhaps contribution margin, we from that subside, talked that viable. and as XXXX, when rates take And we've we to issues some we even think like got in a very pretty

there's think a heading we rate So, really into run strong XXXX.

Justin Long

the to wanted ask guidance, on And It last wondering about in you provide your MirrorEye recently. retrofit. Okay. chain supply you're expectations a rate environment. MirrorEye if on was OE retrofit update maybe activity, normalized I what's thing seeing a perspective, XXXX on baked good And here was take get the MirrorEye. update was both could getting what and But I to in from an

Jon DeGaynor

OE rates We're excited it's the the and rates Justin, about take as we we that With our just about There, loose. the from Schneider. put acceptance talked trials the and about market huge. working to material, and product what first seeing So, the greater fleet, both to chain level customer are constrained hearing like call. our customers half. see results that's we've will break there we we that is exceeding the portends more expand continue those or And what second with acceptance see should for - read the And that the as the the in anticipated. take Jon. in OE in try so we the we to on or the continue for confident - And Maverick feel the half, side, both one but success hearing supply OEM the regard initially our are what - confident about, from also those one also of reasons during because and the it's of progress why fleet and our the program, expect again, on second we're by far backlogs talked feel then And to fleets for is are across. we to well programs, next they’re specific to

that in look of and So, both what year end OE forward and sides, the the XXXX. the proud retrofit what to on we're means bullish really the the of both team side, doing is on

Justin Long

And I for this in on on what's Okay. guidance, revenue share MirrorEye year? the baked Thanks. Matt, you guess is there anything can

Matt Horvath

Yes, sure. Yes.

sales. even That by million year-to-date, OE $X recognized So, talked we in up like material. been obviously, till about, about we've now, constrained has

expect we we that's go retrofit improve sequentially incremental as portion well. is an to So, There as forward. that

$XX the remainder kind through beginning would to with constraints here. the range, million think about and stay OE of million of the And even the we of I retrofit. total within of year we that MirrorEye sales the at material year, talked $XX I think that

Justin Long

Got it. Thanks, Very helpful. Thanks, Matt. Jon.

Kelly Harvey

turn to like closing it DeGaynor now would I Jon Justin. you, back Thank right. for All remarks. to

Jon DeGaynor

close will team you variables to the confident drive This actions. will and much. strong the everybody results. I I in of to continuing is to of continue efficiently just We're shareholder that through participation and results management want strong assure effectively want respond saying deployment can thank has to results control committed we Thanks value your company focus financial available to that today's to We'll call. in very impact by the the those and we operating for deliver respond, and manage in business that balance our new resources. drive can profitable beyond. our great year to responded, and and

Operator

you your the today's participation This Thank does conclude in program. for conference.

You disconnect. may now

Stoneridge (SRI) 7 Aug 222022 Q2 Earnings call transcript