Release Date: May 01, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Stoneridge Inc (SRI, Financial) delivered strong performance in the first quarter with operating margin improvement across all segments.
- MirrorEye revenue increased by 24% relative to the fourth quarter of 2024, driven by strong sales in the bus market and OEM programs.
- The company achieved a 210 basis point improvement in adjusted gross margin, driven by material cost improvements and reduced quality-related costs.
- Free cash flow improved to approximately $4.9 million, an increase of $1.5 million compared to the first quarter of the prior year.
- Stoneridge Inc (SRI) successfully mitigated the impact of tariffs with 91% of product sales from Mexico being USMCA certified, reducing potential tariff exposure.
Negative Points
- There is significant volatility and uncertainty in the market due to global tariff discussions, which could impact future demand and production volumes.
- Higher SGNA costs were noted, primarily due to the normalization of incentive compensation to annual targeted amounts.
- The company faces continued volatility in end markets, particularly related to the market's response to tariff policies.
- Despite improvements, quality-related costs remain a concern, with ongoing efforts needed to address potential issues.
- Stoneridge Inc (SRI) is exposed to potential risks from changes in macroeconomic policies and their impact on the automotive industry.
Q & A Highlights
Q: Can you provide more details on the momentum of MirrorEye and SMART 2, and how they are performing against expectations?
A: James Zizelman, President, Chief Executive Officer, Director: The improvements in the first quarter of 2025 are largely due to the ramp-up with Volvo in Europe and the application of MirrorEye as standard equipment on additional models. We are also seeing increased interest in the aftermarket, especially in the bus market across North America and Europe. We expect continued growth as we launch in North America with Volvo and Daimler Truck North America, following a similar trajectory as in Europe.
Q: How are tariffs impacting Stoneridge, and what are you hearing from auto customers regarding demand?
A: James Zizelman, President, Chief Executive Officer, Director: Recent announcements have provided some relief to automakers, and most of our products are USMCA compliant, exempting them from tariffs. We have seen robust orders in the first quarter, with no significant changes in demand from customers yet. We remain vigilant and ready to take mitigating actions if necessary.
Q: How sustainable are the improvements in inventory and working capital, especially as the industry returns to growth?
A: Matthew Horvath, Chief Financial Officer, Treasurer: We have made significant progress in reducing inventory, with a $30 million reduction over the last year. We aim for high single-digit inventory turns, and there is still room for improvement. These improvements are sustainable, and we expect inventory turns to hold as volumes increase.
Q: Can you address the quality-related costs and whether they are under control?
A: Matthew Horvath, Chief Financial Officer, Treasurer: We have made significant progress in reducing quality-related costs, with a $2.5 million reduction from the previous quarter. While quality issues are normal in our industry, we have improved our processes to limit these issues and respond efficiently. We are focused on building quality into our products to prevent future problems.
Q: Is there any change in the outlook for MirrorEye revenue, and how is the connected trailer suite progressing?
A: Matthew Horvath, Chief Financial Officer, Treasurer: There is no change in the MirrorEye revenue outlook, and we are pleased with the start of the year. The connected trailer suite is progressing well, with customer evaluations expected by the end of 2025 and significant expansion anticipated in 2026.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
