Stoneridge, Inc.

Good morning, everyone, and welcome to the StoneRidge, Inc., fourth quarter and full year 2025 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist 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 and then one on your touchtone telephones. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I would like to turn the floor over to Kelly Harvey, Director of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us to discuss our fourth quarter and full year 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 Ziselman, our president and chief executive officer, and Matt Horvath, our chief financial officer. Also on today's call are Natalia Noble, our president of Stoneridge Electronics and incoming chief executive officer, and Bob Hartman, our Chief Accounting Officer, who will be stepping into the role of Interim Chief Financial Officer on April 1st. 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 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 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 on page three of the presentation and in our most recently filed Form 8K and the 2025 Form 10K, which will be filed in the next few business days with the Securities and Exchange Commission under the heading Forward Looking Statements. After our speakers 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.

Thank you, Kelly, and good morning, everyone. Let me begin on page four. In 2025, our focused growth strategy, continuous improvements on material and quality-related costs, and rigorous structural cost control enabled us to successfully navigate another year marked by very challenging macroeconomic conditions. We are proud of our ability to continuously outperform our end markets, even in a significantly challenged production environment, while also limiting the impact on our bottom line. Our outperformance was primarily driven by continued momentum with Mirai, resulting in sales of over $110 million, or approximately 70% growth compared to the prior year. In addition to strong performance this year, our strategy to grow the Mirai platform continues to pay off with additional business awards and expansion across many of our global OEMs. Our focus on long-term growth enabled by our advanced technology offerings, drove significant new business awards in 2025. New business awards announced this year for electronics and storage Brazil total approximately $830 million in estimated lifetime revenue. This included the largest business award in storage history for a global OEM Mirai program extension and the largest OEM program award in storage Brazil's history as well as several other significant programs for secondary displays, the Smart2 tachograph, and other electronic control products. In 2025, we limited the impact of significant end-market headwinds by reducing material costs by 80 basis points, reducing quality-related costs by $6.6 million, and driving continued inventory reductions to support positive cash flow performance. Our focus on cash performance and inventory management resulted in positive free cash flow of approximately $19 million, driven by a significant improvement in inventory balances of $18.7 million. Earlier this year, we announced that we completed the sale of our control devices segment for a base purchase price of $59 million, reflecting an important milestone for the company's long-term strategy. As a result of this sale, StoneRidge will now focus its resources on our highest growth, highest return businesses, and reduce overall organizational complexity, leading to a clear focus strategy for the company. Additionally, this transaction strengthens our balance sheet as proceeds from the sale will be used to pay down debt and reduce interest expense burden. As part of this next chapter for StoneRidge, we are thrilled to announce that Natalia Noble, our current president of StoneRidge Electronics, has been promoted to President and Chief Executive Officer effective April 1st. Natalia will continue focusing on the strategic vision of the company by advancing the rigor and discipline we have built into our daily execution over the last several years to drive long-term sustainable performance. Later on the call, I will more formally introduce Natalia, and she will provide her perspective on the deeply embedded strategy for StoneRidge and our unshakable commitment to long-term value creation for our stakeholders. We are proud of our accomplishments in 2025. Yet again, we successfully navigated a year of macroeconomic pressures and maintained operational discipline and focus. With the expected favorable market tailwinds ahead, a revitalized company following the divestiture of control devices, sustained momentum from our growth products driving continued outperformance, and keen monitoring of potential headwinds such as geopolitical volatility, we are quite optimistic about the years to come. Page 5 covers our fourth quarter financial performance and summarizes our key financial metrics for the full year 2025 compared to the prior year. While we continued to make significant progress across our key priorities in 2025, fourth quarter results did underperform our prior expectations. The control devices segment, which was subsequently divested in January 2026, underperformed by approximately $2 million, driven primarily by the unfavorable impact of FX and incremental tariffs. Similarly, tariffs impacted the remaining business by an incremental $1.2 million in the quarter relative to our prior expectations. While we expect to recover a significant portion, if not all of these incremental costs, there are timing differences between when the tariffs are incurred and when the recovery is realized. We have shown historically strong performance in recouping these tariff-related costs and expect to continue to do so with those incurred at the end of the year. Finally, during the fourth quarter, we incurred incremental quality-related costs of approximately $3.3 million relative to our prior expectations. As evidenced by our full year quality cost reduction of $6.6 million, our relentless focus on continuous improvement has been effective. That stated, we have continued to face challenges with certain legacy warranty issues culminating with settlements with key customers to bring them to conclusion. While this drove incremental costs in the quarter, it also allows us to move on from these historical issues and focus on building stronger relationships with these customers to drive growth in the future. This is why it is imperative that we remain committed to improve quality processes early in the product development cycle to prevent quality issues with long tails, such as the ones we dealt with this quarter. Now shifting to our full-year performance, there is no question that 2025 presented some challenges for the broader transportation industry as production volume declined significantly compared to the prior year and fell well below our initial expectations. Even with significantly reduced production volumes, we outperformed our weighted average OEM end markets by 150 basis points in 2025. This market outperformance was driven primarily by the substantial growth in Mirai sales as our OEM programs continued to mature, take rates continued to increase in Europe, and new programs launched with Daimler and Volvo in North America. This resulted in Mirai OEM revenue growth of 84% compared to the prior year. We continue to be encouraged by the overwhelming positive response to our Mirai technology from our customers and their customers alike. Later on the call, we will discuss how this strong market acceptance is expected to continue to drive substantial growth over the long term. Adjusted operating margin was significantly impacted by the decline in sales and and the underlying macroeconomic pressures, including tariff-related headwinds and significantly reduced production at certain customers. However, our actions to improve material costs, manufacturing performance, and quality-related costs partially mitigated this impact. Our focused efforts to reduce material-related costs resulted in an 80 basis point improvement relative to the prior year. In addition, and as indicated earlier, quality-related costs improved by $6.6 million contributing an additional 50 basis points to operating performance, as we continue to focus on built-in quality, responsiveness, and a proactive process to address any historical quality issues. Excluding other non-operating expense of $3.6 million, primarily related to adverse foreign currency impacts, full-year adjusted EBITDA was $28.6 million, or 3.3% of sales. This resulted in a 60 basis point decline compared to the prior year, which reflects our success in limiting the impact of the significantly reduced production volumes faced during the year. We achieved this by our strict focus on improved operational performance, which drove a decremental contribution margin of just 14.2% versus our historical average of 25 to 30%. Finally, as I mentioned previously, our focus on cash and inventory management drove positive adjusted free cash flow of approximately $19 million. Lower contribution margin was offset by the significant improvement in our inventory balances, which declined by $18.7 million this year. Overall, despite continued and significant challenges in our end markets, we were able to outperform our weighted average end markets, significantly improve our operational performance, and drive cash performance in 2025. Turning to page six. Just a few weeks ago, I announced that I will be retiring effective May 20th of this year. As part of Storm Ridge's long-term, thoughtful succession planning strategy, the board has prioritized leadership continuity and a smooth transition to support the company's next phase of growth. That said, I was pleased to announce that Natalia Noble our current president of electronics that's been appointed as incoming president and CEO and member of the board of directors. I will remain as president and chief executive officer through March 31st. On April 1st, Natalia will assume the role of president and chief executive officer, and I will remain on the board of directors and transition into a strategic advisor role to support the transition and key stakeholder relationships through May 20th. I will also be a board nominee for election at our next annual meeting to provide continuity and support for the company. Natalia is the right leader for this company. For nearly two years, Natalia has led the electronic segment with focus and discipline, making this a natural and well-prepared transition. Natalia is a highly experienced global leader with deep roots in the commercial vehicle industry. She consistently delivers on our commitment and operational excellence. while strengthening meaningful relationships with our customers. During her tenure, Natalia led the segment in securing several significant new business awards, including the largest program in company history. Her customer connections and commitment to excellence in execution demonstrate her ability to drive growth, strengthen competitive positioning, and deliver measurable results. Over the course of her career, she's held various senior leadership roles within global transportation technology companies, including ZF and WAPCO, where she led complex multi-regional businesses with full profit and lost responsibility. Her broad cross-functional leadership experience and proven ability to drive performance make her a natural choice to lead StoneRidge through its well-planned evolution. Natalia's appointment marks an exciting new chapter for the company. Over the next few months, we will continue to work very closely together to ensure a seamless, well-organized transfer of responsibilities I am confident that under her leadership, Stone Ridge will continue to accelerate its drive forward. Before I conclude, I'd like to take a moment to say thank you. Serving as a CEO of this company has truly been an honor. I'm incredibly proud of what we've built together, our focus, our rigor, and our discipline to drive operational excellence and the establishment of a strong performance culture. To our employees, our customers, our shareholders, and other partners, thank you for your trust and your commitment. I am confident the improvements we've made are built into the company DNA, positioning it for sustainable long-term growth well beyond my tenure. Now, I am proud to turn the call over to Natalia to walk us through StoneRidge's refined company strategy and position. Natalia, the floor is yours.