STONERIDGE INC

Previous wording

The Company had net income of $2.8 million, or $0.10 per diluted share, for the three months ended June 30, 2024.

Current wording

The Company had net loss of $7.1 million, or $(0.26) per diluted share, for the three months ended September 30, 2024.

Previous wording

Net income for the quarter ended June 30, 2024 improved by $5.8 million, or $0.21 per diluted share, from net loss of $3.0 million, or $(0.11) per diluted share, for the three months ended June 30, 2023. Net income improved due to lower D&D costs from higher customer reimbursements and the favorable impact of non-operating foreign currency gains. Net sales decreased by $29.8 million, or 11.2%, compared to the three months ended June 30, 2023, primarily from lower volumes in our North American automotive market for Control Devices and lower volumes in our European and North American commercial vehicle markets for Electronics. Gross margin as a percent of sales remained consistent at 22.7% driven by lower contribution from lower sales offset by favorable sales mix and a reduction in adverse foreign exchange related material variances.

Current wording

Net loss for the quarter ended September 30, 2024 increased by $9.2 million, or $(0.33) per diluted share, from net income of $2.2 million, or $0.08 per diluted share, for the three months ended September 30, 2023. Net loss increased due to lower contribution from lower sales offset by a reduction in SG&A spending and the favorable impact of non-operating foreign currency gains. Net sales decreased by $24.3 million, or 10.2%, compared to the three months ended September 30, 2023, primarily from lower volumes in our North American automotive market for our Control Devices segment and lower volumes in our European and North American commercial vehicle and European off-highway markets for our Electronics segment. Gross margin as a percent of sales for the quarter ended September 30, 2024 decreased to 20.8% from 22.0% for the three months ended September 30, 2023 driven by lower contribution from lower sales offset by favorable sales mix, material cost improvements and a reduction in adverse foreign exchange related material variances.

Previous wording

Our Control Devices segment net sales decreased by 13.3% compared to the second quarter of 2023 primarily as a result of decreases in our North American and China automotive markets. The decrease in our North American automotive market was due to lower customer volumes and the expected wind down of end-of-life programs. These decreases were offset by increases in our China commercial vehicle market. Segment gross margin as a percentage of sales decreased slightly due to lower contribution from lower sales levels. Segment operating income decreased due to lower contribution from lower sales volumes offset by lower D&D and SG&A spending.

Current wording

Our Control Devices segment net sales decreased by 18.1% compared to the third quarter of 2023 primarily as a result ofdecreases in our North American automotive and China commercial vehicle markets. The decrease in our North American automotive market was due to lower customer volumes including electronic and hybrid vehicle platforms and the expected wind down of end-of-life programs. These decreases were offset by sales increases in our China automotive and North American commercial vehicle markets. Segment gross margin as a percentage of sales decreaseddue to lower contribution from lower sales levels. Segment operating income decreased due to lower contribution from lower sales volumes and higher SG&A spending offset by lower D&D spending.

Previous wording

Our Electronics segment net sales decreased by 8.9% compared to the second quarter of 2023 primarily due to lower sales volumes in our European and North American commercial vehicle markets, partially mitigated by the ramp-up of recently launched programs, including our next generation tachograph. Net sales also decreased due to a reduction in pricing actions including the impact of retroactive pricing and lower electronic component spot buy purchases, which are material purchases reimbursed by customers and recorded as both revenue and offsetting material cost. As such, spot buy purchases do not impact gross profit. We experienced higher sales volumes in our European off-highway vehicle market which offset the aforementioned reductions. Segment gross margin as a percent of sales remained consistent with the prior year second quarter as lower contribution from lower sales levels was offset by a reduction in foreign exchange related material variances. Operating income for the segment increased compared to the second quarter of 2023 primarily due to lower D&D from higher customer reimbursements and lower SG&A from 2023 business realignment costs offset by lower contribution from lower sales levels.

Current wording

Our Electronics segment net sales decreased by 5.3% compared to the third quarter of 2023 primarily due tolower sales volumes in our European and North American commercial vehicle markets, partially mitigated by the ramp-up of recently launched programs, including a European MirrorEye OEM program and our next generation tachograph. We also experienced lower sales volume in our European off-highway vehicle market. Additionally, net sales decreased due to lower electronic component spot buy purchases, which are material purchases reimbursed by customers and recorded as both revenue and offsetting material cost. Offsetting these sales decreases was the favorable impact of foreign currency translation. Segment gross margin as a percent of sales decreased compared to the prior year third quarter as lower contribution from lower sales levels was offset by material cost improvements and a reduction in foreign exchange related material variances. Operating income for the segment decreased compared to the third quarter of 2023 because of lower contribution from lower sales levels and higher D&D because of lower customer reimbursements offset by lower SG&A from 2023 business realignment costs.

Previous wording

In the second quarter of 2024, SG&A expenses decreased by $1.6 million compared to the second quarter of 2023 primarily due tolower SG&A business realignment costs, lower professional services and a 2024 non-recurring commercial settlement gain offset by higher medical insurance costs.

Current wording

In the third quarter of 2024, SG&A expenses decreased by $1.6 million compared to the third quarter of 2023 driven primarily by lower incentive compensation, business realignment costs and professional services partially offset by higher wages and self-insured medical costs.

Previous wording

At June 30, 2024 and December 31, 2023, we had cash and cash equivalents balances of $42.1 million and $40.8 million, respectively, and we had $187.4 million and $189.3 million, respectively, in borrowings outstanding on our Credit Facility. The 2024 increase in cash and cash equivalents was mostly due to cash generated from operating activities including a reduction in inventory balances.

Current wording

At September 30, 2024 and December 31, 2023, we had cash and cash equivalents balances primarily held at our foreign locations of $54.1 million and $40.8 million, respectively, and we had $196.3 million and $189.3 million, respectively, in borrowings outstanding on our Credit Facility. The 2024 increase in cash and cash equivalents was mostly due to cash generated from operating activities including a reduction in accounts receivable and inventory balances.

Previous wording

In 2024, our European and North American commercial vehicle end market volumes are forecasted to decrease 11.5% and 3.0%, respectively. We expect our Electronics’ segment sales to outperform forecasted changes in production volumes due to strong demand for our existing products and the impact of ongoing launches of our OEM MirrorEye programs in North America and Europe as well as our next generation tachograph in Europe. Driven by European regulatory requirements we expect significant growth of our next generation tachograph product over the next several years. We expect continued growth in MirrorEye as our OEM programs continue to launch and as take rates continue to increase for existing OEM programs. Recovery from customers related to spot buys of materials purchased by the Company on behalf of those customers, which is recognized as revenue and material costs, increased net sales by$14.6 million for the full year 2023. As a result of supply chains normalizing and material availability improving, the Company did not incur any spot buy material purchases in the first half of 2024 and does not expect to incur additional spot buy material purchases in the future based on current market conditions. During 2024, our Electronics segment has incurred $0.5 million of support costs for a troubled supplier. We expect to continue to incur these costs in the second half of 2024.

Current wording

Based on IHS Market production forecasts, in 2025 the European and North American commercial vehicle end market volumes are forecasted to increase 10.0% and 4.4%, respectively. Over the long-term, we expect our Electronics’ segment sales to outperform forecasted changes in production volumes due to strong demand for our existing products and the impact of ongoing launches of our OEM MirrorEye programs in North America and Europe as well as our next generation tachograph in Europe. During 2024, sales related to our recent MirrorEye OEM program launch have been lower than anticipated, however we expect continued growth in MirrorEye as we launch new OEM programs in both North America and Europe and our equipment becomes standard on key truck platforms for existing OEM programs.

Previous wording

In the second half of 2024, we expect net D&D spending to remain relatively stable driven by operating cost control reduced launch activities, and as a result, we expect lower customer reimbursements and capitalization of software development costs. We continue to execute our strategy to optimize our engineering footprint to enhance capabilities and capacity for the most efficient return on our engineering spend including the reorganization of our Solna, Sweden location which resulted in business realignment expense of $1.4 million in the second quarter of 2024.

Current wording

For the remainder of 2024, we expect net D&D spending to remain relatively stable driven by reduced launch activities, and as a result, we expect lower customer reimbursements and capitalization of software development costs. We continue to execute our strategy to optimize our engineering footprint to enhance capabilities and capacity for the most efficient return on our engineering spend including the reorganization of our Solna, Sweden location which resulted in business realignment expense of $1.5 million in 2024.

Previous wording

In July 2024, the International Monetary Fund forecasted the Brazil gross domestic product to grow 2.1% in 2024. We expect our served market channels to remain relatively stable in 2024 based on current market and economic conditions, however our sales of in region OEM products have been lower than expected due to lower customer demand. Stoneridge Brazil continues to focus on growing our OEM capabilities in-region to better support our global customers. We expect this strategy will provide opportunities for future growth and a platform to continue to rotate our local portfolio to more closely align with our global products. In addition, we continue to align our global engineering capabilities and footprint by expanding our Brazilian engineering center.

Current wording

In October 2024, the International Monetary Fund forecasted the Brazil gross domestic product to grow 2.2% in 2025, a decline from forecasted growth of 3.0% in 2024. We expect our served market channels to remain relatively stable in 2024 based on current market and economic conditions, however our sales of in region OEM products have been lower than expected due to lower customer demand. Stoneridge Brazil continues to focus on growing our OEM capabilities in-region to better support our global customers. We expect this strategy will provide opportunities for future growth and a platform to continue to rotate our local portfolio to more closely align with our global products. In addition, we continue to align our global engineering capabilities and footprint by expanding our Brazilian engineering center.

Previous wording

We remain focused on improving cash generation and the reduction of debt through targeted actions to reduce net working capital, particularly our inventory levels, as the impacts from our Electronics segment product launches normalize.

Current wording

While we expect continued challenges across our end markets for the remainder of the year and into 2025, we continue to focus on operating performance and enterprise-wide cost reduction. We remain focused on improving cash generation and the reduction of debt through targeted actions to reduce net working capital, particularly our inventory levels, from both the impact of our Electronics segment product launches normalizing and specific inventory reduction actions.

Previous wording

A significant portion of our sales are outside of the United States. These sales are generated by our non-U.S. based operations, and therefore, movements in foreign currency exchange rates can have a significant effect on our results of operations, which are presented in U.S. dollars. A significant portion of our raw materials purchased by our Electronics and Stoneridge Brazil segments are denominated in U.S. dollars, and therefore movements in foreign currency exchange rates can also have a significant effect on our results of operations. The U.S. Dollar strengthened against the euro, Swedish krona, Chinese yuan, Mexican peso, Brazilian real and Argentine peso in 2024 and the Swedish krona, Chinese yuan and Argentine peso in 2023, unfavorably impacting our reported results.

Current wording

A significant portion of our sales are outside of the United States. These sales are generated by our non-U.S. based operations, and therefore, movements in foreign currency exchange rates can have a significant effect on our results of operations, which are presented in U.S. dollars. A significant portion of our raw materials purchased by our Electronics and Stoneridge Brazil segments are denominated in U.S. dollars, and therefore movements in foreign currency exchange rates can also have a significant effect on our results of operations. The U.S. Dollar strengthened against the Mexican peso, Brazilian real and Argentine peso in 2024 favorably impacting our reported results.

Previous wording

We regularly evaluate the performance of our businesses and their cost structures, including personnel, and make necessary changes thereto in order to optimize our results. We also evaluate the required skill sets of our personnel and periodically make strategic changes. As a consequence of these actions, we incur severance and resignation related costs that we refer to as business realignment charges. Business realignment costs of $1.9 million were incurred in both the three months ended June 30, 2024 and 2023, respectively.

Current wording

We regularly evaluate the performance of our businesses and their cost structures, including personnel, and make necessary changes thereto in order to optimize our results. We also evaluate the required skill sets of our personnel and periodically make strategic changes. As a consequence of these actions, we incur severance and resignation related costs that we refer to as business realignment charges. Business realignment costs of $0.3 million and$1.2 million were incurred in the three months ended September 30, 2024 and 2023, respectively.

Previous wording

Our Control Devices segment net sales decreased $12.2 million because of decreases in our North American and China automotive markets of $11.5 million and $1.4 million, respectively. The decrease in our North American automotive market was primarily due to lower customer volumes and the expected wind down of end-of-life programs. These decreases were offset by an increase in our China commercial vehicle markets of $1.2 million. In addition, second quarter of 2024 net sales were adversely impacted by an increase in unfavorable foreign currency translation of $0.4 million.

Current wording

Our Control Devices segment net sales decreased $16.2 million because of decreases in our North American automotive and China commercial vehicle markets of $21.0 million and $5.3 million, respectively. The decrease in our North American automotive market was primarily due to lower customer volumes including electronic and hybrid vehicle platforms and the expected wind down of end-of-life programs. These decreases were partially offset by increases in our China automotive, North American commercial vehicle and off highway markets of $3.5 million, $2.7 million and $2.1 million, respectively.

Previous wording

Our Electronics segment net sales decreased $14.3 million because of lower customer production volumes in our European and North American commercial vehicle markets of $5.8 million and $2.5 million, respectively, mitigated by the ramp-up of recently launched programs, including our next generation tachograph. Net sales also decreased because of the 2023 impacts of both required electronic component spot buy purchases of $4.3 million and retroactive price increases of $3.1 million. These decreases were offset by increases in our European off-highway market of $2.3 million. Second quarter of 2024 net sales were adversely impacted by euro and Swedish krona foreign currency translation of $1.1 million compared to the prior year quarter.

Current wording

Our Electronics segment net sales decreased $7.2 million because of lower customer production volumes in our European and North American commercial vehicle markets of $1.7 million and $1.7 million, respectively, mitigated by the ramp-up of recently launched programs, including a European OEM MirrorEye program and our next generation tachograph. We experienced lower sales volumes in our European off-highway vehicle and agricultural markets of $4.5 million and $1.3 million, respectively. Net sales also decreased because of the 2023 impact of required electronic component spot buy purchases of $0.9 million. Net sales in the third quarter of 2024 were favorably impacted by euro and Swedish krona foreign currency translation of $2.4 million compared to the prior year quarter.

Previous wording

The decrease in North American net sales was mostly attributable to a decrease in sales volume in our automotive and commercial vehicle markets of $11.6 million and $3.0 million, respectively. The decrease in our North American automotive market was partially caused by the expected wind down of end-of-life programs. These decreases were offset by higher sales in our agricultural market of $0.5 million.

Current wording

The decrease in North American net sales was mostly attributable to a decrease in sales volume in our automotive market of $21.1 million. The decrease in our North American automotive market was primarily caused by lower customer volumes including electronic and hybrid vehicle platforms and by the expected wind down of end-of-life programs. These decreases were offset by higher sales in our off-highway and commercial vehicle markets of $2.0 million and $1.0 million, respectively.

Previous wording

The decrease in net sales in Europe and Other was due to decreases in customer production volumes in our European commercial vehicle and China automotive markets of $5.9 million and $1.4 million, respectively, as well as a decrease in electronic component spot buys of $3.7 million and a decrease in negotiated price increases of $2.1 million. These decreases were offset by higher sales in our European off-highway market of $2.3 million. Net sales were adversely impacted by an increase in unfavorable foreign currency translation of $1.5 million.

Current wording

The decrease in net sales in Europe and Other was due to decreases in customer production volumes in our China and European commercial vehicle markets of $5.1 million and $1.7 million, respectively, as well as a decrease in our European off-highway market of $4.5 million. In addition, we experienced a decrease in electronic component spot buys of $0.7 million. These decreases were offset by higher sales in our China automotive market of $3.5 million. Net sales were impacted by a favorable foreign currency translation of $2.6 million.

Previous wording

Cost of Goods Sold and Gross Margin. Cost of goods sold decreased compared to the second quarter of 2023 and our gross margin remained consistent at 22.7% compared to the second quarter of 2023. Our material cost as a percentage of net sales decreased to 55.9% in the second quarter of 2024 from 58.3% in the second quarter of 2023. The decrease in material cost percentage was due tofavorable product mix and material cost improvements as well as a reduction in foreign exchange related material variances. Overhead as a percentage of net sales was 16.6% and 14.1% for the second quarter of 2024 and 2023, respectively. The increase in overhead as a percentage of sales was attributable to higher warranty and indirect wage and fringe benefits.

Current wording

Cost of Goods Sold and Gross Margin. Cost of goods sold decreased compared to the third quarter of 2023 and our gross margin decreased from 22.0% in the third quarter of 2023 to 20.8% in the third quarter of 2024. Our material cost as a percentage of net sales decreased to 57.2% in the third quarter of 2024 from 58.1% in the third quarter of 2023. The decrease in material cost percentage was due tofavorable product mix and material cost improvements as well as a reduction in foreign exchange related material variances. Overhead as a percentage of net sales was 17.3% and 14.9% for the third quarter of 2024 and 2023, respectively. The increase in overhead as a percentage of sales was attributable to lower sales as overhead spending was consistent with the prior year quarter.

Previous wording

Our Control Devices segment gross margin slightly decreased primarily because of lower sales offset by improved sales mix.

Current wording

Our Control Devices segment gross margin decreased primarily because of lower contribution from lower sales offset by improved sales mix.

Previous wording

Our Electronics segment gross margin remained consistent with the prior year second quarter as lower contribution from lower sales levels and higher overhead spending were offset by lower direct material from a reduction in foreign exchange related material variances.

Current wording

Our Electronics segment gross margin decreased from the prior year third quarter as lower contribution from lower sales levels and higher overhead spending were partially offset by lower direct material from material cost improvements and a reduction in foreign exchange related material variances.

Previous wording

Selling, General and Administrative. SG&A expenses decreased by $1.6 million primarily because of lower business realignment costs, lower professional services and a 2024 non-recurring commercial settlement gain offset by higher medical insurance costs.

Current wording

Selling, General and Administrative. SG&A expenses decreased by $1.6 million primarily because of lower incentive compensation, business realignment costs and professional services being offset by higher wages and self-insured medical costs.

Previous wording

Design and Development. D&D costs decreased by $4.2 million because of higher customer reimbursements in our Electronics segment.

Current wording

Design and Development. D&D costs decreased by $0.2 million from reduced launch activities that resulted in lower wages and consulting being mostly offset by lower customer reimbursements in our Electronics and Control Devices segments.

Previous wording

Our unallocated corporate operating loss increased from higher SG&A and D&D spending.

Current wording

Our unallocated corporate operating loss decreased from lower SG&A and D&D spending.

Previous wording

Our North American operating loss increased due to higher SG&A and D&D spending. Operating loss in South America increased due to lower contribution from lower sales levels offset by favorable product mix. Our operating results in Europe and Other increased primarily due to lower D&D and SG&A spending.

Current wording

Our North American operating loss increased due to lower contribution margin from lower sales levels. Operating income in South America decreased 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. Our operating results in Europe and Other decreased primarily due to lower contribution from lower sales levels and higher overhead and D&D spending resulting from lower customer reimbursements.

Previous wording

Interest Expense, net. Interest expense, net was $3.8 million and $3.1 million for the three months ended June 30, 2024 and 2023, respectively. The increase for the quarter ended June 30, 2024, was the result of higher outstanding balances and higher benchmark rates affecting our floating rate Credit Facility debt.

Current wording

Interest Expense, net. Interest expense, net was $3.6 million and $3.3 million for the three months ended September 30, 2024 and 2023, respectively. The increase for the quarter ended September 30, 2024, was the result of higher Credit Facility outstanding balances.

Previous wording

Equity in Loss of Investee. Equity loss for Autotech Fund II was $0.1 million and $0.3 million for the three months ended June 30, 2024 and 2023, respectively.

Current wording

Equity in Loss of Investee. Equity loss for Autotech Fund II was $0.8 million and $0.1 million for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

Other (Income) Expense, net. We record certain foreign currency transaction (gains) losses as a component of other (income) expense, net on the condensed consolidated statement of operations. Other (income) expense, net of $(2.3) million increased by $4.7 million compared to the second quarter of 2023 due to foreign currency transaction gains in our Electronics and SRB segments from the strengthening of the U.S. dollar.

Current wording

Other Income, net. We record certain foreign currency transaction (gains) losses as a component of other income, net on the condensed consolidated statement of operations. Other income, net of $0.4 million decreased by $1.0 million compared to the third quarter of 2023 due to lower foreign currency transaction gains in our Electronics segment.

Previous wording

(Benefit) Provision for Income Taxes. For the three months ended June 30, 2024, income tax benefit of $0.9 million was attributable to the mix of earnings among tax jurisdictions and U.S. taxes on foreign earnings, offset by tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions. The effective tax rate of (50.6)% varies from the statutory tax rate primarily due to U.S. taxes on foreign earnings offset by the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions.

Current wording

Provision for Income Taxes. For the three months ended September 30, 2024, income tax expense of $3.4 million was attributable to the mix of earnings among tax jurisdictions and tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions, offset by U.S. taxes on foreign earnings. The effective tax rate of (93.3)% varies from the statutory tax rate primarily due to the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions, offset by U.S. taxes on foreign earnings.

Previous wording

For the three months ended June 30, 2023, income tax expense of $1.5 million was attributable to the mix of earnings among tax jurisdictions as well as tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions. The effective tax rate of (98.8)% varies from the statutory tax rate primarily due to U.S. taxes on foreign earnings and non-deductible expenses offset by the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions and tax credits and incentives.

Current wording

For the three months ended September 30, 2023, income tax expense of $2.3 million was attributable to the mix of earnings among tax jurisdictions as well as tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions, U.S. taxes on foreign earnings and non-deductible expenses offset by tax credits and incentives. The effective tax rate of 51.1% varies from the statutory tax rate primarily due to U.S. taxes on foreign earnings, non-deductible expenses and the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions offset by tax credits and incentives.

Previous wording

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Current wording

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Previous wording

Our Control Devices segment net sales decreased $21.0 million because of decreases in our North American automotive market of $21.1 million, including the impact of expected end of life production for certain programs and lower demand for electronic vehicle related products, and decreases in our China automotive market of $0.8 million. These decreases were offset by an increase in our China commercial vehicle market of $2.1 million. In addition, net sales for the six months ended June 30, 2024 were impacted by unfavorable foreign currency translation of $0.9 million.

Current wording

Our Control Devices segment net sales decreased $37.2 million because of decreases in our North American automotive market of $44.0 million, including lower demand for electronic and hybrid vehicle platforms and the impact of expected end of life production for certain programs, as well as decreases in our China commercial vehicle market of $3.2 million. These decreases were offset by increases in our China automotive, North American commercial vehicle and off highway markets of $2.6 million, $2.1 million and $2.1 million, respectively. The decreases were also offset by negotiated price increases of $1.2 million. In addition, net sales for the nine months ended September 30, 2024 were impacted by unfavorable foreign currency translation of $0.7 million.

Previous wording

Our Electronics segment net sales decreased $5.6 million because of higher sales volumes in our European and North American commercial vehicle markets of $6.4 million and$2.4 million, respectively, which were more than offset by the 2023 impacts of both required electronic component spot buy purchases of $13.3 million and retroactive price increases of $3.0 million. As well as lower sales in our agricultural market of $1.8 million. In addition, we experienced higher sales volumes in our North American and European off-highway vehicle markets of $2.9 million and $1.2 million, respectively, and unfavorable euro and Swedish krona foreign currency translation of $0.5 million compared to the prior year.

Current wording

Our Electronics segment net sales decreased $12.8 million primarily due to the 2023 impacts of both lower required electronic component spot buy purchases of $14.2 million, a reduction in retroactive price increases of $2.6 million, as well as lower sales in our European off-highway vehicle and agricultural markets of $3.3 million and $3.1 million, respectively. Offsetting these decreases were higher sales volumes in our European and North American commercial vehicle markets of $4.7 million and $1.3 million, respectively. In addition, we experienced higher sales volumes in our North American off-highway vehicle market of $2.2 million and favorable euro and Swedish krona foreign currency translation of $1.8 million compared to the prior year.

Previous wording

Our Stoneridge Brazil segment net sales decreased because of lower sales of our OEM products, monitoring service fees and tracking devices.

Current wording

Our Stoneridge Brazil segment net sales decreased because of lower sales of our OEM products, monitoring service fees and tracking devices offset by an increase in aftermarket product sales. In addition, net sales were adversely impacted by an increase in unfavorable foreign currency translation of $1.8 million.

Previous wording

The decrease in North American net sales was mostly attributable to decreases in sales volume in our automotive market including the impact of expected end of life production for certain programs and lower demand for electric vehicle related products and our agricultural market of $21.2 million and $0.6 million, respectively, as well as the 2023 impact of required electronic component spot buy purchases of $2.2 million. These decreases were offset by higher sales volume in our North American off-highway and commercial vehicle markets of $2.8 million and $1.8 million, respectively.

Current wording

The decrease in North American net sales was mostly attributable to decreases in sales volume in our automotive market of $44.1 million primarily caused by lower customer volumes including electronic and hybrid vehicle platforms and the impact of expected end of life production for certain programs as well as the 2023 impact of required electronic component spot buy purchases of $2.4 million. These decreases were offset by higher sales volume in our North American off-highway and commercial vehicle markets of $4.3 million and $3.2 million, respectively.

Previous wording

The decrease in net sales in South America was primarily due to lower sales in local OEM products, tracking devices and monitoring service fees. In addition, second quarter of 2024 net sales were adversely impacted by an increase in unfavorable foreign currency translation of $0.7 million.

Current wording

The decrease in net sales in South America was primarily due to lower sales of our OEM products, monitoring service fees and tracking devices offset by an increase in aftermarket products. In addition, net sales were adversely impacted by an increase in unfavorable foreign currency translation of $1.8 million.

Previous wording

The decrease in net sales in Europe and Other was due to 2023 required customer recoveries of electronic component spot buys of $11.1 million anda reduction in negotiated price increases of $2.0 million. In addition, we experienced decreases in our China automotive market of $0.8 million as well as unfavorable foreign currency translation of $1.5 million. These decreases were offset by increases in our European commercial vehicle market, including sales related to the launch of a next generation tachograph, and China commercial vehicle marketsof $6.4 million and $2.3 million, respectively.

Current wording

The decrease in net sales in Europe and Other was due to 2023 required customer recoveries of electronic component spot buys of $11.7 million andthe change in negotiated price increases of $1.5 million. In addition, we experienced decreases in our European off-highway and agriculture markets and China commercial vehicle markets of $3.3 million, $2.8 million and $2.8 million, respectively. These sales decreases were offset by increases in our European commercial vehicle market, including sales related to the launches of a European OEM MirrorEye program and our next generation tachograph, and China automotive marketsof $4.8 million and $2.6 million, respectively, as well as favorable foreign currency translation of $1.1 million.

Previous wording

Cost of Goods Sold and Gross Margin. Cost of goods sold decreased compared to the six months ended June 30, 2023 and our gross margin increased from 20.3% in the first six months of 2023 to 21.4% in the first six months of 2024. Our material cost as a percentage of net sales decreased from 60.3% in the first six months of 2023 to 57.4% in the first six months of 2024. The decrease in material cost percentage was partially due to the impact of required electronic component spot buy purchases, reimbursed by customers. The impact of these spot buy purchases increased cost of goods sold by $13.5 million, or 2.7% of sales, for the first six months of 2023, which reduced gross margin percent by 0.6% in 2023. Other factors contributing to the reduction in material costs were favorable product mix and material cost improvement actions. Overhead as a percentage of net sales was 16.4% and 14.4% for the first six months of 2024 and 2023, respectively. The increase in overhead as a percentage of sales was attributable to higher indirect wage inflation and adverse leverage from lower sales levels.

Current wording

Cost of Goods Sold and Gross Margin. Cost of goods sold decreased compared to the nine months ended September 30, 2023 and our gross margin increased from 20.9% in the first nine months of 2023 to 21.2% in the first nine months of 2024. Our material cost as a percentage of net sales decreased from 59.6% in the first nine months of 2023 to 57.3% in the first nine months of 2024. The decrease in material cost percentage was partially due to the impact of 2023 required electronic component spot buy purchases, reimbursed by customers. The impact of these spot buy purchases increased cost of goods sold by $14.4 million, or 1.9% of sales, for the first nine months of 2023, which reduced gross margin percent by 0.4% in 2023. Other factors contributing to the reduction in material costs were favorable product mix, material cost improvements and a reduction in foreign exchange related material variances. Overhead as a percentage of net sales was 16.7% and 14.6% for the first nine months of 2024 and 2023, respectively. The increase in overhead as a percentage of sales was attributable to higher overhead spending including higher warranty related expense and capitalized software development cost amortization as well as adverse leverage from lower sales levels.

Previous wording

Our Control Devices segment gross margin increased primarily as a result of favorable sales mix.

Current wording

Our Control Devices segment gross margin increased primarily as a result of favorable sales mix despite lower sales levels.

Previous wording

Our Electronics segment gross margin increased because of the reduction of the adverse effect of required electronic component spot buy purchases, net of customer recoveries, favorable sales mix and material cost improvement actions.

Current wording

Our Electronics segment gross margin remained consistent because of the reduction of the adverse effect of required electronic component spot buy purchases, net of customer recoveries, favorable sales mix, material cost improvement actions and a reduction in foreign exchange related material variances.

Previous wording

Design and Development. D&D costs decreased by $3.6 million because of higher customer reimbursements for our Electronics segment.

Current wording

Design and Development. D&D costs decreased by $3.8 million from a reduction in launch activities that resulted in lower consulting, wages and recruiting being partially offset by lower capitalization of software development costs and customer reimbursements for our Electronics and Control Devices segments as well as higher Electronics business realignment costs.

Previous wording

Our Electronics segment operating income increased primarily because of lower D&D from higher customer reimbursements and lower SG&A from 2023 business realignment costs offset by lower contribution from lower sales levels.

Current wording

Our Electronics segment operating income increased primarily because of lower SG&A from lower business realignment costs and lower D&D from lower services spending offset by lower contribution from lower sales.