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    STONERIDGE (SRI)

    SRI Q1 2025: Margins Expand to ~30%, Inventory Cuts Boost Cash Flow

    Reported on Jun 9, 2025 (After Market Close)
    Pre-Earnings Price$4.15Last close (May 1, 2025)
    Post-Earnings Price$4.23Open (May 2, 2025)
    Price Change
    $0.08(+1.93%)
    • Strong Revenue Drivers: The momentum in key products such as MirrorEye and SMART 2 Tachograph continues to fuel growth. Executives noted robust sales and strong launch programs in both North America and Europe, pointing to sustained demand for these systems.
    • Operational Excellence: Management highlighted significant cost improvements with enhanced quality control and reduction in quality-related expenses, which is leading to expanding margins and a more efficient operating model.
    • Resilient Supply Chain & Inventory Management: The company’s effective handling of tariff exposures and ongoing inventory reductions (with nearly $30 million improvement over the prior year) strengthens working capital and overall cash flow, positioning the business well for future growth.
    • Production Volatility: Third-party production forecasts have shown a significant reduction in full-year production volume expectations, suggesting potential underperformance relative to guidance if lower volumes materialize.
    • Tariff and Trade Uncertainty: Despite current tariff mitigations, ongoing global trade volatility and the possibility of future tariff changes or ripple effects on demand remain a concern.
    • Quality and Cost Management Risks: While quality-related expenses have improved, the inherent risk of recurring quality issues could lead to unexpected cost spikes and margin erosion.
    MetricYoY ChangeReason

    Total Revenue (business segments)

    Down 8.9% (from $239.16M to $217.89M)

    Sales declined across key segments in Q1 2025 due to lower sales volumes in Control Devices and Electronics, partially offset by growth in Stoneridge Brazil, reflecting mixed product performance and market pressures compared to Q1 2024.

    Control Devices

    Down 10.8% (from $77.16M to $68.83M)

    A decline in Control Devices is driven by lower sales volumes, particularly in markets such as the North American automotive segment, contributing to a 10.8% drop from Q1 2024 levels.

    Electronics

    Down 10% (from $149.78M to $134.78M)

    Electronics experienced a 10% drop as reduced sales volumes and margin pressures overshadowed previous gains from product initiatives; the decline reflects challenges in recovering prior favorable customer orders.

    Stoneridge Brazil

    Up 16.7% (from $12.22M to $14.27M)

    Stoneridge Brazil saw strong growth, up 16.7%, driven by higher OEM product sales and improved local market conditions, which counterbalanced declines in other segments.

    North America (Geographic)

    Down 14.5% (from $118.1M to $101.1M)

    North American revenue fell by 14.5% due to lower sales volumes and the impact of end-of-life production in the automotive market, indicating a tougher competitive environment compared to the prior period.

    South America (Geographic)

    Up 17.2% (from $12.2M to $14.3M)

    South America grew by 17.2% as increased OEM sales helped overcome some negative currency impacts and lower OES channel sales, showing an improving market dynamic relative to Q1 2024.

    Europe and Other (Geographic)

    Down 5.7% (from $108.8M to $102.5M)

    Revenue in Europe and Other declined by 5.7% with reduced customer recoveries and retroactive price decreases outpacing gains in certain market segments, continuing a downward trend from the previous year.

    Operating Income

    Turned negative (-$3.23M vs. +$0.33M)

    Operating income deteriorated sharply from a modest profit of $331K in Q1 2024 to a loss of $3,225K in Q1 2025, reflecting margin pressures from lower sales and increased operating expenses.

    Net Loss

    Increased by 17.3% (from -$6.13M to -$7.20M)

    Net loss widened by 17.3% due to the combined effect of declining net sales and higher operating costs, including increased overhead and business realignment expenses relative to the same period last year.

    Cash and Cash Equivalents

    Up nearly 63% (from $48.44M to $79.11M)

    A robust 63% increase in cash is driven by improved operating cash flow and reduced investing outflows, boosted by effective working capital management compared to Q1 2024.

    Total Shareholders’ Equity

    Down 8.7% (from $277.26M to $253.10M)

    Shareholders’ equity declined by 8.7% as net losses and accumulating comprehensive losses eroded retained earnings, marking a deterioration from Q1 2024 levels.

    Operating Cash Flow

    Up about 20% (from $9.11M to $10.90M)

    Operating cash flow improved by approximately 20% due to better working capital management and operational efficiency, despite lower net sales impacting overall revenue compared to Q1 2024.

    1. Margin Outlook
      Q: How much margin improvement and future guidance?
      A: Management emphasized strong Q1 margin expansion with contribution margins typically around 25%-30% and expects a steady, linear improvement as cost initiatives mature.

    2. Revenue Outlook
      Q: Any changes to MirrorEye revenue outlook?
      A: Management maintained the outlook with no adjustments, anticipating that MirrorEye will continue its strong pace toward a $120 million target driven by robust program launches in both North America and Europe.

    3. Inventory Sustainability
      Q: Are current inventory improvements sustainable with growth?
      A: Management highlighted a $28 million inventory reduction and expects high single-digit inventory turns to persist even as revenue grows, with further improvements underway.

    4. Tariff Impact
      Q: How are tariffs affecting auto customer demand?
      A: Management noted minimal direct tariff impact because approximately 91% of products are USMCA certified, and robust order activity indicates stable demand.

    5. Quality Issues
      Q: Were quality-related issues a concern this quarter?
      A: Management reported a sequential improvement with quality-related costs down by $2.5 million, attributing the result to efficient processes and proactive issue management.

    6. Production Location
      Q: Where are MirrorEye and Tachograph produced?
      A: Both MirrorEye and Tachograph are produced in Europe, which helps mitigate tariff challenges.

    7. Connected Trailer
      Q: When can we expect connected trailer rollout?
      A: The connected trailer suite is progressing well, with initial customer evaluations beginning late 2025 and significant expansion forecasted in 2026.

    Research analysts covering STONERIDGE.