Stoneridge Inc (SRI) Q2 2024 Earnings Call Highlights: Margin Gains and Strategic Partnerships ...
Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Stoneridge Inc (NYSE:SRI) achieved significant margin improvements in Q2 2024, with a 250 basis point increase in gross margin and a 410 basis point increase in adjusted EBITDA margin.
The company successfully launched its MirrorEye OEM systems with Volvo in Europe and Peterbilt in North America, receiving positive initial customer feedback.
Stoneridge Inc (NYSE:SRI) announced a partnership with Volvo Bus to provide AI-based fuel advice systems, aligning with their focus on data services and AI.
The appointment of Natalia Noblet as President of Electronics is expected to drive financial performance and innovation, leveraging her extensive industry experience.
The company is focused on operational excellence and cost control, leading to improved financial performance and setting the stage for future growth.
Negative Points
Current orders for the Volvo MirrorEye system are lower than initially expected, leading to potential volatility in revenue projections.
Stoneridge Inc (NYSE:SRI) reduced its full-year 2024 revenue guidance due to unfavorable foreign currency impacts and lower OEM production volumes.
There is increased pressure and timing delays on non-OEM and customer demand-based products, including MirrorEye retrofit applications.
The company faces macroeconomic pressures affecting OEM production volumes in Europe and North America, impacting revenue expectations.
Despite improvements, there remains uncertainty in the market, with potential volatility affecting the company's ability to meet its guidance.
Q & A Highlights
Q: How can we think about the progression of material cost improvements and operating cost controls through the second half of the year? A: Matthew Horvath, CFO: We have made significant progress on material costs and operational excellence priorities. Material costs and quality-related costs have improved, supporting better gross margins. We expect continued improvements across the P&L, which should persist throughout the remainder of the year, setting us up well for 2025.
Q: Can you provide an update on the MirrorEye take rates and how they compare to earlier expectations? A: James Zizelman, CEO: We are excited about the MirrorEye program's take rates, especially with new launches. Although early in the launch, feedback from customers has been positive, and we expect to meet or exceed our targets. We have additional launches planned, which should increase MirrorEye's market presence.
Q: What are your customers saying about the OEM demand outlook for the remainder of 2024 and into early 2025? A: Matthew Horvath, CFO: We have seen some volatility, leading to a reduction in guidance related to OEM production. While 2025 is still uncertain, macroeconomic conditions and interest rates are influencing our end markets. However, we expect to continue outperforming our underlying markets.
Q: Can you clarify the impact of reduced guidance on your business segments, particularly regarding MirrorEye projections? A: Matthew Horvath, CFO: The $18 million reduction is related to OEM production forecasts and does not include MirrorEye take rates. The $15 million potential volatility includes MirrorEye and other non-OE products. It's too early to determine the exact impact on the $100 million MirrorEye revenue target.
Q: Is the Volvo Bus pilot for the AI-based fuel advice system your first pilot for this product? A: James Zizelman, CEO: Yes, Volvo Bus is our first customer for this pilot, and we are already seeing results. This product uses AI to analyze driver behavior and improve fuel efficiency, and we are considering expanding to other customers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.