Q2 2024 Stoneridge Inc Earnings Call

Thank You Kelly and good morning everyone. Beginning on page 4, our second quarter financial performance highlights our continued focus on improving the fundamentals of our business leading to significantly improved margins in the quarter.

James Zizelman: Our second quarter financial performance highlights our continued focus on improving the fundamentals of our business, leading to significantly improved margins in the quarter. This is primarily driven by continued material cost improvements and operating cost control as we continue to execute on the key initiatives we set at the beginning of the year.

James Zizelman: Our efforts resulted in a 250 basis point improvement in gross margin, a 210 basis point improvement in adjusted operating margin.

James Zizelman: Matt will provide additional detail regarding our quarterly financial performance and expectations for the remainder of the year later in the call. We remain focused on flawless execution of the program launches that will drive strong growth going forward.

Matt will provide additional detail regarding our quarterly financial performance and expectations for the remainder of the year later in the call.

James Zizelman: We are excited to announce that during the second quarter, we began shipping our first MIRI OEM systems to Volvo for the launch of their FH Arrow model in Europe. Similarly, our program with Peter built North America launched on models 579 and 567 in July. Both customers are focusing significant marketing efforts on MIRI as a differentiating product in the market, and our initial customer feedback has been excellent.

James Zizelman: Similarly, our program with Peterbilt North America launched on models 579 and 567 in July. Both customers are focusing significant marketing efforts on Mirai as a differentiating product in the market, and our initial customer feedback has been excellent. As a follow-on to that discussion, this morning we welcome Troy Koopryder, our Chief Technology Officer, to the call to expand on our advanced development activities, including what's next for Stoneridge, utilizing our capabilities in advanced software and AI.

James Zizelman: I will provide a more detailed update on our OEM programs also later in the call.

James Zizelman: Finally, this morning, I will provide some additional detail on the recent announcement by Volvo Bus that they have partnered with Stoneridge to provide connected services and digital solutions using our artificial intelligence fuel advice system in a pilot program this year. This partnership is aligned with our continued focus on data services, software, and AI to drive advanced system capabilities and an expansion of our existing technology platforms and products.

Speaker Change: Finally, this morning, I will provide some additional detail on the recent announcement by Volvo Bus that they have partnered with Stoneridge to provide connected services and digital solutions using our Artificial Intelligence Fuel Advice System in a pilot program this year.

This partnership is aligned with our continued focus on data services, software, and AI to drive advanced system capabilities and an expansion of our existing technology platforms and products.

James Zizelman: As a follow-on to that discussion this morning, we welcome Troy Cooper, our Chief Technology Officer, to the call to expand on our advanced development activities, including what's next for Stoneridge utilizing our capabilities in advanced software and AI. We continue to improve the financial performance of the business through a robust focus on core operating performance and investing in the technologies and capabilities that will drive continued long-term growth.

James Zizelman: We continue to improve the financial performance of the business through a robust focus on core operating performance and investing in the technologies and capabilities that will drive continued long-term growth. Page 5 summarizes our key financial metrics for the second quarter compared to the first quarter of the year.

James Zizelman: Phase 5 summarizes our key financial metrics for the second quarter compared to the first quarter of the year. Second quarter sales of $237.1 million were approximately in line with first quarter sales when you exclude the impact of foreign currency. Driven by continued progression on our key company initiatives, margins expanded significantly in the second quarter. A continued focus on broad operational excellence, including material costs improvement actions and reduced quality-related costs, drove the gross margin to 22.7%, a 250 basis point improvement over the first quarter. Adjusted operating profit of $5.4 million resulted in adjusted operating margin of 2.3%, which is an improvement of 210 basis points over the first quarter.

Speaker Change: Page 5 summarizes our key financial metrics for the second quarter compared to the first quarter of the year. Second quarter sales of 237.1 million dollars were approximately in line with first quarter sales when you exclude the impact of foreign currency.

James Zizelman: Adjusted operating profit of $5.4 million resulted in an adjusted operating margin of 2.3%, which is an improvement of 210 basis points over the first quarter. This expansion was primarily due to gross margin improvement and overall lower engineering spend as we continue to focus on controlling operating costs to improve earnings performance. This favorable non-operating FX impact more than offsets the unfavorable impact that occurred in the first quarter of approximately $2 million for a total quarterly-over-quarter benefit of $4.3 million.

Speaker Change: Adjusted operating profit of 5.4 million dollars resulted in adjusted operating margin of 2.3 percent which is an improvement of 210 basis points over the first quarter.

James Zizelman: This expansion was primarily due to gross margin improvement and overall lower engineering spend as we continue to focus on controlling operating costs to improve earnings performance. Finally, second quarter adjusted EBITDA of just over $16 million drove an adjusted EBITDA margin of 6.8%, which is improved sequentially by 410 basis points. This was driven by improved operating performance I just outlined, as well as the favorable impact of non-operating foreign currency of $2.3 million. This favorable non-operating FX impact more than offset the unfavorable impact that occurred in the first quarter of approximately $2 million for a total quarter-over-quarter benefit of $4.3 million.

Speaker Change: Finally, second quarter adjusted EBITDA of just over 16 million dollars drove an adjusted EBITDA margin of 6.8 percent, which is improved sequentially by 410 basis points.

Speaker Change: This was driven by improved operating performance I just outlined, as well as the favorable impact of non-operating foreign currency of 2.3 million dollars.

James Zizelman: Matt will provide further details on our second quarter performance later in the call.

James Zizelman: Matt will provide further details on our second quarter performance later in the call. Natalia's appointment marks an exciting new chapter for the company. Natalia has more than 20 years of automotive and commercial vehicle experience.

James Zizelman: Now, turning to page 6, in April, we announced that Natalia Noble was appointed as President of Electronics, effective September 1st of this year. She will succeed Peter Osterberg, who, by mutual agreement, has left the company to pursue other opportunities. Natalia's appointment marks an exciting new chapter for the company. Natalia has more than 20 years of automotive and commercial vehicle experience. Prior to Stoneridge, Natalia spent nearly two decades at a webco where she held progressively challenging roles across operations, sourcing and purchasing, project management, quality, six-sigma, and change management. Following Webco's acquisition by ZF in 2020, Natalia seamlessly transitioned into various leadership positions within ZF, focusing on integration, quality assurance, and P&L ownership.

Speaker Change: Now turning to page six, in April , we announced that Natalia Noble was appointed as president of electronics effective September 1st of this year. She will succeed Peter Osterberg, who by mutual agreement has left the company to pursue other opportunities.

Speaker Change: Natalia's appointment marks an exciting new chapter for the company. Natalia has more than 20 years of automotive and commercial vehicle experience.

Speaker Change: Following Wabco's acquisition by ZF in 2020, Natalia seamlessly transitioned into various leadership positions within ZF, focusing on integration, quality assurance, and P&L ownership.

James Zizelman: In her new role as President of the Electronics Division, Natalia will be responsible for leading financial performance, product development, business strategy, and technical vision. She will also manage the division's engineering sales and manufacturing functions to ensure alignment with Stoneridge's business and operational strategy, grab operational excellence, and deliver long-term shareholder value. Her proven track record of leadership and innovation align with our commitments of delivering cutting-edge solutions for the mobility industry to drive long-term profitable growth. Now, I'm confident that under her leadership, our electronic division will continue to accelerate its drive forward.

Speaker Change: In her new role as President of the Electronics Division, Natalia will be responsible for leading financial performance, product development, business strategy, and technical vision.

James Zizelman: Her proven track record of leadership and innovation align with our commitment to delivering cutting-edge solutions for the mobility industry to drive long-term profitable growth. And I'm confident that under her leadership, our Electronics Division will continue to accelerate its pace forward. Turning to page 7, as mentioned earlier in the call, our largest OEM Mirai program has launched with Volvo on the FH Aero model in Europe. Our system replaces the traditional mirrors on the new Volvo truck with aerodynamic wings that contribute to significant improvements in fuel efficiency on the new vehicle.

Speaker Change: Her proven track record of leadership and innovation align with our commitment to delivering cutting-edge solutions for the mobility industry to drive long-term profitable growth. And I'm confident that under her leadership, our Electronics Division will continue to accelerate its drive forward.

James Zizelman: Now, turning to page seven, as mentioned earlier on the call, our largest OEM mirror program has launched with Volvo on the FH Arrow model in Europe. Our system replaces the traditional mirrors on the new Volvo truck with aerodynamic wings that contribute to significant improvements in fuel efficiency on the new vehicle. Our system improves driver visibility and improves overall vehicle safety through the reduction of vehicle blind spots, software-based safety improvements, including auto panning, and improved performance versus traditional mirrors in inclement weather. We are proud to support Volvo on the brand-new FH Arrow with our industry-leading camera mirror technology, and look forward to launching the technology on the North American platform, the all-new VNL, early next year.

James Zizelman: We are proud to support Volvo on the brand new FH Aero with our industry-leading camera mirror technology and look forward to launching the technology on their North American platform, the all-new VNL, early next year, and we'll continue to provide updates on this progress as the year continues. This morning, I'm also excited to provide an update on a partnership that was recently announced between Volvo Bus and Stoneridge related to our connected services and digital solutions. Stoneridge's data and artificial intelligence fuel advice solution will be available to Volvo bus customers in selected markets in a pilot program starting this year.

James Zizelman: The initial feedback in the system from customers and industry experts has been exceptional, as they have praised the clarity of the image, the responsiveness, and overall safety improvements facilitated by the system.

James Zizelman: As can be the case with new program launches, we're seeing a broad range of potential volumes for the remainder of the year. While we are very early into the launch, current orders for the year are relatively lower than our initial expectations. However, the feedback directly from Volvo has been to expect volumes in line with our regional expectations. And as such, we have expanded potential volume outcomes for this year in our guidance.

Speaker Change: As can be the case with new program launches, we are seeing a broad range of potential volumes for the remainder of the year. While we are very early into the launch, current orders for the year are relatively lower than our initial expectations. However, the feedback directly from Volvo has been to expect volumes in line with our original expectations.

Speaker Change: And as such, we have expanded potential YM outcomes for this year in our guidance.

James Zizelman: Productions. Overall, we continue to be very bullish on the launch of this product as we continue to see incremental orders for the system. For example, just last week, orders increased by more than 10% for the remainder of the year.

Speaker Change: For example, just last week, orders increased by more than 10% for the remainder of the year.

James Zizelman: In addition, customer feedback continues to support incremental volume, including a public announcement by Volvo that they have secured one of their largest deals ever: an order of 1,500 vehicles from an Italian transportation and logistics company, all of which will be equipped with mirror eye and delivered throughout 2024 and 2025. Given the strength of the customer feedback, we expect run rate customer take rates to at least reach the level that initially expected at approximately 45%. And we'll continue to provide updates on this progress as the year continues.

James Zizelman: In addition, our mirror eye program with Peterville in North America on models 579 and 567 launched in July with their marketing focus on the system's core features, including maximizing driver visibility and safety. We continue to work with all of our customers to reach their end customers to drive awareness of the system, with the ultimate goal to drive take rate expansion.

James Zizelman: This morning, I'm also excited to provide an update on a partnership that was recently announced between Volvo Bus and Stoneridge related to our connective services and digital solutions. Stoneridge's data and artificial intelligence fuel advice solution will be available to Volvo Bus customers in selected markets in a pilot program starting this year. This technology uses artificial intelligence to provide predictive insights to fleets about their drivers, planned routes, and fleet performance, allowing for more efficient and intelligent decision making.

Speaker Change: This morning, I'm also excited to provide an update on a partnership that was recently announced between Volvo Bus and Stoneridge related to our connected services and digital solutions.

James Zizelman: This technology uses artificial intelligence to provide predictive insights to fleets about their drivers, planned routes, and fleet performance, allowing for more efficient and intelligent decision making. Our innovative collaboration with Volvo Bus enables them to support their customers' transformation into connected and sustainable people transport solutions. Expanding on our existing products and technology platforms with advanced capabilities, applications, and data services is core to our long-term strategy. To expand more on some of the exciting advanced development activities that will continue to propel our long-term growth, I'd like to welcome Troy Cooprider, our Chief Technology Officer, to the call. Troy said:

James Zizelman: Our innovative collaboration with Volvo Bus enables them to support their customers' transformation in the connected and sustainable people transport solutions. Expanding on our existing products and technology platforms with advanced capabilities, applications, and data services is core to our long-term strategy.

Speaker Change: Expanding on our existing products and technology platforms with advanced capabilities, applications, and data services is core to our long-term strategy.

James Zizelman: To expand more on some of the exciting advanced development activities that will continue to propel our long-term growth, I'd like to welcome Troy Cooperider, our Chief Technology Officer, to the call.

Troy Koopreiter: To expand more on some of the exciting advanced development activities that will continue to propel our long-term growth I'd like to welcome Troy Koopreiter, our Chief Technology Officer, to the call. Troy.

Troy Cooprider: Troy, thank you, Jim. We have developed and commercialized several advanced products, including our mirrorized system, our off-highway vision systems, our connectivity devices, and our soon-to-launch connected trailer products that have secured us valuable technology real estate in and around the vehicle. Going forward, we will utilize this real estate to bring advanced technology to our customers that will help differentiate their vehicles and prove vehicle safety and efficiency, and provide opportunities for long-term profitable growth for the company. A significant portion of our advanced development roadmap has been and continues to be related to artificial intelligence-based software in various applications.

Troy Cooprider: Thank you, Jim. We have developed and commercialized several advanced products, including our Mirai system, our Off-Highway Vision System, and our new Vision System, our connectivity devices, and our soon-to-launch Connected Trailer product, that will help differentiate their vehicles, improve vehicle safety and efficiency, and provide opportunities for long-term profitable growth for the company. A significant portion of our Advanced Development Roadmap has been and continues to be related to AI-based software in various applications.

Troy Koopreiter: Thank you, Jim. We have developed and commercialized several advanced products, including our MirrorEye system, our off-highway vision systems, our connectivity devices, and our soon-to-launch Connected Trailer products.

Troy Cooprider: Driving that development over the last several years is a significant team of engineers directly focused on AI technology and product-related development, which has resulted in 25 patents and patent applications. Recently, we deployed a software improvement to Mirrori, which incorporates a predictive algorithm to enable automated reverse spanning, keeping the trailer of a semi-truck infused during multi-angle reverse movements. This ensures safe backing and a full field of view for the driver-using algorithms predict the path of the trailer depending on the speed and movement of the track.

Troy Cooprider: Driving that development over the last several years is a significant team of engineers directly focused on AI technology and product-related development, which has resulted in 25 patents and patent applications. Recently, we deployed a software improvement to Mirai that incorporates a predictive algorithm to enable automated reverse panning, keeping the trailer of a semi-truck in view during multi-angle reverse movement. This ensures safe backing and a full field of view for the driver using algorithms to predict the path of the trailer depending on the speed and movement of the tractor.

Troy Koopreiter: Driving that development over the last several years is a significant team of engineers directly focused on AI technology and product related development which has resulted in 25 patents and patent applications.

Troy Koopreiter: Recently, we deployed a software improvement to Mirai, which incorporates a predictive algorithm to enable automated reverse panning, keeping the trailer of a semi-truck in view during multi-angle reverse movements.

Troy Koopreiter: This ensures safe backing and a full field of view for the driver using algorithms to predict the path of the trailer depending on the speed and movement of the tractor.

Troy Cooprider: Director. Incorporating this feature into the existing MIRI system ensures full field of view and predictive vision capabilities, whether the vehicle is moving forward or backward. As you can see on the images, you see on slide eight. We are also incorporating object detection capabilities within our MIRI platform to alert the driver to improve overall driver behavior and enhanced safety. Another good example of AI-based algorithm deployment is on our off-highway vision systems, particularly in the construction mining space. Here too, we have incorporated detection capabilities, differentiating objects and pedestrians in heavy equipment environments to improve situational awareness and site safety.

Troy Cooprider: As you can see in the images on slide 8, we are also incorporating object detection capabilities within our MirrorEye platform to alert the driver to improve overall driver behavior and enhance safety. Another good example of AI-based algorithm deployment is in our off-highway vision, particularly in the construction and mining space. Here too, we have incorporated detection capabilities, differentiating objects and pedestrians in heavy equipment environments to improve situational awareness and site safety.

Troy Koopreiter: Another good example of AI-based algorithm deployment is on our off-highway vision systems, particularly in the construction mining space. Here, too, we have incorporated detection capabilities, differentiating objects and pedestrians in heavy equipment environments to improve situational awareness and site safety.

Troy Cooprider: Both of these examples, along with the fuel advice data service solution in our partnership with Global Bus, are currently in the market and being utilized by our customers to improve overall vehicle and driver performance.

Troy Cooprider: By continuing to rotate our global engineering footprint to take advantage into a more cost effective structure, we have generated the ability to continue to invest in advanced software and AI-based capabilities without increasing overall engineering spend. As we continue to invest in these capabilities, we have generated a robust technology roadmap that will both enhance and expand on our existing products and bring new products and technologies to the market. For example, we continue to expand the cameras and perception sensors we have positioned around the vehicle in connection with connectivity devices on vehicles. We will be able to identify and communicate triggering events to enable data recording based on driver or vehicle behavior.

Troy Cooprider: We have generated the ability to continue to invest in advanced software and AI-based capabilities without increasing overall engineering spend. This will create a data and video log of any incidents or abnormal operations to ensure fleets are equipped with the right data to avoid unnecessary liability, train drivers, and improve fleet efficiency and cost. Similarly, as we continue to focus on and expand our activities in Connected Trailers, there are several applications that can utilize both our existing hardware and our advanced software capabilities to dramatically improve vehicle safety and efficiency, as well as Hitching and Docking Solutions.

Troy Cooprider: This will create a data and video log of any incidents or abnormal operations to ensure police are equipped with the right data to avoid unnecessary liability, train drivers, and improved fleet efficiency and cost. While many of our MIRI equipped vehicles already have continuous video recording capabilities, these, as the incidents, will allow for targeted video recording requiring less data and more efficient data transmission.

Troy Cooprider: Similarly, as we continue to focus on and expand our activities and connected trailers, there are several applications that can utilize both our existing hardware and our advanced software capabilities to dramatically improve vehicle safety and efficiency. In addition to the backup camera and other connected camera applications launching shortly on our connected trailer program, we are using advanced algorithms and AI to create forward and reverse predictive paths, curve detection and warning systems, soft shoulder detection, and hitching and docking solutions. These advancements, along with our existing vision and safety and connectivity solutions, will create an integrated safety system for both the tractor and trailer.

Troy Koopreiter: Similarly, as we continue to focus on and expand our activities and connected trailers, there are several applications that can utilize both our existing hardware and our advanced software capabilities to dramatically improve vehicle safety and efficiency.

Troy Koopreiter: These advancements, along with our existing vision and safety and connectivity solutions, will create an integrated safety system for both the tractor and trailer.

Troy Cooprider: We continue to invest in advanced technologies that will build on our existing capabilities and technologies to drive continued growth opportunities for our company.

Troy Cooprider: We continue to invest in advanced technologies that will build on our existing capabilities and technologies to drive continued growth opportunities for our company. With that, I will turn it over to Matt for additional discussion on our financial performance in the quarter and our forward expectations. Adjusted EPS was $0.17 in the second quarter, a $0.39 improvement versus the first quarter. The below-the-line impact of foreign currency favorably impacted the second quarter results by $2.3 million.

Troy Koopreiter: We continue to invest in advanced technologies that will build on our existing capabilities and technologies to drive continued growth opportunities for our company.

Matthew Horvath: With that, I will turn it over to Matt for additional discussion on our financial performance in the quarter and forward expectations.

Matthew Horvath: Thanks, Troy. Turning to page 10, sales in the second quarter were $237.1 million, which was relatively in line with the prior quarter.

Matthew Horvath: Adjusted operating income was $5.4 million or 2.3% of sales, which resulted in a 210 basis point improvement in adjusted operating margin and a $5 million improvement in operating profit relative to the first quarter of this year on similar sales. Adjusted EPS was $0.17 in the second quarter, a $0.39 improvement versus the first quarter.

Matthew Horvath: Cooprider. As Jim mentioned earlier on the call, our second quarter performance was driven by our continued focus on improving the fundamentals of our business, leading to significantly improved margins. Our continued focus on material cost improvement actions, reduced quality related costs, and control of our operating expenses significantly benefited our performance in the quarter.

Troy Koopreiter: Our continued focus on material cost improvement actions, reduced quality-related costs, and control of our operating expenses significantly benefited our performance in the quarter.

Matthew Horvath: The below-the-line impact of foreign currency favorably impacted the second quarter results by $2.3 million. This was driven primarily by overall favorable X-Rates as well as the capitalization of certain intercompany loans in the second quarter, taking advantage of those rates to offset the headwinds we saw in the first quarter and reduce the potential for future volatility.

Matt: This was driven primarily by overall favorable FX rates as well as the capitalization of certain intercompany loans in the second quarter, taking advantage of those rates to offset the headwinds we saw in the first quarter and reduce the potential for future volatility. Finally, on similar sales, EBITDA improved by $9.5 million from quarter to quarter, with an EBITDA margin improvement of 410 basis points. Page 12 summarizes our key financial metrics specific to electronics. Lower sales in the European commercial vehicle end market, primarily as a result of continued macroeconomic pressure, were offset by higher sales in the European off-highway and North American commercial vehicle end markets.

Matthew Horvath: Finally, on similar sales, EBITDA improved by $9.5 million from quarter to quarter, with EBITDA margin improvement of 410 basis points.

Troy Koopreiter: Finally, on similar sales, EBITDA improved by $9.5 million from quarter to quarter, with EBITDA margin improvement of 410 basis points.

Matthew Horvath: Page 11 summarizes our key financial metrics specific to control devices. Control devices second quarter sales of $80.9 million increased by approximately $2.9 million or 3.7% versus the first quarter, primarily driven by higher sales in the North American passenger vehicle market as well as higher China commercial vehicle sales. Sales into electric vehicle platforms also moderately improved relative to the first quarter.

Troy Koopreiter: Page 11 summarizes our key financial metrics specific to control devices.

Troy Koopreiter: Sales into electric vehicle platforms also moderately improved relative to the first quarter.

Matthew Horvath: Second quarter operating margin of 4.6% increased by 180 basis points compared to the first quarter of 2024, primarily due to benefits recognized from completed negotiations related to price and low-volume claims, improved operational execution, and continued operating cost control. As discussed on previous calls, we remain focused on drive training diagnostic technologies to drive new business awards as the market evolves.

Troy Koopreiter: Second quarter operating margin of 4.6 percent increased by 180 basis points compared to the first quarter of 2024, primarily due to benefits recognized from completed negotiations related to price and low-volume claims, improved operational execution, and continued operating cost control.

Troy Koopreiter: As discussed on previous calls, we remain focused on drive training agnostic technologies to drive new business awards as the market evolves. We continue to focus on operational excellence and enterprise-wide cost reduction, including material cost reduction plans, to continue to drive margin improvement going forward.

Matthew Horvath: We continue to focus on operational excellence and enterprise-wide cost reduction, including material cost reduction plans, to continue to drive margin improvement going forward.

Matthew Horvath: Page 12 summarizes our key financial metrics specific to electronics. Excluding the unfavorable impact of foreign currency, electronics second quarter sales of just under $156 million were approximately in line with the first quarter of the year. Lower sales in the European commercial vehicle and market, primarily as a result of continued macroeconomic pressure, were offset by higher sales in the European off-highway and North American commercial vehicle and markets. Second quarter adjusted operating margin expanded by approximately 310 basis points compared to the first quarter, primarily due to material cost improvements, lower quality-related cost, and lower engineering expenses, due in part to higher customer reimbursements during the quarter.

Troy Koopreiter: Lower sales in the European commercial vehicle end market, primarily as a result of continued macroeconomic pressure, were offset by higher sales in the European off-highway and North American commercial vehicle end markets.

Matt: Second quarter adjusted operating margin expanded by approximately 310 basis points compared to the first quarter, primarily due to material cost improvements, lower quality-related costs, and lower engineering expenses due in part to higher customer reimbursements during the quarter. On relatively flat sales, we generated an incremental $4.6 million of operating income in the quarter, building upon the operational excellence initiatives we are already implementing. Electronics remains well positioned to take advantage of significant future growth and margin expansion as a result of a strong product portfolio, a substantial backlog of awarded programs, continued improvement in material costs, and organizational optimization. Page 13 summarizes our key financial metrics specific to Stoneridge Brazil. Excluding the unfavorable impact of foreign currency of approximately $600,000, Stoneridge Brazil's second quarter sales improved by 2% versus the first quarter.

Speaker Change: Second quarter adjusted operating margin expanded by approximately 310 basis points compared to the first quarter primarily due to material cost improvements, lower quality related cost, and lower engineering expenses due in part to higher customer reimbursements during the quarter.

Matthew Horvath: On relatively flat sales, we generated an incremental $4.6 million of operating income in the quarter.

Speaker Change: On relatively flat sales, we generated an incremental $4.6 million of operating income in the quarter.

Matthew Horvath: Building upon the operational excellence initiatives we are already executing, we expect a further benefit from recent actions taken to improve our engineering organization through the rebalancing of our footprint to improve our capacity and our capabilities, as well as reduce our total costs. Electronics remains well positioned to take advantage of significant future growth and margin expansion as a result of a strong product portfolio, a substantial backlog of awarded programs, continued improvement in material costs, and organizational optimization.

Troy Koopreiter: Building upon the operational excellence initiatives we are already executing, we expect to further benefit from recent actions taken to improve our engineering organization through the rebalancing of our footprint to improve our capacity and our capabilities as well as reduce our total costs.

Troy Koopreiter: Electronics remains well positioned to take advantage of significant future growth and margin expansion as a result of a strong product portfolio, a substantial backlog of awarded programs, continued improvement in material costs, and organizational optimization.

Matthew Horvath: Page 13 summarizes our key financial metrics specific to Stone Ridge Brazil. Excluding the unfavorable impact of foreign currency of approximately $600,000, Stone Ridge Brazil's second quarter sales improved by 2% versus the first quarter. Again, excluding the unfavorable impact of foreign currency of approximately $200,000 on operating income, second quarter operating profit was in line with the first quarter of the year.

Speaker Change: Page 13 summarizes our key financial metrics specific to Stoneridge Brazil, excluding the unfavorable impact of foreign currency of approximately $600,000, Stoneridge Brazil's second quarter sales improved by 2% versus the first quarter.

Troy Koopreiter: Again, excluding the unfavorable impact of foreign currency of approximately $200,000 on operating income, second quarter operating profit was in line with the first quarter of the year.

Matthew Horvath: 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.

Matthew Horvath: Brazil has become a critical engineering center as we continue to align our global engineering capabilities and footprint. We will continue to utilize our global footprint to cost-effectively support our global business.

Troy Koopreiter: Brazil has become a critical engineering center as we continue to align our global engineering capabilities and footprint. We will continue to utilize our global footprint to cost-effectively support our global business.

Matthew Horvath: Turning to slide 14, we are updating our full year 2024 guidance to reflect updated foreign currency rates, updated OEM production volumes, and current expectations for non-OEM and customer demand-based products, including aftermarket and option-selectable products. Unfavorable foreign currency is expected to impact our guidance by approximately $12 million. That said, we do not expect the impact of foreign currency on sales to impact earnings materially, as cost and local currency also declined to generally offset the revenue decline.

Troy Koopreiter: Turning to slide 14, we are updating our full-year 2024 guidance to reflect updated foreign currency rates, updated OEM production volumes, and current expectations for non-OEM and customer-demand-based products, including aftermarket and option-selectable products.

Troy Koopreiter: Unfavorable foreign currency is expected to impact our guidance by approximately $12 million. That said, we do not expect the impact of foreign currency on sales to impact earnings materially, as costs in local currency also declined to generally offset the revenue decline.

Matt: That said, we do not expect the impact of foreign currency on sales to impact earnings materially, as costs in local currency also declined to generally offset the revenue. The forecasted reduction in OEM volumes is expected to reduce full-year revenue by approximately $18 million. As a result, we are expecting midpoint revenue of approximately $955 million for the full year, with a range of $940 to $970 million based on the potential for volatility in our non-OEM and customer demand-based products for the remainder of the year.

Matthew Horvath: Based on current forecasts, we expect a reduction in OEM production volumes related to lower production volumes for commercial vehicle programs in both Europe and North America, driven primarily by continued macroeconomic pressures, as well as reduced demand in North America passenger vehicle programs. The forecasted reduction in OEM volumes is expected to reduce full year revenue by approximately $18 million. In addition, we are seeing increased pressure and some timing delays on non-OEM and customer demand-based products, including the timing of adoption for certain mirror eye retrofit applications, the market adoption of the Smart2 Tecograph, and increased headwinds in our off-IWN markets.

Troy Koopreiter: In addition, we are seeing increased pressure and some timing delays on non-OEM and customer demand based products, including the timing of adoption for certain MirrorEye retrofit applications, the market adoption of the Smart2Tachograph, and increased headwinds in our off-highway end markets.

Matthew Horvath: Finally, as Jim mentioned previously, while current orders for the Volvo Mirror Eye system are less than initially expected, communication from Volvo has suggested volumes relatively in line with our original expectations for the full year. The high end of our guidance assumes a nominal impact based on these factors, while the midpoint considers approximately $15 million of revenue headwinds from non-OEM and customer demand-based products. We continue to put actions in place to influence the revenue that we have some control over for the remainder of the year. For example, we continue to see significant opportunity in the Smart2 Tecograph aftermarket and are working closely with our distributors to maximize market penetration.

Troy Koopreiter: Finally, as Jim mentioned previously, while current orders for the Volvo Mirai system are less than initially expected, communication from Volvo has suggested volumes relatively in line with our original expectations for the full year.

Matthew Horvath: As a result, we are expecting midpoint revenue of approximately $955 million for the full year, with a range of $940 to $970 million based on the potential for volatility in our non-OEM and customer demand-based products for the remainder of the year. As has been the case historically, we are expecting a reduced revenue in the third quarter relative to the second quarter due to summer shutdowns and seasonality in production. We are expecting fourth quarter revenue to continue to improve according to normal seasonality, with the potential for outperformance based on continued OEM mirror eye acceleration and Tecograph aftermarket sales.

Matt: We are expecting fourth-quarter revenue to continue to improve according to normal seasonality with the potential for outperformance based on continued OEM mirror eye acceleration and tachygraph aftermarket sales. As a result of the reduced revenue, we would typically expect decremental margins aligned with our historical rates of approximately 25 to 30 percent, excluding the impact of foreign currency, as I discussed earlier. The $33 million total reduction between OEM and non-OEM products at the midpoint would result in an EBITDA reduction of approximately $9 million for the year.

Troy Koopreiter: We are expecting fourth quarter revenue to continue to improve according to normal seasonality with the potential for outperformance based on continued OEM mirror eye acceleration and tachygraph aftermarket sales.

Matthew Horvath: As a result of the reduced revenue, we would typically expect decremental margins aligned with our historical rates of approximately 25 to 30%. Excluding the impact of foreign currency, as I discussed earlier, the $33 million total reduction between OEM and non-OEM products at the midpoint would result in EBITDA reduction of approximately $9 million for the year. However, similar to our outperformance in the second quarter, we are expecting continued core performance initiatives to improve our earnings as the year continues and to limit the impact of reduced revenue expectation. We expect these activities will improve earnings by approximately $3 million for the remainder of the year, resulting in a decremental contribution margin of approximately 18 percent, excluding the impact of foreign currency, and only 13 percent, including the impact of FX.

Matt: However, similar to our outperformance in the second quarter, we are expecting continued core performance initiatives to improve our earnings as the year continues and to limit the impact of reduced revenue expectations. We continue to significantly outpace our underlying end markets, creating a runway for sustainable, long-term growth. Similarly, we continue to improve the fundamental performance of the business, resulting in some mitigation of the expected revenue decline this year and, more importantly, continuing to build a foundation for strong incremental earnings as we grow next year and beyond.

Troy Koopreiter: However, similar to our outperformance in the second quarter, we are expecting continued core performance initiatives to improve our earnings as the year continues and to limit the impact of reduced revenue expectations.

Matthew Horvath: And more importantly, continuing to build a foundation for strong incremental earnings as we grow next year and beyond.

Matthew Horvath: Page 15 outlines our full-year guidance we outlined on the prior page. As we have discussed throughout the call, our base performance is improving as we continue to execute on the key priorities we outlined for the year. As a result, despite reduced revenue expectations, we are increasing our gross margin midpoint guidance by 50 basis points to reflect our expectations of continued improvements in material costs and manufacturing performance.

Matt: As we have discussed throughout the call, our base performance is improving as we continue to execute on the key priorities we outlined for the year. As a result, despite reduced revenue expectations, we are increasing our gross margin midpoint guidance by 50 basis points to reflect our expectations of continued improvements in material costs and manufacturing performance. Finally, we are reducing our midpoint adjusted EPS guidance for the full year by $0.12 to a midpoint of $0.23 to reflect reduced fixed cost leverage on reduced sales and an updated tax expense expectation of $5 to $6 million based on our current expectation of earnings by jurisdiction. Thank you, Matt.

Matthew Horvath: Aligned with current market conditions, we are reducing our adjusted operating margin and adjusted EBITDA margin expectations to reflect reduced leverage on lower sales.

Matthew Horvath: Finally, we are reducing our midpoint adjusted EPS guidance for the full year by 12 cents to a midpoint of 23 cents to reflect reduced fixed cost leverage on reduced sales and an updated tax expense expectation of $5 to $6 million based on our current expectation of earnings by jurisdiction. We continue to focus on improving the variables that are in our control and acting swiftly to mitigate factors that may be outside of our control, including continued macroeconomic pressures in our end markets and currency volatility. Our second quarter result and our expectations of improved gross margin for the remainder of the year are proved that our actions are improving our run rate as we progress toward our long-term targets.

James Zizelman: With that, I will turn it back over to Jim for some closing comments. Thank you, Matt.

James Zizelman: In closing, turning to page 16, our second quarter performance shows continued improvement across each of our 2024 key priorities. Based on our strong performance today and our expectations of continued strong performance for the remainder of the year, we have increased our gross margin midpoint guidance by 50 basis points, increasing our margin expansion target to 190 basis points over 2023. Third, we are focused on leveraging our global footprint to maximize our capabilities and output.

James Zizelman: In closing, turning to page 16, our second quarter performance shows continued improvement across each of our 2024 key priorities. First, we are focused on driving continued growth and market outperformance. Our full year midpoint revenue guidance implies 3.6 percentage points of outperformance compared to our weighted average underlying end markets, which are expected to decline by 4.3%. This outperformance is driven primarily by stone bridge specific growth drivers, including new programs, incremental content, and expansion of our existing opportunities. Second, we are focused on gross margin expansion through material cost improvement and enterprise-wide operational excellence. Based on our strong performance today and our expectations of continued strong performance for the remainder of the year, we have increased our gross margin midpoint guidance by 50 basis points.

Troy Koopreiter: Thank you, Matt. In closing, turning to page 16, our second quarter performance shows continued improvement across each of our 2024 key priorities.

Troy Koopreiter: Our Full Year Midpoint Revenue Guidance implies 3.6 percentage points of outperformance compared to our weighted average underlying end markets, which are expected to decline by 4.3%.

Troy Koopreiter: Based on our strong performance today and our expectations of continued strong performance for the remainder of the year, we have increased our Gross Margin Midpoint Guidance by 50 basis points, increasing our Margin Expansion Target to 190 basis points over 2023.

James Zizelman: Increased in our margin expansion target to 190 basis points over 2023. Third, we are focused on leveraging our global footprint to maximize our capabilities and output. Again, based on our strong performance today, we have improved adjusted EBITDA margin by 160 basis points in the first half of this year compared to the same period last year. Fourth, we are focused on efficient cash generation through effective inventory management. Through our focused efforts on reducing inventory to improve working capital and generate more cash, we reduced our inventory balance by $9 million since the beginning of the year. We remain focused on inventory reduction and cash performance to reduce overall net debt and interest expense.

Troy Koopreiter: We have improved adjusted EBITDA margin by 160 basis points in the first half of this year compared to the same period last year.

Troy Koopreiter: Through our focused efforts on reducing inventory to improve working capital and generate more cash, we've reduced our inventory balance by $9 million since the beginning of the year. We remain focused on inventory reduction and cash performance to reduce overall net debt and interest expense.

James Zizelman: Finally, we are focused on efficient capital deployment while maintaining an appropriate capital structure. This includes prioritizing our organic investment opportunities with a focus on return on engineering and investing in technology to develop new products for customers that will facilitate future growth, such as the AI-based advanced development projects that Troy outlined earlier in the call. As evidenced by our progress made so far this year, this team is focused on executing against our priorities to drive strong growth and continued margin improvement and an improved balance sheet. We will continue to execute across these initiatives and expect to see the benefits in our financial performance.

James Zizelman: Again, based on our strong performance to date, we have improved our adjusted EBITDA margin by 160 basis points in the first half of this year compared to the same period last year. Finally, we are focused on efficient capital deployment while maintaining an appropriate capital structure.

Troy Koopreiter: Finally, we are focused on efficient capital deployment while maintaining an appropriate capital structure.

Troy Koopreiter: This includes prioritizing our organic investment opportunities, with a focus on return on engineering, and investing in technology to develop new products for customers that will facilitate future growth, such as the AI-based advanced development projects that Troy outlined earlier in the call.

Troy Koopreiter: As evidenced by our progress made so far this year, this team is focused on executing against our priorities to drive strong growth.

James Zizelman: Stoneridge remains well positioned to outpace our underlying end markets and drive significant earnings expansion going forward.

James Zizelman: As always, driving shareholder value is at the forefront of all of Stoneridge's strategic initiatives.

Operator: And with that, I'll open the call for questions. At this time, we will conduct the question-and-answer session. If you would like to ask a question, please press star one on your phone now, and you'll be placed into the queue in the order received. Once again, to ask a question, press star one on your phone now.

James Zizelman: This includes prioritizing our organic investment opportunities with a focus on return on engineering and investing in technology to develop new products for customers that will facilitate future growth, such as the AI-based advanced development projects that Troy outlined earlier in the call. And with that, I'll open the call for questions. Hey guys, this is Collin Neiman on behalf of Daniel Embro.

Collin Nieman: And our first question will come from Daniel Imbro with Stevens. Hey guys, this is Collin Nieman on for Daniel Imbro. Thanks for taking my question.

Collin Nieman: Hey Collin, good morning. How you doing? Very well.

Troy Koopreiter: Hey guys, this is Collin Nieman on for Daniel Embro. Thanks for taking my question.

Collin Nieman: I wanted to ask about some of the cost improvements. You guys have made material cost improvements, and the operating cost controls grow sequential improvement in EBITDA margin in the quarter. How can we think about that progression through the second half and how much opportunity remains on the cost side if you can help frame that up.

Speaker Change: Hey Colin, good morning, how are you doing?

Collin Nieman: very well.

Collin Neiman: Thanks. You guys have made material cost improvements and, uh... The operating cost controls drove sequential improvement in EBITDA margin. So curious to get your thoughts on that and how it will affect you through the remainder of 24 and maybe into early 25.

Speaker Change: You guys have made material cost improvements and...

Matthew Horvath: Yeah, we appreciate the question, Collin. Obviously, this has been a key focus for us this year. You know, we have made significant progress, not only on material cost, but really across all of our operational excellence type priorities, right? So you saw material costs significantly improve in the quarter. Quality related costs have also come down, which is supporting an improved gross margin. You also saw that in the guidance, although we had some revenue headwind, we're offsetting quite a substantial portion, about a third of that potential headwind, on the bottom line with continued improvement. So we think that there's quite a bit left to do here, particularly on the material cost side as we continue down a pipeline of material cost improvement plans.

Speaker Change: Yeah, I appreciate the question, Colin. Obviously, this has been a...

Speaker Change: are a key focus for us this year. You know, we have made significant progress, not only on material costs, but really across all of our operational excellence type priorities, right? So you saw material costs significantly improve in the quarter.

Troy Koopreiter: [inaudible]

Speaker Change: So, we think that there's quite a bit left to do here, particularly on the material cost side as we continue down a pipeline of material cost improvement plans, and we'll continue to control operating costs and flexes necessary based on market conditions. So, we're really making improvements across the P&L. You saw that come through in pretty good outperformance in the quarter, and we expect that that will continue certainly throughout the remainder of the year as we get set up for a good 2025.

Matthew Horvath: And we'll continue to control operating costs and flex as necessary based on market conditions. So we're really making improvements across the P&L. You saw that come through in, you know, pretty good outperformance in the quarter. And we expect that will continue certainly throughout the remainder of the year.

Collin Nieman: We get some for a good 2025.

Collin Nieman: Yeah, that makes sense.

Collin Nieman: And then moving on, I wanted to ask one on the mirror. I take rates right now versus expectations earlier in the year. It sounds like the your program that started maybe started out with a great lower, but then you guys noted a couple really positive data points here recently.

Speaker Change: Yeah, that makes sense.

Speaker Change: And then moving on, I wanted to ask one on the MRI take rates right now versus...

Speaker Change: expectations earlier in the year. It sounds like the

Speaker Change: Your program that started maybe, started out with take rates lower, but then you guys noted a couple really positive data points here recently.

Collin Nieman: So curious, get your thoughts on that and how you continue to think about how that will progress through the year.

James Zizelman: Hey, Colin, thanks for the question. You know, we are actually quite excited about where tech rates are for the mirror eye program, especially the new launching programs. You know, with Volvo, as we had indicated here a few moments ago, you know, it's so early in the launch. So it's hard to gauge that exactly, but you know, with commentary that we're getting back to, the feedback from customers being so positive. You know, we really do feel that we'll hit the target or even go beyond the target at this point. So we're very, very, very excited and bullish on where that goes.

Troy Koopreiter: Think about how that will progress through the year.

Speaker Change: Hey Colin, thanks for the question. You know, we are actually quite excited about where take rates are for the MIRAI program, especially the new launching programs.

Troy Koopreiter: You know, we really do feel that we'll hit the target or even go beyond the target at this point. So we're very, very, very excited and bullish on where that goes.

James Zizelman: And of course, as you know, we have some other launches coming up as well, you know, including at the beginning of next year, two more launches here in North America. And you know, that will of course increase the amount of mirror eye product that goes out into the market. And we're bullish on those tech rates.

Collin Nieman: as well. And then I'll do one more quick one here.

Collin Nieman: Any color you can give on what your customers are saying on the OEM side for their demand outlook through the remainder of 24 and maybe into early 25 as well. Yeah, I mean, obviously you saw we had a little bit of a reduction in the guidance based on the forecasted production. I still think there's some volatility here in the second half. You're seeing that as we brought guidance down a little bit related to the OEM production.

Speaker Change: That's helpful. And then I'll do one more quick one here. Any color you can give on what your customers are saying on the OEM side for their demand outlook through the remainder of 24 and maybe into early 25 as well.

Matt: Yeah, I mean, obviously, we had a little bit of a reduction in the guidance based on forecasted production. I still think there's some volatility here in the second half. You're seeing that as we brought guidance down a little bit related to OEM production. You know, 2025, it's probably too early to tell yet.

Matthew Horvath: You know, 2025 it's probably too early to tell yet. You know, obviously the markets moving with interest rates and the overall macroeconomic conditions are big influences on some of our end markets. So, you know, we do see obviously a tremendous amount of self-help as we go into 2025, like Jim mentioned. So we expect, you know, to continue to outperform our underlying end markets, but you did see a little bit of a reduction here in the back half.

Matt: You know, obviously, the market's moving with interest rates, and the overall macroeconomic conditions are big influences on some of our end markets. So, you know, we do see, obviously, a tremendous amount of self-help as we go into 2025, like Jim mentioned. So, we expect, you know, to continue to outperform our underlying end markets, but you did see a little bit of a reduction here in the back half. Okay, I'll leave it there. Thanks a lot, guys. Thanks Collin; I appreciate the questions. Thank you. And our next question will come from Gary Prestopino with Barrington. What is it?

Collin Nieman: Okay, I'll leave it there.

Collin Nieman: Thanks a lot, guys. Thanks, Colin. Appreciate the questions.

Operator: Thank you.

Gary Prestopino: And our next question will come from Gary Presipino with Burnton Research. Hey, good morning, all.

Speaker Change: Thanks Colin, appreciate the questions. Thank you.

Speaker Change: And our next question will come from Gary Prestopino with Barrington Research.

Gary Prestopino: Can we turn this slide 14? I want to try and parse this out as exactly what is transpiring here in terms of the reduced guidance between the various business segments that you have. I mean, the 12 million decline due to FX. I mean, that's self-explanatory.

Gary Prestopino: Hey, good morning all. Can we turn to slide 14? I want to try and parse this out exactly.

Gary Prestopino: I think it's inspiring here in terms of the reduced guidance. But the $18 million from OEM production volume... is that mainly in the projections that you gave for this year, which called for about $100 million of revenue in between? So those numbers that you had started the beginning of the year at with about $100 million of revenue, the low end of adjusted EBITDA, would be attainable, or are there other wild cards out there that, You know, obviously, Gary, we go through a pretty robust process to evaluate guidance and try to give a, you know, transparent view of where the business is going for the remainder of the year.

Gary Prestopino: What is transpiring here in terms of the reduced guidance between the various business segments that you have? I mean, the 12 million decline due to FX, I mean, that's self-explanatory.

Gary Prestopino: But the 18 million from OEM production volumes is that mainly in the control devices segment or electronics, or where is that spread around? I guess what I'm really trying to get at is what I'm really trying to get at is the MIRAI projections that you gave for this year, which called for about a hundred million of revenue between new wins and retrofit. How is that going to look now, given what's transpired in the market?

Speaker Change: Is that mainly in the...

Speaker Change: control devices segment or electronics or where is that spread around I guess what I'm really trying to get at is what I'm really trying to get it is

Speaker Change: The Mirai projections that you gave for this year, which called for about $100 million of revenue between new wins and retrofit, how is that going to look now given what's transpired in the market?

Matthew Horvath: Yeah, thanks, Gary. So the couple of buckets that you see there on slide 14, FX, like you said, is pretty self-explanatory. The 18 million is really think about it as effectively IHS or our view on OEM production for the remainder of the year. Okay.

Speaker Change: Yeah, thanks Gary. So the couple of buckets that you see there on slide 14, FX, like you said, is pretty self-explanatory. The $18 million is really, think about it as effectively IHS or our view on OEM production for the remainder of the year. So that would not include anything related necessarily to Mirai take rates, for example, or any other kind of non-OE product where the market's going.

Matthew Horvath: So that would not include anything related necessarily to MIRAI take rates, for example, or any other kind of non-OE product with the markets going. Yeah, that next bucket there, that 15 million incorporates any volume volatility that we might see on the newly launched program, as Jim outlined in the remarks. But also anything else is non-OE. So off-highway end markets, aftermarket end markets, kind of that whole bucket of non-OE, which is obviously a pretty growing portion of our overall business. So you can think of kind of the left side of that as more kind of macroeconomic, the FX and the OEM production volumes, more formulaic.

Speaker Change: Yeah, that next bucket there, that $15 million, incorporates any volume volatility that we might see on the newly launched program, as Jim outlined in the remarks.

Speaker Change: But also, you know, anything else is non-OE, so off-highway end markets, aftermarket end markets, kind of that whole bucket of non-OE, which is obviously a pretty growing portion of our overall business.

Matthew Horvath: And the right side is more non-OE and specific customer demand related or option selectable products.

Matthew Horvath: But is that 15 million decline? That includes MIRAI or doesn't, that's where I'm taking it. It does include potential volatility in MIRAI, yes, that's right.

Speaker Change: But is that 15 million decline, that includes Mirai or doesn't, that's what I'm trying to get at. It does include potential volatility in Mirai, yes, that's right. Okay.

Matthew Horvath: Okay, so those numbers that you had started the beginning of the year out with about a hundred million of revenue from MIRAI, that is not going to be tangible, in your opinion. Well, what we said, Gary, is we're still early in the launch on the MIRAI program. That kind of zero to thirty million dollar range of the guidance is the potential impact for not only MIRAI, but really everything else, not only so smart to tack a graph, aftermarket, for example, the off-highway business. So we're still early in the launch, and that volatility is incorporated in that range.

Speaker Change: Okay, so so those numbers that you had started the beginning of the year at with about a hundred million of revenue From your eye that is not going to be attainable and in your opinion

Matthew Horvath: But I think it's too early to say how materially different it would be from the hundred million dollar number that we put out early in the year. There is certainly some pressure on that, like Jim said, with some volatility in that launch early on. But we're still too early to extrapolate that over really even the remainder of the year at this point.

Matthew Horvath: Okay, and obviously your new guidance is based on what you're seeing now in terms of demand on your end user and market. So do you feel that, given what's going on in the market right now? The low end of the adjusted EBITDA would be attainable. Is there other wild cards out there that could make that lower end not be attainable? You know, obviously, Gary, we go through a pretty robust process to evaluate guidance and try to give a transparent view of where the business is going for the remainder of the year. So we do have a little bit of a broader range than we typically give at this point in the year given, frankly, how much of the business has some, we can influence really for the remainder of the year.

Speaker Change: Okay, and obviously your new guidance is based on what you're seeing now.

Speaker Change: in terms of demand on your end-user, end-market.

Speaker Change: Do you feel that, given what's going on...

Speaker Change: The low end of adjusted EBITDA would be attainable, or is there other wild cards out there that could make that lower end not be attainable?

Speaker Change: You know obviously Gary we go through a pretty robust process to evaluate guidance and try to give a you know transparent view of where the business is going for the remainder of the year so

Gary Prestopino: So, we do have a little bit of a broader range than we typically give at this point in the year given, frankly, how much of the business has some we can influence, really, for the remainder of the year. So, you know, there are things we can do to move revenue in some of those non-OE products more so than we have in prior years, which is why that range is broad. As we see it now, Gary, you know, this range is attainable.

Speaker Change: We do have a little bit of a broader range than we typically give at this point in the year given, frankly, how much of the business we can influence, really, for the remainder of the year.

Matthew Horvath: So there are things we can do to move revenue in some of those non-AL products more so than we have in prior years, which is why that range is broad. As we see in our Gary, this range is attainable. We wouldn't put out guidance that we don't see as attainable. And we're really pushing hard on some of the things that we can control to outperform where we are. There is a lot more influence over the back after year than we typically have. Whether it's the after market in smart too and market penetration there, some of the off highway markets where we're not traditional OE, that's a little more of an after market business.

Gary Prestopino: So, you know, there are things we can do to move revenue in some of those non-OE products more so than we have in prior years, which is why that range is broad. As we see it now, Gary, you know, this range is attainable. We wouldn't put out guidance that we don't see as attainable. And we're really pushing hard on some of the things that we can control to outperform where we are. You know, there is a lot more influence over the back half of the year than we typically have, whether it's, you know, the aftermarket in Smart2 and market penetration there, some of the off-highway markets where we're not traditional OE, it's a little more of an aftermarket business.

Matt: We wouldn't put out guidance that we don't see as attainable, and we're really pushing hard on some of the things that we can control to outperform where we are. You know, there is a lot more influence over the back half of the year than we typically have, whether it's the aftermarket in Smart2 and market penetration there, some of the off-highway markets where we're not traditional OE, that's a little more of an aftermarket business.

Matthew Horvath: Even on the mirror, I take great piece on how we work with customers and their customers, the dealers, to push take rate and improve visibility of the product. All those things are opportunities for us as the year goes on.

Matt: Even on the mirror-eyed take rate piece and how we work with customers and their customers, the dealers, to push take rates and improve visibility of the product, I think all those things are opportunities for us as the year goes on. So, we certainly see the guidance as attainable. Okay, so I also want to talk about, [inaudible] Is this the first pilot that you have out there for this product? Yeah, it is the first pilot, Gary, yes. Okay. So Volvo Bus is the first customer that has this. That's what I'm trying to get at, or do you have a bunch of other pilots out there?

Matthew Horvath: So we certainly see the guidance as attainable.

Gary Prestopino: Okay, so I also want to talk about this Volvo bus pilot for data and AI-based fuel advice systems. Is this the first pilot that you have out there for this product? Yeah, it is the first pilot, Gary, yes. Okay, so it's already going. We're already getting some results from it as well. So it's not something that is, you know, an academic thought, right? This is a product that's truly being piloted with real customers, with real drivers. Yes.

Speaker Change: Okay, so I also want to talk about this Volvo bus.

Speaker Change: pilot for data and AI-based fuel.

Speaker Change: Advice Systems.

Speaker Change: Is this the first pilot that you have out there for this product?

Speaker Change: Yeah, it is the first pilot, Gary, yes.

Speaker Change: Okay.

Speaker Change: It's already going. We're already getting some results from it as well. So it's not something that is, you know, an academic thought, right? This is a product that's truly being piloted with real customers, with real drivers.

Gary Prestopino: So, so Volvo buses the first customer that has this, that's what I'm trying to get. Do you have a bunch of other pilots out there? Volvo buses the first customer and their consideration for others as we go forward. Yes.

Speaker Change: So Volvo Bus is the first customer that has this, that's what I'm trying to get at, or do you have a bunch of other pilots out there?

Speaker Change: Bobo Bus is the first customer and there is consideration for others as we go forward, yes.

Troy Cooprider: So, if you look at this product with AI-based fuel system, just very simply explain how this really would work in terms of does it look at, I mean does it take into account everything: weather, wind, routes, how does this thing work? Yeah, we're going to have Troy talk to that. He's obviously the tactical expert here, and I think you can offer a lot of background to help us understand.

Speaker Change: Okay, so if you if you look at this product with AI based fuel system advice system, just very simply explain

Gary Prestopino: How would this really work in terms of, does it look at, I mean, does it take into account everything, weather, and wind? So it's very interesting for bus services. Okay, so then in terms of this product, and also, you know, along with the advanced software and AI that you're developing from your eye as well, or you have developed. Well, per se, I'm not sure that there'd be a very significant improvement in additional fuel economy improvement that would come from Mirai.

Speaker Change: How this really would work in terms of, does it look at, I mean does it take into account everything, weather, wind, routes, how does it, how does this thing work?

Speaker Change: We're going to have Troy talk to that. He's, you know, obviously the technical expert here and I think he can offer a lot of background to help us understand.

Troy Cooprider: Hi, Gary. Hi. So, from an attribute standpoint of what we use in the AI algorithm, we're really looking at the driver behavior and how the driver behaves with respect to the slope of the road, the overall weight of the bus, and the average speed. And we're helping the fleet managers, the bus managers, understand how the best drivers work in those situations versus some of their challenge drivers so that they can coach the behavioral impact to make better drivers better and some of their underperforming drivers more towards average or better. So, it's really on the behavioral side and using multiple attributes in and around the bus.

Troy Koopreiter: Hi, Gary.

Troy Koopreiter: So from a attribute standpoint of what we use in the AI algorithm, we're really looking at

Troy Koopreiter: and how the driver behaves with respect to the slope of the road, the overall weight of the bus, and the average speed. And we're helping the fleet managers, the bus managers, understand how the best drivers

Troy Koopreiter: work in those situations versus some of their challenge drivers so that they can coach the behavioral impact to make better drivers better and some of their underperforming drivers more towards average or better.

Troy Koopreiter: So it's really on the behavioral side and using multiple attributes in and around the bus.

Gary Prestopino: Okay.

Troy Cooprider: So, Gary, think about how, just think about how someone might even drive a car. Some people take away from a traffic light very quickly. We all know that's a very energy-consuming kind of event. Some people may not slow down for curves and wear brakes down, etc. So, it really looks at a lot of those attributes of driver-based performance, all the things that we all do every day and turns you into a much less aggressive driver. Someone that really is trying to maximize fuel economy on the vehicle that's being driven. Early results; we won't be quantitative today, but early results are very impressive for the amount of fuel economy improvement that is brought from the technology, including from the very best drivers that are already driving reasonably well and reasonably reasonable relative to conserving fuel.

Troy Koopreiter: Okay, I really... So Gary, think about how...

Gary Prestopino: Just think about how someone might even drive a car. Some people take away from a traffic light very quickly. We all know that's a very energy-consuming kind of event. Some people may not slow down for curves and where it breaks down, etc.

Speaker Change: So it really looks at a lot of those attributes of driver-based performance, all the things that we all do every day, and turns you into a much less aggressive driver, someone that.

Troy Koopreiter: for the amount of fuel economy improvement.

Troy Koopreiter: that is brought from the technology, including from the very best drivers that are already driving reasonably well and reasonable relative to conserving fuel. Even those drivers have a marked improvement in performance with this technology.

Troy Cooprider: Even those drivers have a market improvement in performance with this technology.

Gary Prestopino: So, it's very interesting to bus services.

Gary Prestopino: And I know this is a pilot, but there's a revenue model that contemplates some kind of a SaaS software.

Troy Koopreiter: So it's very interesting to bus services.

Speaker Change: And I know this is a pilot, but does the revenue model contemplate some kind of a SAS software?

Gary Prestopino: Yeah, Gary, that's the go-to-market. That's right.

Troy Cooprider: Okay, so then in terms of, and I want to keep just because this is interesting to me, in terms of this product, can you incorporate that into MIRAI? And also, you know, along with the advanced software and AI that you're developing from MIRAI as well, or you have built? Well, I mean, per se, you know, I'm not sure that there would be a very significant improvement in additional fuel economy improvement that would come from that from MIRAI. However, the base technology, the base idea of it could be. So, you know, with recording, for example, we can see how drivers execute lane changes and some other things, relative to looking backward with the side view mirrors.

Speaker Change: Yeah, Gary, that's the go-to-market. That's right.

Speaker Change: Okay, so then in terms of and I want to keep just because this is interesting to me in terms of this product

Speaker Change: Can you incorporate that into MiraEye and also, you know, along with the advanced software and AI that you're developing for MiraEye as well, or you have developed?

Speaker Change: Well, I mean, per se, you know, I'm not sure that there would be a, you know, a very

Gary Prestopino: However, it could be that the base technology, the base idea of it, is. So, you know, with recording, for example, we can see how drivers execute lane changes and some other things relative to looking backward with the side view mirrors. And yeah, there could be some guidance given to the driver, maybe more so for safety performance, you know, acceptable driving technique on the road, those kinds of things. So, in concept, it could be applied.

Speaker Change: So, you know, with recording, for example, we can see how drivers execute.

Speaker Change: Lane changes and some other things relative to looking backward with the side view mirrors.

Troy Cooprider: And yeah, there could be some guidance given to the driver, maybe more so for safety performance, you know, acceptable driving technique on the road, those kinds of things. So, yes, in concept, it could be applied. And we've already begun to apply AI to MIRAI with, you know, path lanes and so forth, the trailer projection for where the trailer will go.

Speaker Change: And, yeah, there could be some guidance given to the driver, maybe more so for safety performance, you know, acceptable driving technique on the road, those kinds of things. So, yes.

Unnamed Speaker: And we've already begun to apply AI to Mirai with, you know, path lanes and so forth, trailer projection for where the trailer will go, and those kinds of things. So this would be an addendum to that that would add yet another layer of potential improved safety with this type of technology. I mean, it says developing, deploying, and developing. I mean, this is very early in the game. Scott is going out in a Iowa.

Troy Cooprider: And those kinds of things; this would be an addendum to that that would add yet another layer of potential improved safety with this type of technology.

Speaker Change: and those kinds of things. So this would be an addendum to that that would add yet another layer of potential improved safety with with this with this type of technology.

Gary Prestopino: Right. And then we look at, yeah, that makes sense.

Troy Cooprider: And if we look at slide A, where you're talking about what you've got on AI from MIRAI at this point, I mean, it says developing, deploying, developing. I mean, this is very early in the game here for what you've got going out in AI, or assume, right? Well, you know, AI is already embedded in the MIRAI as we speak today, right? Depends on which model and so forth, but it's already embedded. And yeah, it's the more rudimentary stuff. It's the pathways that you saw when you saw the track, but there's more to come. I mean, what you see in the slide itself, and you know, what you see there in terms of alerting the driver and so forth, you know, these are right at the doorstep of being, you know, broadly utilized.

Unnamed Speaker: Well, you know, AI is already embedded in the Mirai, as we speak today. It depends on which model and so forth, but it's already embedded. And yeah, it's the more rudimentary stuff. It's the path lanes that you saw when you saw the truck.

Speaker Change: Well, you know, AI is already embedded in the mirror eye as we speak today, right? It depends on which model and so forth, but it's already embedded and yeah, it's the more rudimentary stuff. It's the path lanes that you saw when you saw the truck.

Unnamed Speaker: But there's more to come. I mean, what you see on the slide itself, and what you see there in terms of alerting the driver and so forth, these are right at the doorstep of being, you know, broadly utilized. So, yeah, it's already in, and there's a lot more to come, and it's soon. Well, it makes the application more sticky.

Speaker Change: but there's more to come. I mean what you see in the in the slide itself and you know what you see there in terms of alerting the driver and so forth you know these are these are right at the at the doorstep of being you know broadly utilized.

Troy Cooprider: So yeah, it's already in, and there's a lot more to come, and it's soon.

Speaker Change: So, yeah, it's already in, and there's a lot more to come, and it's soon.

Gary Prestopino: Well, it makes the operation more sticky as it goes on. Yeah, for sure. For sure.

Unnamed Speaker: All right, thank you. We will continue to deliver on our commitments by focusing on our long-term strategy, broad operational improvements, and excellence in execution. We expect that our performance, along with our unique mix of industry-changing product platforms, will continue to drive strong shareholder value. Thanks again, everybody. The Ultimate Parody Site!

Gary Prestopino: All right. Thank you.

Operator: Thank you, Gary. Appreciate all the questions.

Operator: And this concludes our question-and-answer session.

Operator: I will now turn the conference back to Mr. Zizlman for closing remarks. Well, thank you, everyone, for joining us for the call. Look, I know your time is super important, and we truly appreciate your willingness to engage us once again today. You know, in the second quarter, we continue to make progress towards the key initiatives we outlined for 2024. As discussed earlier in the call, we are delivering on our key priorities, including a keen focus on the development of critical advanced technologies, and expect our efforts to continue to drive long-term profitable revenue growth and significant earnings expansion going forward.

Speaker Change: As discussed earlier in the call, we are delivering on our key priorities, including a keen focus on the development of critical advanced technologies, and expect our efforts to continue to drive long-term profitable revenue growth and significant earnings expansion going forward.

James Zizelman: We will continue to deliver on our commitments by focusing on our long-term strategy, broad operational improvements, and excellence in execution. We expect that our performance, along with our unique mix of industry-changing product platforms, will continue to drive strong shareholder value.

Speaker Change: We will continue to deliver on our commitments by focusing on our long-term strategy, broad operational improvements, and excellence in execution.

James Zizelman: Thanks again, everybody.

Operator: And this concludes today's conference call. Thank you for attending.

Speaker Change: And this concludes today's conference call. Thank you for attending.

Operator: The host has ended this call. Goodbye.

Speaker Change: The host has ended this call. Goodbye.

Speaker Change: Thank you for watching!

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Speaker Change: HAAAAAHHHHHHHHHHHHHHHHHHHHHHH SUBSCRIBE