Q1 2025 Stoneridge Inc Earnings Call
Operator: Good day and welcome to the Stoneridge First Quarter 2025 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Good day and welcome to the Stoneridge first quarter 2025 conference calls.
All participants will be in a listen only mode should you need assistance. Please signal and conference specialist by pressing the star key followed by CFO. After today's presentation, there would be an opportunity to ask questions to ask a question. You May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded.
Please note this event is being recorded.
Kelly Harvey: I would now like to turn the conference over to Kelly Harvey. Please go ahead. Good morning, everyone. And thank you for joining us to discuss our first quarter 2025 results. The release and accompanying presentation was filed with the SEC and is posted on our website at stoneridge.com in the investor section under presentations and events.
Speaker Change: Now I'd like to turn the conference over to Kelly Harvey. Please go ahead.
Kelly Harvey: Good morning, everyone and thank you for joining us to discuss our first quarter 2025 results. The release and accompanying presentation was filed with the SEC and is posted on our website at stoneridge Dot com.
Speaker Change: In the investors section under presentations and events.
Kelly Harvey: Joining me on today's call are Jim Zizelman, our President and Chief Executive Officer, and Matt Horvath, our Chief Financial Officer. During today's call, we will be referring to certain non-GAAP financial measures. Please see slide 2 of the presentation for a more detailed description of these non-GAAP financial measures and the appendix for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. In addition, certain statements today may be forward-looking statements. Forward-looking statements include statements that are not historical in nature and include information concerning our future results or plans. Although we believe that such statements are based upon reasonable assumptions, you should understand that these statements are subject to risks and uncertainties, and actual results may differ materially.
Speaker Change: Joining me on today's call are Jim affirming, our president and Chief Executive Officer, and Matt Horvath, Our Chief Financial Officer.
Speaker Change: During today's call, we will be referring to certain non-GAAP financial measures. Please see slide two of the presentation for a more detailed description of these non-GAAP financial measures in the appendix for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures.
Speaker Change: In addition, certain statements today, maybe forward looking statements forward looking statements include statements that are not historical in nature and include information concerning our future results or plans.
Speaker Change: Although we believe that such statements are based upon reasonable assumption you should understand that these statements are subject to risks and uncertainties and actual results may differ materially.
Kelly Harvey: Additional information about such factors and uncertainties that could cause actual results to differ may be found on page 3 of the presentation and in our Form 10-Q, which has been filed with the Securities and Exchange Commission under the heading Forward-Looking Statements.
Speaker Change: Additional information about such factors and uncertainties that could cause actual results to differ may be found on page three of the presentation and in our Form 10-Q, which has been filed with the Securities and Exchange Commission under the heading forward looking statements.
Kelly Harvey: After Jim and Matt have finished their formal remarks, we will then open up the call to questions.
Speaker Change: After Jim and Matt have finished their formal remarks, we will then open up the call to questions and with that I will hand, the call over to Jim.
James Zizelman: And with that, I will hand the call over to Jim. Thanks, Kelly. And good morning, everyone. Let me begin on page four. In summary, we delivered strong performance in the first quarter, including operating margin improvement across every single one of our segments, overall adjusted gross margin improvement of 210 basis points, and adjusted EBITDA and cash performance that soundly exceeded our expectations. Murai revenue increased by an impressive 24% relative to the fourth quarter of 2024, driven by strong sales in the bus market, and the continued ramp up of our previously launched OEM programs, where we are benefiting from the system becoming standard equipment on several additional truck models.
Jim Affirming: Thanks, Kelly and good morning, everyone. Let me begin on page four in summary, we delivered strong performance in the first quarter, including operating margin improvement across every single one of our segments overall adjusted gross margin improvement of 210 basis points and adjusted EBITDA and cash performance that soundly exceeded our.
Speaker Change: Our expectations.
Speaker Change: <unk> revenue increased by an impressive 24% relative to the fourth quarter of 2024, driven by strong sales in the bus market and the continued ramp up of our previously launched OEM programs, where we are benefiting from the system, becoming standard equipment on several additional truck models.
James Zizelman: Mirai continues to be a strong growth driver for Stoneridge, as the system continues to gain momentum through our OEM programs, as well as through continued expansion in our aftermarket applications. And then as I mentioned previously, adjusted gross margin improved by a healthy 210 basis points in the first quarter, driving adjusted operating and adjusted EBITDA margin expansion. This progress was a result of success across our key operational priorities as we continued to focus on material cost improvement, where we achieved a strong 220 basis point reduction and reduced quality related costs, which resulted in a $2.5 billion improvement relative to the fourth quarter of last year.
Speaker Change: <unk> continues to be a strong growth driver for stoneridge as the system continues to gain momentum through our OEM programs as well as through continued expansion in our aftermarket applications and then as I mentioned previously adjusted gross margin improved by a healthy 210 basis points in the first quarter driving adjusted.
Speaker Change: <unk> operating and adjusted EBITDA margin expansion. This progress was a result of success across our key operational priorities as we continue to focus on material cost improvement, where we achieved a strong 220 basis point reduction.
Speaker Change: And reduced quality related costs, which resulted in a $2 $5 billion improvement relative to the fourth quarter of last year.
James Zizelman: We are also seeing success in improving our cash performance as well, driving working capital reductions through continued management of our inventory. This resulted in free cash flow of approximately $4.9 million, an increase of approximately $1.5 million versus the first quarter of the prior year. We are very proud of the progress we have made in reducing our inventory, which has resulted in a $28 million reduction over the first quarter of last year.
Speaker Change: We are also seeing success in improving our cash performance as well driving working capital reductions through continued management of our inventory. This resulted in free cash flow of approximately $4 $9 million, an increase of approximately $1 $5 million versus the first quarter of the prior year.
Speaker Change: We are very proud of the progress we have made in reducing our inventory, which has resulted in a $28 million reduction over the first quarter of last year, Matt will provide further details on our financial and cash performance later on the call.
Matthew Horvath: Matt will provide further details on our financial and cash performance later on the call.
James Zizelman: Over the last several months, tariffs have been the focal point of discussion globally and certainly in our industry. There has been significant volatility in the details around the application of U.S. imposed tariffs and the corresponding reciprocal tariffs, creating uncertainty in the overall market and the transportation industry. Stoneridge is well positioned with our global manufacturing footprint and a supply chain strategy is currently in place to mitigate the impact of potential tariffs. During the first quarter, we saw very little direct impact of tariffs. However, we continue to develop and implement mitigation strategies to further offset potential tariffs that have been either discussed or are scheduled to be implemented.
Speaker Change: Over the last several months tariffs had been the focal point of discussion globally and certainly in our industry.
Speaker Change: There has been significant volatility in the details around the application of U S imposed tariffs and the corresponding reciprocal tariffs, creating uncertainty in the overall market and the transportation industry Stoneridge is well positioned with our global manufacturing footprint and supply chain strategies currently in place to mitigate the impact.
Speaker Change: The potential tariffs.
Speaker Change: During the first quarter, we saw very little direct impact of tariffs. However, we continued to develop and implement mitigation strategies to further offset potential tariffs that have been either discussed or are scheduled to be implemented.
James Zizelman: Our long-term operational improvement strategies are paying off, and we are proud of the resulting strong performance in the first quarter. As always, we will continue to monitor and to respond efficiently to market changes and manage the business accordingly to drive earnings and cash performance. We are taking a deliberate and thoughtful approach for the remainder of the year, and given our outperformance in the quarter, we are maintaining our previously provided full year guidance.
Speaker Change: Our long term operational improvement strategies are paying off and we are proud of the resulting strong performance in the first quarter and as always we will continue to monitor and to respond efficiently to market changes and manage the business Accordingly to drive earnings and cash performance, we are taking a deliberate and thoughtful approach for the remainder of the year.
Speaker Change: And given our outperformance in the quarter, we are maintaining our previously provided full year guidance, Matt will provide more details on our expectations for the remainder of the year later in the call.
James Zizelman: Matt will provide more details on our expectations for the remainder of the year later in the call. On page five, summarizes our key financial metrics for the first quarter of 2025 compared to the fourth quarter. Stoneridge-specific growth drivers, including a record sales quarter for the SMART2 tachograph and Mirai, a 60% growth in our local OEM business in Brazil, and our higher sales for our North America passenger vehicle customers fully offset lower production volumes in the commercial vehicle end markets and lower off-highway sales. As a result, and as expected, first quarter revenue was in line with the fourth quarter of the prior year.
Matt Horvath: On page five summarizes our key financial metrics for the first quarter of 2025 compared to the fourth quarter.
Matt Horvath: Stoneridge specific growth drivers, including a record sales quarter for the smart <unk> Tachograph and mirror I Ah, 60% growth in our local OEM business in Brazil, and our higher sales for our North America passenger vehicle customers fully offset lower production volumes in the commercial vehicle end markets and lower off highway sales.
Matt Horvath: As a result, and as expected first quarter revenue was in line with the fourth quarter of the prior year.
Driven by continued strong progression on key company initiatives and our longstanding focus on operational excellence, margins continued to expand in the first quarter. Serious focus on material cost improvement actions, continuous improvement and manufacturing performance, and company-wide efforts on reducing quality-related costs contributed to the 210 basis point improvement in adjusted gross margin over the fourth quarter of last year. We've redoubled our efforts to focus on built-in quality, responsiveness, and proactive processes to address any quality issues and expect continued progress in quality-related costs going forward. First quarter operating income improved in all of our segments relative to the fourth quarter of 2024, resulting in a notable overall adjusted operating margin improvement of 160 basis points.
Matt Horvath: Driven by continued strong progression on key company initiatives and our long standing focus on operational excellence margins continued to expand in the first quarter.
Matt Horvath: Serious focus on material cost improvement actions continuous improvement in manufacturing performance and companywide efforts on reducing quality related costs contributed to the 210 basis point improvement in adjusted gross margin of the fourth quarter of last year, we've redoubled our efforts to focus on built in quality responsiveness.
Matt Horvath: And proactive processes to address any quality issues and expect continued progress in quality related costs going forward.
Matt Horvath: First quarter operating income improved in all of our segments relative to the fourth quarter of 2024, resulting in a notable overall adjusted operating margin improvement of 160 basis points.
Matt Horvath: SG&A.
Matt Horvath: Primarily due to the normalization of incentive compensation to annual targeted amounts was offset by improved operational performance and continued structural cost control, including reduction of engineering expenses as we continue to focus on the globalization of our engineering organization.
Matt Horvath: First quarter, adjusted EBITDA of $7 $6 million or three 5% of sales improved by approximately $1 6 million or 80 basis points compared to the fourth quarter overall, we significantly improved our operating margin performance in the first quarter, both in total and at each of our segments is.
Matt Horvath: Matt will discuss in more detail again later in the call.
Matt Horvath: Now turning to page six as discussed a bit earlier, we saw very little direct impact of tariffs in the first quarter. Our primary exposure to tariffs is related to products manufactured in our facility in Juarez, Mexico and sold to U S customers for U S consumption. It's important to note that currently approximately 91%.
Matt Horvath: Our product sales from Mexico are exempt from tariffs as they are U S. MCA certified.
Matt Horvath: For the remainder of our products that are not U S MCA certified or potentially exposed to the next round of non U S content based tariffs we've already notified customers that we will be issuing price increases related to any incremental costs. We incur related to these tariffs in fact, we have already secured our we are well down the path of sicker.
Matt Horvath: <unk> price increases, including payment for previously incurred tariffs to help offset our current tariff exposure. Similarly, we are working with our current customers to increase the number of U S. MCA certified products by adding qualifying content to offset any tariff exposure that is under our control.
Matt Horvath: We have successfully addressed most of the complexities and component purchases the strength of our current supply chain structure in response to tariffs. We are utilizing previously established methods. They have already recently implemented strategic sourcing and shipping actions to limit the impact of tariffs on components and as a result, we expect that our manufacturing.
Matt Horvath: <unk> print and supply chain strategies will allow us to mitigate the majority of the direct impact of tariffs.
Matt Horvath: The overall impact on consumer demand and production volumes remains a bit uncertain as the market continues to respond to the volatile tariff environment, However, through strong communication and transparency with our suppliers and our customers. We are confident in our ability to implement mitigating actions to limit the impact of current or future tariffs on our financial.
Matt Horvath: Results. Additionally.
Matt Horvath: Additionally, stoneridge as a relatively higher exposure to the domestic three Oems rather than foreign Oems, which we believe could benefit us in this environment we.
Matt Horvath: We will continue to monitor shifts and macroeconomic policies and the impact on our business to ensure that we act quickly to offset any incremental costs as we have done historically and with that I will turn it over to Matt to discuss our financial results.
Matt Horvath: Thank you Jim turning to page eight sales in the first quarter were $217 9 million approximately in line with our expectations.
Matt Horvath: First quarter, adjusted EBITDA was $7 $6 million, resulting in a $1 $6 million improvement relative to the fourth quarter of last year exceeding our previously outlined expectations.
Speaker Change: As Jim mentioned earlier on the call we are maintaining our full year guidance ranges based on our first quarter outperformance and run rate margin improvement as well as our original relatively conservative assumptions related to vehicle production volumes.
In the recent weeks third party production forecasts have significantly reduced full year production volume expectations, primarily in the back half of the year. However, based on our original conservative assumptions for our full year guidance as well as the current short term production forecast provided by our customers our expectations have not been significantly impacted.
Speaker Change: Even considering the most recent external production forecast, we expect to perform within our previously provided EBITDA guidance range.
Speaker Change: Consistent with the outperformance we saw in the first quarter. We expect continued progress on our material cost improvement initiatives and quality related costs for the remainder of the year, we will continue to manage structural costs and make adjustments as necessary to align our operating structure with current market conditions.
We expect our revenue and EBITDA cadence for the year to be relatively consistent with previous expectations. We expect our second quarter performance will slightly increase compared to the first quarter. We expect continued expansion of <unk> sales in the second half of the year, primarily driven by the continued ramp up of new programs to substantially offset production volume headwinds.
Speaker Change: As a result, we expect revenue to be approximately evenly split between the first and second half of the year.
Speaker Change: We expect continued EBITDA margin performance as a result of the actions we are taking to improve gross margin and managed structural costs. As a result, we expect EBITDA to be slightly more back half weighted as these actions compound overall, we delivered a strong first quarter, which exceeded our expectations across all of our key metrics.
Speaker Change: Page nine summarizes our key financial metrics specific to control devices controlled devices first quarter sales of $69 $9 million increased by 10, 6% relative to the fourth quarter of the prior year, primarily due to higher production volumes for our North American passenger vehicle customers.
Speaker Change: Troll devices significantly outperformed its underlying end markets, including the North American passenger vehicle end market that grew by just three 9% primarily due to production tailwind for our specific customers and our mix of vehicle programs.
Speaker Change: First quarter adjusted operating income of $1 $5 million improved by 470 basis points compared to the prior quarter, primarily as a result of higher sales lower quality related costs of approximately $800000 and lower engineering spend due to recent actions taken to streamline the engineering function.
Speaker Change: This represents a 46% contribution margin on $6 7 million of.
Speaker Change: Of incremental sales in the quarter as we continue to focus on executing on our key priorities for the year and managing the variables that are in our control. We expect continued volatility in our end markets as uncertainty remains related to the market's response to tariff policies. However, there could even be opportunity to outperform our end markets as international Oems adapt new tariff policies.
Speaker Change: That should favor domestic OEM selling in North America, which are our primary exposure.
Speaker Change: We will continue to focus on the things, we can control, including advanced in new product development commercial expansion and improvement in material cost and manufacturing performance.
Speaker Change: Page 10 summarizes our key financial metrics specific to electronics as expected first quarter sales of $145 million were slightly lower than sales in the fourth quarter Stoneridge specific growth factors continued to offset production volume headwinds more specifically mirror set a record for quarterly sales, which grew by 24% relative to the fourth quarter of 2000.
Speaker Change: For this.
Speaker Change: This was primarily driven by the ramp up of recently launched OEM programs and incremental sales in our global bus market.
Speaker Change: Additionally, our smart to tachograph set our second consecutive quarterly sales record driven by continued strong demand we remain confident that stoneridge specific growth drivers, including mirror and our smart tachograph will drive market outperformance going forward.
Speaker Change: First quarter adjusted operating margin expanded by approximately 130 basis points compared to the fourth quarter of the prior year included in our operating performance was a $1 $8 million improvement in quality related costs. We expect that our continued focus on building quality and rapid response and mitigation of quality related issues will result in continued improvement in <unk>.
Speaker Change: 2025.
Speaker Change: We continue to expect revenue growth for electronics in 2025%, primarily driven by the annualized <unk> and launch of mirror OEM programs and continued strong performance with our smart to tachograph applications.
Speaker Change: We expect to continue to drive improvement in material cost and quality related costs throughout the year. As a result, we are expecting continued positive margin progression in 2025% as the impact of our key initiatives mature.
Page 11 summarizes our key financial metrics specific to Stoneridge, Brazil, Stoneridge, Brazil first quarter sales totaled $14 4 million, which represents an increase of $2 million or approximately 16% growth relative to the fourth quarter of last year. This increase was driven by higher local OEM sales, which consistent with our strategy.
Speaker Change: Focused on local OEM growth expanded by $2 $6 million or over 60% relative to the fourth quarter.
Speaker Change: We remain focused on expanding our local OEM business to grow our presence in Brazil, and unlock global opportunities with our global customers.
Speaker Change: First quarter operating profit improved by 320 basis points or $500000 relative to the fourth quarter of 2024, primarily driven by improved fixed cost leverage on incremental sales.
Speaker Change: We expect stable revenue and margin in 2025, as 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, Brazil remains a critical engineering center, which we will continue to utilize and grow to cost effectively support our global business.
Speaker Change: Turning to page 12 in the first quarter, we generated $4 9 million and free cash flow an improvement of $1 $5 million relative to the first quarter of 2024.
Speaker Change: We continued to focus on inventory management, which has resulted in approximately $28 million of improvement over the last year as we remain focused on our key working capital initiatives. We are expecting continued improvement throughout this year net.
Speaker Change: Net debt to trailing 12 month EBITDA as calculated for compliance purposes was just under four times.
Speaker Change: We remain confident the company has ample liquidity and flexibility to operate in the current macroeconomic environment. We are maintaining the previously communicated targeted compliance net debt to EBITDA leverage ratio of two to two five times by the end of the year with that I will turn it over to Jim for closing comments.
Speaker Change: Thanks, Matt and turning to page 13 in summary, our strong first quarter performance was driven by continued progression across each of our key priorities for 2025 as evidenced by the progress made so far this year. This team is laser focused on executing on our key priorities to drive strong growth continued margin improvement and an improved <unk>.
Speaker Change: Alan sheet.
Speaker Change: We remain focused on building a strong foundation for continued earnings expansion as we capitalize on our impressive portfolio of advanced technologies.
Speaker Change: We will continue to focus on overall operating cost improvement and operational execution to drive strong contribution margin and focus on inventory reduction to improve our cash position and reduced our leverage profile.
Speaker Change: We are quite confident in our ability to navigate global trade policies and implement mitigating actions to limit the impact of tariffs on our performance.
Speaker Change: We will continue to focus on addressing the things, we can control and reacting efficiently and effectively to conditions that are not in our control.
Speaker Change: Stoneridge remains well positioned to continue to outperform our underlying end markets and drive margin expansion, resulting in long term shareholder value and as always driving shareholder value is at the forefront of all of stoneridge as strategic initiatives and with that I will open the call to questions.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
Speaker Change: Got it using a speaker phone please pick up your handset before pressing the case itself.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from the line of Danielle Brill with Stephens. Please go ahead.
Danielle Brill: Yeah, Hey, good morning, guys. Thanks for taking my questions.
Speaker Change: Hey, good morning, Daniel.
Speaker Change: Yes.
Speaker Change: Maybe Jim will start on the electronics kind of momentum, it's really good to see mirror and smart to both accelerate can you maybe just unpack a little bit more detail, what improved kind of how that trended versus your expectations for the improvement this year and if you think about the margin Matt I think you mentioned sales and margin as you ramp through the year any way to help frame up the amount of increase we should.
Speaker Change: <unk> office <unk> margin.
Speaker Change: Daniela first of all thanks for the question and thanks for joining us this morning.
Speaker Change: The improvements that we saw here in the first quarter of 2025 really springboard for a lot of what we were talking about after the fourth quarter call. We obviously are now ramping up quite significantly our launch with Volvo in Europe, that's really taking.
Speaker Change: Grip and Theres a lot of traction there.
Speaker Change: We've talked a lot about.
Speaker Change: The application of the product as standard equipment on additional models, alright, so thats, providing some additional opportunity for us and we're seeing that in the sales.
Speaker Change: And we also are seeing in the aftermarket, especially in the bus market a lot more interest and a lot more applications happening throughout both North America and Europe. So all of those things really lead to where we are today and we do expect as we go forward through the remainder of the year as we launch here in North America with Volvo.
Speaker Change: <unk> related brands as well as with Daimler truck North America, we will expect to see those begin to take the same kind of pathway that global in Europe did in terms of implementation and acceptance of the product. So we're really quite bullish on the sales for.
Speaker Change: Formula going forward for sure on the margin side, Daniel I would say typical contribution margins kind of 25% to 30% I would expect that some of the initiatives. We've talked about this morning on the material cost side and the quality side continue to ramp as we go through the year like we talked about some of those initiatives mature.
Speaker Change: But I would expect kind of a linear progression of margin as we as we move through the year with a pretty strong run rate obviously at the end of the year.
Speaker Change: Great. That's helpful color, maybe shifting to the tariff discussion Jim I think you mentioned direct costs are pretty limited maybe the risk is more on the demand side or the ripple effect I'm just curious what youre hearing.
Speaker Change: Im your auto customers now youre exposed to the big three but you are plugged into the industry like what are you hearing in terms of actual impacts on demand out there if anything yet.
Speaker Change: Yes, So first off you know relative to tariffs maybe I'll speak first to the recent announcements made by the president.
Speaker Change: That is helpful in general for the automotive industry and then it give some relief to the automakers.
Speaker Change: For the auto parts folks it wasn't too impactful other than the fact that there was an elimination of the stacking of tariffs right. There can be multiple ways that tariffs can impact tier ones in the automotive industry, whether it be through steel and aluminum tariffs the emergency tariffs called I E.
Speaker Change: Are the direct auto to what they call the auto tariffs of the auto 232 tariffs and you can't stack any of those anymore and before they were all stackable. So.
Speaker Change: Looked a little daunting that is now gone and the fact that.
We have most of our products as I said in the call as U S. MCA compliance those are still exempt from tariffs and at the moment. There is no exploration of that exemption.
Speaker Change: No exploration date that is published so we are pretty free from that well.
Speaker Change: <unk> two <unk>.
Speaker Change: Our customers.
Speaker Change: We've had fairly robust orders actually through the first quarter.
Speaker Change: We are now beginning to see.
Speaker Change: Some changes in that but at this point, we would still call it not that significant coming from our customers but of course, we have.
Speaker Change: Keen eye on that we are engaged with these guys on a regular basis.
Speaker Change: And we would take any mitigating action necessary if those if those kinds of projected volumes or just start to have some substantive decline.
Speaker Change: Great and then maybe last one extent, we go down here.
Speaker Change: Yes that does that's helpful. If I could as we go into the balance sheet, Matt inventory coming down nicely continues to drive a working capital benefit for free cash flow.
Speaker Change: I'd love to hear your thoughts around as we return to overall growth in the industry, maybe in 2006 and beyond I guess, how sustainable are these improvements can we continue to grow can we grow revenue with inventories levels do we need to add inventory how should we think about this.
Speaker Change: The inability of the working capital benefit there.
Speaker Change: Yes, Great question. Danielle This has been one of our focus is obviously the last year, we've been really successful in reducing inventory balance like you heard in the prepared remarks inventory balances have come down almost $30 million over the last year. So really good progress there, but what I would tell you. There's more to go if you look historically at our inventory turns we should be at least high single digits, where kind of mid single digits.
Speaker Change: Trending in a good direction now, but we should be high single digits. Some of our facilities have even been over 10, historically, which is I wouldn't say best in class, but certainly.
Speaker Change: Better better than average for our peer set so there's still more work to do there. So I think there's still opportunity to improve inventory, even as we grow and.
Speaker Change: I think it's sustainably improved as well so when we start growing I think youll see inventory turns hold at those levels.
Speaker Change: As we pick up volume so still more work to do this year, which obviously we're on a good track with good momentum and I think that that will be sustainable even as we as the overall industry returns to growth here as we navigate some of the volatility in the short term.
Speaker Change: Great. Thanks for all the detail this morning, and best of luck guys.
Daniel: Thanks, Daniel can you talk I appreciate it.
Speaker Change: The next question comes from the line of Guy of Christopher <unk> with Barrington Research. Please go ahead.
Guy: Hey, good morning, all.
Speaker Change: Hey, Gary.
Speaker Change: Okay.
Speaker Change: Matt.
Speaker Change: Maybe address.
Speaker Change: <unk>.
Speaker Change: Issues related to quality related items I was looking at what you did in Q4, you had an impact was there any real big impact here in this quarter.
Speaker Change: Do you think that you've got that situation under control and it shouldnt.
Speaker Change: Come out.
Speaker Change: <unk>.
Speaker Change: One time expenses going forward in any of the quarters.
Speaker Change: Leading quarters in 2025.
Speaker Change: Yes, Gary Good question, obviously quality related costs is something we've focused on specifically over the last couple of years.
Speaker Change: We have made a significant amount of progress there like you heard in the prepared remarks, both control devices and electronics had a significant improvement over the fourth quarter and their quality related expenses total company was $2 $5 million down in quality related expenses from quarter to quarter.
Quality related costs, Youre always going to run into tissues right for us. It's built in quality, which is you are seeing an overall reduction of quality related expenses, but it's also speed and efficiency and addressing any quality issues that come up and that's where we've really made a lot of progress. So we're limiting any of the issues that we have which are normal in our industry you always.
Speaker Change: Got it.
Speaker Change: Some level of quality back and forth, but we've done a really good job limiting those peaks and valleys and building and better quality with our kind of consistent global processes to improve the baseline. So I don't think its I don't think anybody would ever tell you youll never have another quality related issue I think we've done a good job of putting processes in place to limit any of those issues that may come up.
Speaker Change: I won't tell you it'll never Youll never have a quality related expense again, I think that would be silly, but I can tell you that the processes. We have in place are driving a significant improvement in both the baseline and our response to those issues.
Speaker Change: Okay.
Speaker Change: And you can see significant improvement in the quarter here, it's really moving fast on anything that does come up and it's working.
Speaker Change: Elbows and everyone. We are working hard to drive.
Speaker Change: Quality into the product that we're developing and bringing into production.
Speaker Change: To be a key focus there and just got to be appropriate processes there.
Speaker Change: That our proactive to eliminate quality before it becomes a problem either on the plants are in the field and that's the most important thing because that puts you at a strong foundation for good quality and being sure that you'll you'll have very very few big problems in the future now for US obviously, that's we've redoubled those efforts.
Speaker Change: As I said in the call and we're truly focused on that we feel very good about what we're doing but we also have adjusted our processes. So that we act with great speed if anything starts to.
Speaker Change: Crop up that we have to really go and address.
Speaker Change: Okay. Thank you for that and then in terms of what's going on with tariffs, which it will probably change today somewhat.
Speaker Change: Other major linear.
Speaker Change: Yes.
Speaker Change: With what Youre doing in Europe with Bureau is that production of mirror eye products coming in ship from the U S into Europe or are you able to produce it in Europe as well.
Speaker Change: No Thats produced in Europe, Okay.
Speaker Change: And as your tachograph product produced in Europe as well.
Speaker Change: Tachograph is produced in Europe, yes, Sir Okay. So there's no there's no issues there.
Speaker Change: The tariffs then okay, just a couple of more questions.
Last quarter, you talked about <unk> revenue almost doubling to $120 million this year.
Speaker Change: There have been any change in that.
Speaker Change: That outlook.
Speaker Change: Yes, so Gary I would say no change in the outlook right now, but obviously, we're very pleased with the start we've gotten to in the year here.
Speaker Change: We will evolve our program in Europe in particular has had really good volume.
Speaker Change: We're on a really good track with with our existing programs like you heard in the prepared remarks, we're really proud of the the bus applications the global bus applications.
Speaker Change: Both really in Europe, and overall North America. So we're making good progress on the aftermarket side Boston Fleet, we're making really good progress and we're seeing good volume on the OE side with launch programs I think all of that suggest good momentum with the programs that we expect to launch this year in North America.
Speaker Change: And some nice volume there so overall.
Speaker Change: Good start to the year, obviously, we're still early in the year, but.
Speaker Change: Good start to the year with the things that are already in the market and we're looking forward to our two launches here in North America, North America to continue that trend here as we ramp them up here in the second half.
Speaker Change: Okay.
Speaker Change: Then just lastly.
Speaker Change: And connected trailers suite of products still working on that you still think you're going to be getting some of these out in 2025, followed by significant expansion in 2026.
Speaker Change: Yes, Thats program is actually going quite well and.
Speaker Change: A lot of the <unk>.
Speaker Change: Various trade shows that we go to including CES and TMC and so forth we've been.
Speaker Change: Really showing further expansion in the capability of connected trailer.
Speaker Change: So customers are very excited about that and in a very small way, we do expect to see.
Speaker Change: See some some of that here at the very tail end of 2025 more.
Speaker Change: In the evaluation mode by customers, whether theyre going to have a few here and there where they start to evaluate.
Speaker Change: How deeply they want to go what kind of features they really want to have on this but really getting it out there and making use of that.
Speaker Change: Stoneridge specific connectivity innovation that allows it to be so quickly applicable in the market.
Speaker Change: Okay can I just get one more in and then I'll jump off.
Speaker Change: Sure go ahead.
Speaker Change: You mentioned that.
Speaker Change: I've seen these numbers I mean, the IHS numbers are all over the place but.
Speaker Change: At least what I've seen.
Speaker Change: A lot of these prognosticators I've put out a range.
Speaker Change: And the ranges.
Speaker Change: The high end is where they work for the year the low end as their new targeted number.
Speaker Change: Yeah.
Speaker Change: Relative to where the new.
Speaker Change: Numbers are in terms of unit production are you.
Speaker Change: With your assumptions for 2025 are you still below.
Speaker Change: Some of those assumptions I mean, you said you went into the year with very conservative projections. So I just I'm just trying to get an idea of where you are relative to where maybe some of these new estimates or are coming out at.
Speaker Change: Yes, Gary Good question, obviously, there's a lot of volatility, particularly in the production forecast space right now.
Jim Affirming: Like Jim said from our customers' perspective, we're not seeing any real significant short term impact.
Normal normal variation in production I would say, we obviously are looking at the range of potential outcomes and like you mentioned, it's pretty broad we feel comfortable that with.
Jim Affirming: I would say, we're within that range from our original expectation.
Jim Affirming: Just expectation wasn't quite as low as the low end of the range is now, but we feel comfortable with that even within that range high to low.
Jim Affirming: We can still maintain the guidance for the full year. So obviously now we have got a crystal ball and like you said that the potential of outcomes here is pretty broad.
Jim Affirming: But we feel very comfortable that we can still fall within our guidance.
Jim Affirming: Even within that very broad range.
Jim Affirming: Okay. Thank you very much.
Jim Affirming: Sure.
Jim Affirming: Okay.
Speaker Change: Again, if you have a question. Please press Star then one.
Jim Affirming: Okay.
Jim Affirming: Okay.
Jim Affirming: Okay.
Jim Affirming: This concludes our question and answer session I would like to turn the conference back over to Jim Zimmerman for any closing remarks.
Speaker Change: Thank you everyone for joining us for the call I know your time is very important and as always we truly appreciate your willingness to engage US today, we are operating with an unrelenting focus on our key priorities driving significant earnings expansion as we grow we will continue to deliver on our commitments by focusing.
Speaker Change: And long term strategy quality improvements and material amount of factoring cost reductions all while maintaining a clear focus on market dynamics and making any necessary mitigating actions, we expect that our performance along with our unique mix of industry changing product platforms will continue to drive strong shareholder value. Thanks again.
Speaker Change: The one.
Speaker Change: Okay.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Okay.
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