Stoneridge Inc.
11/06/2025 | Press release | Distributed by Public on 11/06/2025 15:49
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
We are a global supplier of safe and efficient electronics systems and technologies. Our systems and products power vehicle intelligence, while enabling safety and security for global commercial, automotive, off-highway and agricultural vehicle markets.
The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes related thereto and other financial information included elsewhere herein.
Segments
We are organized by products produced and markets served. Under this structure, our operations have been reported using the following segments:
Control Devices.This segment includes results of operations that manufacture actuators, sensors, switches and connectors.
Electronics.This segment includes results of operations from the production of advanced driver information solutions, vision systems, connectivity and compliance solutions and control modules.
Stoneridge Brazil.This segment includes results of operations that design and manufacture vehicle tracking devices and monitoring services, driver information systems, vehicle security alarms and convenience accessories, telematics solutions and multimedia devices.
Third Quarter Overview
The Company had net loss of $9.4 million, or $(0.34) per diluted share, for the three months ended September 30, 2025.
Net loss for the quarter ended September 30, 2025 increased by $2.3 million, or $(0.08) per diluted share, from net loss of $7.1 million, or $(0.26) per diluted share, for the three months ended September 30, 2024. Net sales decreased by $3.6 million, or 1.7%, compared to the three months ended September 30, 2024, fromlower production volumes in our North American and European commercial vehicle markets in our Electronics segment and lower production volumes in our China automotive market in our Control Devices segment. These decreases were offset by higher European off-highway sales in our Electronics segment, OEM product sales at Stoneridge Brazil and North American and China commercial vehicle sales in our Control Devices segment. Net sales were also favorably impacted by foreign exchange translation in our Electronics segment. Gross margin as a percent of sales for the quarter ended September 30, 2025 decreased to 20.3% from 20.8% for the three months ended September 30, 2024 due togenerally lower contribution from lower sales mostly in our Electronics segment. SG&A expense increased because of higher professional services related to our ongoing review of strategic alternatives for Control Devices, as announced in the second quarter of 2025, which were mostly offset by lower D&D expense from higher customer reimbursements in our Electronics segment. In addition, non-operating foreign currency losses unfavorably impacted results for the quarter ending September 30, 2025.
Our Control Devices segment net sales decreased by 2.1% compared to the third quarter of 2024 as a result of decreases in our China and North American automotive markets, including the impact of end-of-life production for an actuator product in North America. These decreases were offset by sales increases in our North American and China commercial vehicle markets. Segment gross margin as a percentage of sales decreased due to unfavorable leverage of fixed costs from lower sales levels and higher overhead spending for tariffs.Segment operating income decreased due to lower gross margin partially offset by lower D&D spending.
Our Electronics segment net sales decreased by 4.7% compared to the third quarter of 2024 primarily due tolower production volumes in our North American and European commercial vehicle markets. These decreases were offset by higher sales in our European off-highway vehicle market and a favorable impact of foreign currency translation. Segment gross margin as a percent of sales decreased compared to the prior year third quarter from lower contribution from lower sales levels, higher business realignment costs and higher overhead spending, including tariff costs and depreciation, offset by lower direct material costs as a percentage of sales due to favorable sales mix. Operating income for the segment increased compared to the third quarter of 2024because of lower SG&A expense resulting from a royalty liability adjustment and lower D&D expense from higher customer reimbursements partially offset by lower contribution from lower sales levels.
Our Stoneridge Brazil segment net sales increased by 29.7% compared to the third quarter of 2024 primarily from higher OEM product sales. Operating income increased due to higher contribution from higher sales levels.
In the third quarter of 2025, SG&A expenses increased by $5.1 million compared to the third quarter of 2024 driven primarily by higher professional services for the previously announced review of strategic alternatives related to the Control Devices segment, higher incentive compensation and higher wages offset by a royalty liability adjustment and a 2024 non-recurring commercial settlement gain.
In the third quarter of 2025, D&D costs decreased by $3.2 million compared to the prior year third quarter from lower expense in our Electronics segment as a result of higher customer reimbursements offset by higher business realignment costs mostly in unallocated corporate.
At September 30, 2025 and December 31, 2024, we had cash and cash equivalents balances primarily held at our foreign locations of $54.0 million and $71.8 million, respectively, and we had $170.2 million and $201.6 million, respectively, in borrowings outstanding on our Credit Facility. The 2025 decrease in cash and cash equivalents was mostly caused by repayments of Credit Facility borrowings from the repatriation of cash and cash equivalents at foreign locations.
Outlook
The Company believes that focusing on products that address industry megatrends has had and will continue to have a positive effect on both our top-line growth and financial performance. Expanding on our existing product portfolio and technology platforms with advanced capabilities, applications and data services is core to our long-term strategy. We are continuing to develop safety, vehicle intelligence and connectivity based products, such as our OEM MirrorEye® programs in North America and Europe. As a result of executing our long-term strategy, we have received significant new OEM program awards in all of our segments in 2025.
In April 2025, the U.S. government announced additional tariffs on various goods imported to the U.S. and other countries announced reciprocal tariffs on goods imported to such countries, including goods used by or manufactured by the Company. Some of these additional tariffs have been implemented and others have been conditionally paused, and it is reasonably possible that new or additional tariffs will be periodically announced given the current global trade environment. We continue to monitor and evaluate the direct and indirect impacts of these tariffs as well as heightened global trade disputes.
Our business model of manufacturing by regions for the regions limits the global impact of certain trade restrictions and tariffs. Our primary tariff exposure relates to our Mexico and Brazilian operations that sell products into the U.S., most of which are exempt under the provisions of the United States-Mexico-Canada Agreement. Further, the majority of our supply components are not subject to the additional tariffs or are compliant with exceptions. We are taking and will continue to take actions to mitigate any direct and indirect impacts of new or additional tariffs, including directly or indirectly passing the additional costs through to our customers. However, these matters are changing rapidly and there is significant uncertainty as to how long and to what degree that the Company and the global transportation industry will be impacted by these new or additional tariffs, the adverse global trade environment, and the resulting economic uncertainty.
In addition to tariffs, the U.S. and foreign governments have implemented sanctions, export controls and other restrictions on trade that impact industries around the world, including the automotive industry. For example, China recently implemented restrictions on the export of rare earth materials originating in China (some of which have since been paused for one year), as well as restrictions on the export of certain semiconductors and other electronic components that are used by us and throughout the automotive industry. We are monitoring the potential disruption to automotive industry supply chains as a result of these actions.
Based on IHS Market production forecasts, the North American automotive market is expected to decrease from 15.4 million units in 2024 to 15.1 million units in 2025. In our Control Devices segment, we remain focused on drivetrain agnostic technologies to drive new business awards as the market continues to evolve. However, we expect lower sales in 2025 related to both lower automotive market production levels and the impact of lower end-of-life production for an actuator product. We expect continued volatility in our end markets as uncertainty remains related to the market's response to tariff policies. 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.
Based on the IHS Market 2025 production forecasts published in November 2025, the European and North American commercial vehicle end market volumes are forecasted to decrease 6.4% and 27.7%, respectively. In 2025 and over the long-term, we expect our Electronics' segment sales to outperform forecasted changes in production volumes due to the impact of ongoing launches of our OEM MirrorEye programs in North America and Europe. We expect continued growth in MirrorEye as we launch and ramp up new and existing OEM programs in both North America and Europe, and MirrorEye systems becomes standard on key truck platforms for existing OEM programs.
In 2025, we expect net D&D spend to decrease driven by a shift to spending for the development of next generation products, opposed to product launch related spend. As a result of reduced launch activities, we expect lower customer reimbursements and capitalization of software development costs. We continue to evaluate and optimize our engineering footprint to enhance capabilities and capacity for the most efficient return on our engineering spend, including increasing the utilization of our Stoneridge Brazil engineering resources to support Electronics segment projects.
In October 2025, the International Monetary Fund forecasted the Brazil gross domestic product to grow 2.4% in 2025, a decline from forecasted growth of 3.0% in 2024.We expect our served market channels to remain relatively stable in 2025 based on current market and economic conditions. However, we expect Stoneridge Brazil's OEM channel sales to continue to grow significantly based on the ramp-up of existing programs and new awards. As we continue to align our global engineering capabilities and footprint, we expect to further expand our Brazilian engineering center.
While we expect continued challenges across our end markets in 2025, we will continue to focus on overall operating cost improvement and operational execution to drive contribution margin and focus on inventory reduction to improve our cash position and reduce our leverage profile.
Our future effective tax rate depends on various factors, such as changes in tax laws, regulations, accounting principles and our jurisdictional mix of earnings. We monitor these factors and the impact on our effective tax rate.
Other Matters
A significant portion of our sales are outside of the United States. These sales are generated by our non-U.S. based operations, and therefore, movements in foreign currency exchange rates can have a significant effect on our results of operations, which are presented in U.S. dollars. A significant portion of our raw materials purchased by our Electronics and Stoneridge Brazil segments are denominated in U.S. dollars, and therefore movements in foreign currency exchange rates can also have a significant effect on our results of operations. In the third quarter of 2025, the U.S. Dollar weakened against the euro, Mexican peso and Swedish krona unfavorably impacting our reported results.
We regularly evaluate the performance of our businesses and their cost structures, including personnel, and make necessary changes thereto to optimize our results. We also evaluate the required skill sets of our personnel and periodically make strategic changes. Because of these actions, we incur severance and resignation related costs that we refer to as business realignment charges. Business realignment costs of $2.1 million and $0.3 million were incurred in the three months ended September 30, 2025and 2024, respectively. We incurred $1.0 million and $4.0 million in business realignment costs in the three and ninemonths ended September 30, 2025, respectively, related to operational efficiency initiatives at our Juarez facility, which we expect will result in cost savings for direct and indirect labor and a more efficient overall operating structure. We may incur additional realignment costs in the future.
In the second quarter of 2025, we announced a strategic review of the Control Devices segment with the intent to sell the segment. We have incurred incremental costs with third-party advisors of $3.7 million and $4.7 million in the three and nine months ended September 30, 2025. We expect to incur additional costs as we continue to evaluate strategic alternatives.
Because of the competitive nature of the markets we serve, we face pricing pressures from our customers in the ordinary course of business. In response to these pricing pressures we have been able to effectively manage our production costs by the combination of lowering certain costs and limiting the increase of others, the net impact of which to date has not been material. However, if we are unable to effectively manage production costs in the future to mitigate future pricing pressures, our results of operations would be adversely affected.
Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024
Condensed consolidated statements of operations as a percentage of net sales are presented in the following table (in thousands):
| Three months ended September 30, | 2025 | 2024 |
Dollar increase (decrease) |
|||||||||||||||||||||||||||||
| Net sales | $ | 210,267 | 100.0 | % | $ | 213,831 | 100.0 | % | $ | (3,564) | ||||||||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||||||||||||||
| Cost of goods sold | 167,498 | 79.7 | 169,340 | 79.2 | (1,842) | |||||||||||||||||||||||||||
| Selling, general and administrative | 31,594 | 15.0 | 26,533 | 12.4 | 5,061 | |||||||||||||||||||||||||||
| Design and development | 14,454 | 6.9 | 17,643 | 8.3 | (3,189) | |||||||||||||||||||||||||||
|
Operating (loss) income
|
(3,279) | (1.6) | 315 | 0.1 | (3,594) | |||||||||||||||||||||||||||
| Interest expense, net | 3,801 | 1.8 | 3,604 | 1.7 | 197 | |||||||||||||||||||||||||||
|
Equity in loss of investee
|
220 | 0.1 | 752 | 0.4 | (532) | |||||||||||||||||||||||||||
|
Other expense (income), net
|
2,414 | 1.1 | (384) | (0.2) | 2,798 | |||||||||||||||||||||||||||
|
Loss before income taxes
|
(9,714) | (4.6) | (3,657) | (1.7) | (6,057) | |||||||||||||||||||||||||||
|
(Benefit) provision for income taxes
|
(343) | (0.2) | 3,413 | 1.6 | (3,756) | |||||||||||||||||||||||||||
|
Net loss
|
$ | (9,371) | (4.5) | % | $ | (7,070) | (3.3) | % | $ | (2,301) | ||||||||||||||||||||||
Net Sales. Net sales for our reportable segments, excluding inter-segment sales, are summarized in the following table (in thousands):
| Three months ended September 30, | 2025 | 2024 |
Dollar
increase (decrease)
|
Percent
increase (decrease)
|
||||||||||||||||||||||||||||||||||
| Control Devices | $ | 71,629 | 34.1 | % | $ | 73,129 | 34.2 | % | $ | (1,500) | (2.1) | % | ||||||||||||||||||||||||||
| Electronics | 121,496 | 57.7 | 127,483 | 59.6 | (5,987) | (4.7) | % | |||||||||||||||||||||||||||||||
| Stoneridge Brazil | 17,142 | 8.2 | 13,219 | 6.2 | 3,923 | 29.7 | % | |||||||||||||||||||||||||||||||
| Total net sales | $ | 210,267 | 100.0 | % | $ | 213,831 | 100.0 | % | $ | (3,564) | (1.7) | % | ||||||||||||||||||||||||||
Our Control Devices segment net sales decreased $1.5 million because of decreases in our China and North American automotive markets of $2.1 million and $0.8 million, respectively, including the impact of end-of-life production for an actuator product in North America. These decreases were offset by increases in our North American and China commercial vehicle markets of $0.7 million and $0.3 million, respectively.
Our Electronics segment net sales decreased $6.0 million because of lower customer production volumes in our North American and European commercial vehicle markets of $14.5 million and $2.6 million respectively. These decreases were offset by an increase in our European off-highway vehicle market of $5.3 million.Net sales in the third quarter of 2025 were favorably impacted by euro and Swedish krona foreign currency translation of $5.7 million compared to the prior year quarter.
Our Stoneridge Brazil segment net sales increased $3.9 million from higher OEM product sales.
Net sales by geographic location are summarized in the following table (in thousands):
| Three months ended September 30, | 2025 | 2024 |
Dollar
increase (decrease)
|
Percent
increase (decrease)
|
||||||||||||||||||||||||||||||||||
| North America | $ | 96,992 | 46.1 | % | $ | 109,395 | 51.2 | % | $ | (12,403) | (11.3) | % | ||||||||||||||||||||||||||
| South America | 17,142 | 8.2 | 13,219 | 6.2 | 3,923 | 29.7 | % | |||||||||||||||||||||||||||||||
| Europe and Other | 96,133 | 45.7 | 91,217 | 42.7 | 4,916 | 5.4 | % | |||||||||||||||||||||||||||||||
| Total net sales | $ | 210,267 | 100.0 | % | $ | 213,831 | 100.0 | % | $ | (3,564) | (1.7) | % | ||||||||||||||||||||||||||
The decrease in North American net sales was mostly attributable to a decrease in sales volume in our commercial vehicle market of $13.8 million.
The increase in net sales in South America was from higher OEM product sales of $4.4 million.
The increase in net sales in Europe and Other was due to increases in volumes in our European off-highway and China commercial vehicle markets of $5.3 million and $0.5 million, respectively, offset by decreases in our European commercial vehicle and China automotive markets of $2.6 million and $2.1 million, respectively. Net sales were also impacted by a favorable foreign currency translation of $5.7 million.
Cost of Goods Sold and Gross Margin.Cost of goods sold decreased compared to the third quarter of 2024 and our gross margin decreased to 20.3% in the third quarter of 2025 from 20.8% in the third quarter of 2024. Our material cost as a percentage of net sales decreased to 55.1% in the third quarter of 2025 from 57.2%in the third quarter of 2024. The decrease in material cost percentage was dueto favorable sales mix mostly in our Electronics segment. Overhead as a percentage of net sales increased from 17.3% in the third quarter of 2024 to 19.7% in the third quarter of 2025 due to unfavorable leverage of fixed costs, higher tariffs, depreciation and business realignment costs in our Electronics and Control Devices segments.
Our Control Devices segment gross margin decreased because of lower contribution from lower sales levels and higher overhead costs for tariffs.
Our Electronics segment gross margin as a percent of sales decreased compared to the prior year third quarter from lower contribution from lower sales levels and higher overhead spending including tariff costs, depreciation and business realignment offset by lower direct material costs as a percentage of sales from favorable sales mix.
Our Stoneridge Brazil segment gross margin as a percent of sales increased from the favorable leverage of fixed costs due to higher OEM product sales levels.
Selling, General and Administrative. SG&A expenses increased by $5.1 million primarily because of higher professional services for review of strategic alternatives, higher incentive compensation and higher wages which were partially offset by a non-recurring royalty liability adjustment and a 2024 non-recurring commercial settlement gain.
Design and Development. D&D costs decreased by $3.2 million compared to the third quarter of 2024 from lower expense in our Electronics segment as a result of higher customer reimbursements offset by higher business realignment costs mostly in unallocated corporate of $0.6 million.
Operating (Loss) Income.Operating (loss) income by segment is summarized in the following table (in thousands):
| Three months ended September 30, | 2025 | 2024 |
Dollar increase (decrease) |
Percent increase (decrease) |
||||||||||||||||||||||
| Control Devices | $ | 1,198 | $ | 2,131 | $ | (933) | (43.8) | % | ||||||||||||||||||
| Electronics | 5,871 | 3,514 | 2,357 | 67.1 | ||||||||||||||||||||||
| Stoneridge Brazil | 2,684 | 717 | 1,967 | 274.3 | ||||||||||||||||||||||
| Unallocated corporate | (13,032) | (6,047) | (6,985) | (115.5) | ||||||||||||||||||||||
|
Operating (loss) income
|
$ | (3,279) | $ | 315 | $ | (3,594) | (1141.0) | % | ||||||||||||||||||
Our Control Devices segment operating income decreased because of lower contribution from lower sales levels and higher overhead costs for tariffs offset by lower D&D spending.
Our Electronics segment operating income increased because of lower D&D expense from higher customer reimbursements and lower SG&A expense from a royalty liability adjustment partially offset by lower contribution from lower sales levels.
Our Stoneridge Brazil segment operating income increased due tohigher contribution from higher OEM sales levels.
Our unallocated corporate operating loss increased from higher SG&A related to higher professional services for review of strategic alternatives and higher incentive compensation as well as higher D&D related to higher business realignment costs and professional services.
Operating (loss) income by geographic location is summarized in the following table (in thousands):
| Three months ended September 30, | 2025 | 2024 |
Dollar
increase (decrease)
|
Percent
increase (decrease)
|
||||||||||||||||||||||
| North America | $ | (14,377) | $ | (5,130) | $ | (9,247) | (180.3) | % | ||||||||||||||||||
| South America | 2,684 | 717 | 1,967 | (274.3) | ||||||||||||||||||||||
| Europe and Other | 8,414 | 4,728 | 3,686 | 78.0 | ||||||||||||||||||||||
|
Operating (loss) income
|
$ | (3,279) | $ | 315 | $ | (3,594) | (1141.0) | % | ||||||||||||||||||
Our North American operating loss increased due to lower contribution from lower sales levels, higher SG&A for professional services and incentive compensation and D&D spending. Operating income in South America increased due tohigher contribution from higher OEM sales levels. Our operating results in Europe and Other increased because of lower D&D expense from higher customer reimbursements, lower SG&A expense from a royalty liability adjustment partially offset by lower gross margin.
Interest Expense, net.Interest expense, net was $3.8 million and $3.6 million for the three months ended September 30, 2025 and 2024, respectively. The increase for the quarter ended September 30, 2025, was the result of higher Credit Facility interest rates being offset by lower outstanding Credit Facility borrowings.
Equity in Loss of Investee.Equity loss for Autotech Fund II was $0.2 million and $0.8 million for the three months ended September 30, 2025 and 2024, respectively.
Other Expense (Income), net. We record certain foreign currency transaction (gains) losses as a component of other expense (income), net on the condensed consolidated statement of operations. Other expense, net of $2.4 million increased by $2.8 million compared to the third quarter of 2024 due to foreign currency transaction losses in our Electronics and Control Devices segments from the weakening of the U.S. dollar.
(Benefit) Provision for Income Taxes. For the three months ended September 30, 2025, income tax benefit of $0.3 million was attributable to the mix of earnings among tax jurisdictions and tax credits and incentives offset by U.S. taxes on foreign earnings. The effective tax rate of 3.5% varies from the statutory tax rate primarily due to tax credits and incentives offset by U.S. taxes on foreign earnings.
For the three months ended September 30, 2024, income tax expense of $3.4 million was attributable to the mix of earnings among tax jurisdictions and tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions, offset by U.S. taxes on foreign earnings. The effective tax rate of (93.3)% varies from the statutory tax rate primarily due to the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions, offset by U.S. taxes on foreign earnings.
Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024
Condensed consolidated statements of operations as a percentage of net sales are presented in the following table (in thousands):
| Nine months ended September 30, | 2025 | 2024 |
Dollar increase / (decrease) |
|||||||||||||||||||||||||||||
| Net sales | $ | 656,109 | 100.0 | % | $ | 690,047 | 100.0 | % | $ | (33,938) | ||||||||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||||||||||||||
| Cost of goods sold | 518,105 | 79.0 | 543,459 | 78.8 | (25,354) | |||||||||||||||||||||||||||
| Selling, general and administrative | 96,125 | 14.7 | 88,832 | 12.9 | 7,293 | |||||||||||||||||||||||||||
| Design and development | 50,984 | 7.8 | 53,703 | 7.8 | (2,719) | |||||||||||||||||||||||||||
|
Operating (loss) income
|
(9,105) | (1.5) | 4,053 | 0.5 | (13,158) | |||||||||||||||||||||||||||
| Interest expense, net | 10,102 | 1.5 | 11,039 | 1.6 | (937) | |||||||||||||||||||||||||||
|
Equity in (earnings) loss of investee
|
(124) | - | 1,081 | 0.2 | (1,205) | |||||||||||||||||||||||||||
|
Other expense (income), net
|
5,378 | 0.9 | (644) | - | 6,022 | |||||||||||||||||||||||||||
| Loss before income taxes | (24,461) | (3.9) | (7,423) | (1.3) | (17,038) | |||||||||||||||||||||||||||
|
Provision for income taxes
|
1,465 | 0.2 | 2,987 | 0.4 | (1,522) | |||||||||||||||||||||||||||
| Net loss | $ | (25,926) | (4.1) | % | $ | (10,410) | (1.7) | % | $ | (15,516) | ||||||||||||||||||||||
Net Sales. Net sales for our reportable segments, excluding inter-segment sales, are summarized in the following table (in thousands):
| Nine months ended September 30, | 2025 | 2024 |
Dollar increase
(decrease)
|
Percent increase
(decrease)
|
||||||||||||||||||||||||||||||||||
| Control Devices | $ | 210,873 | 32.1 | % | $ | 230,186 | 33.3 | % | $ | (19,313) | (8.4) | % | ||||||||||||||||||||||||||
| Electronics | 398,960 | 60.8 | 422,777 | 61.3 | (23,817) | (5.6) | % | |||||||||||||||||||||||||||||||
| Stoneridge Brazil | 46,276 | 7.1 | 37,084 | 5.4 | 9,192 | 24.8 | % | |||||||||||||||||||||||||||||||
| Total net sales | $ | 656,109 | 100.0 | % | $ | 690,047 | 100.0 | % | $ | (33,938) | (4.9) | % | ||||||||||||||||||||||||||
Our Control Devices segment net sales decreased $19.3 million because of decreases in our North American automotive market of $15.3 million including the impact of end-of-life production for an actuator product as well as a decrease in our China automotive market of $3.8 million.
Our Electronics segment net sales decreased $23.8 million because of lower customer production volumes in our North American and European commercial vehicle markets of $30.4 million and $6.2 million, respectively, partially mitigated by higher MirrorEye sales, including the ramp-up of a recently launched European OEM program and higher aftermarket sales for our next generation tachograph.We also experienced lower sales volumes in our North American off-highway vehicle market of $2.4 million. These decreases were partially offset by an increase in our European off-highway market of $5.6 million. Net sales in 2025 were favorably impacted by euro and Swedish krona foreign currency translation of $9.9 million compared to the prior year.
Our Stoneridge Brazil segment net sales increased from higher OEM product sales of $12.6 million partially offset by lower original equipment services sales of $0.8 million and unfavorable foreign currency translation of $2.5 million.
Net sales by geographic location are summarized in the following table (in thousands):
| Nine months ended September 30, | 2025 | 2024 |
Dollar increase
(decrease)
|
Percent increase
(decrease)
|
||||||||||||||||||||||||||||||||||
| North America | $ | 302,634 | 46.1 | % | $ | 349,025 | 50.6 | % | $ | (46,391) | (13.3) | % | ||||||||||||||||||||||||||
| South America | 46,276 | 7.1 | 37,084 | 5.4 | 9,192 | 24.8 | % | |||||||||||||||||||||||||||||||
| Europe and Other | 307,199 | 46.9 | 303,938 | 44.0 | 3,261 | 1.1 | % | |||||||||||||||||||||||||||||||
| Total net sales | $ | 656,109 | 100.0 | % | $ | 690,047 | 100.0 | % | $ | (33,938) | (4.9) | % | ||||||||||||||||||||||||||
The decrease in North American net sales was mostly attributable to a decrease in customer production volumes in our commercial vehicle, automotive and off-highway markets of $28.5 million, $15.3 million and $4.1 million, respectively. The decrease in our North American automotive market was primarily caused by lower customer volumes and the impact of end-of-life production of an actuator product.
The increase in net sales in South America was from higher OEM product sales of $12.6 million partially offset by lower OE services sales of $0.8 million and unfavorable foreign currency translation of $2.5 million.
The increase in net sales in Europe and Other was due to increases in customer production volumes in our European off-highway and China commercial vehicle markets of $5.6 million and $0.5 million, respectively, offset by decreases in our European commercial vehicle and China automotive markets of $6.2 million and $3.8 million, respectively. Net sales were also impacted by a favorable foreign currency translation of $9.8 million.
Cost of Goods Sold and Gross Margin.Cost of goods sold decreased compared to the nine months ended September 30, 2024 and our gross margin decreased to 21.0% in 2025 from 21.2% in the first nine months 2024. Our material cost as a percentage of net sales decreased from 57.3%in the first nine months of 2024 to 56.2% in the first nine months of 2025. The decrease in material cost percentage was due to lower material costs from favorable foreign exchange related variances. Overhead as a percentage of net sales was 18.0% and 16.7% for the first nine months of 2025 and 2024, respectively. The increase in overhead as a percentage of sales was attributable to unfavorable fixed cost leverage from lower sales levels, higher tariffs and higher business realignment costs of $2.2 million.
Our Control Devices segment gross margin decreased primarily because of lower contribution from lower sales and higher business realignment costs of $0.5 million.
Our Electronics segment gross margin decreased because of lower contribution from lower sales and higher overhead spending, including higher tariffs and higher business realignment costs of $1.7 million.
Our Stoneridge Brazil segment gross margin as a percent of sales decreased due to the unfavorable sales mix impact of higher OEM product sales offset by higher contribution from higher sales levels.
Selling, General and Administrative. SG&A expenses increased by $7.3 million because of higher professional services for review of strategic alternatives, business realignment costs of $1.4 million, incentive compensation and wages which partially offset by a non-recurring royalty liability adjustment.
Design and Development. D&D costs decreased by $2.7 million from lower spending in our Control Devices segment for wage and fringe costs. D&D spending in our Electronics segment was consistent with the prior year as lower spending on wages and fringe was offset by lower capitalized software development costs and customer reimbursements.
Operating (Loss) Income. Operating (loss) income by segment is summarized in the following table (in thousands):
| Nine Months Ended September 30, 2025 |
2025
|
2024
|
Dollar
increase
(decrease)
|
Percent
increase
(decrease)
|
||||||||||||||||||||||
| Control Devices | $ | 4,929 | $ | 8,020 | $ | (3,091) | (38.5) | % | ||||||||||||||||||
| Electronics | 14,115 | 20,434 | (6,319) | (30.9) | % | |||||||||||||||||||||
| Stoneridge Brazil | 4,238 | 880 | 3,358 | 381.6 | % | |||||||||||||||||||||
| Unallocated corporate | (32,387) | (25,281) | (7,106) | (28.1) | % | |||||||||||||||||||||
|
Operating (loss) income
|
$ | (9,105) | $ | 4,053 | $ | (13,158) | 324.6 | % | ||||||||||||||||||
Our Control Devices segment operating income decreased because of lower contribution from lower sales levels, higher business realignment costs of $0.9 million and a non-recurring commercial settlement gain recognized in 2024 offset by lower D&D spending.
Our Electronics segment operating income decreased primarily because of lower contribution from lower sales levels and higher tariffs and higher business realignment costs of $1.7 million.
Our Stoneridge Brazil segment operating income increased due tohigher Stoneridge Brazil OEM product sales levels.
Our unallocated corporate operating loss increased due to higher SG&A from higher professional services for review of strategic alternatives. Additionally, business realignment costs increased $1.9 million.
Operating (loss) income by geographic location is summarized in the following table (in thousands):
| Nine Months Ended September 30, 2025 |
2025
|
2024
|
Dollar increase (decrease) |
Percent increase (decrease) |
||||||||||||||||||||||
| North America | $ | (36,826) | $ | (17,895) | $ | (18,931) | (105.8) | % | ||||||||||||||||||
| South America | $ | 4,238 | 880 | 3,358 | 381.6 | % | ||||||||||||||||||||
| Europe and Other | $ | 23,483 | 21,068 | 2,415 | 11.5 | % | ||||||||||||||||||||
|
Operating (loss) income
|
$ | (9,105) | $ | 4,053 | $ | (13,158) | 324.6 | % | ||||||||||||||||||
Our North American operating loss increased due to lower contribution from lower sales levels and higher business realignment costs offsetting lower D&D spending. Operating income in South America increased due tohigher Stoneridge Brazil OEM product sales levels. Our operating results in Europe and Other increased because of higher contribution from higher sales levels and lower material costs including favorable foreign exchange related variances offset by higher D&D spending as a result of lower customer reimbursements.
Interest Expense, net.Interest expense, net was $10.1 million and $11.0 million for the nine months ended September 30, 2025 and 2024, respectively. The decrease was the result of lower outstanding Credit Facility borrowings and interest rates.
Equity in (Earnings) Loss of Investee.Equity (earnings) loss for Autotech Fund II was $(0.1) million and $1.1 million for the nine months ended September 30, 2025 and 2024, respectively.
Other Expense (Income), net. We record certain foreign currency transaction (gains) losses as a component of other expense (income), net on the condensed consolidated statement of operations. Other expense, net of $5.4 million increased by $6.0 million compared to the first nine months of 2024 due to the impact of unfavorable foreign currency movements in our Electronics and Control Devices segments from the weakening of the U.S. dollar.
Provision for Income Taxes.For the nine months ended September 30, 2025, income tax expense of $1.5 million was attributable to the mix of earnings among tax jurisdictions and tax credits and incentives offset by U.S. taxes on foreign earnings. The effective tax rate of (6.0%) varies from the statutory tax rate primarily due to tax credits and incentives offset by U.S. taxes on foreign earnings.
For the nine months ended September 30, 2024, income tax expense of $3.0 million was attributable to the mix of earnings among tax jurisdictions and tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions, offset by U.S. taxes on foreign earnings. The effective tax rate of (40.2)% varies from the statutory tax rate primarily due to the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions, offset by U.S. taxes on foreign earnings.
Liquidity and Capital Resources
Summary of Cash Flows:
| Nine Months Ended September 30, 2025 | 2025 | 2024 | ||||||||||||
| Net cash provided by (used for): | ||||||||||||||
| Operating activities | $ | 25,192 | $ | 28,517 | ||||||||||
| Investing activities | (15,587) | (18,997) | ||||||||||||
| Financing activities | (34,640) | 4,133 | ||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | 7,191 | (356) | ||||||||||||
| Net change in cash and cash equivalents | $ | (17,844) | $ | 13,297 | ||||||||||
Cash provided by operating activities decreased compared to 2024 because of a higher net loss which was partially offset by cash provided from lower working capital levels primarily inventory and accounts payable. Cash used by receivables was unfavorable compared to 2024, however collection terms have remained consistent.
Net cash used for investing activities decreased compared to 2024due to lower capitalized software development costs and capital expenditures.
Net cash used for financing activities increased compared to 2024 due to an increase in Credit Facility repayments from the repatriation of $43.8 million in cash held at foreign locations, net of borrowings.
As outlined in Note 7 to our condensed consolidated financial statements, the Credit Facility permits borrowing up to a maximum level of $275.0 million. This variable rate facility has an accordion feature which allows the Company to increase its availability by up to $150.0 million upon the satisfaction of certain conditions and lender consent through its expiration in November 2026. The Credit Facility contains certain financial covenants that require the Company to maintain less than a maximum leverage ratio and more than a minimum interest coverage ratio. The Credit Facility also contains affirmative and negative covenants and events of default that are customary for credit arrangements of this type including covenants that place restrictions and/or limitations on the Company's ability to borrow money, make capital expenditures and pay dividends. The Credit Facility had an outstanding balance of $170.2 million at September 30, 2025.
On February 26, 2025, the Company entered into Amendment No. 1 to the Fifth Amended and Restated Credit Agreement and Waiver ("Amendment No. 1"). Amendment No. 1 provides for certain covenant relief and restrictions during the "Covenant Relief Period" (the period ending on the date that the Company delivers a compliance certificate for the quarter ending December 31, 2025). During the Covenant Relief Period:
•the maximum leverage ratio of 3.50 was increased to 6.00 for the quarter ended March 31, 2025, 5.50 for the quarter ended June 30, 2025, 4.50 for the quarter ended September 30, 2025 and 3.50 for the quarter ended December 31, 2025;
•the minimum interest coverage ratio of 3.50 was waived for the quarter ended December 31, 2024 and was reduced to 2.00 for the quarters ended March 31 and June 30, 2025, and 2.50 and 3.50 for the quarter ended September 30, 2025 and December 31, 2025, respectively;
•the Company's aggregate amount of cash and cash equivalents, defined as 100% of North American and 65% of foreign cash balances, cannot exceed $70.0 million;
•the sale of significant assets (as defined) will require repayment in the amount of any net cash proceeds received and result in the reduction of the Credit Facility commitment, at the lesser of $100.0 million or the net cash proceeds;
•there were certain restrictions on Restricted Payments (as defined); and
•a Permitted Acquisition (as defined) could not be consummated unless otherwise approved in writing by the required lenders.
Amendment No. 1 added an additional level to the leverage ratio based pricing grid, through maturity, when the leverage ratio is greater than 3.50.
On November 5, 2025, the Company entered into Amendment No. 2 to the Fifth Amended and Restated Credit Agreement and Consent Agreement ("Amendment No. 2"). Amendment No. 2 amends the Credit Facility and provides for certain covenant relief and restrictions through the Credit Facility's termination date of November 2, 2026. Amendment No. 2 supersedes certain terms of the Credit Facility and Amendment No. 1 beginning November 5, 2025 and ending at the Credit Facility's termination date of November 2, 2026. Amendment No. 2 amends certain Credit Facility terms and provides covenant relief as follows:
•borrowing capacity is reduced from $275.0 million to $225.0 million;
•the sale of the Control Devices business (as defined) is a permitted transaction and upon notice will result in the reduction of the Credit Facility commitment, at the lesser of $50.0 million or the net cash proceeds of this transaction;
•the current minimum interest coverage ratio of 2.5 was extended through the quarter ending March 31, 2026 and increased to 3.5 for the quarter ended June 30, 2026 and thereafter;
◦if the Control Devices business sale is consummated, the minimum interest coverage ratio will increase to 3.5 as of the last day of the first full quarter ending after the sale and thereafter; and
•the maximum leverage ratio of 4.5 for the quarter ended September 30, 2025 and 3.5 for the quarter ended December 31, 2025 and thereafter remains unchanged.
Our Credit Facility matures on November 2, 2026, which is within twelve months of the issuance of the accompanying unaudited condensed consolidated financial statements, and will become current in the fourth quarter of 2025. The Company expects to refinance its Credit Facility. While there can be no assurance that the Company will refinance the current Credit Facility, the Company anticipates that the refinancing will occur prior to the issuance of the financial statements for the year ending December 31, 2025. To the extent the Company is not able to refinance its Credit Facility prior to the issuance of the financial statements for the year ended December 31, 2025, our independent auditors may issue an audit opinion including an explanatory paragraph that indicates there is substantial doubt about our ability to continue as a going concern which would breach a covenant under our Credit Facility which, unless cured, would constitute an event of default thereunder. In such a case, the Company would not expect that it would have sufficient liquidity to repay all of its outstanding indebtedness at such time.
The Company was in compliance with all covenants at September 30, 2025 and December 31, 2024. The Company has not experienced a violation that would limit the Company's ability to borrow under the Credit Facility, as amended, and does not expect that the covenants under it will restrict the Company's financing flexibility. However, it is possible that future borrowing flexibility under the Credit Facility may be limited as a result of lower than expected financial performance due to the adverse impact of significantly lower global demand in our markets and challenging macroeconomic conditions. The Company expects to make additional repayments on the Credit Facility when cash exceeds the amount needed for operations and to remain in compliance with all covenants.
The Company's wholly owned subsidiary located in Stockholm, Sweden, has an overdraft credit line that allows overdrafts on the subsidiary's bank account up to a daily maximum level of 20.0 million Swedish krona, or $2.1 million and $1.8 million at September 30, 2025 and December 31, 2024, respectively. At September 30, 2025 there was 8.9 million Swedish krona, or $0.9 million outstanding on this overdraft credit line. At December 31, 2024 there were no borrowings outstanding on this overdraft credit line. During the nine months ended September 30, 2025, the subsidiary borrowed 153.8 million Swedish krona, or $16.4 million and repaid 144.9 million Swedish krona, or $15.4 million. The Stockholm subsidiary has pledged certain of its assets as collateral in order to obtain a guarantee of certain of the Stockholm subsidiary's obligations to third parties.
The Company's wholly owned subsidiary located in Suzhou, China, has lines of credit that allow up to a maximum borrowing level of 50.0 million Chinese yuan, or $7.0 million at September 30, 2025 and 20,000 Chinese yuan, or $2.7 million at December 31, 2024. At September 30, 2025 and December 31, 2024 there were no borrowings outstanding on the Suzhou credit lines. In addition, the Suzhou subsidiary has a bank acceptance draft line of credit which facilitates the extension of trade payable payment terms by 180 days. The bank acceptance draft line of credit allows up to a maximum borrowing level of 30.0 million Chinese yuan, or $4.2 million at September 30, 2025. At September 30, 2025 there were no borrowings outstanding on the bank acceptance draft line of credit.
In December 2018, the Company entered into an agreement to make a $10.0 million investment in Autotech Fund II managed by Autotech, a venture capital firm focused on ground transportation technology. The Company's $10.0 million investment in the Autotech Fund II will be contributed over the expected ten-year life of the fund. As of September 30, 2025, the Company's cumulative investment in the Autotech Fund II was $9.2 million. The Company contributed $0.3 million and $0.3 million to Autotech Fund II during the nine months ended September 30, 2025 and September 30, 2024, respectively.
Our future results could also be adversely affected by unfavorable changes in foreign currency exchange rates. We have significant foreign denominated transaction exposure in certain locations, especially in Brazil, Argentina, Mexico, Sweden, Estonia, the Netherlands, United Kingdom and China. Currently, we have foreign currency forward contracts in place for Mexican pesos. See Note 5 to the condensed consolidated financial statements for additional details. Our future results could also be unfavorably affected by increased commodity prices and material cost inflation as these fluctuations impact the cost of our raw material purchases.
At September 30, 2025, we had a cash and cash equivalents balance of approximately $54.0 million, of which 86.7% was held in foreign locations. The Company has approximately $104.8 million of undrawn commitments under the Credit Facility as of September 30, 2025, which results in total undrawn commitments and cash balances of more than $158.8 million. However, it is possible that future borrowing flexibility under our Credit Facility may be limited as a result of our financial performance.
The principal sources of liquidity available for our future cash requirements are expected to be (i) cash flows from operations, (ii) cash and cash equivalents on-hand and (iii) borrowings from our Credit Facility. We believe that our overall liquidity and operating cash flow will be sufficient to meet our anticipated cash requirements for capital expenditures, working capital and other commitments during the next twelve months. While uncertainty surrounding the current economic environment could adversely impact our business, based on our current financial position, we believe it is unlikely that any such effects would preclude us from maintaining sufficient liquidity.
Commitments and Contingencies
See Note 10 to the condensed consolidated financial statements for disclosures of the Company's commitments and contingencies.
Seasonality
Our Control Devices and Electronics segments are moderately seasonal, impacted by mid-year and year-end shutdowns and the ramp-up of new model production at key customers. In addition, the demand for our Stoneridge Brazil segment consumer products is generally higher in the second half of the year.
Critical Accounting Policies and Estimates
The Company's critical accounting policies, which include management's best estimates and judgments, are included in Part II, Item 7, to the consolidated financial statements of the Company's 2024 Form 10-K. These accounting policies are considered critical as disclosed in the Critical Accounting Policies and Estimates section of Management's Discussion and Analysis of the Company's 2024 Form 10-Kbecause of the potential for a significant impact on the financial statements due to the inherent uncertainty in such estimates. There have been no material changes in our significant accounting policies or critical accounting estimates during the third quarter of 2025.
Information regarding other significant accounting policies is included in Note 2 to our consolidated financial statements in Item 8 of Part II of the Company's 2024 Form 10-K.
International Presence
By operating internationally, we are affected by foreign currency exchange rates and the economic conditions of certain countries. Furthermore, given the current economic climate and fluctuations in certain commodity prices, we believe that an increase in such items could significantly affect our profitability. See Note 5 to the condensed consolidated financial statements for additional details on the Company's foreign currency exchange rate risks.
Stoneridge Inc. published this content on November 06, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 06, 2025 at 21:49 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]