Stoneridge Inc. (NYSE:SRI) Q2 2018 Earnings Conference Call - Final Transcript

Aug 02, 2018 • 09:00 am ET

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Stoneridge Inc. (NYSE:SRI) Q2 2018 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen, and welcome. Thank you for standing by and welcome to Stoneridge Second Quarter 2018 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call may be recorded.

At this time, I would like to turn the conference over to Mr. Matt Horvath, Director of Investor Relations. Please go ahead, sir.

Executive
Matt Horvath

Good morning, everyone, and thank you for joining us to discuss our second quarter results. The release and the company presentation was filed with the SEC yesterday evening and is posted on our website at www.stoneridge.com in the Investors section under Webcasts and Presentations. Joining me on today's call are Jon DeGaynor, our President and Chief Executive Officer; and Bob Krakowiak, our Chief Financial Officer.

(Forward-Looking Cautionary Statements)

During today's call, we will also be referring to certain non-GAAP financial measures. Please see the appendix for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. After Jon and Bob have finished their formal remarks, we will then open up the call for questions. I would ask that you keep your questions to a single follow-up.

With that, I will turn the call over to Jon.

Executive
Jon DeGaynor

Thanks, Matt, and good morning, everyone. Yesterday evening, we released our results for the second quarter, in which we delivered another quarter of strong financial performance.

Let me begin on page three with a summary of the quarter. Our second quarter sales of approximately $221 million resulted in a gross margin of 30.6%, and an adjusted operating margin of 9.1%. Adjusted EPS for the quarter was $0.55, an increase of $0.13 or 33% relative to the second quarter of last year. Each of our segments contributed to our success during the quarter, delivering adjusted operating margin performance that exceeded the prior quarter.

Control Devices continued to drive operational performance resulting in gross margin expansion of 130 basis points over the prior quarter, which translated to continued up -- adjusted operating margin improvement for the segment. Electronics, with a continued focus on engineering efficiency and SG&A leverage, delivered adjusted operating margin improvements of 30 basis points over the first quarter and 220 basis points over the second quarter of last year. PST delivered adjusted operating margin expansion of approximately 160 basis points relative to the first quarter of the year.

More specifically, in Control Devices, revenue growth was offset by temporary reductions in customer production volumes in China and on certain key platforms in North America. Gross margin improved as we continued to address the production inefficiencies that we discussed on the last call. The gross margin expansion was somewhat offset by additional expenses targeted at developing the technologies and products that will deliver future growth. Overall, adjusted operating margin expanded by 20 basis points relative to the first quarter.

Electronics revenue increased by 22% quarter-over-quarter, as the global commercial vehicle and off-highway