Stoneridge Reports First Quarter 2024 Results
Stoneridge, Inc. reported Q1 2024 results with sales of $239.2 million, gross profit of $48.4 million, and operating income of $0.3 million. The company maintained its full-year 2024 guidance with sales of $990.0 million - $1,010.0 million, gross margin of 22.0% - 22.75%, and EPS of $0.30 - $0.40. Despite some challenges like warranty-related expenses impacting Q1 results, Stoneridge is focused on cost reduction and improving profitability through operational efficiency.
Strong top-line growth in Electronics segment with a 170 basis point improvement in gross margin.
Improvement in operating margin by 160 basis points due to streamlined operating structure.
Focus on mitigating quality issues and centralizing key functions to drive profitability.
Robust backlog providing a strong foundation for growth with drivetrain agnostic technologies.
Continued focus on gross margin expansion and leveraging existing cost structure for operating margin growth.
Inventory balances improved by $7.9 million in the first quarter, expecting further reductions throughout the year.
Expectation to outpace OEM end markets by over eight percentage points with $1 billion revenue target, focusing on material cost improvement and operational execution.
Mid-point EBITDA margin guidance of 6.7% results in 170 basis point margin improvement and 39% growth in EBITDA over 2023.
First quarter operating income unfavorably impacted by incremental warranty-related expenses of ~$2.0 million.
Loss per share (
Insights
Maintains Previously Provided Full-Year 2024 Guidance Driven by Sales Growth and Operating Performance for the Remainder of the Year
2024 First Quarter Results
- Sales of
$239.2 million - Gross profit of
$48.4 million 20.2% of sales) - Operating income of
$0.3 million 0.1% of sales)- Q1 operating income unfavorably impacted by incremental warranty-related expenses of
~ $2.0 million
- Q1 operating income unfavorably impacted by incremental warranty-related expenses of
- EBITDA of
$6.6 million 2.8% of sales)- Q1 EBITDA includes unfavorable impact of non-operating FX and equity interest expenses of
~ and incremental warranty-related expenses of$2.3 million ~ (Total EBITDA impact of$2.0 million ~ )$4.3 million
- Q1 EBITDA includes unfavorable impact of non-operating FX and equity interest expenses of
- Loss per share ("EPS") of
$(0.22) - Q1 EPS includes unfavorable impact of non-operating FX and equity interest expenses of
~ and incremental warranty-related expenses of$0.08 ~ (Total EPS impact of$0.05 ~ )$0.13
- Q1 EPS includes unfavorable impact of non-operating FX and equity interest expenses of
2024 Full-Year Guidance
- Maintaining previously provided full-year 2024 guidance ranges
- Sales guidance of
$990.0 million $1,010.0 million - Gross margin guidance of
22.0% -22.75% - Operating margin guidance of
2.75% -3.25% - EBITDA guidance of
$64 million $70 million 6.5% -6.9% ) - EPS guidance of
$0.30 $0.40
- Sales guidance of
Stoneridge, Inc. (NYSE: SRI) today announced financial results for the first quarter ended March 31, 2024, with sales of
For the first quarter of 2024, Stoneridge reported gross profit of
The exhibits attached hereto provide reconciliation detail on normalizing adjustments of non-GAAP financial measures used in this press release. For comparison purposes, the exhibits also provide reconciliation detail on normalizing adjustments of non-GAAP financial measures related to prior periods used in this press release.
Jim Zizelman, president and chief executive officer, commented, "Our first quarter performance was driven by continued strong top-line growth in our Electronics segment and progress across each of our key company initiatives. Our efforts to reduce material costs contributed to a 170 basis point improvement in gross margin over the first quarter of last year. Similarly, we continued to streamline our operating structure and centralize key functions to improve our operating efficiency resulting in operating margin improvement of 160 basis points over the first quarter of last year. Despite the significant momentum we have in the fundamentals of the business, we must continue to focus on mitigating some of the historical quality issues that resulted in
Zizelman continued, "While we continue to improve our existing programs, we remain focused on flawless execution of the program launches that will drive strong growth going-forward. Our next OEM MirrorEye programs launch with Volvo in
Zizelman concluded, "Our robust backlog continues to provide a strong foundation for our strategy focused on drivetrain agnostic technologies that will allow us to continue to grow as market preferences and customer platforms continue to evolve. We continue to focus on gross margin expansion while we leverage our existing cost structure to expand operating margin as we grow."
First Quarter in Review
Electronics sales of
Control Devices sales of
Stoneridge Brazil sales of
Cash and Debt Balances
As of March 31, 2024, Stoneridge had compliance net debt of
The Company continues to focus on both operating performance and working capital improvement to drive cash performance, particularly related to inventory reduction. During the first quarter, inventory balances improved by
2024 Outlook
The Company is maintaining its previously provided full-year 2024 guidance ranges including sales guidance of
Matt Horvath, chief financial officer, concluded, "We are maintaining our expectations for approximately
Conference Call on the Web
A live Internet broadcast of Stoneridge's conference call regarding 2024 first quarter results can be accessed at 9:00 a.m. Eastern Time on Thursday, May 2, 2024, at www.stoneridge.com, which will also offer a webcast replay.
About Stoneridge, Inc.
Stoneridge, Inc., headquartered in
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 the 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 (including semiconductors, printed circuit boards, resin, aluminum, steel and copper) and components 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; - our ability to achieve cost reductions that offset or exceed customer-mandated selling price reductions;
- the reduced purchases, loss or bankruptcy of a major customer or supplier;
- the costs and timing of business realignment, facility closures or similar actions;
- a significant change in automotive, commercial, 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 on 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
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 and margin, EBITDA, adjusted EBITDA, adjusted net debt and adjusted cash 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 and margin, EBITDA, adjusted EBITDA, adjusted net debt and adjusted cash should not be considered in isolation or as a substitute for sales, gross profit, operating income, income (loss) before tax, debt, cash and cash equivalents, cash provided by operating activities or other income statement or cash flow statement data prepared in accordance with GAAP.
CONSOLIDATED BALANCE SHEETS
(in thousands) | March 31, | December 31, | ||
(Unaudited) | ||||
ASSETS | ||||
Current assets: | ||||
Cash and cash equivalents | $ 48,440 | $ 40,841 | ||
Accounts receivable, less reserves of | 170,296 | 166,545 | ||
Inventories, net | 179,891 | 187,758 | ||
Prepaid expenses and other current assets | 32,716 | 34,246 | ||
Total current assets | 431,343 | 429,390 | ||
Long-term assets: | ||||
Property, plant and equipment, net | 106,170 | 110,126 | ||
Intangible assets, net | 45,270 | 47,314 | ||
Goodwill | 34,488 | 35,295 | ||
Operating lease right-of-use asset | 9,552 | 10,795 | ||
Investments and other long-term assets, net | 48,589 | 46,980 | ||
Total long-term assets | 244,069 | 250,510 | ||
Total assets | $ 675,412 | $ 679,900 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Current liabilities: | ||||
Current portion of debt | $ 2,077 | $ 2,113 | ||
Accounts payable | 109,222 | 111,925 | ||
Accrued expenses and other current liabilities | 68,947 | 64,203 | ||
Total current liabilities | 180,246 | 178,241 | ||
Long-term liabilities: | ||||
Revolving credit facility | 194,420 | 189,346 | ||
Deferred income taxes | 6,849 | 7,224 | ||
Operating lease long-term liability | 6,594 | 7,684 | ||
Other long-term liabilities | 10,047 | 9,688 | ||
Total long-term liabilities | 217,910 | 213,942 | ||
Shareholders' equity: | ||||
Preferred Shares, without par value, 5,000 shares authorized, none issued | — | — | ||
Common Shares, without par value, 60,000 shares authorized, 28,966 and 28,966 | — | — | ||
Additional paid-in capital | 223,856 | 227,340 | ||
Common Shares held in treasury, 1,299 and 1,417 shares at March 31, 2024 and | (39,386) | (43,344) | ||
Retained earnings | 190,383 | 196,509 | ||
Accumulated other comprehensive loss | (97,597) | (92,788) | ||
Total shareholders' equity | 277,256 | 287,717 | ||
Total liabilities and shareholders' equity | $ 675,412 | $ 679,900 |
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
Three months ended | ||||
(in thousands, except per share data) | 2024 | 2023 | ||
Net sales | $ 239,157 | $ 241,325 | ||
Costs and expenses: | ||||
Cost of goods sold | 190,800 | 198,523 | ||
Selling, general and administrative | 30,423 | 29,863 | ||
Design and development | 17,603 | 16,968 | ||
Operating income (loss) | 331 | (4,029) | ||
Interest expense, net | 3,634 | 2,746 | ||
Equity in loss of investee | 277 | 171 | ||
Other expense, net | 2,036 | 1,148 | ||
Loss before income taxes | (5,616) | (8,094) | ||
Provision (benefit) for income taxes | 510 | (708) | ||
Net loss | $ (6,126) | $ (7,386) | ||
Loss per share: | ||||
Basic | $ (0.22) | $ (0.27) | ||
Diluted | $ (0.22) | $ (0.27) | ||
Weighted-average shares outstanding: | ||||
Basic | 27,529 | 27,349 | ||
Diluted | 27,529 | 27,349 | ||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
Three months ended March 31, (in thousands) | 2024 | 2023 | ||
OPERATING ACTIVITIES: | ||||
Net loss | $ (6,126) | $ (7,386) | ||
Adjustments to reconcile net loss to net cash provided by (used for) operating activities: | ||||
Depreciation | 6,601 | 6,573 | ||
Amortization, including accretion and write-off of deferred financing costs | 2,164 | 1,946 | ||
Deferred income taxes | (2,279) | (2,536) | ||
Loss of equity method investee | 277 | 171 | ||
Loss (gain) on sale of fixed assets | 266 | (886) | ||
Share-based compensation expense | 1,092 | 69 | ||
Excess tax deficiency related to share-based compensation expense | 230 | 34 | ||
Changes in operating assets and liabilities: | ||||
Accounts receivable, net | (6,676) | (16,833) | ||
Inventories, net | 3,699 | (15,228) | ||
Prepaid expenses and other assets | 1,377 | 1,943 | ||
Accounts payable | (709) | 21,264 | ||
Accrued expenses and other liabilities | 9,193 | 1,687 | ||
Net cash provided by (used for) operating activities | 9,109 | (9,182) | ||
INVESTING ACTIVITIES: | ||||
Capital expenditures, including intangibles | (5,795) | (10,110) | ||
Proceeds from sale of fixed assets | 81 | 1,355 | ||
Net cash used for investing activities | (5,714) | (8,755) | ||
FINANCING ACTIVITIES: | ||||
Revolving credit facility borrowings | 30,500 | 8,000 | ||
Revolving credit facility payments | (24,500) | (8,568) | ||
Proceeds from issuance of debt | 7,798 | 8,148 | ||
Repayments of debt | (7,790) | (8,475) | ||
Repurchase of Common Shares to satisfy employee tax withholding | (620) | (1,224) | ||
Net cash provided by (used for) financing activities | 5,388 | (2,119) | ||
Effect of exchange rate changes on cash and cash equivalents | (1,184) | 423 | ||
Net change in cash and cash equivalents | 7,599 | (19,633) | ||
Cash and cash equivalents at beginning of period | 40,841 | 54,798 | ||
Cash and cash equivalents at end of period | $ 48,440 | $ 35,165 | ||
Supplemental disclosure of cash flow information: | ||||
Cash paid for interest, net | $ 4,194 | $ 2,494 | ||
Cash paid for income taxes, net | $ 2,653 | $ 2,611 | ||
Regulation G Non-GAAP Financial Measure Reconciliations | |||||||||
Reconciliation to US GAAP | |||||||||
Exhibit 1 – Reconciliation of Adjusted EBITDA | |||||||||
(USD in millions) | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | ||||
Income (Loss) Before Tax | $ (8.1) | $ (1.5) | $ 4.4 | $ 3.2 | $ (5.6) | ||||
Interest expense, net | 2.7 | 3.1 | 3.3 | 3.8 | 3.6 | ||||
Depreciation and amortization | 8.3 | 8.4 | 8.5 | 8.4 | 8.6 | ||||
EBITDA | $ 3.0 | $ 10.0 | $ 16.2 | $ 15.5 | $ 6.6 | ||||
Add: Pre-Tax Business Realignment Costs | 1.3 | 1.9 | 1.2 | 0.1 | — | ||||
Less: Pre-Tax Gain on Disposal of Fixed Assets | (0.8) | — | — | — | — | ||||
Add: Pre-Tax Environmental Remediation Costs | 0.1 | — | — | — | — | ||||
Add: Pre-Tax Brazilian Indirect Tax Credits, Net | — | — | (0.5) | — | — | ||||
Adjusted EBITDA | $ 3.6 | $ 11.9 | $ 17.0 | $ 15.6 | $ 6.6 | ||||
Exhibit 2 – Reconciliation of Adjusted Gross Profit | |||
(USD in millions) | Q1 2023 | Q1 2024 | |
Gross Profit | $ 42.8 | $ 48.4 | |
Add: Pre-Tax Business Realignment Costs | 0.2 | — | |
Adjusted Gross Profit | $ 43.0 | $ 48.4 | |
Exhibit 3 - Reconciliation of Adjusted Operating Income (Loss) | |||
(USD in millions) | Q1 2023 | Q1 2024 | |
Operating Income (Loss) | $ (4.0) | $ 0.3 | |
Add: Pre-Tax Business Realignment Costs | 1.3 | — | |
Less: Pre-Tax Gain on Disposal of Fixed Assets | (0.8) | — | |
Add: Pre-Tax Environmental Remediation Costs | 0.1 | — | |
Adjusted Operating Income (Loss) | $ (3.4) | $ 0.3 | |
Exhibit 4 – Segment Adjusted Operating Income | |||
Reconciliation of Control Devices Adjusted Operating Income | |||
(USD in millions) | Q1 2023 | Q1 2024 | |
Control Devices Operating Income | $ 2.1 | $ 2.2 | |
Less: Pre-Tax Gain on Disposal of Fixed Assets | (0.8) | — | |
Add: Pre-Tax Environmental Remediation Costs | 0.1 | — | |
Control Devices Adjusted Operating Income | $ 1.4 | $ 2.2 | |
Reconciliation of Electronics Adjusted Operating Income | |||
(USD in millions) | Q1 2023 | Q1 2024 | |
Electronics Operating Income | $ 1.4 | $ 7.1 | |
Add: Pre-Tax Business Realignment Costs | 0.3 | — | |
Electronics Adjusted Operating Income | $ 1.7 | $ 7.1 | |
Exhibit 5 – Reconciliation of Adjusted Sales | |||
(USD in millions) | Q1 2023 | Q1 2024 | |
Sales | $ 241.3 | $ 239.2 | |
Less: Sales from Spot Purchases Recoveries | (9.1) | — | |
Adjusted Sales | $ 232.2 | $ 239.2 | |
Exhibit 6 – Reconciliation of Electronics Adjusted Sales | |||
(USD in millions) | Q1 2023 | Q1 2024 | |
Electronics Sales | $ 149.6 | $ 156.1 | |
Less: Sales from Spot Purchases Recoveries | (9.1) | — | |
Electronics Adjusted Sales | $ 140.5 | $ 156.1 | |
Exhibit 7 – Reconciliation of Compliance Leverage Ratio | ||||||||||
Reconciliation of Adjusted EBITDA for Compliance Calculation | ||||||||||
(USD in millions) | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | |||||
Income (Loss) Before Tax | $ (8.1) | $ (1.5) | $ 4.4 | 3.2 | (5.6) | |||||
Interest Expense, net | 2.7 | 3.1 | 3.3 | 3.8 | 3.6 | |||||
Depreciation and Amortization | 8.3 | 8.4 | 8.5 | 8.4 | 8.6 | |||||
EBITDA | $ 3.0 | $ 10.0 | $ 16.2 | $ 15.5 | $ 6.6 | |||||
Compliance adjustments: | ||||||||||
Add: Non-Cash Impairment Charges and Write-offs or Write Downs | — | — | — | — | 0.2 | |||||
Add: Adjustments from Foreign Currency Impact | 1.4 | 3.1 | 0.4 | (0.7) | 2.2 | |||||
Add: Extraordinary, Non-recurring or Unusual Items | 0.2 | — | 0.5 | — | — | |||||
Add: Cash Restructuring Charges | 1.4 | 0.5 | 0.1 | 0.3 | 1.6 | |||||
Add: Charges for Transactions, Amendments, and Refinances | — | — | — | 0.3 | — | |||||
Add: Adjustment to Autotech Fund II Investment | 0.2 | 0.3 | 0.1 | (0.1) | 0.3 | |||||
Adjusted EBITDA (Compliance) | $ 6.1 | $ 13.9 | $ 17.4 | $ 15.3 | $ 10.9 | |||||
Adjusted TTM EBITDA (Compliance) | $ 52.7 | $ 57.5 | ||||||||
Reconciliation of Adjusted Cash for Compliance Calculation | |||
(USD in millions) | Q4 2023 | Q1 2024 | |
Total Cash and Cash Equivalents | $ 40.8 | $ 48.4 | |
Less: | (12.8) | (14.8) | |
Total Adjusted Cash (Compliance) | $ 28.0 | $ 33.6 | |
Reconciliation of Adjusted Debt for Compliance Calculation | |||
(USD in millions) | Q4 2023 | Q1 2024 | |
Total Debt | $ 191.5 | $ 196.5 | |
Outstanding Letters of Credit | 1.6 | 1.6 | |
Total Adjusted Debt (Compliance) | $ 193.0 | $ 198.1 | |
Adjusted Net Debt (Compliance) | $ 165.0 | $ 164.5 | |
Compliance Leverage Ratio (Net Debt / TTM EBITDA) | 3.13x | 2.86x | |
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SOURCE Stoneridge, Inc.
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