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Zizelman continued, "While we are proud of our achievements in 2024, we recognize there is still opportunity for significant improvement, especially in quality. Additionally, we are focused on overall cost structure, as evidenced by our recent actions to de-layer certain corporate functions and streamline our operations in manufacturing facilities which reduced costs and is also improving operational efficiency. Quality-related costs, material cost improvement and structural cost reduction remain our key priorities for 2025."

Zizelman concluded, "Finally, we continue to monitor the impacts, if any, related to potential tariffs, particularly related to Mexico. Similar to previously enacted tariffs or other raw material related cost increases over the last several years, we will implement supply chain and customer pricing strategies to mitigate any cost increases that may occur. We will continue to monitor shifts in macroeconomic policies and the potential for impacts on our business to ensure that we act quickly to offset any incremental costs, as we have done historically."

Fourth Quarter in Review

Electronics fourth quarter sales of $149.4 million increased by 1.8% relative to adjusted sales of the fourth quarter of 2023. This was primarily driven by the ramp-up of recently launched programs, including MirrorEye and the Company's next generation tachograph, the Smart 2, as well as higher sales in the European off-highway end market. This was partially offset by lower sales in the European and North American commercial vehicle end markets due to production volume declines. Fourth quarter adjusted operating margin of 3.6% declined by 390 basis points relative to the fourth quarter of 2023, driven by higher D&D, primarily related to a reduction in customer reimbursements, and higher SG&A costs. This was partially offset by lower material and labor costs.

Control Devices fourth quarter sales of $63.2 million decreased by 16.3% relative to the fourth quarter of 2023. This decrease was primarily due to lower customer production volumes in the North American passenger vehicle end market, as well as the expected wind-down of end-of-life programs and lower sales in China.  Fourth quarter adjusted operating margin of (2.5)% decreased by 380 basis points relative to the fourth quarter of 2023, primarily due to reduced leverage on lower sales, partially offset by lower direct material and labor costs.

Stoneridge Brazil fourth quarter sales of $12.4 million decreased by $1.5 million relative to the fourth quarter of 2023. This decrease was due to unfavorable foreign currency translation of $(2.0) million. Additionally, higher OEM sales during the quarter were partially offset by lower sales in aftermarket products and monitoring service fees. Fourth quarter operating income of $0.1 million decreased by approximately $0.9 million relative to the fourth quarter of 2023, driven by higher material costs due to the adverse impact of U.S. dollar-denominated material purchases and unfavorable sales mix from lower monitoring service fees offset by lower SG&A spending.

Full-Year in Review

Electronics full-year sales of $594.7 million were relatively in line with 2023 sales adjusted for spot purchase recoveries. This was primarily driven by the ramp-up of recently launched programs, including MirrorEye and Smart 2, partially offset by lower sales in the European and North American commercial vehicle end markets due to customer production volume declines. Full-year adjusted operating margin of 4.7% declined by 40 basis points relative to 2023, driven by higher operating expenses and increased quality-related costs of approximately $1.2 million, partially offset by lower material and direct labor costs.

Control Devices full-year sales of $296.3 million decreased by 14.3% relative to 2023. This decrease was primarily due to lower customer production volumes in the North American passenger vehicle end market, as well as the expected wind-down of end-of-life programs. Full-year adjusted operating margin of 2.2% decreased by 170 basis points relative to 2023, primarily due to reduced leverage on lower sales, partially offset by lower direct material and quality-related costs.

Stoneridge Brazil full-year sales of $50.3 million decreased by $7.1 million relative to 2023. This decrease was primarily due to unfavorable foreign currency translation of $(3.8) million as well as lower sales in all our South American end markets driven by continued macroeconomic challenges. Full-year operating income of $1.0 million decreased by approximately $3.0 million relative to 2023, primarily due to reduced fixed cost leverage on lower sales, relatively higher material costs due to the adverse impact of U.S. dollar-denominated material purchases and unfavorable sales mix from lower monitoring service fees, partially offset by lower SG&A costs.

Cash and Debt Balances

As of December 31, 2024, Stoneridge had cash and cash equivalents totaling $71.8 million. During 2024, the Company generated $47.7 million in net cash provided by operating activities and $23.8 million in free cash flow, an increase of $42.8 million and $55.5 million, respectively over 2023. This was driven by the Company's continued focus on reducing net working capital, including a $36.4 million reduction in inventory balances.

For compliance purposes, adjusted net debt was $147.9 million while adjusted EBITDA for the trailing twelve months was $48.0 million, resulting in an adjusted net debt to trailing twelve-month EBITDA compliance leverage ratio of 3.08x relative to a required leverage ratio of not greater than 3.5x.

The Company amended the existing Credit Facility to provide financial covenant relief for the fourth quarter of 2024 and the first three quarters of 2025. This amendment modified the first, second and third quarter leverage ratio maximum to 6.0x, 5.5x and 4.5x, respectively. The interest coverage ratio was waived in the fourth quarter of 2024 and was modified to 2.0x for the first and second quarters of 2025 and 2.5x for the third quarter of 2025. The Company expects to remain compliant with all amended compliance ratios.

The Company continues to focus on both operating performance and efficient cash management to improve financial performance and return its leverage profile to more normalized ratios. Based on its 2025 guidance and working capital initiatives, the Company is targeting a compliance net debt to EBITDA leverage ratio of 2.0x to 2.5x by the end of the year, relative to a 3.5x leverage ratio requirement by the end of the year.

2025 and Future Outlook

The Company is issuing guidance ranges for its full-year 2025 performance including sales guidance of $860 million to $890 million, gross margin guidance of 22.0% to 22.5% operating margin guidance of 0.75% to 1.25%, and EBITDA guidance of $38 million to $42 million, or approximately 4.4% to 4.7% of sales. The Company is also issuing guidance for free cash flow in 2025 of $25 million to $30 million.

Matt Horvath, chief financial officer, commented, "We are establishing our full-year 2025 guidance ranges, including midpoint revenue of $875 million to reflect current market expectations and our expectations for Stoneridge specific growth drivers. Overall, we expect OEM volume to decline by approximately 3.8% relative to 2024. We expect continued strong growth in MirrorEye in 2025 driven by the launch of new programs in North America, the ramp-up of recently launched programs and improved take rates on existing programs, resulting in full-year MirrorEye revenue of $120 million or almost double 2024. The growth in MirrorEye will offset the expected roll-off of certain end-of-life programs resulting in a range of expected revenue of $860 million to $890 million for 2025. As Jim outlined previously, we will continue to drive material cost improvement, manage our structural costs, and drive improved quality resulting in expanded margins. As a result, we expect EBITDA of $38 million to $42 million in 2025."

Horvath continued, "Finally, today we are providing both short-term and long-term revenue and EBITDA targets.  Looking at 2026, our weighted-average end markets are expected to grow by 7.4%. Additionally, we expect continued ramp-up and annualization of our existing OEM MirrorEye programs. Based only on market and MirrorEye related growth, we are targeting at least $975 million of revenue in 2026. We have additional opportunities for growth, including growth in our actuation and sensor programs in Control Devices, growth in our connected trailer activities and growth in our aftermarket businesses, including our off-highway business. Based only on the contribution on growth related to our markets and existing OEM MirrorEye programs, we are targeting 2026 EBITDA of at least $70 million, or 7.2% of sales. Incremental to that contribution-based target would be our continued focus and expectation on improving material costs, direct labor costs and most importantly, quality-related costs. We will provide more detail regarding these opportunities and our 2026 specific guidance as we get closer to the end of this year."

Horvath concluded, "Similarly, we have updated our long-term targets to reflect continued strong growth expectations in our key product categories to a 2029 revenue target of $1.3 billion to $1.45 billion and EBITDA of $160 million to $200 million implying an EBITDA margin range of 12.3% to 13.8%. We remain focused on building a strong foundation for continued earnings expansion as we capitalize on our impressive portfolio of advanced technologies. Stoneridge remains well positioned to continue to outperform our underlying markets and drive margin expansion resulting in long-term shareholder value creation."

Conference Call on the Web
A live Internet broadcast of Stoneridge's conference call regarding 2024 fourth quarter results can be accessed at 9:00 a.m. Eastern Time on Thursday, February 27, 2025, at www.stoneridge.com, which will also offer a webcast replay.

About Stoneridge, Inc.
Stoneridge, Inc., headquartered in Novi, Michigan, is a global supplier of safe and efficient electronic systems and technologies. Our systems and products power vehicle intelligence, while enabling safety and security for on- and off- highway transportation sectors around the world. Additional information about Stoneridge can be found at www.stoneridge.com.

Forward-Looking Statements
Statements in this press release contain "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this report and may include statements regarding the intent, belief or current expectations of the Company, with respect to, among other things, our (i) future product and facility expansion, (ii) acquisition strategy, (iii) investments and new product development, (iv) growth opportunities related to awarded business, and (v) operational expectations. Forward-looking statements may be identified by the words "will," "may," "should," "designed to," "believes," "plans," "projects," "intends," "expects," "estimates," "anticipates," "continue," and similar words and expressions. The forward-looking statements are subject to risks and uncertainties that could cause actual events or results to differ materially from those expressed in or implied by these statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, among other factors:

• the ability of our suppliers to supply us with parts and components at competitive prices on a timely basis, including the impact of potential tariffs and trade considerations on their operations and output;

• fluctuations in the cost and availability of key materials and components (including semiconductors, printed circuit boards, resin, aluminum, steel and copper) and our ability to offset cost increases through negotiated price increases with our customers or other cost reduction actions, as necessary;

• global economic trends, competition and geopolitical risks, including impacts from ongoing or potential global conflicts and any related sanctions and other measures, or an escalation of sanctions, tariffs or other trade tensions between the U.S. and other countries;

• tariffs specifically in countries where we have significant manufacturing or supply chain exposure and our ability to either mitigate the impact of tariffs or pass any incremental costs to our customers;

• our ability to achieve cost reductions that offset or exceed customer-mandated selling price reductions;

• the reduced purchases, loss, financial distress or bankruptcy of a major customer or supplier;

• the costs and timing of business realignment, facility closures or similar actions;

• a significant change in commercial, automotive, off-highway or agricultural vehicle production;

• competitive market conditions and resulting effects on sales and pricing;

• foreign currency fluctuations and our ability to manage those impacts;

• customer acceptance of new products;

• our ability to successfully launch/produce products for awarded business;

• adverse changes in laws, government regulations or market conditions affecting our products, our suppliers, or our customers' products;

• our ability to protect our intellectual property and successfully defend against assertions made against us;

• liabilities arising from warranty claims, product recall or field actions, product liability and legal proceedings to which we are or may become a party, or the impact of product recall or field actions of our customers;

• labor disruptions at our facilities, or at any of our significant customers or suppliers;

• business disruptions due to natural disasters or other disasters outside of our control;

• the amount of our indebtedness and the restrictive covenants contained in the agreements governing our indebtedness, including our revolving Credit Facility;

• capital availability or costs, including changes in interest rates;

• the failure to achieve the successful integration of any acquired company or business;

• risks related to a failure of our information technology systems and networks, and risks associated with current and emerging technology threats and damage from computer viruses, unauthorized access, cyber-attack and other similar disruptions; and

• the items described in Part I, Item IA ("Risk Factors") in our Form 10-K filed with the SEC.

The forward-looking statements contained herein represent our estimates only as of the date of this release and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, whether to reflect actual results, changes in assumptions, changes in other factors affecting such forward-looking statements or otherwise.

Use of Non-GAAP Financial Information

This press release contains information about the Company's financial results that is not presented in accordance with accounting principles generally accepted in the United States ("GAAP"). Such non-GAAP financial measures are reconciled to their closest GAAP financial measures at the end of this press release. The provision of these non-GAAP financial measures for 2024 and 2023 is not intended to indicate that Stoneridge is explicitly or implicitly providing projections on those non-GAAP financial measures, and actual results for such measures are likely to vary from those presented. The reconciliations include all information reasonably available to the Company at the date of this press release and the adjustments that management can reasonably predict.

In evaluating its business, the Company considers and uses free cash flow and net debt as supplemental measures of its liquidity and the other non-GAAP financial measures as supplemental measures of its operating performance. Management believes the non-GAAP financial measures used in this press release are useful to both management and investors in their analysis of the Company's financial position and results of operations. In particular, management believes that adjusted sales, adjusted gross profit and margin, adjusted operating income (loss) and margin, adjusted loss before tax, adjusted income tax expense (benefit), adjusted net income (loss), adjusted EPS, EBITDA, adjusted EBITDA, adjusted debt, adjusted net debt, adjusted cash and free cash flow are useful measures in assessing the Company's financial performance by excluding certain items that are not indicative of the Company's core operating performance or that may obscure trends useful in evaluating the Company's continuing operating activities. Management also believes that these measures are useful to both management and investors in their analysis of the Company's results of operations and provide improved comparability between fiscal periods.

Adjusted sales, adjusted gross profit and margin, adjusted operating income (loss) and margin, adjusted loss before tax, adjusted income tax expense (benefit), adjusted net income (loss), adjusted EPS, EBITDA, adjusted EBITDA, adjusted debt, adjusted net debt, adjusted cash and free cash flow should not be considered in isolation or as a substitute for sales, gross profit, operating income (loss), income (loss) before tax, income tax expense (benefit), net income (loss), EPS, debt, cash and cash equivalents, cash provided by operating activities or other income statement or cash flow statement data prepared in accordance with GAAP.

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE Stoneridge, Inc.