SRI 10-K & 10-Q changes, risk factors and insider trading
Stoneridge Inc. · NYSE · Motor Vehicle Parts & Accessories · CIK 1043337 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Military conflicts and geopolitical instability in the Middle East, including U.S. and Israeli military actions against Iran, could disrupt global markets and adversely affect our business.”
Removed heading “Public health crises and other global health pandemics, epidemics or disease outbreaks could adversely impact our business, results of operation and financial condition.”
Removed heading “If we do not respond appropriately, the evolution of the global transportation industry toward electrification and shared mobility could adversely affect our business.”
Largest changes
“Armed conflicts and heightened geopolitical tensions in the Middle East, including ongoing U.S. and Israeli military operations against Iran, pose risks to the global economy and to our business, even though we do not have direct operations in the region. …”see in full comparison
“Military conflicts and geopolitical instability in the Middle East, including U.S. and Israeli military actions against Iran, could disrupt global markets and adversely affect our business.”see in full comparison
“Public health crises and other global health pandemics, epidemics or disease outbreaks could adversely impact our business, results of operation and financial condition.”see in full comparison
“The global transportation industry is increasingly focused on the development of more fuel-efficient solutions to meet demands from consumers and governments worldwide to address climate change and an increased desire for environmentally sustainable solutions. The impacts of these changes on us are uncertain and could ultimately prove dramatic. If we do not respond appropriately, the evolution toward electrification and other energy sources could adversely affect our business. …”see in full comparison
“If we do not respond appropriately, the evolution of the global transportation industry toward electrification and shared mobility could adversely affect our business.”see in full comparison
“A significant public health crisis, pandemic or disease outbreak could adversely impact our business as well as those of our suppliers and customers. For example, the COVID-19 pandemic disrupted the global vehicle industry and customer sales, production volumes, supply of components critical to our business, and purchases of commercial, automotive, off-highway and agricultural vehicles by end-consumers. Any future significant public health crisis could adversely impact the global economy, our industry and the overall demand for our products. …”see in full comparison
Full comparison: every changed paragraph (25)
We are dependent on several principal customers for a significant percentage of our net sales. In 2024,2025, our top five customers were Volvo, PACCAR, Traton, Volvo, Daimler Truck and Ford, which comprised 16%,18%, 13%,15%, 13%,11%, 7% and 7%6% of our net sales, respectively. In 2024,2025, our top ten customers accounted for 66%69% of our net sales. The loss of any significant portion of our sales to these customers would have a material adverse effect on our results of operations and financial condition. In addition, we have significant receivable balances related to these customers and other major customers that would be at risk in the event of their insolvency.
Public health crises and other global health pandemics, epidemics or disease outbreaks could adversely impact our business, results of operation and financial condition.
A significant public health crisis, pandemic or disease outbreak could adversely impact our business as well as those of our suppliers and customers. For example, the COVID-19 pandemic disrupted the global vehicle industry and customer sales, production volumes, supply of components critical to our business, and purchases of commercial, automotive, off-highway and agricultural vehicles by end-consumers. Any future significant public health crisis could adversely impact the global economy, our industry and the overall demand for our products. In addition, preventative or reactionary measures taken by governmental authorities may disrupt the ability of our employees, suppliers and other business partners to perform their respective functions and obligations relative to the conduct of our business. Our ability to predict and respond to future changes resulting from potential health crises is uncertain as are the ultimate potential impacts on our business. The extent to which a pandemic or similar significant health crises will impact our business in the future is uncertain. In addition, to the extent such significant health crises may adversely affect our business, financial condition, results of operations and cash flows, they may also have the effect of heightening many of the other risk factors in this section.
As of December 31, 2024,2025, there was $201.6$180.9 million in borrowings outstanding on our Fifth Amended and Restated Credit AgreementAgreement, as amended (the “Credit Facility”). In addition, we are permitted under our Credit Facility to incur additional debt, subject to specified limitations. Our leverage and the terms of our indebtedness may have important consequences including the following:
On March 6, 2026, the Company entered into Amendment No. 3 to the Fifth Amended and Restated Credit Agreement (“Amendment No. 3”). Amendment No. 3 amends and restates the Credit Facility in its entirety beginning December 31, 2025 and ending at the Credit Facility's amended termination date of July 1, 2027. Amendment No. 3 also provides for certain covenant relief and adjustments to terms and conditions as follows:
•expiration date of the Credit Facility is extended from November 2, 2026 to July 1, 2027;
On February 26, 2025, we entered into Amendment No. 1 to the Fifth Amended and Restated Credit Agreement and Waiver ("Amendment No. 1"). Amendment No. 1 provides for certain financial covenant relief and additional covenant 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 maximumcurrent leverageminimum interest coverage ratio of 3.502.50 waswill increasedbe reduced to 6.001.60 for the quarter ended March 31, 2025,2026, 5.501.70 for the quarter ended June 30, 2025,2026, 4.501.75 for the quarter ended September 30, 20252026 and 3.502.50 for the quarter ended December 31, 20252026 and thereafter;
•the minimummaximum interest coverageleverage ratio of 3.50 was waivedincreased to 3.75 for the quarter ended December 31, 20242025, and was reducedincreases to 2.006.25 for the quartersquarter ended March 3131, and2026, 6.75 for the quarter ended June 30, 2025,2026, and 2.50 and 3.506.00 for the quarter ended September 30, 20252026 and 4.00 for the quarter ended December 31, 2025,2026 respectivelyand thereafter;
•on December 31, 2026, the current borrowing capacity of $175.0 million will be reduced to the lesser of $157.5 million or the then current Credit Facility commitment;
•modifications to Consolidated EBITDA (as defined); and
•modifications and additions to affirmative covenants.
•the Company’s aggregate amount of cash and cash equivalents (as defined) 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;
•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.
We require substantial amounts of raw materials, components and other supplies, and substantially all such materials we require are purchased from outside sources. The availability and prices of raw materials, components and other supplies may be subject to curtailment or change due to, among other things, new laws or regulations, suppliers’ allocations to other purchasers and interruptions in production by suppliers, weather emergencies, natural disasters, commercial disputes, acts of terrorism or war, changes in exchange rates and worldwide price levels. If demand for raw materials we require increases, we may have difficulties obtaining adequate raw materials and other supplies from our suppliers to satisfy our customers. In the past, we have experienced difficulty obtaining adequate supplies of semiconductors, memory chips and other electronic components. In addition, there have been challenges at times in obtaining timely supply of nylon and resins for our Control Devices segment. If we cannot obtain adequate amounts of raw materials, components and other supplies, or if we experience an increase in the price of raw materials, components and other supplies, our business, financial condition or results of operations could be materially adversely affected.
Our supply agreements with our customers typically require us to provide our products at predetermined prices. In some cases, these prices decline over the course of the contract and may require us to meet certain productivity and cost reduction targets. In addition, our customers may require us to share productivity savings in excess of our cost reduction targets. The costs that we incur in fulfilling these contracts may vary substantially from our initial estimates. Unanticipated cost increases or the inability to meet certain cost reduction targets may occur as a result of several factors, including increases in the costs of labor, components or materials and operating inefficiencies. In some cases, we are permitted to pass on to our customers the cost increases associated with specific materials.materials or incremental tariffs. However, cost overruns that we cannot pass on to our customers and the inability to achieve productivity and cost reduction targets could adversely affect our business, financial condition or results of operations.
Military conflicts and geopolitical instability in the Middle East, including U.S. and Israeli military actions against Iran, could disrupt global markets and adversely affect our business.
Armed conflicts and heightened geopolitical tensions in the Middle East, including ongoing U.S. and Israeli military operations against Iran, pose risks to the global economy and to our business, even though we do not have direct operations in the region. A significant escalation of hostilities, including any disruption to the flow of oil through the Strait of Hormuz or other critical shipping lanes, could result in a rapid and sustained increase in global oil and energy prices, which would increase our transportation and logistics costs and the cost of petroleum-based production materials, including resins and certain molded plastic components, used across our manufacturing operations. Higher energy and fuel prices would also adversely affect our OEM customers and the end markets we serve. Elevated fuel costs have historically reduced demand for commercial vehicles and off-highway equipment, which are the principal markets for our products and accounted for approximately 95% of our net sales in 2025. A sustained increase in fuel prices could lead OEM customers to reduce production volumes, delay new vehicle platform launches, or seek additional pricing concessions from their supply base, any of which would have a material adverse effect on our revenues and profitability. In addition, an escalation of military action in the Middle East could disrupt global shipping routes, increase transit times and freight costs for components and raw materials sourced from Asia and Europe, and create broader supply chain bottlenecks similar to those experienced during prior periods of global disruption. Our business relies on electronic components sourced globally, including semiconductors, microprocessors, and memory devices, would be particularly vulnerable to such supply chain disruptions. Any macroeconomic deterioration resulting from an escalation in Middle Eastern hostilities could compound the existing challenges facing our business and could have a material adverse effect on our business, financial condition, results of operations, and liquidity.
Changes in laws or policies governing the terms of trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where we manufacture products, such as Mexico and China, could have a material adverse effect on our business and financial results. For example, in February 2025,2026, the U.S. government imposed or threatened to impose new tariffs on imported products from Mexico, Canada and China.products. The impact of these tariffs is subject to a number of factors, including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any retaliatory responses to such actions that the target countries may take and any mitigating actions that may become available. Despite recent trade negotiations between the U.S. and the Mexican, CanadianCanadian, Chinese and ChineseBrazilian governments, given the uncertainty regarding the scope and duration of any new tariffs, as well as the potential for additional tariffs or trade barriers by the U.S., Mexico, Canada, ChinaChina, Brazil or other countries, we can provide no assurance that any strategies we implement to mitigate the impact of such tariffs or other trade actions will be successful. A trade war or other significant changes in trade regulations could have a material adverse effect on our business, financial condition and results of operations.
Failure to successfully identify, complete and/or integrate acquisitions could have a material adverse effect on us. A portion of our growth in sales and earnings has historically been generated from acquisitions and subsequent improvements in the performance of the businesses acquired. We expect to follow a strategy of selectively identifying and acquiring businesses with complementary products. We cannot assure you that any business acquired by us will be successfully integrated with our operations or prove to be profitable. We could incur substantial indebtedness in connection with our acquisition strategy, which could significantly increase our interest expense.
If we do not respond appropriately, the evolution of the global transportation industry toward electrification and shared mobility could adversely affect our business.
The global transportation industry is increasingly focused on the development of more fuel-efficient solutions to meet demands from consumers and governments worldwide to address climate change and an increased desire for environmentally sustainable solutions. The impacts of these changes on us are uncertain and could ultimately prove dramatic. If we do not respond appropriately, the evolution toward electrification and other energy sources could adversely affect our business. The increased adoption of electrified and other non-internal combustion-based powertrains may result in lower demand for some of our products. There has also been an increase in consumer preferences for car and ride sharing, as opposed to automobile ownership, which may result in a long-term reduction in the number of vehicles per capita. The evolution of the industry toward electrification and shared mobility has also attracted increased competition from entrants outside of the traditional light vehicle industry, some of whom may seek to provide products which compete with ours. Failure to innovate and to develop or acquire new and compelling products that capitalize upon new technologies in response to these evolving consumer preferences and demands could adversely affect our business, financial condition or results of operations.
We rely on information technology systems to process, transmit and store electronic information and manage and operate our business. Despite the implementation of security measures, our IT networks and systems are at risk to damages from computer viruses, unauthorized access, cyber-attack and other similar disruptions. A breach in security could expose us and our customers and suppliers to risks of misuse of confidential information, manipulation and destruction of data, production downtimes and operations disruptions, which in turn could adversely affect our reputation, competitive position, business or results of operations. While we have taken steps to protect the Company from cybersecurity risks and security breaches (including enhancing our firewall, workstation, email security and network monitoring with managed extended detection and response ("MXDR") and alerting capabilities, and training employees around phishing, malware and other cybersecurity risks), and we have policies and procedures to prevent or limit the impact of systems failures, interruptions, and security breaches, there can be no assurance that such events will not occur or that they will be adequately addressed if they do. Although we rely on commonly used security and processing systems to provide the security and authentication necessary to effect the secure transmission of data, these precautions may not protect our systems from all potential compromises or breaches of security. We may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future. The Company has taken actions to mitigate risks relating to our information technology systems and cybersecurity; however, significant compromises or breaches related to cybersecurity could have a material adverse effect on our business, financial condition or results of operations.
Management's Discussion & Analysis (MD&A)
New heading “Recently Issued Accounting Standards Not Yet Adopted as of December 31, 2025”
Removed heading “Recently Issued Accounting Standards Not Yet Adopted as of December 31, 2024”
Largest changes
Global inflationsee in full comparisonhasratesincreasedhave significantly fluctuated since2021.2021 as a result of pandemic related supply chain disruptions. Beginning in 2024, inflation rates began to moderate as supply chains normalized but remain elevated compared to historical levels. As a result, rising costs of materials, labor and other inputs used to manufacture and sell our products have impacted our financial performance. In order to minimize the impact of these incremental costs, we have taken several actions, including negotiating price increases and cost recoveries with our customers. Additionally, we continue to focus on improving manufacturing performance and optimizing our global cost structure to both reduce costs and improve operational efficiency. We expect these actions will benefit our future financial performance.
Our Control Devices segment net sales decreased bysee in full comparison14.5%6.2% primarilyas a resultbecause of decreases in our North American automotive market, including the impact of expected end of life production for certain programs as well as decreases in our Chinacommercial vehicleautomotive market.These decreases were offset by increases in our off-highway, North American commercial vehicle and China automotive markets.Segment gross margin decreased due to lower contribution from lowersales, however, gross margin as a percentage ofsalesremainedandconsistenthigherwithbusinesstherealignmentprior year.costs. Segment operating income decreased from lower contribution from lower sales levels andhighertheselling, general and administrative expenses ("SG&A") due to a 2023 gain on saleimpairment of fixed assets offset by lower D&D fromhigherlowercustomerwagereimbursements.and fringe spending.
see in full comparisonTheIn February 2026, the U.S. government imposed or threatened to impose new tariffs onMexicoimported products in addition to those imposed during 2025, from countries including China andChinaMexico. Should these existing tariffs, or any other proposedon February 1, 2025 by the U.S. government, should theytariffs, be implemented and sustained for an extended period of time, there couldhavebe a significant adverse effect on the Company.ShouldWethehavetariffs be implemented, weand would continue to implement mitigation actions to reduce the impact of tariffs including but not limited to passing any incremental costs to our customers.
“Recently Issued Accounting Standards Not Yet Adopted as of December 31, 2024”see in full comparison
“Recently Issued Accounting Standards Not Yet Adopted as of December 31, 2025”see in full comparison
Cost of Goods Sold and Gross Margin. Cost of goods sold decreased compared tosee in full comparison20232024 and our gross marginincreaseddecreased to 19.9% in 2025 compared to 20.8% in2024 compared to 20.6% in 2023.2024. Our material cost as a percentage of net sales decreased by1.8%0.8% to 56.8% in 2025 compared to 57.6% in2024 compared to 59.4% in 2023.2024. The decrease inthematerial cost percentage waspartiallydue tothe impact of 2023 required electronic component spot buy purchases, reimbursed by customers. The impact of these spot buy purchases increased cost of goods sold by $14.6 million, or 1.5% of net sales during 2023 which reduced gross margin percent by 0.3% in 2023. Other factors contributing to the reduction thelower materialcostcostspercentagefromwerefavorablematerialforeigncostexchangeimprovementandactions.purchase related variances. Overhead as a percentage of net sales was17.0%18.5% and15.1%17.0% for20242025 and2023,2024, respectively. The increase in overhead as a percentage of sales was attributable tohigherunfavorableoverheadfixedspending including higher warranty related expense and amortization for capitalized software development costs as well as adversecost leverage from lower saleslevels.levels, higher tariffs, which were partially reimbursed by customers and recognized in net sales, and higher business realignment costs of $1.8 million.
Full comparison: every changed paragraph (100)
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.
During 2024,2025, we were adversely affected by lower production volumes at our customers from lower customer demand in most of our served markets, which was partially offset by sales in our Electronics segment related to MirrorEye, including the launchesramp up of a previously launched European OEM MirrorEyeprogram at the end of 2024 and two additional OEM program andlaunches outin nextNorth generationAmerica tachograph.that launched in 2025. Lower sales levels adversely affected gross margin contribution,contribution howeveroffset weby were able to mitigate a portion of the adverse impact throughdirect material cost improvement and structurallower costquality reductionrelated actions.costs relative to 2024. We haveincurred continuednon-recurring to optimize our engineering footprint to enhance capabilities and capacityexpense for the mostrecognition efficientof returna onvaluation allowance for U.S. federal deferred tax assets and the impairment of fixed assets in our engineeringControl spend.Devices Furthersegment. weWe significantly increased cash provided by operating activities by reducing working capital levels, specifically lowering inventory.inventory through targeted actions and alignment with current production levels.
The Company had a net loss of $16.5$102.8 million, or $(0.603.70) per diluted share, for the year ended December 31, 2024.2025.
Net loss in 20242025 increased by $11.3$86.3 million, or $(0.413.10) per diluted share, from $5.2$16.5 million, or $(0.190.60) per diluted share, for the year ended December 31, 20232024 primarily due to lower contribution from lower sales levelslevels, andthe impairment of fixed assets in our Control Devices segment, SG&A costs related to the Control Devices strategic alternatives, higher interestbusiness expenserealignment offsetcosts, by other income from favorableunfavorable foreign exchange fluctuations and lowerthe businessrecognition realignmentof costs.a valuation allowance for U.S. federal deferred tax assets.
In 2024,2025, our net sales decreased by $67.5$47.0 million, or 6.9%,5.2%, while our operating incomeloss decreasedincreased $13.2to $38.6 million.
Our Control Devices segment net sales decreased by 14.5%6.2% primarily as a resultbecause of decreases in our North American automotive market, including the impact of expected end of life production for certain programs as well as decreases in our China commercial vehicleautomotive market. These decreases were offset by increases in our off-highway, North American commercial vehicle and China automotive markets. Segment gross margin decreased due to lower contribution from lower sales, however, gross margin as a percentage of sales remainedand consistenthigher withbusiness therealignment prior year.costs. Segment operating income decreased from lower contribution from lower sales levels and higherthe selling, general and administrative expenses ("SG&A") due to a 2023 gain on saleimpairment of fixed assets offset by lower D&D from higherlower customerwage reimbursements.and fringe spending.
Our Electronics segment net sales decreased by 7.0% primarily due to lower customer production volumes in our North American and European commercial vehicle markets partially mitigated by higher MirrorEye product sales, including the continued ramp-up of recently launched OEM programs in both Europe and North America, improved customer take rates and higher bus end market sales. We also experienced lower sales volumes in our North American off-highway vehicle market. Also offsetting these decreases were higher sales volumes in our European off-highway vehicle market. Segment gross margin as a percent of sales decreased due to lower sales and higher overhead spending, including higher tariffs and business realignment costs offset by direct material cost improvement and lower quality-related costs. Operating income for the segment decreased due to lower contribution from lower sales levels offset by lower D&D spending and lower SG&A from a non-recurring royalty liability adjustment.
Our Electronics segment net sales decreased by 1.8% primarily due to the 2023 impact of lower customer recoveries of required electronic component spot buy purchases, a reduction in retroactive price increases, and lower sales in our agricultural, North American commercial vehicle and European off-highway vehicle markets from lower customer demand. Offsetting these decreases were higher sales volumes in our European commercial vehicle market, including sales related to the launches of a European OEM MirrorEye program and our next generation tachograph as well as our China commercial vehicle and North American off-highway vehicle markets. Segment gross margin as a percent of sales slightly improved due to material cost improvement actions and lower required electronic component spot buy purchases being offset by an increase in overhead costs including higher warranty related expense. Operating income for the segment decreased due to higher D&D as reduced product launch activity resulted in customer reimbursements decreasing more than spending.
Our Stoneridge Brazil segment net sales decreasedincreased by 13.2%21.6% primarily as a result of unfavorable foreign currency translation and lowerhigher sales of our OEM products andpartially monitoringoffset serviceby feeslower original equipment services sales and trackingunfavorable devices.foreign currency translation. Segment gross margin as a percent of sales decreased due to lowerunfavorable sales mix impact of higher OEM product sales offset by higher contribution from lowerhigher sales and adverse sales mix.levels. Operating income decreasedincreased due lowerto saleshigher andcontribution lowerfrom grosshigher marginOEM offsetproduct by lower SG&A because of a reduction in incentive compensation.sales.
In 2024,2025, SG&A expenses increased slightly compared to 20232024 primarily due to higher self-insuredprofessional medicalservices for Control Devices strategic alternatives, business realignment costs, wagesincentive compensation and legalwages feeswhich aswere well as a 2023 gain on the sale of fixed assets beingpartially offset by lower business realignment costs and incentive compensation benefits as a resultnon-recurring ofroyalty Companyliability performance.adjustment.
D&D costs decreased in 2025 because of lower spending for wage and fringe and professional services offset by higher business realignments costs.
D&D costs increased in 2024 because of lower launch activities and a shift to platform development resulting in lower customer reimbursements and capitalization of software development costs that were offset by lower consulting spend compared to 2023 for our Electronics and Control Devices segments. In addition, higher business realignment costs were incurred in our Electronics segment.
At December 31, 20242025 and 2023,2024, we had cash and cash equivalents of $71.8$66.3 million and $40.8$71.8 million, respectively. At December 31, 20242025 and 2023,2024, we had $201.6Credit Facility borrowings of $180.9 million and $189.3$201.6 million, respectively, in borrowings outstanding on the Credit Facility.respectively. The 20242025 increasedecrease in cash and cash equivalents was duemostly tocaused reductionsby inrepayments workingof capital,Credit specificallyFacility lowerborrowings inventoryfrom the repatriation of cash and acash higherequivalents outstandingat balanceforeign on our Credit Facility.locations.
Stoneridge's remaining portfolio, subsequent to the disposal of the Control Devices business, will be focused on technology solutions primarily for the global commercial vehicle and off-highway end markets. More specifically, Stoneridge will serve three primary product categories: Vision and Safety, Connectivity, and Vehicle Intelligence and Electronic Controls, each with their own significant growth opportunities. We expect continued expansion of our Vision and Safety systems, including MirrorEye® and adjacent products and advanced technologies, through maturity of our existing products and the introduction of new products to the market, including our connected trailer and surround-view capabilities. As we continue to invest in these capabilities, we have generated a robust technology roadmap that will both enhance and expand on our existing products and bring new products and technologies to the market. We expect this to drive growth that significantly outpaces our weighted average end markets resulting in shareholder value creation.
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. For example, we continue to develop safety, vehicle intelligence and connectivity based products, such as our OEM MirrorEye programs in North America and Europe as well as our next generation tachograph in Europe.
Global inflation hasrates increasedhave significantly fluctuated since 2021.2021 as a result of pandemic related supply chain disruptions. Beginning in 2024, inflation rates began to moderate as supply chains normalized but remain elevated compared to historical levels. As a result, rising costs of materials, labor and other inputs used to manufacture and sell our products have impacted our financial performance. In order to minimize the impact of these incremental costs, we have taken several actions, including negotiating price increases and cost recoveries with our customers. Additionally, we continue to focus on improving manufacturing performance and optimizing our global cost structure to both reduce costs and improve operational efficiency. We expect these actions will benefit our future financial performance.
TheIn February 2026, the U.S. government imposed or threatened to impose new tariffs on Mexicoimported products in addition to those imposed during 2025, from countries including China and ChinaMexico. Should these existing tariffs, or any other proposed on February 1, 2025 by the U.S. government, should theytariffs, be implemented and sustained for an extended period of time, there could havebe a significant adverse effect on the Company. ShouldWe thehave tariffs be implemented, weand would continue to implement mitigation actions to reduce the impact of tariffs including but not limited to passing any incremental costs to our customers.
Based on IHS Market production forecasts, the North American automotive market is expected to slightly decrease from approximately 15.4 million units in 2024 to 15.1 million units in 2025. We expect our Control Devices segment revenues to decrease as a result of the expected reduction in North American production volumes and the impact of end of life programs. In our Control Devices segment, we remain focused on drivetrain agnostic technologies to drive new business awards as the market continues to evolve. This strategy is highlighted by our recent new business award for a leak detection module product which provides further global opportunities primarily for hybrid vehicle applications, a market that we expect to continue to grow, and is also applicable to traditional powertrain vehicles. We continue to focus on material cost reduction and improved manufacturing performance in order to stabilize margin performance.
Based on IHS Market production forecasts, in 20252026 the European commercial vehicle end market volumes are forecasted to increase 3.9% and North American commercial vehicle end market volumes are forecasted to decreaseincrease 3.3%.6.0% and 9.8%, respectively. Over the long-term, we expect our Electronics’ segment sales to continue to outperform forecasted changes in production volumes due to strong demand for our existing products including our OEM MirrorEye programs in North America and Europe as well as ourfrom nextlaunches generationof tachographawarded in Europe.business. In addition, over the long-term we expect revenue growth and margin contribution from our off-highway products. We continue to focus on margin improvement through material cost reduction and product quality initiatives. We continue to invest in the development of advanced system capabilities that are complementary to our driver information solutions and vision systems such as integrated driver assistance technologies and an intelligent connected trailer system.
In 2025, we expect net D&D spend to slightly increase driven by spend for the development of next generation products as opposed to new 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. For example, we expect to utilize our Stoneridge Brazil engineering resources to support Electronics segment projects.
In October 2024,2025, the International Monetary Fund forecasted the Brazil gross domestic product to grow 2.2%1.6% in 2025, a decline from forecasted growth of 3.0% in 2024.2026. We expect our served market channels to remain relatively stable in 20242026 based on current market and economic conditions,conditions; however our sales of in regionin-region OEM products have been lower thanare expected to increase in the second half of 2026 due to lowerthe customerlaunch demandof andan programawarded delays.infotainment product. Stoneridge Brazil will focus on continuing to grow our OEM capabilities in-region to better support our global customers. This focus will provide opportunities for future growth and provide a platform to continue to rotate our local portfolio to more closely align with our global business.
In 2026, we expect net D&D spend to increase driven by spend for quality improvement and the development of next generation products. We continue to evaluate and optimize our engineering footprint to enhance capabilities and capacity for the most efficient return on our engineering spend including utilizing our Stoneridge Brazil engineering and dedicated engineering partners in India to support Electronics segment projects.
While we expect continued challenges across our end markets in 2025,2026, we continue to focus on operating performance and enterprise-wide cost reduction. We remain focused on improving cash generation and the reduction of debt through efficient operating performanceperformance, structural cost savings and targeted actions to reduce our inventory levels.
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. The U.S. Dollar strengthenedweakened against the Argentine peso, Brazilian real, Chinese renminbi, euro, Mexican peso and Swedish krona in 2024 and the Chinese yuan and Argentine peso in 2023,2025 unfavorably impacting our reported results. In 2024, the U.S dollar strengthened against the Brazilian real, Chinese renminbi and Swedish krona and weakened against the euro and Mexican peso which had a net favorable impact to our reported results.
We regularly evaluate the performance of our businesses and their cost structures, including personnel, and make necessary changes thereto in order to optimize our results. We also evaluate the required skill sets of our personnel and periodically make strategic changes. As a consequence of these actions, we incur severance related costs which we refer to as business realignment charges. Business realignment costs of $2.6$6.4 million and $4.5$2.6 million were incurred during the years ended December 31, 20242025 and 2023,2024, respectively. Realignment expense for 2025 was 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. Realignment expense for the year ended December 31, 2024 was primarily related to the optimization of our engineering footprint and executive separation costs. We expect tomay incur businessadditional realignment costs in 2025the related operations at our Juarez facility, which we expect will result in cost savings for direct and indirect labor and a more efficient overall operating structure.future.
Our Control Devices segment net sales decreased $49.5$18.1 million primarily as a resultbecause of decreases in our North American automotive market of $52.9$11.8 million,million including the impact of expected end of lifeend-of-life production for certainan programsactuator product as well as decreases in our China commercial vehicle market of $5.3 million. These decreases were offset by increases in our off-highway, North American commercial vehicleautomotive and China automotiveoff-highway markets of $3.7 million, $2.6$3.3 million and $2.3$2.5 million, respectively, as well as the favorable impact of negotiated price increases of $0.9 million. In addition, 2024 net sales were impacted by unfavorable foreign currency translation of $0.7 million compared to 2023.respectively.
Our Electronics segment net sales decreased $39.6 million because of production volume decreases at our customers which resulted in sales decreases in our North American and European commercial vehicle markets of $39.0 million and $22.2 million, respectively, partially mitigated by higher MirrorEye sales, including the ramp-up of a previously launched European OEM program and two additional OEM program launches in North America, and higher aftermarket sales for our next generation tachograph. We also experienced lower sales volumes in our North American off-highway vehicle market of $3.2 million. These decreases were partially offset by an increase in our European off-highway market of $4.6 million. Net sales in 2025 were favorably impacted by euro and Swedish krona foreign currency translation of $20.7 million compared to the prior year.
Our Electronics segment net sales decreased $10.5 million primarily due to the 2023 impact of lower customer recoveries of required electronic component spot buy purchases of $14.4 million, a reduction in retroactive price increases of $2.3 million, and lower sales volumes in our agricultural, North American commercial vehicle and European off-highway vehicle markets of $1.8 million, $1.4 million and $1.3 million, respectively. Offsetting these decreases were higher sales volumes in our European commercial vehicle market of $6.2 million, including sales related to the launches of a European OEM MirrorEye program and our next generation tachograph and higher sales in our North American off-highway and China commercial vehicle markets of $2.0 million and $1.3 million, respectively. In addition, 2024 net sales were favorably impacted by foreign currency translation of $1.4 million compared to 2023.
Our Stoneridge Brazil segment net sales decreasedincreased $7.6$10.7 million primarily as a resultbecause of higher OEM product sales of $13.1 million partially offset by lower original equipment services sales of $1.0 million and unfavorable foreign currency translation of $3.8$1.5 million and lower sales of our OEM products and monitoring service fees and tracking devices.million.
The decrease in our North American net sales was mostly attributable to production volume decreases at our customers which resulted in sales decreases in our commercial vehicle, automotive and off-highway markets of $37.5 million, $11.8 million and $5.6 million, respectively. The decrease in our North American automotive market volumes were also adversely impacted by end-of-life production of an actuator product.
The decrease in North American net sales was mostly attributable to decreases in sales volume and the impact of expected end of life production for certain programs in our automotive market of $53.0 million as well as the 2023 impact of required electronic component spot buy purchases of $2.7 million. These decreases were offset by higher sales volume in our North American off-highway and commercial vehicle markets of $5.4 million and $1.2 million, respectively.
The decreaseincrease in net sales in South America was primarily as a resultbecause of higher OEM product sales of $13.1 million partially offset by lower original equipment services sales of $1.0 million and unfavorable foreign currency translation of $3.8$1.5 million and lower sales of our OEM products and monitoring service fees and tracking devices.million.
The decrease in net sales in Europe and Other was primarily due to decreases in our European commercial vehicle and China automotive markets of $22.2 million and $3.3 million, respectively, offset by increases in production volumes at our customers, which resulted in sales increases in our European off-highway and China commercial vehicle markets of $4.6 million and $0.9 million, respectively. Net sales were also favorably impacted by foreign currency translation of $20.7 million.
The decrease in net sales in Europe and Other was primarily due to the 2023 impact of lower customer recoveries of required electronic component spot buys of $11.7 million, and a reduction in retroactive price increases of $2.2 million and lower sales in our China commercial vehicle, European agricultural and European off-highway markets of $4.0 million, $1.4 million and $1.3 million, respectively. Offsetting these decreases were higher sales volumes in our European commercial vehicle market of $6.2 million, including sales related to the launches of a European OEM MirrorEye program and our next generation tachograph and our China automotive market of $2.3 million. 2024 net sales were favorably impacted by foreign currency translation of $0.7 million compared to 2023.
Cost of Goods Sold and Gross Margin. Cost of goods sold decreased compared to 20232024 and our gross margin increaseddecreased to 19.9% in 2025 compared to 20.8% in 2024 compared to 20.6% in 2023.2024. Our material cost as a percentage of net sales decreased by 1.8%0.8% to 56.8% in 2025 compared to 57.6% in 2024 compared to 59.4% in 2023.2024. The decrease in the material cost percentage was partially due to the impact of 2023 required electronic component spot buy purchases, reimbursed by customers. The impact of these spot buy purchases increased cost of goods sold by $14.6 million, or 1.5% of net sales during 2023 which reduced gross margin percent by 0.3% in 2023. Other factors contributing to the reduction thelower material costcosts percentagefrom werefavorable materialforeign costexchange improvementand actions.purchase related variances. Overhead as a percentage of net sales was 17.0%18.5% and 15.1%17.0% for 20242025 and 2023,2024, respectively. The increase in overhead as a percentage of sales was attributable to higherunfavorable overheadfixed spending including higher warranty related expense and amortization for capitalized software development costs as well as adversecost leverage from lower sales levels.levels, higher tariffs, which were partially reimbursed by customers and recognized in net sales, and higher business realignment costs of $1.8 million.
Our Control Devices segment gross margin decreased from lower contribution from lower sales levels.
Our Electronics segment gross margin slightly improved due to material cost improvement actions and lower required electronic component spot buy purchases being offset by an increase in overhead costs including higher warranty related expense.
Our StoneridgeControl BrazilDevices segment gross margin decreased primarily because of lower contribution from lower sales levels and adversehigher salesbusiness mix.realignment costs of $0.2 million.
Selling, General and Administrative. SG&A expenses increased by $0.1 million compared to 2023 due to higher self-insured medical costs, wages and legal fees as well as a 2023 gain on the sale of fixed assets being offset by lower business realignment costs and incentive compensation benefits due to Company performance.
Design and Development. D&D costs increased by $1.1 million because of a reduction in launch activities and a shift in platform development resulting in lower customer reimbursements and capitalization of software development costs that were offset by lower consulting spending compared to 2023 for our Electronics and Control Devices segments. In addition, higher business realignment costs were incurred in our Electronics segment.
Operating (Loss) Income. Operating (loss) income is summarized in the following table by reportable segment (in thousands):
Our Control DevicesElectronics segment operatinggross incomemargin decreased primarily as a resultbecause of lower contribution from lower sales levelsand higher overhead spending, including higher tariffs and higher SG&Abusiness duerealignment to a 2023 gain on salecosts of fixed$1.6 assetsmillion. These increases were partially offset by lowerreduced D&Dmaterial spending.costs and reduced quality related costs.
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 $8.1 million compared to 2024 because of higher professional services for Control Devices strategic alternatives, business realignment costs, incentive compensation and wages which were partially offset by a non-recurring royalty liability adjustment.
Design and Development. D&D costs decreased by $9.6 million from lower spending in our Control Devices and Electronics segments. Our Control Devices segment decrease was due to lower wage and fringe spending while the decrease in our Electronics segment was caused by lower spending on wages, fringe and professional services offset by higher business realignment costs.
Operating Loss. Operating (loss) income is summarized in the following table by reportable segment (in thousands):
Our Control Devices segment operating income decreased because of lower contribution from lower sales levels, the impairment of fixed assets, higher business realignment costs of $0.5 million and a non-recurring commercial settlement gain recognized in 2024 offset by lower D&D spending.
Our Electronics segment operating income decreased primarily due to higher D&D as reduced product launch activity resulted in customer reimbursements decreasing more than spending.
Our Stoneridge BrazilElectronics segment operating income decreased primarily as a resultbecause of lower contribution from lower sales levels and adversehigher salestariffs mixand higher business realignment costs of $1.4 million offset by lower D&D spending and lower SG&A because offrom a reductionnon-recurring inroyalty incentiveliability compensation due to Company performance.adjustment.
Our Stoneridge Brazil segment operating income increased due to higher contribution from higher Stoneridge Brazil OEM product sales.
Our unallocated corporate operating loss increased due to higher self-insuredSG&A medicalfrom costshigher professional services for Control Devices strategic alternatives and wages offset by lower incentive compensation due to Company performance andhigher business realignment costs.costs of $1.9 million.
Our North American operating loss increased primarilydue as a result ofto lower contribution from lower sales levels, higher overhead spending including warranty expense, higher self-insured medical costs, wageslevels and a 2023 gain on disposal of fixed assets, offset by lower incentive compensation due to Company performance and lowerhigher business realignment costs.costs and higher SG&A spending for Control Devices offsetting lower D&D spending. Operating income in South America decreasedincreased becausedue ofto lowerhigher contributionStoneridge fromBrazil lowerOEM product sales levels. Our operating results in Europe and Other increased primarily because of materialhigher costcontribution actionsfrom higher sales levels and lower SG&Amaterial andcosts including favorable foreign exchange related variances offset by higher D&D spending offsetas bya result of lower contributioncustomer from lower sales levels.reimbursements.
Interest Expense, net. Interest expense, net increaseddecreased by $1.4$0.9 million compared to 2023.2024. The increasedecrease was the result of higherlower outstanding Credit Facility balances.borrowings and Credit Facility interest rates.
Equity in (Earnings) Loss of Investee. Equity (earnings) loss for Autotech Fund II was $1.3$(0.3) million and $0.5$1.3 million for the years ended December 31, 20242025 and 2023,2024, respectively.
Other Expense (Income) Expense,, net. We record certain foreign currency transaction losses (gains) losses as a component of other expense (income) expense,, net on the consolidated statement of operations. Other expense, net of $3.6 million, increased by $6.1 million in 2025 compared to other income, net of $2.5 million, increased by $3.8 million in 2024 compared to other expense, net of $1.2 million for 20232024 due to the impact of favorableunfavorable foreign currency movements in our Electronics and StoneridgeControl BrazilDevices segments from strengtheningweakening of the U.S. dollar.dollar especially against the euro and Swedish krona.
The Organization for Economic Cooperation and Development ("OECD") implemented a 15% global corporate minimum tax to ensure that large multinational enterprises pay a minimum level of tax in the countries they operate. A number of countries have passed legislation enacting the OECD Pillar Two model rules as issued, in a modified form or not at all which is effective in 2024. The OECD Pillar Two framework could have a material impact on our effective tax rate and cash tax payments depending on which countries enact the legislation and in what manner.
On January 5, 2026, the OECD issued new guidance introducing the “side‑by‑side” system as part of the Pillar Two Global Minimum Tax framework. This approach is designed to align the Pillar Two rules with jurisdictions that already maintain their own minimum tax regimes. Under the OECD’s guidance, the United States is treated as a qualifying jurisdiction, enabling U.S.-parented multinational enterprises (“MNEs”) to opt out of the global Pillar Two income inclusion rule and undertaxed profits rule beginning January 1, 2026.
The adoption of the side‑by‑side system provides greater clarity and reduces uncertainty regarding the Pillar Two Global Minimum Tax implications for U.S.-parented MNEs. Although many countries have yet to enact Pillar Two legislation, the Company does not expect these developments to have a material impact on its consolidated financial statements.
In July 2025, the 2025 Budget Reconciliation Act or H.R. 1 (the "Act") was signed into law. The Act includes a broad range of tax reform provisions, including extending and modifying various provisions of the Tax Cuts and Jobs Act and expanding certain incentives in the Inflation Reduction Act while accelerating the phase-out of other incentives. The legislation has multiple effective dates, with certain provisions effective in 2025 and other provisions effective in 2026 and subsequent years. The Act did not have a significant impact on the Company's 2025 consolidated financial statements. Further, the Act is not expected to have a significant impact on the Company's 2026 consolidated financial statements, based on the guidance issued to date.
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.
What changed in the latest 10-Q
Risk Factors
There have been no material changes with respect to risk factors previously disclosed in the Company’s 2025 Form 10-K.
No wording changes found in this section.
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Management's Discussion & Analysis (MD&A)
New heading “Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”
Largest changes
Our Electronics segment net sales increased bysee in full comparison7.5%12.8% compared to thefirstsecond quarter of 2025 primarily due tofavorableaneuroincreaseandinSwedishourkronaNorthforeignAmericancurrencycommercialtranslation,vehiclehigher MirrorEye system salesmarket and higher sales of$3.8$7.1 million resulting from the Mexico Manufacturing Agreement related to the sale of Control Devices.TheseAdditionally,increasessales wereoffsetimpacted byafavorabledecrease in product sales to the Europeaneuro andNorthSwedishAmericankronacommercialforeignvehiclecurrencymarkets including lower sales for the Smart 2 tachograph product.translation. Segment gross margin decreased compared to thefirstsecond quarter of 2025 from higher direct material costs due to adverse foreign currency losses and excess inventory charges asawellpercentageasofadverse sales mix from lower Smart 2 tachograph product sales fromunfavorablethesalesendmixofandahigherregulatorydirectretrofitlaborcampaigncostsinslightly offset by lower overhead spending including tariff recoveries and lower business realignment costs.2025. Operating income for the segmentdecreasedincreased compared to thefirstsecond quarter of 2025 because of lowergross profit and higherSG&A expense fromhigherlowerwagesroyalties andbusinessprofessionalrealignmentservicescosts offset byand lower D&D from lower business realignment costs and higher customer reimbursements.
Cost of Goods Sold and Gross Margin. Cost of goods sold increased compared to thesee in full comparisonfirstsecond quarter of 2025 and our gross margin decreased to21.7%20.3% in thefirstsecond quarter of 2026 from23.6%23.1% in thefirstsecond quarter of 2025. Our material cost as a percentage of net sales increased to58.3%57.7% in thefirstsecond quarter of 2026 from56.2%56.8% in thefirstsecond quarter of 2025. The increase in material cost percentage was due to the unfavorable foreign exchange material variances and excess inventory charges as well as adverse sales mixin our Electronics segmentfrom lower Smart 2 tachographsales.product sales from the end of a regulatory retrofit campaign in 2025 in our Electronics segment offset by a benefit from the Mexico Manufacturing Agreement because under this contract manufacturing agreement only direct labor and overhead expenses are recognized. Overhead as a percentage of net salesdecreasedincreased from16.6%16.2% in thefirstsecond quarter of 2025 to15.2%17.2% in thefirstsecond quarter of 2026 due totarifftherecoveriesimpactandoflowerthebusinessMexicorealignmentManufacturing Agreement spend offsetting favorable leverage of fixed costsinfromourhigherElectronicssalessegment.levels.
“Our Credit Facility matures on July 1, 2027, which is within twelve months of the issuance of the accompanying unaudited condensed consolidated financial statements, and will become current in the third quarter of 2026. 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, 2026. …”see in full comparison
“Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”see in full comparison
“Our North American operating loss increased due to higher SG&A from higher share-based compensation from retirement-related accelerated vesting, incentive compensation and legal expenses offset by higher gross margin from higher sales levels including tariff recoveries and lower D&D from lower business realignment costs. Operating income in South America increased from higher gross margin from favorable variances from U.S. dollar denominated material purchases and higher contribution from higher sales levels offset by higher SG&A from higher incentive compensation and selling expenses. …”see in full comparison
Our North American operating losssee in full comparisonincreasedimproved due tohigher SG&A from higher share-based compensation from retirement-related accelerated vesting and higher D&D expense offset byhigher gross margin from higher sales levels andtarifflowerrecoveries.D&D from lower business realignment expense offset by higher SG&A from higher incentive compensation and legal expense. Operating income in South America increased from higher gross margin from favorable variances from U.S. dollar denominated material purchases and favorable leverage of fixed costs from higher sales levels offset by higher SG&A from higher incentive compensation andBraziliansellingindirect taxes.expenses. Our operating results in Europe and Other decreased because of lower margin fromadverse sales mix andhigherSG&A spending from higher business realignmentmaterial costs due to unfavorable foreign exchange material variances offset by lower D&D expense from higher customer reimbursements.
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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, off-highway, automotiveoff-highway and agricultural vehicle markets.
On December 31, 2025, we conducted our business in three reportable business segments, which were the same as our three operating segments: Control Devices, Electronics and Stoneridge Brazil. In January 2026, we completed the sale of the Control Devices segment, which is reflected as discontinued operations in all periods presented. As a result, we now operate our business in two reportable business segments, which are the same as our two operating segments.
FirstSecond Quarter Overview
The Company had net loss from continuing operations of $14.8$5.3 million, or $(0.530.19) per diluted share, for the three months ended MarchJune 31,30, 2026.
Net loss from continuing operations for the quarter ended MarchJune 31,30, 2026 increaseddecreased by $6.8$5.9 million, or $(0.24)$0.21 per diluted share, from net loss from continuing operations of $8.0$11.1 million, or $(0.290.40) per diluted share, for the three months ended MarchJune 31,30, 2025. Net sales increased by $11.8$23.8 million, or 7.9%,15.1%, compared to the three months ended MarchJune 31,30, 2025, fromdue theto favorableincreased impactsales ofvolumes foreignin currencyour translation,North American vehicle market and higher sales resulting from the Mexico Manufacturing Agreement related to the sale of Control Devices,Devices and higher MirrorEyeBrazilian system sales. These increases were offset by a decrease in productOEM sales tofrom the Europeanlaunch andof Northan Americaninfotainment commercialproduct. vehicleGross markets including lower salesmargin for the quarter ended June 30, 2026 decreased to 20.3% from 23.1% for the three months ended June 30, 2025 from higher direct material costs as a percentage of sales due to adverse foreign currency losses and excess inventory charges as well as adverse sales mix from lower Smart 2 tachograph dueproduct tosales from the end of a regulatory retrofit campaign in 2025. Gross margin for the quarter ended March 31, 2026 decreased to 21.7% from 23.6% for the three months ended March 31, 2025 due to higher direct material costs in our Electronics segment from adverse sales mix and higher direct material labor costs.segment. SG&A expense increased primarily due to higher share-basedincentive compensation expense from the retirement related accelerated vesting, Brazilian indirect taxes and higher legal expenses, which were offset by lower D&D expense from 2025 business realignment costs and higher customer reimbursements in our Electronics segment. In addition, non-operating foreign currency lossesgains unfavorablyfavorably impacted results for the quarter endingended MarchJune 31,30, 2026.
Our Electronics segment net sales increased by 7.5%12.8% compared to the firstsecond quarter of 2025 primarily due to favorablean euroincrease andin Swedishour kronaNorth foreignAmerican currencycommercial translation,vehicle higher MirrorEye system salesmarket and higher sales of $3.8$7.1 million resulting from the Mexico Manufacturing Agreement related to the sale of Control Devices. TheseAdditionally, increasessales were offsetimpacted by afavorable decrease in product sales to the Europeaneuro and NorthSwedish Americankrona commercialforeign vehiclecurrency markets including lower sales for the Smart 2 tachograph product.translation. Segment gross margin decreased compared to the firstsecond quarter of 2025 from higher direct material costs due to adverse foreign currency losses and excess inventory charges as awell percentageas ofadverse sales mix from lower Smart 2 tachograph product sales from unfavorablethe salesend mixof anda higherregulatory directretrofit laborcampaign costsin slightly offset by lower overhead spending including tariff recoveries and lower business realignment costs.2025. Operating income for the segment decreasedincreased compared to the firstsecond quarter of 2025 because of lower gross profit and higher SG&A expense from higherlower wagesroyalties and businessprofessional realignmentservices costs offset byand lower D&D from lower business realignment costs and higher customer reimbursements.
Our Stoneridge Brazil segment net sales increased by 12.1%37.6% compared to the firstsecond quarter of 2025 primarily from higher OEM product sales including the sales from the launch of an infotainment product and favorable foreign currency translationtranslation. Segment gross margin increased due to favorable variances from U.S. denominated material purchases and higher OEMcontribution productfrom sales.higher sales levels. Operating income increased due to favorable variances from U.S. dollar denominated material purchases and higher contribution from higher sales levelslevels. offsetOffsetting bythese higherfavorable variances was an increase in SG&A expense from higher incentive compensation and selling costs reduced by a favorable Brazilian indirect taxes.tax claim settlement.
In the firstsecond quarter of 2026, SG&A expenses increased by $6.7$0.4 million compared to the firstsecond quarter of 2025 driven primarily because of higher share-basedincentive compensation fromand retirementlegal relatedcosts acceleratedoffset vesting,by a favorable Brazilian indirect taxestax andclaim higher legal expenses.settlement.
In the firstsecond quarter of 2026, D&D costs decreased by $2.3$2.9 million compared to the prior year firstsecond quarter primarily in our Electronics segment as a resultbecause of lower business realignment costs and higher customer reimbursements.
At MarchJune 31,30, 2026 and December 31, 2025, we had cash and cash equivalents balances primarily held at our foreign locations of $70.5$71.5 million and $53.1 million, respectively, and we had $156.5$151.1 million and $180.9 million, respectively, in borrowings outstanding on our Credit Facility. The 2026 decrease in Credit Facility borrowings and the increase in cash and cash equivalents was mostly due to proceeds received from the sale of Control Devices.
Stoneridge's remaining portfolio, after the sale of the Control Devices business, will beis focused on technology solutions primarily for the global commercial vehicle and off-highway end markets. More specifically, Stoneridge will serveserves three primary product categories: vision and safety, connectivity, and vehicle intelligence and electronic controls, each with their own significant growth opportunities. We expect continued expansion of our vision and safety systems, including MirrorEye® and adjacent products and advanced technologies, through maturity of our existing products and the introduction of new products to the market, including our connected trailer and surround-view capabilities. As we continue to invest in these capabilities, we have generated a comprehensive technology roadmap that we expect will both enhance and expand on our existing products and bring new products and technologies to the market. We expect this will drive growth that significantly outpaces our weighted-average end markets resulting in shareholder value creation.
Our financial performance has been affected by increasing costs of materials, labor, and other inputs used to manufacture and sell our products, including higher costs for memory and other semiconductor components. To minimize the impact of these incremental costs, we continue to take mitigation actions, including negotiating price increases and cost recoveries with our customers, improving manufacturing performance and optimizing our global cost structure to both reduce costs and improve operational efficiency. While we expect these actions will contribute to improvedbenefit financial performance by offsetting cost pressures, there can be no assurance that our mitigation efforts will fully offset the impact of these cost increases.
In AprilJuly 2026, the International Monetary Fund forecasted the Brazil gross domestic product to grow 1.9%2.4% in 2026. We expect our served market channels to remainmoderately relatively stableimprove in 2026 based on current market and economic conditions; however our sales of in-region OEM products are expected to increase in the second half of 2026 due to the launch of an awarded infotainment product.product in the second quarter of 2026. Stoneridge Brazil will focus on continuing to grow our OEM capabilities in-region to better support our global customers. This focus will provide opportunities for future growth and provide a platform to continue to rotate our local portfolio to more closely align with our global business.business more closely.
In 2026, we expect net D&D spend to increase driven by spend for quality improvementimprovement, product cost optimization, and the development of next generation products. 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 function and dedicated engineering partners in India to support Electronics segment projects.
While we expect continued supply chain challenges acrossassociated ourwith endmemory marketsand other electronic component pricing and availability in 2026, we continue to focus on operating performance and enterprise-wide cost reduction. We remain focused on improving cash generation and the reduction of debt through efficient operating performance, structural cost savings and targeted actions to reduce our inventory levels. However, we anticipate working capital investment in the second half of 2026 related to the mid-2027 launch of a new off-highway vision product.
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 materialsmaterial purchased by our Electronics and Stoneridge Brazil segmentspurchases 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 firstsecond quarter of 2026, the U.S. Dollar weakened against the Brazilian real favorably impacting our financial results while it strengthened against the Swedish krona and weakened against the Mexican peso which had an unfavorable impact to our reported results. In the firstsecond quarter of 2025, the U.SU.S. dollar strengthened against the Brazilian real unfavorably impacting our financial results while it weakened against the Swedish krona whichunfavorably had a favorable impact toimpacting 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 $0.4$0.0 million and $2.5$1.4 million were incurred in the three months ended MarchJune 31,30, 2026 and 2025, respectively. Business realignment costs of $0.4 million and $3.9 million were incurred during the six months ended June 30, 2026 and 2025, respectively. For the three and six months ended MarchJune 31,30, 2025, we incurred $1.4 million and $3.0 million, respectively, in business realignment costs related to operational efficiency initiatives at our Juarez facility. We may incur additional realignment costs in the future.
Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025
Our Electronics segment net sales increased $18.2 million because of an increase in our North American commercial vehicle market of $10.0 million including higher MirrorEye system sales and $7.1 million resulting from the Mexico Manufacturing Agreement related to the sale of Control Devices as well as favorable euro and Swedish krona foreign currency translation of $2.6 million. These increases were partially offset by decreases in our China commercial vehicle and North American off-highway markets of $1.0 million and $0.7 million, respectively.
Our Electronics segment net sales increased $10.1 million because of favorable euro and Swedish krona foreign currency translation of $12.3 million and higher sales of $3.8 million resulting from the Mexico Manufacturing Agreement related to the sale of Control Devices. Additionally, sales increased in our North American commercial vehicle market by $0.9 million driven by higher MirrorEye system sales partially offset by lower customer production volumes. These increases were offset by lower sales volumes in our European commercial vehicle market of $7.4 million, primarily due to lower sales for the Smart 2 tachograph product resulting from the end of a retrofit campaign in 2025, and lower customer production volumes partially offset by higher MirrorEye system sales.
Our Stoneridge Brazil segment net sales increased $1.7$5.6 million from higher OEM product sales of $4.4 million including sales from the launch of an infotainment product and favorable foreign currency translation andof higher$1.8 OEM product sales.million.
The increase in North American net sales was due to an increase in production volumes in our commercial vehicle market of $10.0 million including higher MirrorEye system sales and an increase in sales of $7.1 million resulting from the Mexico Manufacturing Agreement related to the sale of Control Devices and higher MirrorEye system sales.Devices.
The increase in net sales in South America was from higher OEM product sales including sales from the launch of an infotainment product of $4.4 million and favorable foreign currency translation andof higher$1.8 OEM product sales.million.
The increase in net sales in Europe and Other was due to higher European off-highway sales of $0.7 million and favorable foreign currency translation of $12.3$2.6 million, higher MirrorEye system sales and an increase in volume in our European off-highway market sales of $1.9 million. These increases weremillion offset by lower sales volumes in our European commercial vehicle marketsales of $7.4$1.4 million,million including lower Smart 2 tachograph product sales from the end of a regulatory retrofit campaign in 2025.
Cost of Goods Sold and Gross Margin. Cost of goods sold increased compared to the firstsecond quarter of 2025 and our gross margin decreased to 21.7%20.3% in the firstsecond quarter of 2026 from 23.6%23.1% in the firstsecond quarter of 2025. Our material cost as a percentage of net sales increased to 58.3%57.7% in the firstsecond quarter of 2026 from 56.2%56.8% in the firstsecond quarter of 2025. The increase in material cost percentage was due to the unfavorable foreign exchange material variances and excess inventory charges as well as adverse sales mix in our Electronics segment from lower Smart 2 tachograph sales.product sales from the end of a regulatory retrofit campaign in 2025 in our Electronics segment offset by a benefit from the Mexico Manufacturing Agreement because under this contract manufacturing agreement only direct labor and overhead expenses are recognized. Overhead as a percentage of net sales decreasedincreased from 16.6%16.2% in the firstsecond quarter of 2025 to 15.2%17.2% in the firstsecond quarter of 2026 due to tariffthe recoveriesimpact andof lowerthe businessMexico realignmentManufacturing Agreement spend offsetting favorable leverage of fixed costs infrom ourhigher Electronicssales segment.levels.
Our Electronics segment gross margin decreased compared to the prior year first quarter from higher direct material costs as a percentage of sales from unfavorable sales mix offset by lower overhead spending including tariff recoveries and lower business realignment costs.
Our Stoneridge BrazilElectronics segment gross margin increaseddecreased compared to the prior year second quarter from higher material costs due to unfavorable foreign exchange material variances and excess inventory charges as well as adverse sales mix from lower Smart 2 tachograph product sales from the favorableend materialof variancesa fromregulatory U.S.retrofit dollarcampaign denominatedin purchases2025 andpartially offset by favorable leverage of fixed costs from higher sales levels.
Our Stoneridge Brazil segment gross margin increased from the favorable material variances from U.S. dollar denominated material purchases and higher contribution from higher sales levels.
Selling, General and Administrative. SG&A expenses increased by $6.7$0.4 million primarily because of higher share-basedincentive compensation fromand retirementlegal relatedexpenses acceleratedoffset vesting,by a favorable Brazilian indirect taxestax andclaim legal expenses.settlement.
Design and Development. D&D costs decreased by $2.3$2.9 million compared to the firstsecond quarter of 2025 because of lower business realignment costs and higher customer reimbursements in our Electronics segment as a result of higher customer reimbursements.segment.
Our Electronics segment operating income increased because of reductions in D&D from lower business realignment costs and higher customer reimbursements and in SG&A from lower royalties and professional services. These increases were offset by lower gross margin from higher material costs due to unfavorable foreign exchange material variances and excess inventory charges as well as adverse sales mix from lower Smart 2 tachograph product sales from the end of a regulatory retrofit campaign in 2025.
Our Electronics segment operating income decreased because of lower gross margin and higher SG&A expense from higher wages and business realignment costs offset by lower D&D from higher customer reimbursements.
Our Stoneridge Brazil segment operating income increased due to favorable variances from U.S. dollar denominated material purchases and higher contribution from higher sales levelslevels. offsetOffsetting bythese higherfavorable variances was an increase in SG&A expense from higher incentive compensation and selling costs offset by a favorable Brazilian indirect taxes.tax claim settlement.
Our unallocated corporate operating loss increased from higher SG&A related to higher share-basedincentive compensation from retirement related accelerated vesting and legal fees offset by lower business realignment costs as well as D&D spending.
Our North American operating loss increasedimproved due to higher SG&A from higher share-based compensation from retirement-related accelerated vesting and higher D&D expense offset by higher gross margin from higher sales levels and tarifflower recoveries.D&D from lower business realignment expense offset by higher SG&A from higher incentive compensation and legal expense. Operating income in South America increased from higher gross margin from favorable variances from U.S. dollar denominated material purchases and favorable leverage of fixed costs from higher sales levels offset by higher SG&A from higher incentive compensation and Brazilianselling indirect taxes.expenses. Our operating results in Europe and Other decreased because of lower margin from adverse sales mix and higher SG&A spending from higher business realignmentmaterial costs due to unfavorable foreign exchange material variances offset by lower D&D expense from higher customer reimbursements.
Interest Expense, net. Interest expense, net was $3.7$2.4 million and $3.2 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The increasedecrease for the quarter ended MarchJune 31,30, 2026, was the result of lower outstanding Credit Facility borrowings offset by higher Credit Facility interest rates partially offset by lower outstanding Credit Facility borrowings.rates.
Equity in Loss (Earnings) of Investee. Equity loss (earnings) for Autotech Fund II was $0.2$(0.2) million and $(0.30.1) million for the three months ended MarchJune 31,30, 2026 and 2025, respectively.
Other Expense (Income), Expense, net. We record certain foreign currency transaction (gains) losses as a component of other expense (income), expense, net on the condensed consolidated statement of operations. Other expense,income, net of $0.5$0.6 million increased by $1.3$2.9 million compared to the firstsecond quarter of 2025 due to foreign currency transaction gains in our SRB segment from the strengthening of the U.S. dollar and lower foreign currency transactions losses in our Electronics segment from the weakening of the U.S. dollar.segment.
Provision for Income Taxes. For the three months ended MarchJune 31,30, 2026, income tax expense from continuing operations of $1.4$2.6 million was attributable to the mix of earnings among tax jurisdictions, tax credits and incentivesincentives, and valuation allowances in certain jurisdictions. The effective tax rate of (10.693.9)% varies from the statutory tax rate primarily due to tax credits and incentives and valuation allowances in certain jurisdictions.
For the three months ended MarchJune 31,30, 2025, income tax expense from continuing operations of $1.6$1.5 million was attributable to the mix of earnings among tax jurisdictions, theforeign impactwithholding of valuation allowances in certain jurisdictionstaxes, and tax credits and incentives offset by U.S. taxes on foreign earnings. The effective tax rate of (24.516.1%)% varies from the statutory tax rate primarily due to theforeign impactwithholding of valuation allowances in certain jurisdictionstaxes and tax credits and incentives offset by U.S. taxes on foreign earnings.
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
Condensed consolidated statements of operations as a percentage of net sales are presented in the following table (in thousands):
Net Sales. Net sales for our reportable segments, excluding inter-segment sales, are summarized in the following table (in thousands):
Our Electronics segment net sales increased $28.3 million because of favorable euro and Swedish krona foreign currency translation of $15.0 million and higher sales of $10.9 million resulting from the Mexico Manufacturing Agreement related to the sale of Control Devices. Additionally, sales increased in our North American commercial vehicle market by $11.1 million from higher production volumes including higher MirrorEye system sales. These increases were offset by lower sales in our European commercial vehicle market of $8.2 million, including lower sales for the Smart 2 tachograph product resulting from the end of a retrofit campaign in 2025 offset by higher MirrorEye system sales, and lower China commercial vehicle sales of $1.6 million Our Stoneridge Brazil segment net sales increased $7.3 million from higher OEM product sales of $4.8 million including sales from the second quarter launch of an infotainment product and favorable foreign currency translation of $3.4 million.
Net sales by geographic location are summarized in the following table (in thousands):
The increase in North American net sales was due to higher production volumes in our commercial vehicle market of $11.1 million including higher MirrorEye system sales and sales of $10.9 million from the Mexico Manufacturing Agreement related to the sale of Control Devices.
The increase in net sales in South America was from higher OEM product sales of $4.7 million including sales from the second quarter launch of an infotainment product and favorable foreign currency translation of $3.4 million.
The increase in net sales in Europe and Other was due to favorable foreign currency translation of $15.0 million and an increase in off-highway sales of $2.6 million. This increase was offset by lower sales in our European commercial vehicle market of $8.2 million, including lower Smart 2 tachograph product sales from the end of a regulatory retrofit campaign in 2025 offset by higher MirrorEye system sales, and lower sales in our China commercial vehicle market of $1.6 million.
Cost of Goods Sold and Gross Margin. Cost of goods sold increased compared to the six months ended June 30, 2025 and our gross margin decreased to 21.0% in 2026 from 23.4% in the first six months 2025. Our material cost as a percentage of net sales increased from 56.5% in the first six months of 2025 to 58.0% in the first six months of 2026. The increase in material cost percentage was due to unfavorable sales mix in our Electronics segment from unfavorable foreign exchange variances and excess inventory charges as well as adverse sales mix from lower Smart 2 tachograph sales from the end of a regulatory retrofit campaign in 2025 offset by a benefit from the Mexico Manufacturing Agreement because under this contract manufacturing agreement only direct labor and overhead expenses are recognized. Overhead as a percentage of net sales was 16.2% and 16.4% for the first six months of 2026 and 2025, respectively. The decrease in overhead as a percentage of sales was attributable to favorable leverage of fixed costs from higher sales levels and lower business realignment costs in our Electronics segment mostly offset by the impact of the Mexico Manufacturing Agreement spend.
Our Electronics segment gross margin decreased compared to the prior year from higher direct material costs as a percentage of sales from unfavorable sales mix, unfavorable foreign exchange variances and excess inventory charges offset by lower business realignment costs.
Our Stoneridge Brazil segment gross margin increased from the favorable variances from U.S. dollar denominated material purchases and higher contribution from higher sales levels.
Selling, General and Administrative. SG&A expenses increased by $7.0 million primarily because of higher share-based compensation from retirement-related accelerated vesting, incentive compensation and legal expenses offset by lower business realignment costs and royalties.
Design and Development. D&D costs decreased by $5.2 million primarily related to our Electronics segment as a result of higher customer reimbursements, lower business realignment costs and non-capital tooling expenses.
Operating (Loss) Income. Operating (loss) income by segment is summarized in the following table (in thousands):
Our Electronics segment operating income increased because of lower D&D from higher customer reimbursements and lower business realignment costs and lower SG&A from lower royalties offset by lower gross margin.
Our Stoneridge Brazil segment operating income increased due to higher gross margin from favorable variances from U.S. dollar denominated material purchases and higher contribution from higher sales levels offset by higher SG&A from higher incentive compensation and selling expenses.
Our unallocated corporate operating loss increased from higher SG&A related to higher share-based compensation from retirement-related accelerated vesting, incentive compensation and legal fees offset by lower business realignment expenses as well as lower D&D spending.
Operating (loss) income by geographic location is summarized in the following table (in thousands):
Our North American operating loss increased due to higher SG&A from higher share-based compensation from retirement-related accelerated vesting, incentive compensation and legal expenses offset by higher gross margin from higher sales levels including tariff recoveries and lower D&D from lower business realignment costs. Operating income in South America increased from higher gross margin from favorable variances from U.S. dollar denominated material purchases and higher contribution from higher sales levels offset by higher SG&A from higher incentive compensation and selling expenses. Our operating results in Europe and Other decreased because of lower margin from adverse sales mix and unfavorable foreign exchange variances offset by lower D&D expense from higher customer reimbursements and lower SG&A from lower royalties.
Interest Expense, net. Interest expense, net was $6.1 million and $6.5 million for the six months ended June 30, 2026 and 2025, respectively. The decrease was the result of lower outstanding Credit Facility borrowings offset by higher Credit Facility interest rates.
SRI insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 4 Form 4 filings (4 insiders, 4 trade dates, 21,000 shares, about $153.6K) and open-market sales in 1 filing (1 insider, 1 trade date, 9,000 shares, about $68.0K). Net open-market shares: 12,000 (purchases minus sales); net value about $85.7K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-09 | Noblet Natalia |
Option exercise | 12,264 | — | — |
| 2026-08-18 | Humphrey Scott Randall |
Open-market purchase | 6,000 | $7.01 | $42.1K |
| 2026-08-10 | Noblet Natalia |
Open-market purchase | 5,000 | $7.31 | $36.5K |
| 2026-06-15 | Ferraiolo Caetano Roberto |
Open-market sale | 9,000 | $7.55 | $68.0K |
| 2026-06-12 | Lasky William M |
Open-market purchase | 5,000 | $7.46 | $37.3K |
| 2026-06-03 | Kaplan Ira C. |
Open-market purchase | 5,000 | $7.54 | $37.7K |
| 2026-05-20 | Zizelman James |
Option exercise | 142,933 | — | — |
| 2026-05-20 | Zizelman James |
Disposition to issuer | 142,933 | $6.89 | $984.8K |
| 2026-05-20 | Zizelman James |
Option exercise | 430,663 | — | — |
| 2026-05-20 | Zizelman James |
Shares withheld for tax | 169,465 | $6.89 | $1.2M |
Well-known investors holding SRI (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| D. E. Shaw & Co. | 2026-06-30 | 579,852 | $4.2M | 0.0% | Reduced 13% |
| Two Sigma Investments | 2026-06-30 | 402,194 | $2.9M | 0.0% | Added 4% |
| Renaissance Technologies | 2026-06-30 | 252,200 | $1.8M | 0.0% | Reduced 11% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 189,499 | $1.4M | 0.0% | Added 212% |
| Millennium Management (Israel Englander) | 2026-06-30 | 87,020 | $637.0K | 0.0% | Reduced 78% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 104,989 | $507.1K | — | Sold out |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 15,798 | $76.3K | — | Sold out |