Stoneridge, Inc.

list by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Kelly Harvey, Director of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us to discuss our third quarter 2024 results. The release and accompanying presentation was filed with the SEC and is posted on our website at stoneridge.com in the investor section under presentations and events. Joining me on today's call are Jim Zisselman, our president and chief executive officer, and Matt Horvath, our chief financial officer. Before we begin, I need to inform you that certain statements today may be forward-looking statements. Forward-looking statements include statements that are not historical in nature and include information concerning our future results or plans. Although we believe that such statements are based upon reasonable assumptions, you should understand that these statements are subject to risks and uncertainties, and actual results may differ materially. Additional information about such factors and uncertainties that could cause actual results to differ may be found in our 10-Q, which was filed yesterday with the Securities and Exchange Commission under the heading Forward Looking Statements. During today's call, we will also be referring to certain non-GAAP financial measures. Please see slide three for a more detailed description of these non-GAAP measures and the appendix for reconciliation of these non-GAAP measures to the most directly comparable GAAP measures. After Jim and Matt have finished their formal remarks, we will open up the call to questions. And with that, I will hand the call over to Jim.

Thank you, Kelly, and good morning, everyone. Beginning on page four, during the third quarter, we continued driving improvements in the fundamentals of our business. Our focus on operational efficiency resulted in reduced quality-related costs while reductions to operating expenses helped to offset some of the significant market-related challenges we faced. We continued to focus on our key initiatives to drive cash performance as well. As a result, during the first nine months of the year, we generated $13.3 million in cash, an improvement of $31.3 million versus the same periods in 2023, primarily driven by improved working capital, including an $11.3 million reduction in inventory. Matt will provide additional detail regarding our quarterly financial performance and expectations for the remainder of the year later in the call. We remain focused on our key growth initiatives, including new business awards and the flawless execution of the program launches that will drive strong growth going forward. We continue to bring strong momentum with Mirai in both our OEM and fleet channels as the system continues to roll out in Europe and North America. Earlier this week, we announced that our next Mirai OEM program will be launching with Daimler Truck North America on their new fifth-generation Freightliner Cascadia truck which begins series production in mid 2025. DTNA has always been supportive of Mirai, offering the first pre-wire option for the trucks in production. Now, they continue to build on that momentum by offering an independent wing design to their customers, including advanced technology features so they can fully take advantage of the driver visibility and vehicle efficiency benefits of the system. Another launch is coming. As expected, one of our global OEM customers has announced they will be launching Mirai on yet another European brand. This launch signifies another milestone in their global Mirai program and will now be offered as standard equipment on several of their truck platforms, as well as an option on several others, beginning in the fourth quarter of this year. Similarly, our existing European OEM customers, DAF and Volvo, have now made their respective camera monitor systems standard on several heavy-duty truck platforms. Mirai becoming standard on several customer models underscores the overwhelmingly positive response from the market, resulting in significant customer demand and an opportunity to outperform the volumes assumed at program award. Similarly, we also continue to expand our retrofit applications with new partnerships with DB Shanker in North America and VDL Bus & Coach in Europe. Both of these partnerships demonstrate our ability to continue to drive broader market acceptance of the Mirai technology. Our investment in the Mirai platform continues to drive year-over-year growth, strong take rate expectations, and continued momentum across all of our end markets and applications. Finally, during the quarter, Control Devices was awarded our first-ever leak detection module program for an all-new hybrid vehicle from a Chinese OEM customer. This strategic technology is situated for growth amid the global hybrid vehicle expansion, but it's applicable to traditional powertrain vehicles as well. I will discuss our Mirai progress across all of our end markets as well as this award in more detail later in the call. Page 5 summarizes our key financial metrics for the third quarter compared to the second quarter of the year. Third quarter sales of $213.8 million decreased by 9.8% compared to the second quarter due in part to typical seasonality and production, but more significantly by the continued macroeconomic pressures in each of our primary end markets and geographies. The global auto industry remains under pressure as automakers continue to balance regional demand dynamics and inventory conditions. In addition, commercial vehicle manufacturers continue to face macroeconomic pressures in both North America and Europe. Margins declined in the third quarter compared to the second quarter, primarily due to reduced fixed cost leverage on lower sales and unfavorable sales mix. This was partially offset by an improvement in variable overhead of 60 basis points versus the second quarter as a result of reduced quality-related costs, and our continued focus on broad operational excellence. Adjusted operating profit of $700,000 resulted in adjusted operating margin of 0.3%, which was a decline of 200 basis points over the second quarter. This decline was primarily due to lower gross margin partially offset by a $4.5 million total reduction to operating expenses quarter to quarter to align with current market conditions. Finally, Third quarter adjusted EBITDA of $9.2 million drove an adjusted EBITDA margin of 4.3%, a decline of 250 basis points versus the second quarter. In addition to the operating drivers I just discussed, this decline was driven by the unfavorable quarter-to-quarter impact of net non-operating expenses related to equity losses on FX of $2.6 million, or approximately 110 basis points. Matt will provide further detail on our third quarter performance relative to our prior expectations later in the call. We continue to develop innovative technologies that address current market needs and expand our customer base to better diversify our end market and geographic exposure. This morning, we are excited to announce a new award with a new technology in control devices. primarily focused on the globally growing hybrid vehicle segment, which is applicable to traditional powertrains as well. We have been awarded our first-ever program for our new leak detection module, or LDM, on an all-new hybrid vehicle platform with a Chinese vehicle manufacturer with an anticipated start of production in the fourth quarter of 2025. This is one of several technologies being developed in controlled devices as we continue to expand the business utilizing our drivetrain agnostic approach. Driven by the advent of more hybrid vehicles in the market and the need to address greater evaporative emissions challenges on traditional powertrain vehicles, the LDM is a new technology designed to enable leak checks on emission systems through the implementation of a vacuum pump. This unique systems-based solution combines our emission systems design expertise with our canister vent solenoid technology to provide an integrated solution focused on improving evaporative emission system performance. Although this first award has a relatively small peak annual volume with a single platform and customer, there is a significant growing demand for this technology, and it positions us for growth amid the global hybrid vehicle expansion. As such, it is expected to bring incremental opportunities for us as a global supplier with new OEMs and new vehicle platforms across multiple geographies. Control Devices continues to focus on bringing system-based solutions and improved technologies to each of our end markets and customer applications. And we remain focused on drivetrain agnostic technologies to drive new business awards as the market continues to evolve. As the global hybrid vehicle market continues to expand, we are well positioned to take advantage of these opportunities. Turning to slide seven, Mirai continues to gain momentum in both the OEM market with new program launches and improved take rate expectations, and in the aftermarket with fleet expansions and new bus applications. Earlier this week, we announced our next Mirai program with Daimler Truck North America, on their new fifth-generation Freightliner Cascadia truck, which begins series production in the middle of next year. This marks Storm Ridge's third North American OEM program, featuring a factory-installed camera monitor system. We are extremely proud to collaborate with DTNA to introduce this cutting-edge system that drives significant advancement in driver visibility and vehicle efficiency on one of the top-performing and top-selling Class 8 trucks in North America. The DTNA system features an independent camera wing design with a high mounting position that provides an extended field of view, displaying front and side views through three high-resolution in-cab displays. As such, this system falls under StoneRidge's FMCSA exemption, allowing owners to remove conventional rear view mirrors and operate using only the factory-installed camera monitor system. This allows the end customer to fully recognize the benefits of the aerodynamic wing design that reduces drag by eliminating the traditional side mirrors, contributing to improved fuel efficiency. The DTNA system also highlights our ability to integrate advanced features and ADAS functionality through its side view cameras that automatically adjust based on trailer position, identifies trailer length, and displays alerts which notify the driver when objects or pedestrians are detected. And based on initial feedback from the customer, we expect take rates will exceed original expectations by the time it reaches peak production in 2026. Additionally, Mirai will be launching on a European brand of a previously launched global OEM, with production beginning in the fourth quarter of this year. Starting with the 2025 model year, we are happy to announce the vision system will be standard equipment on certain models while remaining optional on others. The system helps support the brand's efforts to provide their customers with increased productivity while reducing their carbon footprint, including fuel savings of up to 3% compared to the previous models. As I mentioned earlier on the call, many of our existing customers have begun to equip their trucks with the camera monitor system as standard equipment. Recently, DOF announced its vision system is now standard equipment on certain long-haul trucks. In addition, the vision system continues to be optional on most of their other Class A trucks. Our DOF program continues to have strong, stable take rates as our most mature OEM program. Given the change to standard equipment, as well as the continued positive feedback from DAF and their end customers, we are expecting higher take rates for the system beginning in mid-2025. Similarly, Volvo's FH aero truck in Europe will also include the camera monitor system as standard equipment. Volvo continues to heavily market the system, focusing on the driver ergonomics and safety benefits, as well as the positive environmental impact of the system through reduced emissions. Given the strength of customer feedback and the standardizing of the system on the FH Aerotruck, we expect customer take rates to continue to improve. We also look forward to launching the technology on their North American platform, the all-new VNL, in the first half of next year. With so many models now offering Mirai as standard equipment, we are confident market adoption of this industry-changing technology will continue to accelerate. We are extremely proud to be the market leader in commercial vehicle camera monitor systems throughout the world and expect continued market adoption of this new technology over time. Now turning to slide eight. In addition to the continued momentum with our Mirai OEM programs, we continue to expand with our fleet and bus customers in both Europe and North America. Earlier this month, we announced our fleet partnership with D.V. Shanker, a global leader in supply chain management and logistics. DB Shanker is currently piloting 75 Mirai systems on its North American fleet. Assuming a successful pilot program, DB Shanker intends to expand the implementation of Mirai across its entire North American fleet. DB Shanker's investment in Mirai reflects their ongoing commitment to safety and sustainability in their fleet operations. Through improved aerodynamics and fuel savings, when traditional Mirs are removed from the vehicle, Mirai supports the company's comprehensive emissions reductions effort for CO2 savings across its land transportation business. We are excited to collaborate with DB Schenker on this program and support their commitment to improving driver safety and reducing emissions. In the bus market, VDL Bus & Coach recently announced a large order from a key customer of over 150 new generation electric buses equipped with Mirai to be delivered in the first half of 2025. Arriva, a leading European passenger transport partner focused on contributing to a more sustainable future, ordered the buses to be used in West Brabant, Netherlands, where bus transportation is the main form of public transport. These Mirai-equipped electric buses will be fully emissions-free, aligned with Arriva's zero-emission ambitions, will also provide significant safety benefits. Our fleet and bus partnerships continue to drive broader market acceptance of the Mirai technology. supporting our partners' safety, efficiency, and sustainability goals. That said, while we continue to expand our relationships with fleet and bus customers, recognize that many of these fleets are evaluating the technology at lower volumes prior to the availability as a factory installation. We expect this will increase the OEM volumes, as evidenced by several of our OEM customers making the system standard equipment. However, it naturally reduces demand for the retrofit application. Our investment in the Mirai platform continues to drive year-over-year growth, strong take rate expectations, and continued momentum across our end markets and applications. We will continue to invest in the technologies and the adjacent product opportunities to optimize our position in this market and drive technology innovation, improve safety, efficiency, and driver retention for our customers. With that, I will turn it over to Matt for a more detailed update on our quarterly financial performance and our forward expectations. Matt.