Transcript • May. 7, 2026 1:00 PM • Stoneridge, Inc (SRI)
Transcript
May. 7, 2026 1:00 PM
Stoneridge, Inc (SRI)
Natalia Nobale: in 2028 with estimated lifetime revenue of approximately $70 million and estimated peak annual revenue of approximately $20 million. We now have Mirai programs with four major OEMs in North America, resulting in significant market share. Mirai and our strategy to create long-term growth for the platform is paying off with additional business awards and expression across the global OEMs. We are deploying the resources necessary to optimize this growth platform and create long-term value for our shareholders. Turning to slide seven, in addition to MirrorEye, we continue to win new programs in our other key product categories. As part of our strategy to expand our electronic control business, we secured a business award for a next generation control program with the leading global off-highway vehicle manufacturer in Europe. Replacing our current generation control, this program will deliver upgraded products for the main electronic units on several construction equipment platforms, including wheel loaders, articulated haulers, and excavators. The program is expected to launch in the first quarter of 2028 and is projected to generate total lifetime revenue of approximately $65 million, with estimated peak annual revenue of approximately $15 million. This replacement business with a longstanding strategic customer reflects our ability to consistently deliver exceptional customer service and reliable, high-performance solutions to our customers. As the commercial vehicles are moving towards software-defined vehicles architecture, We are prepared to enable this transformation with our scalable ECU platform products. We expect this award to continue to position us for future business wins. Sunridge remains focused on consistently delivering innovative next generation solutions that meet our customers' evolving needs. And with that, I will turn the call over to Bob for the financial update.
Bob: Thank you, Natalia. Page 9 summarizes our key financial metrics for the first quarter of 2026 compared to the fourth quarter. Sales in the first quarter were $160.8 million, which were relatively consistent with our prior expectations. First quarter revenue grew by 9.2% compared to the fourth quarter, driven by quarterly record sales for Mirai, as well as higher sales in the Brazilian OEM business and off-highway end markets. This growth was partially offset by continued pressure in the commercial vehicle end markets. During the quarter, we also recognized $3.8 million of revenue from contract manufacturing related to the Mexico supply agreement associated with the sale of control devices. Driven by execution of key company initiatives, margins continued to expand in the first quarter. Continuous improvement in manufacturing performance including company-wide efforts to reduce quality-related costs as well as favorable net tariff-related recoveries contributed to the 400 basis point improvement in adjusted gross margin over the fourth quarter of last year. As a result of our continued efforts to remediate tariff-related costs incurred, we recognized a favorable net tariff benefit during the quarter resulting from both customer reimbursement agreements and IEBA tariff refunds. First quarter adjusted operating income improved by 180 basis points relative to the fourth quarter of 2025. This was primarily driven by the gross margin improvement partially offset by higher SG&A due in part to the normalization of incentive-based compensation and higher DMD primarily driven by lower customer reimbursement. As Natalia mentioned earlier on the call, we remain committed to the $5 million structural cost reduction target this year. First quarter adjusted EBITDA was $2 million, which was above our previous expectations of approximately break-even performance. Excluding non-operating income and expenses primarily related to the foreign currency impact on intercompany balances, first quarter adjusted EBITDA expanded by 170 basis points compared to the fourth quarter. In summary, during the quarter, our top line and margin expansion demonstrated solid progress towards our long-term goals. Turning to slide 10. As Natalia mentioned earlier on in the call, we are adjusting our full year 2026 guidance ranges to reflect the incremental impact of contract manufacturing revenue expected to be recognized this year from the Mexico Supply Agreement related to the sale of control devices. While the estimated benefit of this agreement was previously included in our adjusted EBITDA guidance as non-operating other income net, we are updating full-year revenue and operating margin guidance ranges to align with revised revenue recognition treatment. As such, we are updating our full-year revenue guidance by $20 million. This results in four-year revenue guidance of $645 million to $670 million and adjusted operating margin of approximately break-even to 0.5%. Adjusted even to guidance remains unchanged at $20 million to $25 million, resulting in 3.1% to 3.7% sales. That said, Our base guidance remains unchanged, supported by our solid progress to start the year. While commercial vehicle production volume forecasts are continuing to improve, macroeconomic and geopolitical volatility continues to persist. We remain confident in our initial outlook and the meaningful progress we are making across all our key initiatives. Furthermore, we also remain focused on driving organizational efficiencies and have already taken actions to reduce structural costs to better align our cost base with the company's current scale, which will position us to deliver sustainable long-term performance. As it relates to the cadence of our guidance, we are expecting second quarter revenue to be slightly above the first quarter. We are expecting EBITDA to continue to improve in the second half of the year, aligned with expected revenue growth, and the ramp-up of benefits from material and structural cost improvements. This expected cadence would result in improved EBITDA in the second half of the year compared to the first half. In summary, we are still expecting revenue growth, continuous improvement in our operating performance, and structural cost reductions to drive EBITDA expansion in 2026. Page 11 summarizes our key financial metrics specific to electronics. First quarter sales of $144.9 million were 8.7% higher than sales in the fourth quarter. Stoner-specific growth factors continued to offset production volume headwinds. More specifically, Mirai set another record for quarterly sales growing to $33 million, or 11% relative to the fourth quarter of 2025. Furthermore, our sales in the European and North American off-highway end markets increased compared to the fourth quarter, driven by stronger market adoption of our products. This growth was partially offset by lower SMART II tachograph sales in Europe, as expected, due to the completion of the regulatory retrofit campaign. Also included in first quarter sales was $3.8 million of contract manufacturing revenue from the Mexico supply agreement related to the sale of the control devices segment. First quarter adjusted operating margin expanded by approximately 260 basis points compared to the fourth quarter of the prior year, driven by higher gross margin as a result of manufacturing performance improvements, reduced quality-related costs, and the favorable impact of net tariff recoveries. The impact of contract manufacturing under the Mexico Supply Agreement, which began in the first quarter of 2026, was incremental to the fourth quarter. This was partially offset by higher SG&A driven by normalized incentive compensation and higher D&D costs primarily driven by lower customer reimbursements. We remain confident that Stoner's specific growth drivers, including Mirai, will drive market outperformance going forward. We will continue to focus our efforts on material cost and manufacturing performance, including quality-related cost improvements to build a more efficient, scalable operation that consistently delivers high-quality products and results. Page 12 summarizes our key financial metrics specific to StoneRidge Brazil. StoneRidge Brazil's first quarter sales totaled $18.1 million which represents a $1.6 million or 9.4% growth relative to the fourth quarter of last year. This increase was driven by higher local OEM sales, which expanded 54% compared to the fourth quarter. We remain focused on expanding our local OEM business to grow our presence in Brazil and unlock opportunities with our global customers. First quarter adjusted operating income of $1.7 million, or 9.5% of sales, improved by 140 basis points compared to the fourth quarter of 2025, primarily driven by fixed cost leverage on higher sales and lower SG&A costs due to lower incentive compensation. This was offset by unfavorable sales mix caused by a lower proportion of service fee revenue. We continue to shift our portfolio in Brazil to more closely align with our global growth initiatives and further expand our local OEM programs to support our global customers, such as our second quarter launch of an audio product for a global automotive OEM. Brazil remains a critical engineering center where we utilize their local capabilities to cost-effectively support our global business. Turning to page 13, in the first quarter, net debt improved by approximately $42 million compared to the fourth quarter as the proceeds from the sale of control devices were used to pay down our debt balances. We remain focused on driving strong cash flow conversion through both disciplined working capital management and capital expenditure oversight. As a result of these efforts, we reduced inventory balances by approximately $16 million year over year, while continuing to scrutinize capital expenditures. As disclosed last quarter, we completed an amendment of our current credit facility to extend the maturity date to July 1, 2027, to allow ample time to refinance. In April, we initiated this refinancing process to replace our existing credit facility with a capital structure that will more align with the long-term structure of the company and support future growth opportunities. We are targeting completion of the refinancing process by November of this year. Finally, based on our current EBITDA guidance and our amended covenant ratios, we expect to remain in compliance with all of our covenant ratios and have sufficient liquidity to navigate continuing volatility. With that, I will turn it over to Natalia to provide an update on our progress against our key priorities.
Natalia Nobale: Thank you, Bob. Turning to slide 14. To summarize, in the first quarter, we advanced our key strategic priorities, driven by our focus on technology-led products, excellence in execution, and a strong performance culture, enabling meaningful progress across shareholder value of market outperformance, margin expansion, and cash flow conversion. First, our focus on advanced technology solutions continues to drive market outperformance. Our top-line growth exceeded our weight of average OEM and markets by more than 15%, driven by execution in our core programs, including Mirorai, the Brazilian OEM business, and off-highway products. Furthermore, our strong customer intimacy and deep customer integration resulted in the new business awards I outlined earlier on the call. Driven by our robust backlog on differentiated innovative technologies, we expect to drive market outperformance of two to three times over the long term. Second, driven by our focus on excellence in execution, we made meaningful progress towards improving margins and advancing long-term sustainable performance. We continue to reinforce strong, consistent practices across our processes to enhance operational efficiency and product reliability, which in return have driven modestly lower quality-related costs compared to the fourth quarter, primarily thanks to lower warranty-related costs. As a result, first quarter gross margin expanded by 400 base points compared to the fourth quarter of prior year. In addition to margin performance, we are focused on cash flow conversion through disciplined working capital improvements and capital allocation. We continue to prioritize cash generation and a strong balance sheet through operating performance, inventory reduction, and strict capital spending. As Bob already mentioned, we have reduced our year-over-year inventory balances through working capital initiatives and have significantly reduced our net debt compared to year-end through the use of proceeds of the sale of control devices. These actions have strengthened our balance sheet and strengthened our financial position going forward. As a team, we are also mobilized to mitigate arising inflationary pressures especially in semiconductor space, and volume uncertainty due to the current market and geopolitical situation. By fostering a culture of accountability, creativity, collaboration, and continuous improvement, we are focused to execute our plan for this and next years to come. And with that, I will turn the call over to questions.
Operator: Thank you. We will now begin the question and answer session. Participants who wish to ask a question may press star and 1 on your telephone keypad. If you're using a speakerphone, you may pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, you may press star and then 2. At this time, you will pause momentarily to assemble a roster. As we have no questions, I would now like to turn the conference over back to Ms. Natalia Nobale for closing remarks.
Natalia Nobale: Thank you for joining us for the call. I know your time is very important, and as always, we truly appreciate your willingness to engage us today. While the external environment remains dynamic with ongoing inflationary and geopolitical risks, we are focused on what we can control. who are executing with discipline, strengthening our operations, and focusing to mitigate risks. We remain committed to delivering consistent performance, improving results, and creating sustainable value for our shareholders. Thank you again, and we look forward to updating you on our progress next quarter.
Operator: Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
