Company Overview
October 2018
2
Forward-Looking Statements
Statements in this presentation contain “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this report and may include statements regarding the intent, belief or current expectations of the Company, with respect to, among other things, our (i) future product and facility expansion, (ii) acquisition strategy, (iii) investments and new product development, (iv) growth opportunities related to awarded business and (v) operational expectations. Forward-looking statements may be identified by the words “will,” “may,” “should,” “designed to,” “believes,” “plans,” “projects,” “intends,” “expects,” “estimates,” “anticipates,” “continue,” and similar words and expressions. The forward-looking statements are subject to risks and uncertainties that could cause actual events or results to differ materially from those expressed in or implied by the statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, among other factors:
• the reduced purchases, loss or bankruptcy of a major customer or supplier;• the costs and timing of business realignment, facility closures or similar actions;• a significant change in automotive, commercial, off-highway, motorcycle or agricultural vehicle production;• competitive market conditions and resulting effects on sales and pricing;• the impact on changes in foreign currency exchange rates on sales, costs and results, particularly the Argentinian peso, Brazilian real, Chinese
renminbi, euro, Mexican peso and Swedish krona;• our ability to achieve cost reductions that offset or exceed customer-mandated selling price reductions;• customer acceptance of new products;• our ability to successfully launch/produce products for awarded business;• adverse changes in laws, government regulations or market conditions, including tariffs, affecting our products or our customers’ products;• our ability to protect our intellectual property and successfully defend against assertions made against us;• liabilities arising from warranty claims, product recall or field actions, product liability and legal proceedings to which we are or may become a
party, or the impact of product recall or field actions on our customers;• labor disruptions at our facilities or at any of our significant customers or suppliers;• the ability of our suppliers to supply us with parts and components at competitive prices on a timely basis, including the impact of potential
tariffs and trade considerations on their operations and output;• the amount of our indebtedness and the restrictive covenants contained in the agreements governing our indebtedness, including our revolving
credit facility;• capital availability or costs, including changes in interest rates or market perceptions;• the failure to achieve the successful integration of any acquired company or business; • risks related to a failure of our information technology systems and networks, and risks associated with current and emerging technology
threats and damage from computer viruses, unauthorized access, cyber attack and other similar disruptions; and• the items described in Part I, Item IA (“Risk Factors”) of our 10-K filed with the SEC.
In addition, the forward-looking statements contained herein represent our estimates only as of the date of this release and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, whether to reflect actual results, changes in assumptions, changes in other factors affecting such forward-looking statements or otherwise.
Rounding Disclosure: There may be slight immaterial differences between figures represented in our public filings compared to what is shown in this presentation. The differences are the a result of rounding due to the representation of values in millions rather than thousands in public filings.
3
No end-market*
comprises more than
of our year-to-date sales
About Stoneridge
11Manufacturing
locations on 4
continents 1/3
5%
1965Founded
NYSE: SRI
31%5-year backlog***
$3.3 billion5.3x 2017 OEM sales
2018 Revenue growth** 2018 Adj. EPS growth**
Stoneridge is an established, global company with a well diversified product
portfolio, strong historical financial performance and a robust 5-year backlog
*End-markets include passenger car, light truck / SUV, commercial vehicle, aftermarket and other, including agriculture, off-highway vehicles, material handling, etc.
** Based on midpoint of full year guidance provided on Q3 2018 earnings call on October 29, 2018
*** As of December 31, 2017
4
Global Reach
Global Headquarters
Manufacturing Site
Design Center
Sales & Technical Support
11 Manufacturing Sites
10 Design Centers
Headquarters relocated to Novi, MI
in 4Q16 to facilitate stronger
customer relationships and attract
and retain talent
5
Driver Information Systems
Vision Systems
Telematics Systems
Tachograph Systems
Electronic Control Units (ECU)
Electronic Logging Devices
Power & Switch Modules
High Performance Actuators
Sensors: Particle Matter (Soot),
Temperature, Speed, Position,
Pressure, Fluid Level, Torque
Evaporative Emission
Reduction and Solenoid Control
Valves
Track & Trace
Telematics
Safety & Security
Electronic Modules
Alarm & Remote Access
Audio
Organization Overview
Stoneridge, Inc.(NYSE: SRI)
Stoneridge
ELECTRONICSStoneridge
CONTROL DEVICES
PST ELETRÔNICA
(JV, BRAZIL)
SRESCD PST
52% of 2018 Q3 Sales 39% of 2018 Q3 Sales 9% of 2018 Q3 Sales
2018 Sales* : $862.5m
Advanced vehicle camera
systems and displays
Radar
Video Recording
Stoneridge
ELECTRONICS
*Based on midpoint of full year guidance provided
on Q3 2018 earnings call on October 29, 2018
6
Building a Culture of Performance and Growth
7
Our Current Leadership New Hire or New
Position since 2015
8
Leadership Team Capable of Driving Global Growth
Stoneridge has systematically assembled an executive team comprised of industry leaders capable of
driving global, sustainable performance and growth
*Based on midpoint of full year guidance provided on Q3 2018 earnings call on October 29, 2018
9
Business Share by Segment and Region
We continue to diversify our product portfolio and geographic exposure through organic
and inorganic growth opportunities
*Regional sales based on manufactured location.
Business Segments (2018 Q3 YTD) Regions (2018 Q3 YTD)*
10
China – A Platform for Growth
Strong financial performance
Backlog suggests CAGR of over 20% from 2016 –
2020*
World-class manufacturing facility in Suzhou
Products, operations and engineering focused
on “Asia-for-Asia” strategy
Regulations creating emissions requirements
Exhaust gas temperature (EGT) sensors
(Control Devices segment)
Local customers and content growth
Commercial vehicle driver information systems
(Electronics segment)
Continuing to focus on opportunities to serve the local market and expand
manufacturing and development in China as a catalyst for growth
*Based on September 2017 IHS; Q3 2017 LMC
11
2018 Full Year Volume Outlook
Stoneridge is well positioned to take advantage of strong performing regions and end
markets
Passenger Car*Sales by End Market (2017)
Commercial Vehicle*
(Units in Millions) Stoneridge 2018
2017E Sales** 2017E 2018E B/(W) 2017
Europe 5.0% 22.3 22.8 2.0%
Asia 20.9% 50.0 50.4 0.9%
North America 73.8% 17.1 17.4 1.6%
South America 0.1% 3.3 3.7 13.1%
Other 0.2% 2.6 2.8 9.0%
Total 100.0% 95.3 97.1 1.9%
Vehicle Production
(Units in Millions) Stoneridge 2018
2017E Sales** 2017E 2018E B/(W) 2017
Europe 64.5% 0.6 0.6 3.2%
Asia 4.9% 2.0 1.9 -7.8%
North America 30.3% 0.5 0.6 13.9%
South America 0.2% 0.1 0.1 15.5%
Other 0.1% 0.0 0.0 -5.4%
Total 100.0% 3.2 3.2 -1.8%
Vehicle Production
*Excluding Orlaco and PST
** Regional sales based on manufactured location
SOURCE: Dec 2017 IHS; Q4 2017 LMC, Company Data
12
Business Share by Customer (2017)
We are well diversified in our customer exposure. Approximately 75% of sales are
attributable to OEM customers which comprise forecasted backlog.
*Does not include revenue from Minda-Stoneridge JV,
13
Winning with Our Customers
Deepening relationships with customers
Positioning the Company for long-term success
Over the past year we have been recognized for our excellence as both a passenger car and commercial vehicle supplier by some of the largest, global OEMs
Received the 2016 Safe Pillar Award from Ford Motor Company for supplying a variety of advanced technology sensors and actuators
Received the 2017 Partnership award from Daimler AG for the international roll-out of driver information systems for Mercedes-Benz Freightliner and FUSO Trucks
“You always go above-and-beyond to create the best body electronic, instrument and telematics components for our trucks and buses. This is why you take the award
trophy home in the Partnership category.”
Dr. Marcus Shoenenberg Vice President of Procurement, Daimler Trucks and Buses, Daimler AG
14
Focus on Growth
15
Focus on Growth Markets
Source: Dec 2017 IHS; LMCA, ACT Research, Emerging Strategy and Company Data
INTELLIGENCE
10% CAGR
SAFETY &
SECURITY
12% CAGR
EMISSIONS
5% CAGR
FUEL
EFFICIENCY
5% CAGR
These megatrends
are expected to grow
8% - 9% vs. global
vehicle production
growth of 2% - 3%
from 2017 to 2023
We focus on industry megatrends that will drive growth 2-3x our underlying markets
Migrating toward smart products will continue to drive growth through increased vehicle content
*Smart products include Stoneridge products with printed circuit boards and /
or electronic content, including software
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Intelligence
Stoneridge is helping
customers move from
electromechanical to
electronic solutions that can
leverage digital advantages
Stoneridge Solutions
Instrument Clusters Fully reconfigurable, high
resolution displays
Telematics Enhances vehicle diagnostics
and efficiency
Electronic Control Units
(ECUs)
Standard to highly
customizable
Electronic Shift-by-wire
(SBW)
Replaces the mechanical
shifter in automatic
transmissions
Tachograph and Electronic
Logging Device (ELD)
Advanced fleet management
and driver information systems
Power Modules Intelligent distribution and
power control
The market is demanding
innovative display and
vehicle communications
solutions
Stoneridge is applying our
hardware & software solutions
into adaptive systems driving
vehicle / user interaction and
data management
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Emissions
Compliance
requirements are
driving increasingly
sophisticated
emissions products
Recent emissions scandals
are creating requirements for
additional emissions testing
products and more complex
systems
Stoneridge has developed
innovative technologies that
enable compliance with
increasingly stringent
emissions regulations
Stoneridge Solutions
Soot Sensor Particulate sensor monitors
harmful emissions
Exhaust Gas
Temperature Sensors
Controls and monitors critical after-
treatment systems and engine
components protecting engine
from critically high exhaust
temperatures
Canister Vent
Solenoid
Reduces fuel vapor emissions
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Fuel Efficiency
Stoneridge Solutions
MirrorEyeTM Reduces fuel consumption through
enhanced aerodynamics
Front Axle
Disconnect
Improves drivetrain efficiency
Turbo Actuator Improves engine performance
Telematics Enhances vehicle efficiency
Market demand for fuel economy
and performance has led OEMs to
focus on delivering fuel savings
without compromising
performance
Increased regulations
and market demands
have led to changes in
vehicle systems
Stoneridge is helping OEMs
increase fuel economy through
more effective engine
management and performance
enhancing technology
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Safety and Security
Stoneridge Solutions
Track and
Trace
Enhances driver safety and security of
both vehicle and cargo
Tachograph and
ELD
Improves driver safety and enables
compliance
MirrorEyeTM Eliminates driver blind spots and
increases driver’s awareness of
surroundings
Parking Assist Improves vehicle safety / reduces accidents
Seat Track
Position
Improves active restraint systems
Speed Sensors Enables ABS & vehicle stability
Driver safety becoming
more autonomous
through electronic safety
and security solutions
Stoneridge focuses on providing
high reliability products for safety
critical applications through robust
design and testing
Stoneridge is using our
established network to track
vehicle and goods for both driver
and cargo safety and security as
well as fleet management
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Ford F-Series
Trailer Tow Connector, Canister Vent Valve, Rotary 4x4
Control Switch, Seat Track Position Sensor
Exhaust Gas, Cylinder Head, Engine Coolant & Exhaust
Gas Recirculation Temperature Sensors
Buick LaCrosse
Shift by Wire / Transmission Range Control Module,
Canister Vent Solenoid
Ram Trucks
Front Axle Disconnect Actuator, Trailer Tow Connector,
Ram Box and Tailgate Actuators, Under Hood Switch,
Coolant & Oil Temperature Sensors, Smart Bar Actuator
Cadillac XT5
Shift by Wire / Transmission Range Control Module,
Canister Vent Solenoid, Trailer Tow Connector
Jeep Cherokee
Under Hood Security Switch, Coolant & Oil Temperature
Sensors, Tailgate Release Switch, Exhaust Gas,
Temperature Sensor, Trailer Tow Connector
Chevrolet Bolt
Shift by Wire / Transmission Range Control Module,
Park Lock
Chevy / GMC Silverado / Sierra
Front Axle Disconnect Actuator, Trailer Tow Connector,
Canister Vent Solenoid
Lincoln Continental
Shift by Wire / Transmission Range Control Module,
Capacitive Keypad, Seat Track Position Sensor, Vapor,
Bypass Valve, Canister Vent Valve
Ford Fusion
Shift by Wire / Transmission Range Control Module,
Capacitive Keypad, Seat Track Position Sensor,
Release Switches, Canister Vent Solenoid, Vapor
Blocking Valve, Cylinder Head & Engine coolant
Temperature Sensors
Stoneridge Passenger Car / Light Truck Content
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PACCAR
Tachograph, High Temperature Sensor, Power & Switch
Module
Daimler
Instrument Cluster, Tachograph, High Temperature
Sensor, Power & Switch Module, Telematics
MAN
Instrument Cluster, Telematics, Tachograph, Power &
Switch Module, ECU
Navistar
Instrument Cluster, High Temperature Sensor, Switches,
Power & Switch Module
Scania
Instrument Cluster, Tachograph, Power & Switch Modules,
Telematics
Volvo
Instrument Cluster, Power & Switch Modules, ECU, Soot
Sensor, Switches
Crown Equipment Corporation
Vision Systems
Caterpillar
Vision Systems
John Deere
Vision Systems
Stoneridge Commercial Vehicle Content
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Recent Financial Performance
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3rd Quarter 2018 Financial Summary
3rd Quarter 2018 Financial Results
2018 Performance and Guidance
Sales of $208.9 million, an increase of 3% over Q3 2017
Control Devices sales of $110.0 million, an increase of 2% over Q3 2017
Electronics sales of $90.7 million, an increase of 13% over Q3 2017
PST sales of $18.9 million, a decrease of 26% over Q3 2017
Adjusted operating income of $18.7 million, an increase of 20% over Q3 2017 (9.0% adjusted operating margin)
Control Devices adjusted operating income of $16.7 million, an increase of 3% over Q3 2017 (15.2% adjusted operating margin)
Electronics adjusted operating income of $9.3 million, an increase of 38% over Q3 2017 (10.3% adjusted operating margin)
PST adjusted operating income of $1.2 million, a decrease of 18% over Q3 2017 (6.5% adjusted operating margin)
Segment level financial information includes intercompany sales
Due to centralizing certain procurement and operations functions we have allocated certain corporate costs to each segment that were not previously allocated
For purposes of our quarter over quarter comparisons we have adjusted these costs
*Guided to low end of previously provided ranges on Q2 earnings call
2018 Q3
(Actual)
2018 Full Year
Guidance
(Previous)*
2018 Full Year
Guidance
(Updated)
Sales $208.9 Million $870 - $890 Million $855 - $870 Million
Gross Margin 30.3% 31.0% - 32.0% 30.0% - 31.0%
Adj. Operating
Margin9.0% 9.0% - 10.0% 8.75% - 9.25%
Adj. EPS $0.47 $2.05 - $2.20 $2.00 - $2.10
Adj. EBITDA
Margin12.2% 12.5% - 13.5% 12.25% - 12.75%
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Financial Summary
We continue to deliver sustainable, profitable growth
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Control Devices
Deliver growth in sensing and actuation segments
Drive operational efficiency
Manage ramp-down of shift-by-wire programs (~Q4)
Electronics
Execute product
launches
Capture MirrorEye
opportunities
Refine engineering
footprint and drive
global capability
PST
Drive track & trace
growth
Leverage cost
structure
Capitalize on
macroeconomic
tailwinds
Keys to 2018 Success
We continue to execute and focus on our keys to 2018 success
*Based on midpoint of full year guidance provided on Q3 2018 earnings call on October 29, 2018
26
Control Devices
Financial Performance
Revenue growth and stable operating profit despite reduced production levels,
tariffs and continued ramp-down of Shift-by-Wire programs
Control Devices Overview
Growth in certain actuation products and emissions products offset by production volume reductions by our customers, especially in China, and continued ramp-down of current Shift-by-Wire programs
Year-to-date Shift-by-Wire revenue of $52 million relative to $77 million in the same period in 2017 ($25 million or 32% reduction year-over-year)
40 Basis point improvement in SG&A and design and development (“D&D”) expenses relative to last quarter
10 Basis point adjusted operating margin improvement relative to Q3 2017 despite tariff-related headwinds of approximately $1.3 million in the quarter (1.2% of segment sales)
Segment level financial information includes intercompany sales
*Due to centralizing certain procurement and operations functions we have allocated certain corporate costs to each segment that were not previously allocated
For purposes of our quarter over quarter comparisons we have adjusted these costs
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Electronics
Financial Performance
Continued strong revenue performance and margin expansion. Adjusted
operating margin exceeds 10% for the quarter – first time in 5 years.
Segment level financial information includes intercompany sales
*Due to centralizing certain procurement and operations functions we have allocated certain corporate costs to each segment that were not previously allocated
For purposes of our quarter over quarter comparisons we have adjusted these costs
Electronics Overview
Revenue increased by 13% quarter-over-quarter due to continued strong commercial vehicle production volumes and ramp-up of recently launched programs
Revenue was negatively impacted by $3.1 million due to unfavorable currency translation
Adjusted operating margin improved by 190 basis points relative to Q3 2017 and 130 basis points relative to last quarter.
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PST
Financial Performance
Margin expansion continues despite challenging macroeconomic conditions
Segment level financial information includes intercompany sales
*Due to centralizing certain procurement and operations functions we have allocated certain corporate costs to each segment that were not previously allocated
For purposes of our quarter over quarter comparisons we have adjusted these costs
PST Overview
Challenging macroeconomic conditions in Brazil. Reduced demand for aftermarket audio and alarm systems and currency headwinds leading to reduced revenue quarter-over-quarter. Track and trace growth contributing to margin expansion.
Revenue was negatively impacted by approximately $5.1 million relative to Q3 2017 due to unfavorable currency movements.
Despite reduced revenue, adjusted operating income improved by 70 basis points quarter-over-quarter primarily due to reduced SG&A expenses
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Tariff / NAFTA Update
Total announced tariffs expected to impact Q4 by $1.0 to $1.3 million as
reflected in our updated guidance
Expected tariff
headwind in Q4:
$1.0 - $1.3 million
Expected tariff
headwind 2018:
$2.3 - $2.6 million
On August 23, 2018 the United States imposed a 25% import tariff on certain Chinese goods and raw materials (not considered in previously provided guidance)
On September 24, 2018 the United States implemented an additional 10% import tariff to increase to 25% on January 1, 2019 (not considered in previously provided guidance)
Stoneridge is impacted by these tariffs, directly and indirectly through our suppliers, as we import and utilize certain components and raw materials from China
On September 30, 2018 the United States-Mexico-Canada Agreement was reached to replace NAFTA
Stoneridge does not expect to be impacted by this agreement in the short-term, but we will continue to monitor the situation
We will continue to utilize our global manufacturing footprint and supply chain to reduce tariff exposure and work with our customers and suppliers to work to reduce the net impact
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Capital Allocation Strategy
Share Repurchase Authorization
We will utilize our capital structure in order to maximize shareholder value
Net Debt and Leverage Ratio
Net Debt / Adjusted EBITDA
We will utilize our capital to
maximize shareholder return
through investment in our existing
business, inorganic growth and
return of capital to shareholders
Continue to target and prioritize
inorganic growth through strategic
technologies, geographic expansion
and/or customer diversification
Stoneridge’s Board of Directors
have authorized the repurchase of
up to approximately 8% of its
common shares ($50 million) during
the next 18 months*1.6x 1.3x 0.5x 0.7x 0.7x 0.6x 0.4x
*Based on stock price and market capitalization as of October 25, 2018 and authorization of $50 million share repurchase program by the Board of Directors
31
2018 Full-Year Adjusted EPS Guidance
Continued customer volume reductions on certain platforms in China and North America
Movements in currency are creating additional headwinds, specifically in Europe and Brazil
Tariffs announced in Q2 and Q3 created $1.3 million headwind in Q3 and are expected to create $1.0 - $1.3 million headwind for Q4 (total tariff expenses in 2018 expected to be $2.3 - $2.6 million)
Operating margin expansion expected to continue in Q4
Expecting tax rate below previously guided 20% – 25% range for Q4. Q4 tax rate expected to be 15% – 20%.
Q2 Guidance
Outlook
Volume
Reductions
Q3 Guidance
Outlook
Low End of
$2.05 - $2.20
Currency
Midpoint
$2.05
Tariffs
Expected operating margin expansion and reduced tax rate partially offset
challenging macroeconomic factors.
Midpoint of full-year Adjusted EPS guidance ($2.05) reaffirms low-end of
previously provided range.
Tax rateOperating Margin
Expansion
Q2 Guidance Adjusted for
Impact of External Factors
< $2.05
32
Recent Product Updates
33
MirrorEyeTM Update
Awarded first OEM MirrorEyeTM program
Expect retrofit opportunities beginning late 2018
Pending award for our first OEM MirrorEyeTM
program with a leading, global OEM
$13 million peak annual revenue
Start-of-Production – 2020
FMCSA exemption in-process to allow for
removal of traditional mirrors and
replacement by MirrorEyeTM systems
American Truck Association (ATA) encouraging
“expeditiously approving” any requests to allow
mirrorless technology
Expect MirrorEyeTM retrofit revenue late 2018
Multiple development programs with
additional global OEMs – expecting additional
OEM awards
34
MirrorEyeTM Update
MirrorEyeTM commercialization progressing as planned
FMCSA exemption could accelerate market penetration and adoption rate
MirrorEyeTM fleet trials ongoing
Over one million miles driven with major U.S. fleets including Schneider, Maverick and J.B. Hunt
Schneider and J.B. Hunt publicly commented in support of the requested FMCSA exemption as have the Trucking Alliance and American Trucking Associations (ATA)
Expecting decision on FMCSA exemption shortly
MirrorEyeTM featured on Starship Initiative Truck
Partnered with Shell Lubricants and AirFlow Truck Company
Cross-country drive resulted in 28.4% fuel economy improvement
Expect to launch retrofit program late 2018
Not dependent on FMCSA exemption but exemption could provide additional market penetration and adoption
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Connecting Drivers to Information
Pending award for extension and
expansion of our largest global
Driver Information System program
$38 million peak annual revenue
$8 million expansion
$3 million localization in Brazil
Start-of-production – 2021
Deepening our existing customer
relationships
First significant award utilizing our
local Brazilian footprint – serving
our global customers more
efficiently
Driver Information Systems are a key global platform driving growth
Product image is an example of Stoneridge technology and may or may not be representative of the awarded production product
36
Stoneridge - A Vehicle Technology CompanyDriver Information Systems
Driver information systems are driving increased content per vehicle and future
growth opportunities through additional functionality and sub-system integration
Commercial vehicle instrument
clusters are following passenger car
trends and becoming fully
configurable, display-based driver
information systems
Stoneridge is one of the global
leaders in commercial vehicle driver
information systems
Delivering commercial vehicle driver
information systems solutions for 25+
years
Awards
Recently announced $38
million annual* global
award for hybrid and fully
configurable systems
2005 First color TFT diplay
commercial vehicle
instruement cluster
award
2008Launched first “hybrid”
color display driver
information system
2017Awarded fully-
configurable driver
information system
global program
2020Launch fully-
configurable
driver information
system
Additional functionality
development and sub-
system integration (data,
infotainment, etc.)
*Peak annual revenue
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Enabling Intelligent Vehicles
Leading provider of commercial vehicle connectivity and intelligence solutions
OEM and aftermarket connectivity and
intelligence solutions for global commercial
vehicle applications
Hardware solutions that provide in-vehicle connectivity
Software solutions that enable data compilation and
analysis
Our solutions enable improved fleet
management, vehicle efficiency and compliance
Pending award for one of our largest
connectivity programs with global commercial
vehicle OEM
$24 million peak annual revenue
Start-of-production – Early 2019
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Stoneridge – A Vehicle Technology CompanyTachograph Business Realignment
Launching 1C Smart Tachograph in 2019
Includes global navigation satellite system to record vehicle location
Utilizes digital short-range communication (DSRC) to communicate with roadside inspections without stopping vehicle
Managed exit from analog tachograph and non-core related products
Digital tachograph production and operations in Dundee, Scotland will be moved to an alternate facility in Europe
Digital tachograph business follows data and connectivity strategy and is key to our long-term strategic plan
Realignment of the business will drive margin improvement of 3% - 5% in 2019 on total sales of $45 -$50 million
Will provide additional detail regarding expected restructuring costs in Q4
We continue to evaluate our product portfolio and structure to optimize
performance and focus resources for growth
39
Stoneridge - A Vehicle Technology CompanyShift-by-Wire Award
Awarded new Shift-by-Wire program with Chinese
OEM for local market
First major actuation award to be produced in
China for the Company
Establishes our actuation products in Chinese market to
take advantage of growing Shift-by-Wire and Park-by-Wire
market demand
3 Total platforms with both traditional & hybrid
powertrains
Customer prefers a standalone Shift-by-Wire mechanism
external to the transmission
$13 million peak annual revenue
Expected start of production late-2020
7-year total life
Image Source: www.ford.com
Shift-by-Wire and Park-by-Wire remain a platform for growth
40
Stoneridge - A Vehicle Technology CompanyShift-by-Wire Update
Shift-by-Wire (Current)
One of three global suppliers to
receive a 2016 Safe Pillar Award
from Ford for achieving
excellence in quality, cost,
performance and delivery related
to actuation and sensors,
including our Shift-by-Wire
program
Continue to pursue market
opportunities with the existing
Shift-by-Wire product, as well as
product extensions
Image Sources: www.ford.com, www.gm.com, and www.Lincoln.com
Shift-by-Wire and related technologies remain a platform for growth
Park-by-Wire (2019 and beyond)
Extension of Shift-by-Wire technology
Replaces park function normally
controlled by mechanical shifter
Broad applications across all
conventional engines as well as
electric and hybrid-electric powertrains
North America and Europe
programs (2019 start-of-production)
$24 million (peak annual revenue)
awarded
Asia programs (2020 start-of-
production)
$7 million (peak annual revenue)
awarded
41
Stoneridge - A Vehicle Technology CompanyElectrified Drivetrain
Front-Axle Disconnect (Current)
Decouples the front-axle in a
4x4 vehicle allowing 4x2
operation “on-the-fly”
Smart Bar (Current)
Axle-mounted smart actuator
allowing increased performance
in off-road driving situations
Image Sources: www.motortrend.com, www.off-road.com
Axle and suspension actuation technologies remain
a platform for growth as drivetrains continue to
evolve
Electric Axle (E-Axle) (2020+)
Stoneridge has developed
actuators that will be included
in E-Axle systems that will
enable electric drive propulsion
in either hybrid or fully electric
vehicles
Awarded E-Axle development
on high-performance
platform in North America
with a planned start-of-
production (SOP) in 2021
Developing solutions for
multiple other OEM / Tier 1
applications
42
Stoneridge - A Vehicle Technology CompanyActuation Systems
Our actuation technologies will drive growth on traditional, hybrid and fully
electric drivetrains today and in the future
Our actuation technologies will drive growth in traditional drivetrains and the electrified drivetrains of the future
Park-by-wire developed for hybrid and fully electric drivetrains as an extension of our shift-by-wire actuator that is in production on traditional drivetrains today
Awarded contracts for our actuation technology on electrified axle (E-Axle) systems. Extension of our axle-based actuation technologies currently in production.
Awards
Announced in Q2 – $31 million annual* park-by-wire programs awarded in North America, Europe and Asia
Announced in Q3 – E-Axle development award on high-performance platform in North America
*Peak annual revenue
2015Launch shift-by-wire
with multiple global
OEMs
2016Launch shift-by-
wire with park-
by-wire
functionality on
Chevrolet Bolt
2017Awarded $31
million* of
park-by-wire
global
programs
2017Awarded E-Axle
development
platform
2021E-Axle platform
launch in North
America
2019Park-by-wire
platform
launches in
North America
and Europe
2020Park-by-wire
platform
launches in Asia
Exploration of complimentary actuation
technologies (expand customers and capabilites)
Geographic expansion of actuation capabilities
43
Summary
Stoneridge is a well-established, global, public automotive
company
Our business is well diversified among our segments, regions
and served markets
We have a robust backlog representing 5.3x 2017 OEM sales
over the next five years
We are positioned to outpace vehicle market growth by 2 – 3x
over the next 5 years as we continue to focus on segments
that outperform the underlying market
44
Appendix
45
2018 Q3 Adjustments
The expense related to the step-up in the fair value of the earn-out related to the acquisition of
the remaining 26% minority interest in PST was $0.5 million resulting in an EPS adjustment of
$0.02
Expenses related to certain one-time business realignment costs have been adjusted to
reflect normalized earnings. The after-tax impact of this adjustment was ($0.1) million.
Gains related to the impact of the US Tax Cuts and Jobs Act were removed to reflect
normalized earnings. The after-tax impact of this adjustment was ($0.1) million.
Adjustment
Expected Q3 2018 After-
Tax Impact (USD millions)
Expected Q3 2018 After-
Tax EPS Impact
Earn-out (PST) ($0.5) ($0.02)
Business realignment costs $0.1 $0.00
Impact of US Tax Cuts and Jobs Act $0.1 $0.00
Total ($0.3) ($0.01)
46
Income Statement
(Unaudited)
(in thousands, except per share data) 2018 2017 2018 2017
Net sales $ 208,853 $ 203,582 $ 655,385 $ 617,004
Costs and expenses:
Cost of goods sold 145,568 141,033 456,713 429,890
Selling, general and administrative 32,589 37,277 105,106 107,247
Design and development 12,384 11,976 39,226 35,731
Operating income 18,312 13,296 54,340 44,136
Interest expense, net 1,155 1,508 3,679 4,436
Equity in earnings of investee (249) (465) (1,435) (1,200)
Other expense (income), net 647 395 (216) 1,190
16,759 11,858 52,312 39,710
3,467 3,809 10,520 13,569
Net income 13,292 8,049 41,792 26,141
Net loss attributable to noncontrolling interest - - - (130)
Net income attributable to Stoneridge, Inc. $ 13,292 $ 8,049 $ 41,792 $ 26,271
Earnings per share attributable to Stoneridge, Inc.:
Basic $ 0.47 $ 0.29 $ 1.47 $ 0.94
Diluted $ 0.46 $ 0.28 $ 1.44 $ 0.92
Weighted-average shares outstanding:
Basic 28,453 28,136 28,384 28,026
Diluted 29,065 28,652 29,073 28,613
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
September 30,
Income before income taxes
Provision for income taxes
Three months ended Nine months ended
September 30,
47
Segment Financial Information
2018 2017 2018 2017
Net Sales:
Control Devices $ 108,402 $ 106,842 $ 333,715 $ 339,716
Inter-segment sales 1,556 1,118 6,218 3,269
Control Devices net sales 109,958 107,960 339,933 342,985
Electronics 81,587 71,354 261,928 206,769
Inter-segment sales 9,067 8,959 29,310 30,538
Electronics net sales 90,654 80,313 291,238 237,307
PST 18,864 25,386 59,742 70,519
Inter-segment sales - 145 2 145
PST net sales 18,864 25,531 59,744 70,664
Eliminations (10,623) (10,222) (35,530) (33,952)
Total net sales $ 208,853 $ 203,582 $ 655,385 $ 617,004
Operating Income (Loss):
Control Devices $ 16,297 $ 16,249 $ 51,336 $ 55,257
Electronics 8,951 4,896 25,107 13,267
PST 668 1,018 1,553 2,720
Unallocated Corporate (7,604) (8,867) (23,656) (27,108)
Total operating income $ 18,312 $ 13,296 $ 54,340 $ 44,136
Depreciation and Amortization:
Control Devices $ 3,070 $ 2,664 $ 8,762 $ 8,050
Electronics 2,213 2,136 6,756 5,947
PST 1,583 2,115 5,828 6,299
Unallocated Corporate 200 181 596 376
Total depreciation and amortization $ 7,066 $ 7,096 $ 21,942 $ 20,672
Interest Expense, net:
Control Devices $ 19 $ 19 $ 56 $ 84
Electronics 32 24 89 68
PST 230 378 762 1,482
Unallocated Corporate 874 1,087 2,772 2,802
Total interest expense, net $ 1,155 $ 1,508 $ 3,679 $ 4,436
Capital Expenditures:
Control Devices $ 3,938 $ 5,523 $ 12,996 $ 13,318
Electronics 725 2,417 4,892 6,451
PST 522 974 2,477 2,899
Unallocated Corporate 786 811 2,451 2,224
Total capital expenditures $ 5,971 $ 9,725 $ 22,816 $ 24,892
Nine months endedThree months ended
September 30,September 30,
48
Balance Sheet
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
(in thousands) 2018 2017
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 60,655 $ 66,003
150,393 142,438
Inventories, net 86,755 73,471
Prepaid expenses and other current assets 22,107 21,457
Total current assets 319,910 303,369
Long-term assets:
Property, plant and equipment, net 111,012 110,402
Intangible assets, net 63,052 75,243
Goodwill 37,155 38,419
Investments and other long-term assets, net 28,123 31,604
Total long-term assets 239,342 255,668
Total assets $ 559,252 $ 559,037
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of debt $ 1,808 $ 4,192
Accounts payable 91,272 79,386
Accrued expenses and other current liabilities 52,663 52,546
Total current liabilities 145,743 136,124
Long-term liabilities:
Revolving credit facility 101,000 121,000
Long-term debt, net 1,218 3,852
Deferred income taxes 17,170 18,874
Other long-term liabilities 24,722 35,115
Total long-term liabilities 144,110 178,841
Shareholders' equity:
Preferred Shares, without par value, 5,000 shares authorized, none issued - -
Common Shares, without par value, 60,000 shares authorized,
- -
Additional paid-in capital 230,229 228,486
and December 31 2017, respectively, at cost (8,875) (7,118)
Retained earnings 133,803 92,264
Accumulated other comprehensive loss (85,758) (69,560)
Total shareholders' equity 269,399 244,072
Total liabilities and shareholders' equity $ 559,252 $ 559,037
September 30, 2018 and December 31, 2017, respectively, with no stated value
28,966 and 28,966 shares issued and 28,483 and 28,180 shares outstanding at
Common Shares held in treasury, 483 and 786 shares at September 30, 2018
Accounts receivable, less reserves of $1,199 and $1,109, respectively
49
Statement of Cash Flows
(Unaudited)
Nine months ended September 30, (in thousands) 2018 2017
OPERATING ACTIVITIES:
Net income $ 41,792 $ 26,141
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 17,073 15,922
Amortization, including accretion of deferred financing costs 5,112 4,993
Deferred income taxes 2,399 6,233
Earnings of equity method investee (1,435) (1,200)
(Loss) gain on sale of fixed assets (21) 6
Share-based compensation expense 4,214 5,713
Tax benefit related to share-based compensation expense (879) (759)
Change in fair value of earn-out contingent consideration 1,918 4,645
Accounts receivable, net (15,145) (18,232)
Inventories, net (18,041) (6,564)
Prepaid expenses and other assets (1,086) 1,530
Accounts payable 15,280 11,611
Accrued expenses and other liabilities (3,543) 1,079
Net cash provided by operating activities 47,638 51,118
INVESTING ACTIVITIES:
Capital expenditures (22,816) (24,892)
Proceeds from sale of fixed assets 44 66
Insurance proceeds for fixed assets 1,403 -
Business acquisition, net of cash acquired - (77,258)
Net cash used for investing activities (21,369) (102,084)
Changes in operating assets and liabilities, net of effect of business combination:
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
50
Statement of Cash Flows (Cont.)
(Unaudited)
Nine months ended September 30, (in thousands) 2018 2017
FINANCING ACTIVITIES:
Acquisition of noncontrolling interest, including transaction costs - (1,848)
Revolving credit facility borrowings 27,500 91,000
Revolving credit facility payments (47,500) (32,000)
Proceeds from issuance of debt 369 2,557
Repayments of debt (4,372) (10,307)
Other financing costs - (61)
Repurchase of Common Shares to satisfy employee tax withholding (4,206) (2,222)
Net cash (used for) provided by financing activities (28,209) 47,119
Effect of exchange rate changes on cash and cash equivalents (3,408) 4,249
Net change in cash and cash equivalents (5,348) 402
Cash and cash equivalents at beginning of period 66,003 50,389
Cash and cash equivalents at end of period $ 60,655 $ 50,791
Supplemental disclosure of cash flow information:
Cash paid for interest $ 3,899 $ 4,286
Cash paid for income taxes, net $ 14,899 $ 5,745
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
51
Reconciliations to US GAAP
52
Reconciliations to US GAAP
This document contains information about Stoneridge's financial results which is not presented in accordance with accounting principles generally accepted in the United States ("GAAP"). Such non-GAAP financial measures are reconciled to their closest GAAP financial measures in the appendix of this document. The provision of these non-GAAP financial measures for 2017 and 2018 is not intended to indicate that Stoneridge is explicitly or implicitly providing projections on those non-GAAP financial measures, and actual results for such measures are likely to vary from those presented. The reconciliations include all information reasonably available to the Company at the date of this document and the adjustments that management can reasonably predict.
53
Reconciliations to US GAAP
(USD in millions) Q1 2017 Q2 2017 Q3 2017 YTD Q3 2017 Q1 2018 Q2 2018 Q3 2018 YTD Q3 2018
Gross Profit 61.2$ 63.4$ 62.6$ 187.1$ 68.0$ 67.4$ 63.3$ 198.7$
Add: Pre-Tax Step-Up in Acquired Inventory from Orlaco 1.0 0.7 1.6
Adjusted Gross Profit 62.1$ 64.1$ 62.6$ 188.8$ 68.0$ 67.4$ 63.3$ 198.7$
Reconciliation of Adjusted Gross Profit
(USD in millions) Q1 2017 Q2 2017 Q3 2017 YTD Q3 2017 Q1 2018 Q2 2018 Q3 2018 YTD Q3 2018
Operating Income 15.2$ 15.7$ 13.3$ 44.1$ 16.8$ 19.2$ 18.3$ 54.3$
Add: Pre-Tax Step-Up in Acquired Inventory from Orlaco 1.0 0.7 1.6
Add: Pre-Tax Transaction Costs Adjustment (Orlaco) 1.2 1.2
Add: Pre-Tax Step-Up in Fair Value of Earn-Out (Orlaco) 2.1 1.8 3.9 0.4 0.4
Add: Pre-Tax Step-Up in Fair Value of Earn-Out (PST) 0.2 0.5 0.7 0.5 0.5 0.5 1.6
Add: Pre-Tax Business Realignment Costs 0.2 0.4 (0.1) 0.6
Adjusted Operating Income 17.4$ 18.7$ 15.6$ 51.6$ 18.0$ 20.1$ 18.7$ 56.8$
Reconciliation of Adjusted Operating Income
(USD in millions) Q1 2017 Q2 2017 Q3 2017 YTD Q3 2017 Q1 2018 Q2 2018 Q3 2018 YTD Q3 2018
Income Before Tax 13.7$ 14.1$ 11.9$ 39.7$ 16.6$ 18.9$ 16.8$ 52.3$
Interest expense, net 1.4 1.5 1.5 4.4 1.4 1.2 1.2 3.7
Depreciation and amortization 6.5 7.1 7.1 20.7 7.8 7.1 7.1 21.9
EBITDA 21.6$ 22.7$ 20.5$ 64.8$ 25.8$ 27.2$ 25.0$ 77.9$
Add: Pre-Tax Step-Up in Acquired Inventory from Orlaco 1.0 0.7 1.6
Add: Pre-Tax Transaction Costs Adjustment (Orlaco) 1.2 1.2
Add: Pre-Tax Step-Up in Fair Value of Earn-Out (Orlaco) 2.1 1.8 3.9 0.4 0.4
Add: Pre-Tax Step-Up in Fair Value of Earn-Out (PST) 0.2 0.5 0.7 0.5 0.5 0.5 1.6
Add: Pre-Tax Business Realignment Costs 0.2 0.4 (0.1) 0.6
Adjusted EBITDA 23.8$ 25.7$ 22.8$ 72.3$ 26.9$ 28.1$ 25.4$ 80.4$
Reconciliation of Adjusted EBITDA
54
Reconciliations to US GAAP
(USD in millions) Q1 2017 Q2 2017 Q3 2017 YTD Q3 2017 Q1 2018 Q2 2018 Q3 2018 YTD Q3 2018
Control Devices Operating Income 19.1$ 19.9$ 16.2$ 55.3$ 17.9$ 17.2$ 16.3$ 51.3$
Add: Pre-Tax Allocation of Centralized Procurement and Operations Functions 0.5 0.4 0.4 1.4
Add: Pre-Tax Business Realignment Costs 0.1 0.1
Control Devices Adjusted Operating Income 19.1$ 19.9$ 16.2$ 55.3$ 18.4$ 17.7$ 16.7$ 52.8$
Reconciliation of Control Devices Adjusted Operating Income
(USD in millions) Q1 2017 Q2 2017 Q3 2017 YTD Q3 2017 Q1 2018 Q2 2018 Q3 2018 YTD Q3 2018
Electronics Operating Income 5.6$ 2.8$ 4.9$ 13.3$ 7.9$ 8.3$ 9.0$ 25.1$
Add: Pre-Tax Step-Up in Acquired Inventory from Orlaco 1.0 0.7 1.6
Add: Pre-Tax Step-Up in Fair Value of Earn-Out (Orlaco) 2.1 1.8 3.9 0.4 0.4
Add: Pre-Tax Allocation of Centralized Procurement and Operations Functions 0.5 0.4 0.4 1.4
Add: Pre-Tax Business Realignment Costs 0.3 (0.1) 0.2
Electronics Adjusted Operating Income 6.5$ 5.6$ 6.7$ 18.8$ 8.8$ 9.0$ 9.3$ 27.1$
Reconciliation of Electronics Adjusted Operating Income
(USD in millions) Q1 2017 Q2 2017 Q3 2017 YTD Q3 2017 Q1 2018 Q2 2018 Q3 2018 YTD Q3 2018
PST Operating Income 0.6$ 1.1$ 1.0$ 2.7$ 0.2$ 0.7$ 0.7$ 1.6$
Add: Pre-Tax Step-Up in Fair Value of Earn-Out (PST) 0.2 0.5 0.7 0.5 0.5 0.5 1.6
Add: Pre-Tax Business Realignment Costs 0.2 0.2
Add: Pre-Tax Allocation of Centralized Procurement and Operations Functions 0.1 0.1 0.1 0.2
PST Adjusted Operating Income 0.6$ 1.3$ 1.5$ 3.4$ 1.0$ 1.3$ 1.2$ 3.5$
Reconciliation of PST Adjusted Operating Income
55
Reconciliations to US GAAP
(USD in millions) Q3 2018 Q3 2018 EPS
Net Income Attributable to Stoneridge 13.3$ 0.46$
Add: After-Tax Step-Up in Fair Value of Earn-Out (PST) 0.5 $0.02
Less: After-Tax Impact of US Tax Cut and Jobs Act (0.1) ($0.00)
Add: After-Tax Business Realignment Costs (0.1) ($0.00)
Adjusted Net Income 13.6$ 0.47$
Reconciliation of Q3 2018 Adjusted EPS
(USD in millions) Q3 2017 Q3 2017 EPS
Net Income Attributable to Stoneridge 8.0$ 0.28$
Add: After-Tax Step-Up in Fair Value of Earn-Out (PST) 0.5 $0.02
Add: After-Tax Step-Up in Fair Value of Earn-Out (Orlaco) 1.8 $0.06
Adjusted Net Income 10.3$ 0.36$
Reconciliation of Q3 2017 Adjusted EPS
56
Reconciliations to US GAAP
(USD in millions) YTD Q3 2018 YTD Q3 2018 EPS
Net Income Attributable to Stoneridge 41.8$ 1.44$
Add: After-Tax Step-Up in Fair Value of Earn-Out (PST) 1.6 $0.05
Add: After-Tax Step-Up in Fair Value of Earn-Out (Orlaco) 0.4 $0.01
Less: After-Tax Impact of US Tax Cut and Jobs Act (0.1) ($0.00)
Add: After-Tax Business Realignment Costs 0.4 $0.01
Adjusted Net Income 44.0$ 1.52$
Reconciliation of YTD Q3 2018 Adjusted EPS
(USD in millions) YTD Q3 2017 YTD Q3 2017 EPS
Net Income Attributable to Stoneridge 26.3$ 0.92$
Add: After-Tax Step-Up in Fair Value of Earn-Out (PST) 0.7 $0.02
Add: After-Tax Step-Up in Acquired Inventory from Orlaco 1.2 $0.04
Add: After-Tax Transaction Costs Adjustment (Orlaco) 0.8 $0.03
Add: After-Tax Step-Up in Fair Value of Earn-Out (Orlaco) 3.9 $0.14
Adjusted Net Income 32.9$ 1.15$
Reconciliation of YTD Q3 2017 Adjusted EPS