Stoneridge Inc.
03/16/2026 | Press release | Distributed by Public on 03/16/2026 07:10
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
Management's Discussion and Analysis ("MD&A") is intended to help the reader understand the results of operations, financial condition, and cash flows of the Company. MD&A is provided as a supplement to, and should be read in conjunction with, the Company's consolidated financial statements and related notes appearing in Item 8 of this Form 10-K "Financial Statements and Supplementary Data". For discussion related to changes in financial condition and the results of operations for fiscal year 2024-related items, refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K for fiscal year 2024, which was filed with the Securities and Exchange Commission on March 3, 2025.
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 and agricultural vehicle markets.
The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes related thereto and other financial information included elsewhere herein.
Segments
We are organized by products produced and markets served. Under this structure, our operations have been reported using the following segments:
Control Devices.This segment includes results of operations that manufacture actuators, sensors, switches and connectors.
Electronics.This segment includes results of operations from the production of advanced driver information solutions, vision systems, connectivity and compliance solutions and control modules.
Stoneridge Brazil.This segment includes results of operations that design and manufacture vehicle tracking devices and monitoring services, driver information systems, vehicle security alarms and convenience accessories, telematics solutions and multimedia devices.
Overview
During 2025, we were adversely affected by lower production volumes at our customers from lower demand in most of our served markets, which was partially offset by sales in our Electronics segment related to MirrorEye, including the ramp up of a previously launched European OEM program at the end of 2024 and two additional OEM program launches in North America that launched in 2025. Lower sales levels adversely affected gross margin contribution offset by direct material cost improvement and lower quality related costs relative to 2024. We incurred non-recurring expense for the recognition of a valuation allowance for U.S. federal deferred tax assets and the impairment of fixed assets in our Control Devices segment. We significantly increased cash provided by operating activities by reducing working capital levels, specifically lowering inventory through targeted actions and alignment with current production levels.
The Company had a net loss of $102.8 million, or $(3.70) per diluted share, for the year ended December 31, 2025.
Net loss in 2025 increased by $86.3 million, or $(3.10) per diluted share, from $16.5 million, or $(0.60) per diluted share, for the year ended December 31, 2024 primarily due to lower contribution from lower sales levels, the impairment of fixed assets in our Control Devices segment, SG&A costs related to the Control Devices strategic alternatives, higher business realignment costs, unfavorable foreign exchange fluctuations and the recognition of a valuation allowance for U.S. federal deferred tax assets.
In 2025, our net sales decreased by $47.0 million, or 5.2%, while our operating loss increased to $38.6 million.
Our Control Devices segment net sales decreased by 6.2% primarily because 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 automotive market. Segment gross margin decreased due to lower contribution from lower sales and higher business realignment costs. Segment operating income decreased from lower contribution from lower sales levels and the impairment of fixed assets offset by lower D&D from lower wage and fringe spending.
OurElectronics 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 tolower 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 decreaseddue 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 Stoneridge Brazil segment net sales increased by 21.6% primarily as a result of higher sales of our OEM products partially offset by lower original equipment services sales and unfavorable foreign currency translation. Segment gross margin as a percent of sales decreaseddue to unfavorable sales mix impact of higher OEM product sales offset by higher contribution from higher sales levels. Operating income increaseddue to higher contribution from higher OEM product sales.
In 2025, SG&A expenses increased compared to 2024 primarily due to 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.
D&D costs decreased in 2025 because of lower spending for wage and fringe and professional services offset by higher business realignments costs.
At December 31, 2025 and 2024, we had cash and cash equivalents of $66.3 million and $71.8 million, respectively.At December 31, 2025and 2024, we had Credit Facility borrowings of $180.9 millionand $201.6 million, respectively. The 2025 decrease in cash and cash equivalents was mostly caused by repayments of Credit Facility borrowings from the repatriation of cash and cash equivalents at foreign locations.
Outlook
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.
Global inflation rates have significantly fluctuated since 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.
In February 2026, the U.S. government imposed or threatened to impose new tariffs on imported products in addition to those imposed during 2025, from countries including China and Mexico. Should these existing tariffs, or any other proposed tariffs, be implemented and sustained for an extended period of time, there could be a significant adverse effect on the Company. We have and 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, in 2026 the European and North American commercial vehicle end market volumes are forecasted to increase 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 from launches of awarded 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 October 2025, the International Monetary Fund forecasted the Brazil gross domestic product to grow 1.6% in 2026. We expect our served market channels to remain relatively stable 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. 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 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.
Our future effective tax rate depends on various factors, such as changes in tax laws, regulations, accounting principles and our jurisdictional mix of earnings. We monitor these factors and the impact on our effective tax rate.
Other Matters
A significant portion of our sales are outside of the United States. These sales are generated by our non-U.S. based operations, and therefore, movements in foreign currency exchange rates can have a significant effect on our results of operations, which are presented in U.S. dollars. A significant portion of our raw materials purchased by our Electronics and Stoneridge Brazil segments are denominated in U.S. dollars and, therefore, movements in foreign currency exchange rates can also have a significant effect on our results of operations. The U.S. Dollar weakened against the Brazilian real, Chinese renminbi, euro, Mexican peso and Swedish krona in 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.
In December 2018, the Company entered into an agreement to make a $10.0 million investment in a fund ("Autotech Fund II") managed by Autotech Ventures ("Autotech"), a venture capital firm focused on ground transportation technology. The Company's $10.0 million investment in the Autotech Fund II will be contributed over the expected ten year life of the fund. The Company has contributed $9.3 million to the Autotech Fund II since December 2018.
We regularly evaluate theperformance 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 $6.4 million and $2.6 million were incurred during the years ended December 31, 2025 and 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 footprintand executive separation costs. We may incur additional realignment costs in the future.
Because of the competitive nature of the markets we serve, we face pricing pressures from our customers in the ordinary course of business. In response to these pricing pressures we have been able to effectively manage our production costs by the combination of lowering certain costs and limiting the increase of others, the net impact of which to date has not been material. However, if we are unable to effectively manage production costs in the future to mitigate future pricing pressures, our results of operations would be adversely affected.
Year Ended December 31, 2025 Compared To Year Ended December 31, 2024
Consolidated statements of operations as a percentage of net sales are presented in the following table (in thousands):
| Year ended December 31, | 2025 | 2024 |
Dollar increase / (decrease) |
|||||||||||||||||||||||||||||
| Net sales | $ | 861,263 | 100.0 | % | $ | 908,295 | 100.0 | % | $ | (47,032) | ||||||||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||||||||||||||
| Cost of goods sold | 690,109 | 80.1 | 719,042 | 79.2 | (28,933) | |||||||||||||||||||||||||||
| Selling, general and administrative | 125,605 | 14.6 | 117,460 | 12.9 | 8,145 | |||||||||||||||||||||||||||
| Impairment of Control Devices assets | 21,628 | 2.5 | - | - | 21,628 | |||||||||||||||||||||||||||
| Design and development | 62,527 | 7.3 | 72,174 | 7.9 | (9,647) | |||||||||||||||||||||||||||
| Operating loss | (38,606) | (4.5) | (381) | - | (38,225) | |||||||||||||||||||||||||||
| Interest expense, net | 13,578 | 1.6 | 14,447 | 1.6 | (869) | |||||||||||||||||||||||||||
| Equity in (earnings) loss of investee | (340) | - | 1,292 | 0.1 | (1,632) | |||||||||||||||||||||||||||
| Other expense (income), net | 3,608 | 0.4 | (2,523) | (0.3) | 6,131 | |||||||||||||||||||||||||||
| Loss before income taxes | (55,452) | (6.4) | (13,597) | (1.5) | (41,855) | |||||||||||||||||||||||||||
| Provision for income taxes | 47,383 | 5.5 | 2,927 | 0.3 | 44,456 | |||||||||||||||||||||||||||
| Net loss | $ | (102,835) | (11.9) | % | $ | (16,524) | (1.8) | % | $ | (86,311) | ||||||||||||||||||||||
Net Sales.Net sales for our reportable segments, excluding inter-segment sales are summarized in the following table (in thousands):
| Year ended December 31, | 2025 | 2024 |
Dollar increase (decrease) |
Percent increase (decrease) |
||||||||||||||||||||||||||||||||||
| Control Devices | $ | 274,500 | 31.9 | % | $ | 292,606 | 32.2 | % | $ | (18,106) | (6.2) | % | ||||||||||||||||||||||||||
| Electronics | 526,405 | 61.1 | 566,040 | 62.2 | (39,635) | (7.0) | % | |||||||||||||||||||||||||||||||
| Stoneridge Brazil | 60,358 | 7.0 | 49,649 | 5.5 | 10,709 | 21.6 | % | |||||||||||||||||||||||||||||||
| Total net sales | $ | 861,263 | 100.0 | % | $ | 908,295 | 100.0 | % | $ | (47,032) | (5.2) | % | ||||||||||||||||||||||||||
Our Control Devices segment net sales decreased $18.1 million because of decreases in our North American automotive market of $11.8 million including the impact of end-of-life production for an actuator product as well as decreases in our China automotive and off-highway markets of $3.3 million and $2.5 million, 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 Stoneridge Brazil segment net sales increased $10.7 million because 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 $1.5 million.
Net sales by geographic location are summarized in the following table (in thousands):
| Year ended December 31, | 2025 | 2024 |
Dollar increase / (decrease) |
Percent increase / (decrease) |
||||||||||||||||||||||||||||||||||
| North America | $ | 392,298 | 45.5 | % | $ | 447,142 | 49.2 | % | $ | (54,844) | (12.3) | % | ||||||||||||||||||||||||||
| South America | 60,358 | 7.0 | 49,649 | 5.5 | 10,709 | 21.6 | % | |||||||||||||||||||||||||||||||
| Europe and Other | 408,607 | 47.4 | 411,504 | 45.2 | (2,897) | (0.7) | % | |||||||||||||||||||||||||||||||
| Total net sales | $ | 861,263 | 100.0 | % | $ | 908,295 | 100.0 | % | $ | (47,032) | (5.2) | % | ||||||||||||||||||||||||||
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 increase in net sales in South America was because 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 $1.5 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.
Cost of Goods Sold and Gross Margin. Cost of goods sold decreased compared to 2024 and our gross margin decreased to 19.9% in 2025 compared to 20.8% in 2024. Our material cost as a percentage of net sales decreased by 0.8% to 56.8% in 2025 compared to 57.6% in 2024. The decrease in material cost percentage was due to lower material costs from favorable foreign exchange and purchase related variances. Overhead as a percentage of net sales was 18.5% and 17.0% for 2025 and 2024, respectively. The increase in overhead as a percentage of sales was attributable to unfavorable fixed cost leverage from lower sales levels, higher tariffs, which were partially reimbursed by customers and recognized in net sales, and higher business realignment costs of $1.8million.
Our Control Devices segment gross margin decreased primarily because of lower contribution from lower sales and higher business realignment costs of $0.2million.
Our Electronics segment gross margin decreased because of lower contribution from lower sales and higher overhead spending, including higher tariffs and higher business realignment costs of $1.6 million. These increases were partially offset by reduced material 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):
| Year ended December 31, | 2025 | 2024 |
Dollar increase /(decrease) |
Percent increase / (decrease) |
||||||||||||||||||||||
| Control Devices | $ | (17,927) | $ | 6,178 | $ | (24,105) | (390.2) | % | ||||||||||||||||||
| Electronics | 14,315 | 25,561 | (11,246) | (44.0) | % | |||||||||||||||||||||
| Stoneridge Brazil | 5,578 | 982 | 4,596 | 468.0 | % | |||||||||||||||||||||
| Unallocated corporate | (40,572) | (33,102) | (7,470) | (22.6) | % | |||||||||||||||||||||
| Operating loss | $ | (38,606) | $ | (381) | $ | (38,225) | (10032.8) | % | ||||||||||||||||||
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 because of lower contribution from lower sales levels and higher tariffs and higher business realignment costs of $1.4 million offset by lower D&D spending and lower SG&A from a non-recurring royalty liability adjustment.
Our Stoneridge Brazil segment operating income increased due tohigher contribution from higher Stoneridge Brazil OEM product sales.
Our unallocated corporate operating loss increased due to higher SG&A from higher professional services for Control Devices strategic alternatives and higher business realignment costs of $1.9 million.
Operating (loss) income by geographic location is summarized in the following table (in thousands):
| Year ended December 31, | 2025 | 2024 |
Dollar increase / (decrease) |
Percent increase / (decrease) |
||||||||||||||||||||||
| North America | $ | (73,493) | $ | (28,431) | $ | (45,062) | (158.5) | % | ||||||||||||||||||
| South America | 5,578 | 982 | 4,596 | 468.0 | % | |||||||||||||||||||||
| Europe and Other | 29,309 | 27,068 | 2,241 | 8.3 | % | |||||||||||||||||||||
| Operating loss | $ | (38,606) | $ | (381) | $ | (38,225) | (10032.8) | % | ||||||||||||||||||
Our North American operating loss increased due to lower contribution from lower sales levels and higher business realignment costs and higher SG&A spending for Control Devices offsetting lower D&D spending. Operating income in South America increased due tohigher Stoneridge Brazil OEM product sales levels. Our operating results in Europe and Other increased because of higher contribution from higher sales levels and lower material costs including favorable foreign exchange related variances offset by higher D&D spending as a result of lower customer reimbursements.
Interest Expense, net. Interest expense, net decreased by $0.9 million compared to 2024. The decrease was the result of lower outstanding Credit Facility borrowings and Credit Facility interest rates.
Equity in (Earnings) Loss of Investee. Equity (earnings) loss for Autotech Fund II was $(0.3) million and $1.3 million for the years ended December 31, 2025 and 2024, respectively.
Other Expense (Income), net. We record certain foreign currency transaction losses (gains) as a component of other expense (income), 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 for 2024 due to the impact of unfavorable foreign currency movements in our Electronics and Control Devices segments from weakening of the U.S. dollar especially against the euro and Swedish krona.
Provision for Income Taxes. In 2025, the provision for income tax expense was $47.4 million, resulting in an effective tax rate of (85.4)%. In 2024, the provision for income tax expense was $2.9 million, resulting in an effective tax rate of (21.5)%. In 2025 and 2024, the provision for income taxes was impacted by jurisdictional earnings mix, U.S. taxes on foreign earnings, various tax credits and incentives and tax losses for which no benefit is recognized due to valuation allowances.
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.
Liquidity and Capital Resources
Summary of Cash Flows for the years ended December 31, 2025 and 2024 (in thousands):
| Year ended December 31, | 2025 | 2024 |
Dollar increase / (decrease) |
|||||||||||||||||
| Net cash provided by (used for): | ||||||||||||||||||||
| Operating activities | $ | 34,022 | $ | 47,748 | $ | (13,726) | ||||||||||||||
| Investing activities | (21,823) | (24,468) | 2,645 | |||||||||||||||||
| Financing activities | (25,302) | 11,121 | (36,423) | |||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | 7,523 | (3,410) | 10,933 | |||||||||||||||||
| Net change in cash and cash equivalents | $ | (5,580) | $ | 30,991 | $ | (36,571) | ||||||||||||||
Cash provided by operating activities decreased compared to 2024 because of a higher net loss which was partially offset by cash provided from lower working capital levels primarily inventory and accounts payable. Cash used by receivables was unfavorable compared to 2024, however collection terms have remained consistent.
Net cash used for investing activities decreased compared to the prior year due to lower capitalized software development costs and capital expenditures.
Net cash used for financing activities increased compared to the prior year primarily due to an increase in Credit Facility repayments from the repatriation of cash held at foreign locations, net of borrowings.
Summary of Future Cash Flows
The following table summarizes our future cash outflows resulting from financial contracts and commitments, as of December 31, 2025 (in thousands):
| Total |
Less than 1 year |
2-3 years | 4-5 years |
After 5 years |
|||||||||||||||||||||||||
| Credit Facility | $ | 180,942 | $ | - | $ | 180,942 | $ | - | $ | - | |||||||||||||||||||
| Debt | - | - | - | - | - | ||||||||||||||||||||||||
|
Interest payments(A)
|
19,275 | 12,850 | 6,425 | - | - | ||||||||||||||||||||||||
| Operating leases | 15,088 | 4,532 | 6,716 | 3,491 | 349 | ||||||||||||||||||||||||
|
Total contractual obligations(B)
|
$ | 215,305 | $ | 17,382 | $ | 194,083 | $ | 3,491 | $ | 349 | |||||||||||||||||||
(A)Includes estimated payments under the Company's Credit Facility using the most current interest rate and principal balance information available at December 31, 2025, extended through the end of the term.
(B)In December 2018, the Company entered into an agreement to make a $10.0 million investment in Autotech Fund II managed by Autotech, a venture capital firm focused on ground transportation technology. The Company's $10.0 million investment in the Autotech Fund II will be contributed over the expected ten year life of the fund. The Company has contributed $9.3 million to the Autotech Fund II since December 2018.
Management will continue to focus on efficiently managing its weighted-average cost of capital and believes that cash flows from operations and the availability of funds from our Credit Facility provide sufficient liquidity to meet our future growth and operating needs.
As outlined in Note 5 to our consolidated financial statements, as of December 31, 2025, the Credit Facility permitted borrowing up to a maximum level of $225.0 million. On January 30, 2026, the Credit Facility borrowing capacity was reduced to a maximum level of $175.0 million as a result of the sale of the Control Devices business. Effective March 6, 2026, Amendment No. 3 extended the maturity of the Credit Facility through July 1, 2027. The Credit Facility contains certain financial covenants that require the Company to maintain less than a maximum leverage ratio and more than a minimum interest coverage ratio. The Credit Facility also contains affirmative and negative covenants and events of default that are customary for credit arrangements of this type including covenants that place restrictions and/or limitations on the Company's ability to borrow money, make capital expenditures and pay dividends. The Credit Facility had an outstanding balance of $180.9 million at December 31, 2025.
On February 26, 2025, the Company entered into Amendment No. 1 to the Fifth Amended and Restated Credit Agreement and Waiver ("Amendment No. 1"). Amendment No. 1 provides for certain covenant relief and restrictions during the "Covenant Relief Period" (the period ending on the date that the Company delivers a compliance certificate for the quarter ending December 31, 2025). During the Covenant Relief Period:
•the maximum leverage ratio of 3.50 was increased to 6.00 for the quarter ended March 31, 2025, 5.50 for the quarter ended June 30, 2025, 4.50 for the quarter ended September 30, 2025 and 3.50 for the quarter ended December 31, 2025;
•the minimum interest coverage ratio of 3.50 was waived for the quarter ended December 31, 2024 and was reduced to 2.00 for the quarters ended March 31 and June 30, 2025, and 2.50 and 3.50 for the quarter ended September 30, 2025 and December 31, 2025, respectively;
•the Company's aggregate amount of cash and cash equivalents (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;
•there were certain restrictions on Restricted Payments (as defined); and
•a Permitted Acquisition (as defined) could not be consummated unless otherwise approved in writing by the required lenders.
Amendment No. 1 added an additional level to the leverage ratio based pricing grid, through maturity, when the leverage ratio is greater than 3.50.
On November 5, 2025, the Company entered into Amendment No. 2 to the Fifth Amended and Restated Credit Agreement and Consent Agreement ("Amendment No. 2"). Amendment No. 2 amends the Credit Facility and provides for certain covenant relief and restrictions through the Credit Facility's termination date of November 2, 2026. Amendment No. 2 supersedes certain terms of the Credit Facility and Amendment No. 1 beginning November 5, 2025 and ending at the Credit Facility's termination date of November 2, 2026. Amendment No. 2 amends certain Credit Facility terms and provides covenant relief as follows:
•borrowing capacity is reduced from $275.0 million to $225.0 million;
•the sale of the Control Devices business (as defined) is a permitted transaction and upon notice will result in the reduction of the Credit Facility commitment, at the lesser of $50.0 million or the net cash proceeds of this transaction;
•the current minimum interest coverage ratio of 2.5 was extended through the quarter ending March 31, 2026 and increased to 3.5 for the quarter ended June 30, 2026 and thereafter;
▪if the Control Devices business sale is consummated, the minimum interest coverage ratio will increase to 3.5 as of the last day of the first full quarter ending after the sale and thereafter; and
•the maximum leverage ratio of 4.5 for the quarter ended September 30, 2025 and 3.5 for the quarter ended December 31, 2025 and thereafter remains unchanged.
On January 30, 2026, as a result of the sale of the Control Devices business, the Credit Facility borrowing capacity was
reduced from $225.0 million to $175.0 million.
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;
•the current minimum interest coverage ratio of 2.50 will be reduced to 1.60 for the quarter ended March 31, 2026, 1.70 for the quarter ended June 30, 2026, 1.75 for the quarter ended September 30, 2026 and 2.50 for the quarter ended December 31, 2026 and thereafter;
•the maximum leverage ratio was increased to 3.75 for the quarter ended December 31, 2025, increases to 6.25 for the quarter ended March 31, 2026, 6.75 for the quarter ended June 30, 2026, 6.00 for the quarter ended September 30, 2026 and 4.00 for the quarter ended December 31, 2026 and 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.
As a result of Amendment No. 3, the Company was in compliance with all covenants at December 31, 2025. The Company has not experienced a violation that would limit the Company's ability to borrow under the Credit Facility, as amended, and does not expect that the covenants under it will restrict the Company's financing flexibility. However, it is possible that future borrowing flexibility under the Credit Facility may be limited as a result of lower than expected financial performance. The Company expects to make additional repayments on the Credit Facility when cash exceeds the amount needed for operations and to remain in compliance with all covenants.
As of December 31, 2025, the outstanding Credit Facility borrowings were originally scheduled to mature on November 2, 2026. Because the contractual maturity was within twelve months of the balance sheet date, the obligation would typically be classified as a current liability. However, on March 6, 2026, prior to the issuance of these financial statements, the Company entered into Amendment No. 3 which extended the maturity date of the facility to July 1, 2027. In accordance with the guidance for the classification of short-term obligations expected to be refinanced, the Company has classified the $180,942 as long-term debt on the consolidated balance sheets as of December 31, 2025, as the Company demonstrated the intent and ability to refinance the obligation on a long-term basis.
The Company's wholly-owned subsidiary located in Stockholm, Sweden, has an overdraft credit line which allows overdrafts on the subsidiary's bank account up to a daily maximum level of 20.0 million Swedish krona, or $2.2 million and $1.8 million, at December 31, 2025 and 2024, respectively. At December 31, 2025 and 2024 there were no borrowings outstanding on this overdraft credit line. During the year ended December 31, 2025, the subsidiary borrowed and repaid 196.2 million Swedish krona, or $21.3 million. The Stockholm subsidiary has pledged certain of its assets as collateral in order to obtain a guarantee of certain of the Stockholm subsidiary's obligations to third parties.
The Company's wholly-owned subsidiary located in Suzhou, China, has lines of credit that allow up to a maximum borrowing level of 50.0 million Chinese yuan, or $7.2 million at December 31, 2025, and 20.0 million Chinese yuan, or $2.7 million, at December 31, 2024. At December 31, 2025 and 2024 there were no borrowings outstanding on the Suzhou credit lines. In addition, the Suzhou subsidiary has a bank acceptance draft line of credit facilitates the extension of trade payable payment terms by 180 days. The bank acceptance draft line of credit allows up to a maximum borrowing level of 30.0 million Chinese yuan, or $4.3 million at December 31, 2025. At December 31, 2025 there were no borrowings outstanding on the bank acceptance draft line of credit.
In December 2018, the Company entered into an agreement to make a $10.0 million investment in Autotech Fund II managed by Autotech. The Company's $10.0 million investment in the Autotech Fund II will be contributed over the expected ten-year life of the fund. As of December 31, 2025, the Company's cumulative investment in the Autotech Fund II was $9.3 million. The Company contributed $0.4 million and $0.6 million, net to the Autotech Fund II during the years ended December 31, 2025 and 2024, respectively.
Our future results could also be adversely affected by unfavorable changes in foreign currency exchange rates. We have significant foreign denominated transaction exposure in certain foreign currencies including the Argentinian peso, Brazilian real, Chinese renminbi, euro, Mexican peso, and Swedish krona. We have historically entered into foreign currency forward contracts to reduce our exposure related to certain foreign currency fluctuations. See Note 10 to the consolidated financial statements for additional details. Our future results could also be unfavorably affected by increased commodity prices as commodity fluctuations impact the cost of our raw material purchases.
At December 31, 2025, we had a cash and cash equivalents balance of approximately $66.3 million, of which 90.2% was held in foreign locations. The Company has approximately $94.1 million of undrawn commitments under the Credit Facility as of December 31, 2025, which results in total undrawn commitments and cash balances of more than $160.3 million.
Commitments and Contingencies
See Note 11 to the consolidated financial statements for disclosures of the Company's commitments and contingencies.
Seasonality
Our Electronics segment is moderately seasonal, impacted by mid-year and year-end shutdowns and the ramp-up of new model production at key customers. In addition, the demand for our Stoneridge Brazil segment consumer products is generally higher in the second half of the year.
Inflation and International Presence
By operating internationally, we are affected by foreign currency exchange rates and the economic conditions of certain countries. Furthermore, given the current economic climate and recent fluctuations in certain commodity prices, we believe that an increase in such items could significantly affect our profitability. See Note 10 to the consolidated financial statements for additional details on the Company's commodity price and foreign currency exchange rate risks.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.
On an ongoing basis, we evaluate estimates and assumptions used in our consolidated financial statements. We base our estimates on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.
Our critical accounting policies, those most important to the financial presentation and those that are the most complex, subjective or require significant judgment, are as follows. For additional information, see Item 8 of Part II, "Financial Statements and Supplementary Data - Note 2 - Summary of Significant Accounting Policies."
Revenue Recognition and Sales Commitments. We recognize revenue when obligations under the terms of a contract with our customer are satisfied; generally this occurs with the transfer of control of our products and services, which is usually when the parts are shipped or delivered to the customer's premises. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. The transaction price will include estimates of variable consideration to the extent it is probable that a significant reversal of revenue recognized will not occur. Incidental items that are not significant in the context of the contract are recognized as expense. Revenue for OEM and Tier 1 supplier customers and aftermarket products are recognized at the point in time it satisfies a performance obligation by transferring control of a part to the customer. A small portion of our sales are comprised of monitoring services of which the revenue is recognized over the life of the contract. See Note 3 to the consolidated financial statements for additional information on our revenue recognition policies, including recognizing revenue based on satisfying performance obligations.
Goodwill.We test goodwill, all of which relates to our Electronics segment, for impairment on at least an annual basis, or more frequently if a triggering event indicates that an impairment may exist. In qualitatively assessing impairment, the primary qualitative factors include, but are not limited to, the results of prior year fair value calculations, changes in our market capitalization, the reporting unit and overall financial performance, and macroeconomic and industry conditions. We consider the qualitative factors and weight of the evidence obtained to determine if it is more likely than not that a reporting unit's fair value is less than the carrying amount. If not, no further goodwill impairment testing is performed. If it is more likely than not that a reporting unit's fair value is less than its carrying amount, or if we elect not to perform a qualitative assessment of a reporting unit, we then perform a quantitative assessment.
For the quantitative assessment, we utilize the income approach, or a combination of, the income approach and market approach to estimate the fair value of the reporting unit. The income approach uses a discounted cash flow method and the market approach uses valuation multiples observed for the reporting unit's guideline public companies. The determination of discounted cash flows are based on management's estimates of revenue growth rates and earnings before interest, taxes, depreciation and amortization ("EBITDA") margin, taking into consideration business and market conditions for the countries and markets in which the reporting unit operates. We calculate the discount rate based on a market-participant, risk-adjusted weighted average cost of capital, which considers industry specific rates of return on debt and equity capital for a target industry capital structure, adjusted for risks associated with business size, geography and other factors specific to the reporting unit. Our quantitative assessment is affected by the uncertainty of revenue growth rates and EBITDA margin, especially in the outer years of a forecast. Further, affecting our quantitative assessment are future changes in the discount rate, as a result of a change in economic conditions or otherwise, which could result in the carrying value of the reporting unit exceeding its respective fair value.
We performed our annual goodwill impairment analysis for our Electronics reporting unit at the beginning of the fourth quarter of 2025. Based on this analysis, we determined that the fair value of this reporting unit substantially exceeded its carrying value. We performed a sensitivity analysis for the significant assumptions used in the goodwill impairment testing analysis for the Electronics reporting unit. The sensitivities were calculated in isolation using the income approach and keeping all other assumptions constant. The cash flow sensitivities do not consider the offsetting impact of a lower discount rate assumption to reflect the reduced risk in estimated future cash flow growth used under the income approach or the related impacts on pricing multiples used under the market approach.
•A hypothetical increase in the discount rate of 100 basis points would not result in goodwill impairment; and
•A hypothetical decrease in EBITDA margin of 100 basis points for each year in the forecast period would not result in goodwill impairment.
In addition to our annual goodwill impairment analysis, we identified impairment triggering events during our fourth quarter 2024 interim evaluation, which was associated with a decrease in our publicly quoted share price and market capitalization. As such, we quantitatively assessed our Electronics reporting unit as of December 31, 2024, and we determined the fair value of the reporting unit substantially exceeded its carrying value and that no impairment of goodwill was needed.
Warranties. Our warranty liability is established based on our best estimate of the amounts necessary to settle existing and future claims on products sold as of the balance sheet dates. These accruals are based on several factors including past experience, production changes, industry developments and various other considerations. Our estimate is based on historical trends of units sold and claim payment amounts, combined with our current understanding of the status of existing claims and discussions with our customers. The key factors in our estimate are the stated or implied warranty period, the customer source, customer policy decisions regarding warranties and customers seeking to hold the company responsible for their product warranties. Although we believe that our warranty liability is adequate and that the judgment applied is appropriate, such amounts estimated to be due and payable could differ materially from what will actually transpire in the future.
Contingencies.We are subject to legal proceedings and claims, including product liability claims, commercial or contractual disputes, environmental enforcement actions and other claims that arise in the normal course of business. We routinely assess the likelihood of any adverse judgments or outcomes to these matters, as well as ranges of probable losses, by consulting with internal personnel principally involved with such matters and with our outside legal counsel handling such matters.
We have accrued for estimated losses when it is probable that a liability or loss has been incurred and the amount can be reasonably estimated. Contingencies by their nature relate to uncertainties that require the exercise of judgment both in assessing whether or not a liability or loss has been incurred and estimating that amount of probable loss. The liabilities may change in the future due to new developments or changes in circumstances. The inherent uncertainty related to the outcome of these matters can result in amounts materially different from any provisions made with respect to their resolution.
Income Taxes. Deferred income taxes are provided for temporary differences between the amount of assets and liabilities for financial reporting purposes and the basis of such assets and liabilities as measured by tax laws and regulations. Our deferred tax assets include, among other items, net operating loss carryforwards and tax credits that can be used to offset taxable income in future periods and reduce income taxes payable in those future periods. Our U.S. state and foreign net operating losses expire at various times or have indefinite expiration dates. Our U.S. federal general business credits, if unused, begin to expire in 2026, while the state and foreign tax credits expire at various times.
Accounting standards require that deferred tax assets be reduced by a valuation allowance if, based on all available evidence, it is considered more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. This assessment requires significant judgment, and in making this evaluation, the Company has considered historical pre-tax income or loss and the four sources of income in determining the need for a valuation allowance when the realization of its deferred tax assets are not more likely than not. The four sources of income considered are 1.) taxable income in prior carryback years where carryback is allowable, 2.) future reversals of existing temporary differences, 3.) consideration of reasonable and prudent tax planning strategies, and 4.) forecasts of future taxable income, exclusive of reversing temporary differences and carryforwards. In the cases where a valuation allowance has been recorded, the evidence described above did not result in a conclusion that the deferred tax assets are more likely than not to be realizable. Current and future provision for income taxes is significantly impacted by the initial recognition of and changes in valuation allowances. The Company intends to maintain these allowances until it is more likely than not that the deferred tax assets will be realized. Risk factors include U.S. and foreign economic conditions that affect the automotive and commercial vehicle markets in which the Company has significant operations.
As of December 31, 2025, we had a valuation allowance related to deferred tax assets of $44,324 in the United States and $15,630 in several international jurisdictions. If operating results improve or decline in a particular jurisdiction, our decision regarding the need for a valuation allowance could change, resulting in either the initial recognition or reversal of a valuation allowance, which could have a significant impact on income tax expense in the period recognized and subsequent periods.
The Company has recognized deferred taxes related to the expected foreign currency impact upon repatriation from foreign subsidiaries not considered indefinitely reinvested. Taxes of $5,869 related to China and Estonia have been accrued on undistributed earnings that are not indefinitely reinvested.
The Company has made an accounting policy election to reflect the impact of GILTI taxes, if any, as a current period tax expense when incurred.
Recently Adopted Accounting Standards
In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740) - Improvements to Income Tax Disclosures," which requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, companies are required to disclose additional information about income taxes paid. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The standard is to be adopted on a prospective basis; however, retrospective application is permitted. The adoption of this ASU resulted in incremental disclosures in the Company's financial statements.
Recently Issued Accounting Standards Not Yet Adopted as of December 31, 2025
In November 2024, the FASB issued ASU No. 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures," which requires companies to disclose certain costs and expenses within the notes to the financial statements. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact on our annual consolidated financial statement disclosures.
In July 2025, the FASB issued ASU 2025-05, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets," which allows entities to use a simplified approach when estimating credit losses for current accounts receivable and contract assets arising from revenue transactions. The standard update permits consideration of collections after the balance sheet date when estimating expected credit losses, and allows consideration of subsequent collections when estimating credit losses, reducing documentation burden. The standard is effective for annual and interim periods within annual reporting periods beginning after December 15, 2025. We are currently evaluating the impact on our annual consolidated financial statements and disclosures.
In September 2025, the FASB issued ASU 2025-06, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software," which modernizes guidance on internal-use software costs to reflect current development practices and improve operability. The standard eliminates the project stages model and replaces with a principles based recognition threshold. The standard also creates a new capitalization criteria that clarifies capitalization when funding is authorized by management and is probable to be completed and used. The standard is effective for annual and interim periods within annual reporting periods beginning after December 15, 2027. We are currently evaluating the impact on our annual consolidated financial statements and disclosures.
In November 2025, the FASB issued ASU 2025-09, "Derivatives and Hedging (Topic 815): Hedge Accounting Improvements," to better align hedge accounting with an entity's risk management activities and to address issues arising from reference rate reform. The update provides greater flexibility in designating hedging relationships and reduces the risk of hedge dedesignation due to minor changes in hedged items. The new guidance will be applied prospectively and is effective for fiscal years beginning after December 15, 2026, and interim periods within those annual reporting periods, with the option to apply retrospectively. Early adoption is permitted. We are currently evaluating the impact on our annual consolidated financial statements and disclosures.
In December 2025, the FASB issued ASU 2025-10, "Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities," which provides explicit guidance on the accounting for government grants received by business entities. The new guidance will be applied prospectively and is effective for fiscal years beginning after December 15, 2028, and interim periods within those annual reporting periods, with the option to apply retrospectively. Early adoption is permitted. We are currently evaluating the impact on our annual consolidated financial statements and disclosures.
In December 2025, the FASB issued ASU 2025-11, "Interim Reporting (Topic 270): Narrow-Scope Improvements," which provides clarifications intended to improve the consistency and usability of interim disclosure requirements and the applicability to Topic 270. The amendments also provide additional guidance for reporting material events occurring after the most recent annual period. The new guidance will be applied prospectively and is effective for fiscal years beginning after December 15, 2027, and interim periods within those annual reporting periods, with the option to apply retrospectively. Early adoption is permitted. We are currently evaluating the impact on our annual consolidated financial statements and disclosures.
In December 2025, the FASB issued ASU 2025-12, "Codification Improvements," which addresses changes to the Codification that clarify, correct and improve the Codification making it easier to understand and apply. The new guidance will be applied prospectively and is effective for fiscal years beginning after December 15, 2026, and interim periods within those annual reporting periods, with the option to apply retrospectively. Early adoption is permitted. We are currently evaluating the impact on our annual consolidated financial statements and disclosures.
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