Yahoo Finance Stoneridge Inc (SRI) Q1 2024 Earnings Call Transcript Highlights: Robust Growth and Margin Expansion
Revenue: Q1 sales $239.2 million, up 3% year-over-year.
Gross Margin: Improved by 170 basis points from last year.
Operating Margin: Increased by 160 basis points compared to Q1 last year.
EBITDA Margin: Rose by 120 basis points over the same period.
Operating Cash: Generated $9.1 million, an $18.3 million improvement year-over-year.
Inventory Balance: Decreased by $7.9 million.
Leverage Ratio: Improved by approximately a quarter turn from end of 2023.
Net Income: Details not specified, but EBITDA expected around $67 million for full year.
EPS: Expected to break even in Q2; full year guidance maintained.
Smart Tachograph Revenue: Estimated at $60 million for 2024.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Stoneridge Inc (NYSE:SRI) reported a 3% increase in first quarter sales, driven by strong growth in the Electronics segment.
Gross margin improved by 170 basis points, operating margin by 160 basis points, and EBITDA margin by 120 basis points compared to the first quarter of last year.
The company generated $9.1 million of operating cash, an improvement of $18.3 million compared to the first quarter of last year.
Inventory balance was reduced by $7.9 million, contributing to an improved leverage ratio.
Stoneridge Inc (NYSE:SRI) is maintaining its full year 2024 guidance, expecting continued growth and profitability improvements.
Negative Points
The company faced $2 million of incremental warranty-related costs in the quarter due to historical execution issues.
Sales in the North American passenger vehicle end market were lower, primarily due to slowing demand for electric vehicles.
The company experienced unfavorable impacts from foreign currency and equity interest expenses amounting to approximately $2.3 million.
There was a slower ramp-up in aftermarket sales for the Smart tachograph program, as end users delayed adoption.
Control Devices segment sales declined by approximately $8.7 million due to the wind down of end-of-life programs and slower demand for electric vehicle platforms.
Q & A Highlights
Q: Could you provide more detail on the EBITDA cadence for Q2, especially considering the adjustments made in Q1? A: (Matthew Horvath, CFO) Yes, we expect EBITDA to improve in Q2 from the adjusted $11 million in Q1, primarily due to base operating performance improvements. We anticipate continued improvements throughout the year, especially with the launch of large MirrorEye programs and the ramp-up of the tachograph aftermarket, which generally yields a higher margin.
Q: Can you clarify the issues around the tachograph adoption noted in Q1? A: (James Zizelman, CEO) The OEM adoption of the new tachograph is on track. The variability mainly stems from the aftermarket, where adoption has been slower as operators may delay updates until closer to the regulatory deadline at the end of 2024. However, the European Commission has reaffirmed the deadlines, so we expect aftermarket sales to pick up.
Q: What are the revenue expectations for the Smart tachograph and MirrorEye for this year? A: (Matthew Horvath, CFO) There's no change in our revenue expectations for MirrorEye. For the Smart tachograph, despite a slower Q1, the annual outlook remains unchanged as we anticipate a stronger performance in the latter half of the year, especially in the aftermarket segment.
Q: How significant are the material cost and pricing tailwinds expected to be for the full year? A: (Matthew Horvath, CFO) The material cost improvements and operational efficiencies are significantly enhancing our margins. For instance, excluding specific warranty issues, our gross margin would have exceeded 21% in Q1. These improvements are fundamental and expected to persist and amplify with increased revenue.
Q: Are there any more expected warranty expenses, and how do they impact the guidance? A: (Matthew Horvath, CFO) The guidance includes the warranty issues experienced in Q1. These issues are not expected to recur, and our guidance reflects the performance of the business excluding these non-recurring costs.
Q: What is the expected timeline and market size for peak revenue from the new tachograph regulations? A: (Matthew Horvath, CFO) Peak annual revenue from the tachograph is expected around 2025-2026, with a market share estimate of about 30%. This timeline aligns with the phased regulatory requirements, transitioning the product from aftermarket to predominantly OEM-driven post-2026.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
