Stoneridge, Inc. (NYSE:SRI) Q2 2022 Earnings Conference Call August 4, 2022 9:00 AM ET

CompanyParticipants

Jon DeGaynor - President & CEO

Matt Horvath - CFO

Kelly Harvey - Director, IR

Conference Call Participants

Justin Long - Stephens Inc.

Operator

Good day, and thank you for staying by. Welcome to the Stoneridge Second Quarter 2022 Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a Q&A session. [Operator instructions]. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Kelly Harvey, Director of Investor Relations. Please go ahead.

Kelly Harvey

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

Before we begin, I need to inform you that certain statements today may be forward-looking statements. Forward-looking statements include statements that are not historical in nature, and include information concerning our future results or plans. Although we believe that such statements are based upon reasonable assumptions, you should understand that these statements are subject to risks and uncertainties, and actual results may differ materially. Additional information about such factors and uncertainties that could cause actual results to differ, may be found in our 10-Q, which has been filed with the Securities and Exchange Commission under the heading Forward-Looking Statements. During today's call, we will be referring to certain non-GAAP financial measures. Please see the appendix for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures.

After Jon and Matt have finished their formal remarks, we’ll open up the call to questions. . I would ask that you keep your questions to a single follow-up. And with that, I will turn the call over to Jon.

Jon DeGaynor

Thanks, Kelly, and good morning, everyone. Before we begin with the specific results of the quarter, I want to recognize and thank the Stoneridge team for their continued dedication to the company and to our customers during this challenging period. Turning to Page 3. In the second quarter, we continued to navigate through macroeconomic challenges, including ongoing supply chain disruptions, production volatility, and rising material costs. During the quarter, we also experienced significant foreign currency headwinds, primarily related to European currency exposures. We focused on responding to fluctuating production schedules, securing material, managing our cost structure, and continuing to engage with our customers and suppliers on cost recovery actions. Our second quarter adjusted sales of $205.7 million, resulted in an adjusted gross margin of 18.7%, translating to an adjusted operating margin of negative 3.2%. Adjusted EPS for the quarter was negative $0.29. Second quarter adjusted EPS performance was impacted by net foreign currency headwinds of approximately $0.06 versus previous expectations. We continued to offset a large portion of the incremental material and supply chain-related costs through pricing actions and pass-through of costs. We have offset approximately 90% of incremental costs year-to-date relative to last year. Additionally, we continue to pass the majority of spot purchases through to our OEM customers, offsetting more than $15 million in spot buys in the quarter. We will continue to evaluate macroeconomic conditions, and expect ongoing discussions with our customers regarding price increases and other cost recovery actions.