Stoneridge, Inc.

Good morning, everyone, and thank you for joining us to discuss our first quarter 2025 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 Zisleman, our president and chief executive officer, and Matt Horvath, our chief financial officer. During today's call, we will be referring to certain non-GAAP financial measures. Please see slide two of the presentation for a more detailed description of these non-GAAP financial measures and the appendix for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. In addition, certain statements today may be forward-looking statements. Forward-looking statements include statements that are not historical in nature and include information concerning their 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 on page three of the presentation and in our Form 10-Q, which has been filed with the Securities and Exchange Commission under the heading Forward Looking Statements. After Jim and Matt have finished their formal remarks, we will then open up the call to questions. And with that, I will hand the call over to Jim.

Thanks, Kelly, and good morning, everyone. Let me begin on page four. In summary, we delivered strong performance in the first quarter, including operating margin improvement across every single one of our segments, overall adjusted gross margin improvement of 210 basis points, and adjusted EBITDA and cash performance that soundly exceeded our expectations. Mirai revenue increased by an impressive 24% relative to the fourth quarter of 2024, driven by strong sales in the bus market and the continued ramp-up of our previously launched OEM programs, where we are benefiting from the system becoming standard equipment on several additional truck models. Mirai continues to be a strong growth driver for Stone Ridge as the system continues to gain momentum through our OEM programs, as well as through continued expansion in our aftermarket applications. And as I mentioned previously, adjusted gross margin improved by a healthy 210 basis points in the first quarter, driving adjusted operating and adjusted EBITDA margin expansion. This progress was a result of success across our key operational priorities as we continued to focus on material cost improvement, where we achieved a strong 220 basis point reduction, and reduce quality-related costs, which resulted in a $2.5 billion improvement relative to the fourth quarter of last year. We are also seeing success in improving our cash performance as well, driving working capital reductions through continued management of our inventory. This resulted in free cash flow of approximately $4.9 million, an increase of approximately $1.5 million versus the first quarter of the prior year. We are very proud of the progress we have made in reducing our inventory, which has resulted in a $28 million reduction over the first quarter of last year. Matt will provide further details on our financial and cash performance later on the call. Over the last several months, tariffs have been the focal point of discussion globally and certainly in our industry. There has been significant volatility in the details around the application of U.S. imposed tariffs, and the corresponding reciprocal tariffs, creating uncertainty in the overall market and the transportation industry. StoneRidge is well positioned with our global manufacturing footprint, and a supply chain strategy is currently in place to mitigate the impact of potential tariffs. During the first quarter, we saw very little direct impact of tariffs. However, We continue to develop and implement mitigation strategies to further offset potential tariffs that have been either discussed or are scheduled to be implemented. Our long-term operational improvement strategies are paying off, and we are proud of the resulting strong performance in the first quarter. As always, we will continue to monitor and to respond efficiently to market changes and manage the business accordingly to drive earnings and cash performance. We are taking a deliberate and thoughtful approach for the remainder of the year And given our outperformance in the quarter, we are maintaining our previously provided full year guidance. Matt will provide more details on our expectations for the remainder of the year later in the call. On page five, summarizes our key financial metrics for the first quarter of 2025 compared to the fourth quarter. Stone Ridge specific growth drivers, including a record sales quarter for the Smart2 Tachograph and Mirai, a 60% growth in our local OEM business in Brazil, And our higher sales for our North America passenger vehicle customers fully offset lower production volumes in the commercial vehicle end markets and lower off-highway sales. As a result, and as expected, first quarter revenue was in line with the fourth quarter of the prior year. Driven by continued strong progression on key company initiatives and our longstanding focus on operational excellence, margins continued to expand in the first quarter. Serious focus on material cost improvement actions, continuous improvement and manufacturing performance, and company-wide efforts on reducing quality-related costs contributed to the 210 basis point improvement in adjusted gross margin over the fourth quarter of last year. We've redoubled our efforts to focus on built-in quality, responsiveness, and proactive processes to address any quality issues and expect continued progress in quality-related costs going forward. First quarter operating income improved in all of our segments relative to the fourth quarter of 2024, resulting in a notable overall adjusted operating margin improvement of 160 basis points. Higher SG&A, primarily due to the normalization of incentive compensation to annual targeted amounts, was offset by improved operational performance and continued structural cost control, including reduction of engineering expenses as we continue to focus on the globalization of our engineering organization. First quarter adjusted EBITDA of $7.6 million or 3.5% of sales improved by approximately $1.6 million or 80 basis points compared to the fourth quarter. Overall, we significantly improved our operating margin performance in the first quarter, both in total and at each of our segments, as Matt will discuss in more detail again later in the call. Now turning to page six. As discussed a bit earlier, we saw very little direct impact of tariffs in the first quarter. Our primary exposure to tariffs is related to products manufactured in our facility in Juarez, Mexico, and sold to U.S. customers for U.S. consumption. It's important to note that currently approximately 91% of our product sales from Mexico are exempt from tariffs, as they are USMCA certified. For the remainder of our products that are not USMCA certified or potentially exposed to the next round of non-US content-based tariffs, we have already notified customers that we will be issuing price increases related to any incremental costs we incur related to these tariffs. In fact, we have already secured, or we are well down the path of securing price increases, including payment for previously incurred tariffs to help offset our current tariff exposure. Similarly, we are working with our current customers to increase the number of USMCA certified products by adding qualifying content to offset any tariff exposure that is under our control. We have successfully addressed most of the complexities in component purchases to the strength of our current supply chain structure. In response to tariffs, we are utilizing previously established methods that have already recently implemented strategic sourcing and shipping actions to limit the impact of tariffs on components. And as a result, we expect that our manufacturing footprint and supply chain strategies will allow us to mitigate the majority of the direct impact of tariffs. The overall impact on consumer demand and production volumes remains a bit uncertain, as the market continues to respond to the volatile tariff environment. However, through strong communication and transparency with our suppliers and our customers, we are confident in our ability to implement mitigating actions to limit the impact of current or future tariffs on our financial results. Additionally, Stone Ridge has a relatively higher exposure to the domestic three OEMs rather than foreign OEMs, which we believe could benefit us in this environment. We will continue to monitor shifts in macroeconomic policies and the impact on our business to ensure that we act quickly to offset any incremental costs as we have done historically. And with that, I will turn it over to Matt to discuss our financial results. Matt. Thank you, Jim.

Turning to page eight. Sales in the first quarter were $217.9 million, approximately in line with our expectations. First quarter adjusted EBITDA was $7.6 million, resulting in a $1.6 million improvement relative to the fourth quarter of last year, exceeding our previously outlined expectations. As Jim mentioned earlier on the call, we are maintaining our full-year guidance ranges based on our first quarter outperformance and run rate margin improvement, as well as our original, relatively conservative assumptions related to vehicle production volume. In the recent weeks, third-party production forecasts have significantly reduced full-year production volume expectations, primarily in the back half of the year. However, based on our original conservative assumptions for our full-year guidance, as well as the current short-term production forecasts provided by our customers, our expectations have not been significantly impacted. Even considering the most recent external production forecasts, we expect to perform within our previously provided EBITDA guidance range. Consistent with the outperformance we saw in the first quarter, we expect continued progress on our material cost improvement initiatives and quality-related costs for the remainder of the year. We will continue to manage structural costs and make adjustments as necessary to align our operating structure with current market conditions. We expect our revenue and EBITDA cadence for the year to be relatively consistent with previous expectations. We expect the second quarter performance will slightly increase compared to the first quarter. We expect continued expansion of mirrorized sales in the second half of the year, primarily driven by the continued ramp-up of new programs to substantially offset production volume headwinds. As a result, we expect revenue to be approximately evenly split between the first and second half of the year. We expect continued EBITDA margin performance as a result of the actions we are taking to improve gross margin and manage structural costs. As a result, we expect EBITDA to be slightly more back-capped weighted as these actions compound. Overall, we delivered a strong first quarter which exceeded our expectations across all of our key metrics. Page 9 summarizes our key financial metrics specific to control devices. Control devices' first quarter sales of $69.9 million increased by 10.6% relative to the fourth quarter of the prior year, primarily due to higher production volumes for our North American passenger vehicle customers. Control devices significantly outperformed its underlying end markets, including the North American passenger vehicle end market that grew by just 3.9%, primarily due to production tailwinds for our specific customers and our mix of vehicle programs. First quarter adjusted operating income of $1.5 million improved by 470 basis points compared to the prior quarter, primarily as a result of higher sales, lower quality-related costs of approximately $800,000, and lower engineering spend due to recent actions taken to streamline the engineering function. This represents a 46% contribution margin on $6.7 million of incremental sales in the quarter as we continue to focus on executing on our key priorities for the year and managing the variables that are in our control. We expect continued volatility in our end markets as uncertainty remains related to the market's response to tariff policies. However, there could even be opportunity to outperform our end markets as international OEMs adapt to new tariff policies that should favor domestic OEMs selling in North America, which are our primary exposure. We will continue to focus on the things we can control, including advanced and new product development, commercial expansion, and improvement in material costs and manufacturing performance. Page 10 summarizes our key financial metrics specific to electronics. As expected, first quarter sales of $140.5 million were slightly lower than sales in the fourth quarter. Stoner-specific growth factors continued to offset production volume headwinds. More specifically, MirrorEye set a record for quarterly sales, which grew by 24% relative to the fourth quarter of 2024. This was primarily driven by the ramp-up of recently launched OEM programs and incremental sales in the global bus market. Additionally, Our Smart2 tachograph set our second consecutive quarterly sales record driven by continued strong demand. We remain confident that Stoner-specific growth drivers, including Mirai and our Smart2 tachograph, will drive market outperformance going forward. First quarter adjusted operating margin expanded by approximately 130 basis points compared to the fourth quarter of the prior year. Included in our operating performance was a $1.8 million improvement in quality-related costs. We expect that our continued focus on built-in quality and rapid response and mitigation of quality-related issues will result in continued improvement in 2025. We continue to expect revenue growth for electronics in 2025, primarily driven by the annualization and launch of Mirai OEM programs and continued strong performance with our Smart2 tachograph applications. We expect to continue to drive improvement in material costs and quality-related costs throughout the year. As a result, we are expecting continued positive margin progression in 2025 as the impact of our key initiatives mature. Page 11 summarizes our key financial metrics specific to Stoner's Brazil. Stoner's Brazil's first quarter sales totaled $14.4 million, which represents an increase of $2 million, or approximately 16% growth relative to the fourth quarter of last year. This increase was driven by higher local OEM sales, which, consistent with our strategy focused on local OEM growth, expanded by $2.6 million or over 60% relative to the fourth quarter. We remain focused on expanding our local OEM business to grow our presence in Brazil and unlock global opportunities with our global customers. First quarter operating profit improved by 320 basis points or $500,000 relative to the fourth quarter of 2024, primarily driven by improved fixed cost leverage on incremental sales. We expect stable revenue and margins in 2025 as we continue to shift our portfolio in Brazil to more closely align with our global growth initiatives and further expand our local OEM programs to support our global customers. Brazil remains a critical engineering center, which we will continue to utilize and grow to cost-effectively support our global business. Turning to page 12, in the first quarter, we generated $4.9 million in free cash flow, an improvement of $1.5 million relative to the first quarter of 2024. We continue to focus on inventory management, which has resulted in approximately $28 million of improvement over the last year. As we remain focused on our key working capital initiatives, we are expecting continued improvement throughout this year. Net debt to trailing 12-month EBITDA, as calculated for compliance purposes, was just under four times. We remain confident the company has ample liquidity and flexibility to operate in the current macroeconomic environment. We are maintaining the previously communicated targeted compliance net debt to EBITDA leverage ratio of two to two and a half times by the end of the year. With that, I will turn it over to Jim for closing comments.