STONERIDGE INC

Previous wording

We are a global supplier of safe and efficient electronics systems and technologies. Our systems and products power vehicle intelligence, while enabling safety and security for global commercial, off-highway and agricultural vehicle markets.

Current wording

We are a global supplier of safe and efficient electronics systems and technologies. Our systems and products power vehicle intelligence, while enabling safety and security for global commercial, off-highway and agricultural vehicle end markets.

Previous wording

Stoneridge Brazil. This segment includes results of operations that design and manufacture vehicle tracking devices and monitoring services, driver information systems, vehicle security alarms and convenience accessories, telematics solutions and multimedia devices.

Current wording

Stoneridge Brazil. This segment includes results of operations that design, manufacture and sell driver information systems, vehicle tracking devices and monitoring services, vehicle security alarms and convenience accessories, telematics solutions and multimedia devices.

Previous wording

The Company had net loss from continuing operations of $5.3 million, or $(0.19) per diluted share, for the three months ended June 30, 2026.

Current wording

The Company had a net loss from continuing operations of$22.9 million, or$(0.81) per diluted share, for the three months ended September 30, 2026.

Previous wording

Net loss from continuing operations for the quarter ended June 30, 2026 decreased by $5.9 million, or $0.21 per diluted share, from net loss from continuing operations of $11.1 million, or $(0.40) per diluted share, for the three months ended June 30, 2025. Net sales increased by $23.8 million, or 15.1%, compared to the three months ended June 30, 2025, due to increased sales volumes in our North American vehicle market and higher sales resulting from the Mexico Manufacturing Agreement related to the sale of Control Devices and higher Brazilian OEM sales from the launch of an infotainment product. Gross margin for the quarter ended June 30, 2026 decreased to 20.3% from 23.1% for the three months ended June 30, 2025 from higher direct material costs as a percentage of sales due to adverse foreign currency losses and excess inventory charges as well as adverse sales mix from lower Smart 2 tachograph product sales from the end of a regulatory retrofit campaign in 2025 in our Electronics segment. SG&A expense increased primarily due to higher incentive compensation and legal expenses, which were offset by lower D&D expense from 2025 business realignment costs and higher customer reimbursements in our Electronics segment. In addition, non-operating foreign currency gains favorably impacted results for the quarter ended June 30, 2026.

Current wording

Net loss from continuing operations for the three months ended September 30, 2026 increased by$14.0 million, or$(0.49) per diluted share, from net loss from continuing operations of$8.9 million, or$(0.32) per diluted share, for the three months ended September 30, 2025. Net sales increased by$17.2 million, or 12.4%, compared to the three months ended September 30, 2025, due to increased sales from higher production volumes and MirrorEye system sales in our North American and European commercial vehicle end markets, higher sales resulting from the impact of the Mexico Manufacturing Agreement related to the sale of Control Devices and higher Brazilian OEM sales from the 2026 launch of an infotainment product. Net sales decreased by $24.2 million related to an adverse ruling received on November 2, 2026 for the previously disclosed arbitration proceeding brought by a former customer of our Control Devices business described in Note 16, Subsequent Events. Gross margin as a percentage of sales for the three months ended September 30, 2026 decreased to 7.4% from 23.1% for the three months ended September 30, 2025 from the recognition of the charge related to the PM sensor arbitration ruling direct to sales with no associated cost of goods sold, higher direct material costs as a percentage of sales due to adverse sales mix, higher warranty expense from commercial settlements, higher excess inventory charges and higher overhead spending from the impact of the Mexico Manufacturing Agreement partially offset by favorable leverage of fixed costs from higher sales levels. SG&A expense increased primarily because of the non-recurring favorable royalty adjustment recognized in 2025, partially offset by lower wages, self-insured medical and business realignment costs. D&D expense increased from lower customer reimbursements in our Electronics segment, partially offset by lower business realignment costs. Our results for the three months ended September 30, 2026 were also favorably impacted by lower interest expense, net, higher equity in earnings of investee and an increase in non-operating foreign currency gains.

Previous wording

Our Electronics segment net sales increased by 12.8% compared to the second quarter of 2025 primarily due to an increase in our North American commercial vehicle market and higher sales of $7.1 million resulting from the Mexico Manufacturing Agreement related to the sale of Control Devices. Additionally, sales were impacted by favorable euro and Swedish krona foreign currency translation. Segment gross margin decreased compared to the second quarter of 2025 from higher direct material costs due to adverse foreign currency losses and excess inventory charges as well as adverse sales mix from lower Smart 2 tachograph product sales from the end of a regulatory retrofit campaign in 2025. Operating income for the segment increased compared to the second quarter of 2025 because of lower SG&A expense from lower royalties and professional services and lower D&D from lower business realignment costs and higher customer reimbursements.

Current wording

Our Electronics segment net sales increased by 30.5% compared to the third quarter of 2025 primarily due to increases in our North American commercial vehicle end market customers sales from higher production volumes and MirrorEye system sales, higher sales from the impact of the Mexico Manufacturing Agreement related to the sale of Control Devices and an increase in our European commercial vehicle end market customer sales from higher production volumes offset by lower sales for the Smart 2 tachograph product resulting from the end of a regulatory retrofit campaign in 2025. Also offsetting these increases was unfavorable euro and Swedish krona foreign currency translation. Segment gross margin dollars increased compared to the third quarter of 2025 from higher contribution from higher sales levels partially offset by higher overhead spending from the impact of the Mexico Manufacturing Agreement, warranty expense from commercial settlements and excess inventory charges. Operating income for the segment decreased compared to the third quarter of 2025 because of higher SG&A expense from the 2025 favorable royalty adjustment and higher D&D from lower customer reimbursements which was partially offset by higher gross margin contribution.

Previous wording

Our Stoneridge Brazil segment net sales increased by 37.6% compared to the second quarter of 2025 primarily from higher OEM product sales including the sales from the launch of an infotainment product and favorable foreign currency translation. Segment gross margin increased due to favorable variances from U.S. denominated material purchases and higher contribution from higher sales levels. Operating income increased due to favorable variances from U.S. dollar denominated material purchases and higher contribution from higher sales levels. Offsetting these favorable variances was an increase in SG&A expense from higher incentive compensation and selling costs reduced by a favorable Brazilian indirect tax claim settlement.

Current wording

Our Stoneridge Brazil segment net sales increased by 25.3% compared to the third quarter of 2025 primarily from higher OEM product sales including sales from the 2026 launch of an infotainment product and favorable foreign currency translation. Segment gross margin dollars increased slightly as higher contribution from higher sales levels was mostly offset by adverse sales mix from higher OEM product sales and higher overhead spending. Operating income decreased from higher D&D spend partially offset by the increase in gross margin contribution.

Previous wording

In the second quarter of 2026, SG&A expenses increased by $0.4 million compared to the second quarter of 2025 primarily because of higher incentive compensation and legal costs offset by a favorable Brazilian indirect tax claim settlement.

Current wording

In the third quarter of 2026, SG&A expenses increased by $0.9 million compared to the third quarter of 2025 because of the favorable 2025 royalty adjustment and higher environmental remediation costs offset by lower wages, self-insured medical and business realignment costs.

Previous wording

In the second quarter of 2026, D&D costs decreased by $2.9 million compared to the prior year second quarter primarily in our Electronics segment because of lower business realignment costs and higher customer reimbursements.

Current wording

In the third quarter of 2026, D&D costs increased by $0.9 million compared to the third quarter of 2025 because of lower customer reimbursements in our Electronics segment, partially offset by lower business realignment costs.

Previous wording

At June 30, 2026 and December 31, 2025, we had cash and cash equivalents balances primarily held at our foreign locations of $71.5 million and $53.1 million, respectively, and we had $151.1 million and $180.9 million, respectively, in borrowings outstanding on our Credit Facility. The 2026 decrease in Credit Facility borrowings and the increase in cash and cash equivalents was mostly due to proceeds received from the sale of Control Devices.

Current wording

At September 30, 2026 and December 31, 2025, we had cash and cash equivalents balances primarily held at our foreign locations of $63.4 million and $53.1 million, respectively, and we had $143.7 million and $180.9 million, respectively, in borrowings outstanding on our Credit Facility. The 2026 decrease in Credit Facility borrowings and the increase in cash and cash equivalents was mostly due to proceeds received from the sale of Control Devices that were partially used to repay outstanding Credit Facility borrowings.

Previous wording

Stoneridge's portfolio, after the sale of the Control Devices business, is focused on technology solutions primarily for the global commercial vehicle and off-highway end markets. More specifically, Stoneridge serves three primary product categories: vision and safety, connectivity, and vehicle intelligence and electronic controls, each with their own significant growth opportunities. We expect continued expansion of our vision and safety systems, including MirrorEye® and adjacent products and advanced technologies, through maturity of our existing products and the introduction of new products to the market, including our connected trailer and surround-view capabilities. As we continue to invest in these capabilities, we have generated a comprehensive technology roadmap that we expect will both enhance and expand on our existing products and bring new products and technologies to the market. We expect this will drive growth that significantly outpaces our weighted-average end markets resulting in shareholder value creation.

Current wording

Stoneridge's portfolio, after the sale of the Control Devices business, is focused on technology solutions primarily for the global commercial vehicle and off-highway end markets. More specifically, we serve three primary product categories: vision and safety, connectivity, and vehicle intelligence and electronic controls, each with their own significant growth opportunities. We expect continued expansion of our vision and safety systems, including MirrorEye® and adjacent products and advanced technologies, through maturity of our existing products and the introduction of new products to the market, including our surround-view capabilities. As we continue to invest in these capabilities, we have generated a comprehensive technology roadmap that we expect will both enhance and expand on our existing products and bring new products and technologies to the market. We expect this will drive growth that significantly outpaces our weighted-average end markets resulting in shareholder value creation.

Previous wording

Our financial performance has been affected by increasing costs of materials, labor, and other inputs used to manufacture and sell our products, including higher costs for memory and other semiconductor components. To minimize the impact of these incremental costs, we continue to take mitigation actions, including negotiating price increases and cost recoveries with our customers, improving manufacturing performance and optimizing our global cost structure to both reduce costs and improve operational efficiency. While we expect these actions will benefit financial performance by offsetting cost pressures, there can be no assurance that our mitigation efforts will fully offset the impact of these cost increases.

Current wording

Our financial performance has been affected by increasing costs of materials, labor, and other inputs used to manufacture and sell our products, including higher costs for memory and other semiconductor components. To minimize the impact of these incremental costs, we continue to take mitigation actions, including negotiating price increases and cost recoveries with our customers, improving manufacturing performance and optimizing product cost through design and procurement initiatives. While we expect these actions will benefit financial performance by offsetting cost pressures, there can be no assurance that our mitigation efforts will fully offset the impact of these cost increases.

Previous wording

In February 2026, the U.S. government imposed new tariffs on imported products from China and Mexico, in addition to tariffs imposed during 2025, and in April 2026 announced additional broad-based tariffs on imports from most U.S. trading partners. The Company has manufacturing and supply chain exposure from materials sourced from other countries and products produced in Mexico. If existing or proposed tariffs are sustained or expanded, they could materially increase our cost of goods sold and adversely affect our results of operations and cash flows. We continue to implement mitigation actions to reduce the impact of tariffs, including negotiating cost recoveries and price adjustments with our customers, evaluating alternative sourcing arrangements and assessing opportunities to adjust our manufacturing footprint. However, there can be no assurance that these actions will fully offset the incremental costs, and the ultimate impact will depend on the scope and duration of the tariffs and our ability to pass costs through to customers.

Current wording

In February 2026, the U.S. government imposed new tariffs on imported products from China and Mexico, in addition to tariffs imposed during 2025, and in April 2026 announced additional broad-based tariffs on imports from most U.S. trading partners. The U.S. government has also imposed tariffs under Section 232 of the Trade Expansion Act of 1962 on certain automotive parts and on steel, aluminum and copper content. Since then, the scope, rates, and timing of these tariffs have been modified several times, and certain tariffs have been the subject of legal challenges. In addition, the United States-Mexico-Canada-Agreement is subject to a joint review in 2026, the outcome of which is uncertain. The Company has manufacturing and supply chain exposure from materials sourced from other countries and products produced in Mexico including products manufactured for the buyer of our former Control Devices business under the Mexico Manufacturing Agreement. If existing or proposed tariffs are sustained or expanded, they could materially increase our cost of goods sold and adversely affect our results of operations and cash flows. We continue to implement mitigation actions to reduce the impact of tariffs, including negotiating cost recoveries and price adjustments with our customers, evaluating alternative sourcing arrangements and assessing opportunities to adjust our manufacturing footprint. However, there can be no assurance that these actions will fully offset the incremental costs, and the ultimate impact will depend on the scope and duration of the tariffs and our ability to pass costs through to customers.

Previous wording

Based on IHS Markit production forecasts, in 2026 the European and North American commercial vehicle end market volumes are forecasted to increase 1.8% and 12.8%, respectively. Over the long-term, we expect our Electronics’ segment sales to continue to outperform forecasted changes in production volumes due to strong demand for our existing products including our OEM MirrorEye programs in North America and Europe as well as from launches of awarded business. In addition, over the long-term we expect revenue growth and margin contribution from our off-highway products. We continue to focus on margin improvement through material cost reduction and product quality initiatives. We continue to invest in the development of advanced system capabilities that are complementary to our driver information solutions and vision systems such as integrated driver assistance technologies and an intelligent connected trailer system.

Current wording

Based on Mobility Global, formerly IHS Markit, production forecasts, in 2026 the European and North American commercial vehicle end market volumes are forecasted to increase 3.4% and 12.3%, respectively. Over the long-term, we expect our Electronics’ segment sales to continue to outperform forecasted changes in production volumes due to strong demand for our existing products including our OEM MirrorEye programs in North America and Europe as well as from launches of awarded business. In addition, over the long-term we expect revenue growth and margin contribution from our off-highway products including the launch of a new off-highway vision product in 2027. We continue to focus on margin improvement through material cost reduction and product quality initiatives. We continue to invest in the development of advanced system capabilities that are complementary to our driver information solutions and vision systems such as integrated driver assistance technologies and surround-view capabilities.

Previous wording

In July 2026, the International Monetary Fund forecasted the Brazil gross domestic product to grow 2.4% in 2026. We expect our served market channels to moderately improve in 2026 based on current market and economic conditions; however our sales of in-region OEM products are expected to increase in the second half of 2026 due to the launch of an infotainment product in the second quarter of 2026. Stoneridge Brazil will focus on continuing to grow our OEM capabilities in-region to better support our global customers. This focus will provide opportunities for future growth and provide a platform to continue to rotate our local portfolio to align with our global business more closely.

Current wording

In October 2026, the International Monetary Fund forecasted the Brazil gross domestic product to grow 2.2% and 1.9% in 2026 and 2027, respectively. We expect our served market channels to moderately improve throughout 2027 based on current market and economic conditions; however our sales of in-region OEM products will continue to be benefited by the launch of an infotainment product in the second quarter of 2026. Stoneridge Brazil is continuing to focus on expanding OEM capabilities in-region to better support our global customers. This focus will provide opportunities for future growth and provide a platform to continue to rotate our local portfolio to more closely align with our global business.

Previous wording

In 2026, we expect net D&D spend to increase driven by spend for quality improvement, product cost optimization, and the development of next generation products. We continue to evaluate and optimize our engineering footprint to enhance capabilities and capacity for the most efficient return on our engineering spend including increasing the utilization of our Stoneridge Brazil engineering function and dedicated engineering partners in India to support Electronics segment projects.

Current wording

In 2026, we expect D&D spend, net of business realignment to increase driven by spend for quality improvement, product cost optimization, and the development of next generation products. We continue to evaluate and optimize our engineering footprint to enhance capabilities and capacity for the most efficient return on our engineering spend including increasing the utilization of our Stoneridge Brazil engineering function and dedicated engineering partners in India to support Electronics segment projects.

Previous wording

While we expect continued supply chain challenges associated with memory and other electronic component pricing and availability in 2026, 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 efficient operating performance, structural cost savings and targeted actions to reduce our inventory levels. However, we anticipate working capital investment in the second half of 2026 related to the mid-2027 launch of a new off-highway vision product.

Current wording

While we expect continued material inflation and supply chain challenges associated with memory and other electronic component pricing and availability to persist into 2027, 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 efficient operating performance, structural cost savings and targeted actions to reduce our inventory levels. However, we anticipate working capital investment in the fourth quarter of 2026 related to the mid-2027 launch of a new off-highway vision product.

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 material purchases 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. In the second quarter of 2026, the U.S. Dollar weakened against the Brazilian real favorably impacting our financial results while it strengthened against the Swedish krona and weakened against the Mexican peso which had an unfavorable impact to our reported results. In the second quarter of 2025, the U.S. dollar weakened against the Swedish krona 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 material purchases 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. In the third quarter of 2026, the U.S. dollar strengthened against the Swedish krona, euro and Brazilian real which had a favorable impact to our reported results. In the third quarter of 2025, the U.S. dollar weakened against the euro, Mexican peso and Swedish krona unfavorably impacting our reported results.

Previous wording

In December 2018, the Company entered into an agreement to make a $10.0 million investment in a fund (“Autotech Fund II”) managed by Autotech Ventures (“Autotech”), a venture capital firm focused on ground transportation technology. The Company’s $10.0 million investment in the Autotech Fund II will be contributed over the expected ten-year life of the fund. The Company has contributed $9.3 million to the Autotech Fund II since December 2018.

Current wording

In December 2018, the Company entered into an agreement to make a $10.0 million investment in a fund (“Autotech Fund II”) managed by Autotech Ventures (“Autotech”), a venture capital firm focused on ground transportation technology. The Company’s $10.0 million investment in the Autotech Fund II will be contributed over the expected ten-year life of the fund. The Company has contributed$9.4 million to the Autotech Fund II since December 2018.

Previous wording

We regularly evaluate the performance of our businesses and their cost structures, including personnel, and make necessary changes thereto to optimize our results. We also evaluate the required skill sets of our personnel and periodically make strategic changes. Because of these actions, we incur severance and resignation related costs that we refer to as business realignment charges. Business realignment costs of $0.0 million and$1.4 million were incurred in the three months ended June 30, 2026 and 2025, respectively. Business realignment costs of$0.4 million and$3.9 million were incurred during the six months ended June 30, 2026 and 2025, respectively. For the three and six months ended June 30, 2025, we incurred $1.4 million and $3.0 million, respectively, in business realignment costs related to operational efficiency initiatives at our Juarez facility. We may incur additional realignment costs in the future.

Current wording

We regularly evaluate the performance of our businesses and their cost structures, including personnel, and make necessary changes thereto to optimize our results. We also evaluate the required skill sets of our personnel and periodically make strategic changes. Because of these actions, we incur severance and resignation related costs that we refer to as business realignment charges. Business realignment costs of $0.0 million and$1.8 million were incurred in the three months ended September 30, 2026 and 2025, respectively. Business realignment costs of$0.4 million and$5.6 million were incurred during the nine months ended September 30, 2026 and 2025, respectively. For the three and nine months ended September 30, 2025, we incurred $0.8 million and $3.3 million, respectively, in business realignment costs related to operational efficiency initiatives at our Juarez facility. We may incur additional realignment costs in the future.

Previous wording

Because of the competitive nature of the markets we serve, we face pricing pressures from our customers in the ordinary course of business. In response to these pricing pressures, we have been able to manage our production costs through a combination of negotiated cost recoveries with customers, material cost reduction initiatives and optimization of our global manufacturing footprint, the net impact of which to date has not been material to our results of operations. However, these efforts may not be sufficient to fully offset future pricing pressures, particularly in light of current macroeconomic conditions, including tariffs and supply chain disruptions, and if we are unable to effectively manage production costs, our results of operations could be adversely affected.

Current wording

Because of the competitive nature of the markets we serve, we face pricing pressures from our customers in the ordinary course of business. To mitigate the impact of these pricing pressures, we manage our material and production costs through a combination of negotiated cost recoveries with customers, material cost reduction initiatives and optimization of our global manufacturing footprint. The net impact of which to date has not been material to our results of operations. However, these efforts may not be sufficient to fully offset future pricing pressures, particularly in light of current material inflation and supply chain challenges associated with memory and other electronic component pricing and availability and if we are unable to effectively manage our material and production costs, our results of operations could be adversely affected.

Previous wording

The increase in North American net sales was due to an increase in production volumes in our commercial vehicle market of $10.0 million including higher MirrorEye system sales and an increase in sales of $7.1 million resulting from the Mexico Manufacturing Agreement related to the sale of Control Devices.

Current wording

The increase in North American net sales was due to an increase in sales to our commercial vehicle end market customers of $27.7 million from higher production volumes and higher MirrorEye system sales and an increase in sales of $6.3 million from the impact of the Mexico Manufacturing Agreement related to the sale of Control Devices offset by ($24.2) million from the recognition of the charge related to the PM sensor arbitration ruling described in Note 16, Subsequent Events.

Previous wording

The increase in net sales in South America was from higher OEM product sales including sales from the launch of an infotainment product of $4.4 million and favorable foreign currency translation of $1.8 million.

Current wording

The increase in net sales in South America was from higher OEM product sales of $4.1 million including sales from the 2026 launch of an infotainment product and favorable foreign currency translation of $1.0 million.

Previous wording

The increase in net sales in Europe and Other was due to higher European off-highway sales of $0.7 million and favorable foreign currency translation of $2.6 million offset by lower commercial vehicle sales of $1.4 million including lower Smart 2 tachograph product sales from the end of a regulatory retrofit campaign in 2025.

Current wording

The increase in net sales in Europe and Other was due to higher commercial vehicle end market customer sales of $4.4 million from higher production volumes offset by lower sales for the Smart 2 tachograph product resulting from the end of a retrofit campaign in 2025 offset by unfavorable foreign currency translation of $1.2 million.

Previous wording

Cost of Goods Sold and Gross Margin. Cost of goods sold increased compared to the second quarter of 2025 and our gross margin decreased to 20.3% in the second quarter of 2026 from 23.1% in the second quarter of 2025. Our material cost as a percentage of net sales increased to 57.7% in the second quarter of 2026 from 56.8% in the second quarter of 2025. The increase in material cost percentage was due to the unfavorable foreign exchange material variances and excess inventory charges as well as adverse sales mix from lower Smart 2 tachograph product sales from the end of a regulatory retrofit campaign in 2025 in our Electronics segment offset by a benefit from the Mexico Manufacturing Agreement because under this contract manufacturing agreement only direct labor and overhead expenses are recognized. Overhead as a percentage of net sales increased from 16.2% in the second quarter of 2025 to 17.2% in the second quarter of 2026 due to the impact of the Mexico Manufacturing Agreement spend offsetting favorable leverage of fixed costs from higher sales levels.

Current wording

Cost of Goods Sold and Gross Margin. Cost of goods sold increased compared to the third quarter of 2025 and our gross margin as a percentage of sales decreased to 7.4% in the third quarter of 2026 from 23.1% in the third quarter of 2025. Our material cost as a percentage of net sales increased to 66.4% in the third quarter of 2026 from 54.0% in the third quarter of 2025. The increase in material cost percentage was due to the recognition of the charge direct to sales related to the PM sensor arbitration ruling with no associated cost of goods sold, excess inventory charges and adverse sales mix from lower Smart 2 tachograph sales from the end of a regulatory retrofit campaign in 2025 offset by a benefit from the Mexico Manufacturing Agreement because under this contract manufacturing agreement only direct labor and overhead expenses are recognized. Overhead as a percentage of net sales increased from 18.8% in the third quarter of 2025 to 21.2% in the third quarter of 2026 due to higher overhead spending from the impact of the Mexico Manufacturing Agreement and higher warranty expense from commercial settlements and the recognition of the charge direct to sales related to the PM sensor arbitration ruling with no associated cost of goods sold offset by favorable leverage of fixed costs from higher sales levels.

Previous wording

Design and Development. D&D costs decreased by $2.9 million compared to the second quarter of 2025 because of lower business realignment costs and higher customer reimbursements in our Electronics segment.

Current wording

Design and Development. D&D costs increased by $0.9 million compared to the third quarter of 2025 because of lower customer reimbursements in our Electronics segment, partially offset by lower business realignment costs.

Previous wording

Operating (Loss) Income. Operating (loss) income by segment is summarized in the following table (in thousands):

Current wording

Operating Loss. Operating income (loss) by segment is summarized in the following table (in thousands):

Previous wording

Operating (loss) income by geographic location is summarized in the following table (in thousands):

Current wording

Operating income (loss) by geographic location is summarized in the following table (in thousands):

Previous wording

Our North American operating loss improved due to higher gross margin from higher sales levels and lower D&D from lower business realignment expense offset by higher SG&A from higher incentive compensation and legal expense. Operating income in South America increased from higher gross margin from favorable variances from U.S. dollar denominated material purchases and favorable leverage of fixed costs from higher sales levels offset by higher SG&A from higher incentive compensation and selling expenses. Our operating results in Europe and Other decreased because of lower margin from higher material costs due to unfavorable foreign exchange material variances offset by lower D&D expense from higher customer reimbursements.

Current wording

Our North American operating loss increased due to a decrease in gross margin dollars from the recognition of the charge related to the PM sensor arbitration ruling described in Note 16, Subsequent Events, partially offset by higher gross margin contribution from increased sales levels and decreases in D&D from lower business realignment expense and in SG&A from lower self-insured medical costs. Operating income in South America decreased from higher D&D spend partially offset by an increase in gross margin contribution. Our operating results in Europe and Other decreased because of lower gross margin contribution from excess inventory charges, adverse sales mix and higher warranty expense from commercial settlements and increases in SG&A from the favorable 2025 royalty adjustment and in D&D from lower customer reimbursements.

Previous wording

Interest Expense, net. Interest expense, net was $2.4 million and $3.2 million for the three months ended June 30, 2026 and 2025, respectively. The decrease for the quarter ended June 30, 2026, was the result of lower outstanding Credit Facility borrowings offset by higher Credit Facility interest rates.

Current wording

Interest Expense, net. Interest expense, net was $2.9 million and $3.8 million for the three months ended September 30, 2026 and 2025, respectively. The decrease for the quarter ended September 30, 2026, was the result of lower outstanding Credit Facility borrowings offset by higher Credit Facility interest rates.

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, net of $0.6 million increased by $2.9 million compared to the second quarter of 2025 due to foreign currency transaction gains in our SRB segment from the strengthening of the U.S. dollar and lower foreign currency transactions losses in our Electronics segment.

Current 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, net of $0.1 million increased by $1.6 million compared to the third quarter of 2025 due to foreign currency transaction gains in our Electronics segment from the strengthening of the U.S. dollar.

Previous wording

Provision for Income Taxes. For the three months ended June 30, 2026, income tax expense from continuing operations of $2.6 million was attributable to the mix of earnings among tax jurisdictions, tax credits and incentives, and valuation allowances in certain jurisdictions. The effective tax rate of (93.9)% varies from the statutory tax rate primarily due to tax credits and incentives and valuation allowances in certain jurisdictions.

Current wording

(Benefit) Provision for Income Taxes. For the three months ended September 30, 2026, income tax benefit from continuing operations of $2.7 million was attributable to the mix of earnings among tax jurisdictions, tax credits and incentives, and valuation allowances in certain jurisdictions offset by the reversal of the deferred tax liability on outside basis difference in a foreign subsidiary. The effective tax rate of 10.5% varies from the statutory tax rate primarily due to tax credits and incentives and valuation allowances in certain jurisdictions offset by the reversal of the deferred tax liability on outside basis difference in a foreign subsidiary.

Previous wording

For the three months ended June 30, 2025, income tax expense from continuing operations of$1.5 million was attributable to the mix of earnings among tax jurisdictions, foreign withholding taxes, and tax credits and incentives offset by U.S. taxes on foreign earnings. The effective tax rate of(16.1%) varies from the statutory tax rate primarily due to foreign withholding taxes and tax credits and incentives offset by U.S. taxes on foreign earnings.

Current wording

For the three months ended September 30, 2025, income tax expense from continuing operations of $2.0 million was attributable to the mix of earnings among tax jurisdictions and tax credits and incentives offset by U.S. taxes on foreign earnings. The effective tax rate of (28.5)% varies from the statutory tax rate primarily due to tax credits and incentives offset by U.S. taxes on foreign earnings.

Previous wording

Our Stoneridge Brazil segment net sales increased $7.3 million from higher OEM product sales of $4.8 million including sales from the second quarter launch of an infotainment product and favorable foreign currency translation of $3.4 million.

Current wording

Our Stoneridge Brazil segment net sales increased $11.7 million mostly from higher OEM product sales of $8.9 million including sales from the second quarter launch of an infotainment product and favorable foreign currency translation of $4.4 million.

Previous wording

The increase in North American net sales was due to higher production volumes in our commercial vehicle market of $11.1 million including higher MirrorEye system sales and sales of $10.9 million from the Mexico Manufacturing Agreement related to the sale of Control Devices.

Current wording

The increase in North American net sales was due to higher sales to our commercial vehicle end market customers of $37.1 million from higher MirrorEye system sales, higher production volumes and sales of $17.3 million from the Mexico Manufacturing Agreement related to the sale of Control Devices offset by ($24.2) million from the recognition of the charge related to the PM sensor arbitration ruling described in Note 16, Subsequent Events.

Previous wording

The increase in net sales in South America was from higher OEM product sales of $4.7 million including sales from the second quarter launch of an infotainment product and favorable foreign currency translation of $3.4 million.

Current wording

The increase in net sales in South America was mostly from higher OEM product sales of $8.9 million including sales from the second quarter launch of an infotainment product and favorable foreign currency translation of $4.4 million.

Previous wording

The increase in net sales in Europe and Otherwas due to favorable foreign currency translation of $15.0 million and an increase in off-highway sales of $2.6 million. This increase was offset by lower sales in our European commercial vehicle market of $8.2 million, including lower Smart 2 tachograph product sales from the end of a regulatory retrofit campaign in 2025 offset by higher MirrorEye system sales, and lower sales in our China commercial vehicle market of $1.6 million.

Current wording

The increase in net sales in Europe and Otherwas due to favorable foreign currency translation of $13.7 million and an increase in off-highway product sales of $2.2 million. This increase was offset by lower sales to our European commercial vehicle end market customers of $4.9 million from lower Smart 2 tachograph product sales from the end of a regulatory retrofit campaign in 2025 offset by higher production volumes and higher MirrorEye system sales.

Previous wording

Cost of Goods Sold and Gross Margin. Cost of goods sold increased compared to the six months ended June 30, 2025 and our gross margin decreased to 21.0% in 2026 from 23.4% in the first six months 2025. Our material cost as a percentage of net sales increased from 56.5% in the first six months of 2025 to 58.0% in the first six months of 2026. The increase in material cost percentage was due to unfavorable sales mix in our Electronics segment from unfavorable foreign exchange variances and excess inventory charges as well as adverse sales mix from lower Smart 2 tachograph sales from the end of a regulatory retrofit campaign in 2025 offset by a benefit from the Mexico Manufacturing Agreement because under this contract manufacturing agreement only direct labor and overhead expenses are recognized. Overhead as a percentage of net sales was 16.2% and 16.4% for the first six months of 2026 and 2025, respectively. The decrease in overhead as a percentage of sales was attributable to favorable leverage of fixed costs from higher sales levels and lower business realignment costs in our Electronics segment mostly offset by the impact of the Mexico Manufacturing Agreement spend.

Current wording

Cost of Goods Sold and Gross Margin. Cost of goods sold increased compared to the nine months ended September 30, 2025 and our gross margin as a percentage of sales decreased to 16.7% in 2026 from 23.3% in the first nine months 2025. Our material cost as a percentage of net sales increased from 55.7% in the first nine months of 2025 to 60.6% in the first nine months of 2026. The increase inmaterial cost percentage was due to the recognition of the charge direct to sales related to the PM sensor arbitration ruling with no associated cost of goods sold, adverse sales mix from lower Smart 2 tachograph sales from the end of a regulatory retrofit campaign in 2025 and excess inventory charges offset by a benefit from the Mexico Manufacturing Agreement because under this contract manufacturing agreement only direct labor and overhead expenses are recognized. Overhead as a percentage of net sales was 17.8% and 17.1% for the first nine months of 2026 and 2025, respectively. The increase in overhead as a percentage of sales was attributable to the impact of the Mexico Manufacturing Agreement spend and warranty expense from commercial settlements and the recognition of the charge direct to sales related to the PM sensor arbitration ruling with no associated cost of goods sold offset by favorable leverage of fixed costs from higher sales levels and lower business realignment costs in our Electronics segment.

Previous wording

Our Electronics segment gross margin decreased compared to the prior year from higher direct material costs as a percentage of sales from unfavorable sales mix, unfavorable foreign exchange variances and excess inventory charges offset by lower business realignment costs.

Current wording

Our Electronics segment gross margin as a percentage of sales decreased compared to the prior year from higher direct material costs as a percentage of sales from unfavorable sales mix and warranty expense from commercial settlements and excess inventory charges offset by lower business realignment costs.

Previous wording

Selling, General and Administrative. SG&A expenses increased by $7.0 million primarily because of higher share-based compensation from retirement-related accelerated vesting, incentive compensation and legal expenses offset by lower business realignment costs and royalties.

Current wording

Selling, General and Administrative. SG&A expenses increased by $7.9 million primarily because of the favorable 2025 royalty adjustment and an increase in share-based compensation for retirement-related accelerated vesting, incentive compensation and legal expenses offset by lower self-insured medical and business realignment costs.

Previous wording

Design and Development. D&D costs decreased by $5.2 million primarily related to our Electronics segment as a result of higher customer reimbursements, lower business realignment costs and non-capital tooling expenses.

Current wording

Design and Development. D&D costs decreased by $4.3 million primarily related to our Electronics segment as a result of lower business realignment costs, non-capital tooling expenses and wages.