Good day, and welcome to the Stoneridge, Inc. Second Quarter 2025 Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Kelly Harvey, Director of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us to discuss our second quarter 2025 results. The release and accompanying presentation was filed with the SEC and is posted on our website at stoneridge.com in the Investors section under Presentations and Events. Joining me on today's call are Jim Zizelman, our President and Chief Executive Officer; and Matt Horvath, our Chief Financial Officer. During today's call, we will be referring to certain non-GAAP financial measures. Please see Slide 2 of the presentation for a more detailed description of these non-GAAP measures and the appendix for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. In addition, 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 the actual results may differ materially. Additional information about such factors and uncertainties that could cause actual results to differ may be found on Page 3 of the presentation and in our Form 10-Q, which has been filed with the Securities and Exchange Commission under the heading Forward-Looking Statements. After Jim and Matt have finished their formal remarks, we will then open up the call to questions. And with that, I will hand the call over to Jim.

Thanks, Kelly, and good morning, everyone. Let me begin on Page 4. In summary, our second quarter performance highlights our continued progress across all of our key initiatives. This quarter, we set yet another record for MirrorEye sales. We announced our largest ever program award in the history of the company. We improved our quality-related costs and continue to improve our balance sheet through reduced net debt and improved inventory balances. Stoneridge continues to be the leading provider of camera vision systems globally. Our record-setting quarterly sales for MirrorEye resulted in an impressive 21% growth relative to the first quarter of 2025. This is driven by the continued ramp-up of our previously launched OEM programs and the launch of 2 additional OEM programs in North America. MirrorEye continues to be a strong growth driver for Stoneridge as the system continues to gain momentum with incremental OEM demand and continued expansion in our aftermarket applications. We also continue to focus on and improve our balance sheet by driving working capital reductions through continued management of our inventory and the execution of a global program to repatriate cash and reduce our overall net debt. Our continued focus on reducing our inventory resulted in a $7.3 million reduction over the first quarter. Second quarter free cash flow of $7.6 million increased by approximately $5.9 million relative to the second quarter of the prior year. We also executed on a $44 million tax- efficient international cash repatriation project, which contributed to the reduction in total debt of $38.8 million during the quarter. For compliance purposes, this translated to a reduction of almost $20 million in net debt during the quarter, and Matt will provide further details on our financial and cash performance later on this call. Our long-term growth strategies are paying off. We…

Great. Thanks, Jim. Turning to Page 11. Sales in the second quarter were $228 million, including approximately $3 million of favorable foreign currency impact. Second quarter production sales were generally in line with our prior expectations. Second quarter adjusted operating income was $400,000, resulting in a 40 basis point improvement in adjusted operating margin relative to the first quarter of this year. Second quarter adjusted EBITDA was $4.6 million or 2% of sales and was heavily influenced by nonoperating foreign currency expense of $3.4 million. This was driven primarily by the impact of unfavorable FX rates on intercompany loans, which do not impact operating performance. As discussed earlier on the call, we also incurred $500,000 of incremental tariff-related costs due to strategic cost-sharing agreements with key customers. We expect to leverage these cost-sharing agreements into new business development opportunities going forward. Excluding the incremental tariff-related costs and nonoperating foreign currency impact, our second quarter adjusted EBITDA was approximately in line with our previous expectations. We continue to focus on improving the fundamental performance of the business. We are confident that these actions will drive earnings expansion as we continue to launch new programs and expand on our existing products and technologies. Page 12 summarizes our key financial metrics specific to Control Devices. Control Devices second quarter sales of $71.2 million grew by 1.9% relative to the first quarter, primarily due to higher demand in the North American passenger vehicle end market. Second quarter adjusted operating income of $2.8 million improved by 180 basis points compared to the prior quarter, primarily as a result of higher sales and improved overhead costs. Although the North American passenger vehicle market continues to improve, we are prepared for the possibility of continued volatility in our end markets as uncertainty remains related to tariff policies…

Thanks, Matt. As I have discussed consistently throughout my tenure as the CEO of Stoneridge, this management team and our Board of Directors remain focused on creating value for our shareholders, employees and customers. As you would expect, one of our key responsibilities is to regularly assess the structure of our company to make sure we are aligned with our long-term strategic goals and positioned well for sustainable growth. Turning to Page 18. After thoughtful consideration and alignment with our Board of Directors, we are announcing the next step in our long-term strategy, a review of strategic alternatives for our Control Devices division with the primary focus being a potential sale of this business. As our business continues to evolve and grow, we need to ensure each part of our business has both the resources and focus needed to reach its full potential. As I outlined earlier in the call, we are seeing record-breaking business wins in several of our core growth platforms in both Stoneridge Electronics and Stoneridge Brazil. To support and accelerate these growth opportunities, we must dedicate our capital, our engineering resources and our leadership focus accordingly. MirrorEye continues to expand across the world with new record business awards. This creates additional opportunities to expand the platform to drive increasing content and system integration, including our connected trailer activities and other vision and safety products. Similarly, our position as a global leader in transportation electronics continues to expand with record business awards in Brazil for the South American market. The highest and best use of our resources is to focus on the growth and forward opportunities in Electronics and Brazil. Resources allocated to these businesses will drive the highest return profile for shareholders in our current structure. Similarly, a potential sale of Control Devices would allow that…

[Operator Instructions] Our first question comes from Daniel Imbro with Stephens.

I want to start maybe on the MirrorEye contract announcement, the win. First, just a confirmation or check the box. I think they normally take years to ramp up. So I'm assuming that's a multiyear contract, that's not going to affect numbers in '25 or '26, but if you could confirm that. And then stepping back, is this expanding the TAM? Is this previously a contract you were going after that you just kind of pulled forward and realized some of that TAM? Or was this kind of off your radar? Just any color you can share around kind of what this does to the overall opportunity here?

Okay, Daniel, first, thanks for the question. And number one, yes, this will not impact '25 and '26 revenue, not those business awards. They're typically extensions. So the largest one is an extension and that's beyond the current award and takes us through 2033. So hopefully, that clarifies that part. In terms of the award itself and what it means relative to TAM, first off, the award itself is essentially part of the TAM that we had anticipated. There's no question about that. But as we say in some of the verbiage in the call, it also allows us for expansion of the TAM. It allows us to expand the platform and be more apparent in things that allow us to further the vision and safety product portfolio for Stoneridge. So things like connected trailer, sensing technologies that would be attached to the connected trailer product, for example, would be further expansion of the TAM. So in many ways, the answer to that question is both. Yes, it sort of fills out the TAM that we have, and we're doing well in that space, but it also allows us to expand on that TAM. Hope that it's helpful.

Yes. No, it does. And I wanted to follow up. I think at the end of your first comments, you talked about maybe in addition to these new contract wins, some other fleet orders in North America, if we heard you right there on the commercial side. I guess, has that changed the 2026 outlook with these new wins, all else equal? Or were those already contemplated in that outlook?

No, I would say that, that does actually offer an improvement in the 2026 outlook relative to fleet, because part of the commentary there was those new fleet customers were associated with our most recent OEM business win in North America. And we are aware that, that business win is, I'll say, viewed very positively by several new fleets that would be picking up those new OEM products that would contain our MirrorEye technology. So yes, I think that helps us from a fleet perspective, yes, in '26.

Any way to size up that benefit in '26 from these new fleet adoptions?

Yes. That's a little bit harder to answer. As this gets launched and it ramps up, I think we'll have a clear picture. Probably better answerable in maybe 2 quarters or so from now once this is out there and the market is reacting to it.

Great. And maybe last one for me, and I'll hop back in the queue. Matt, maybe on just the guidance. So the nonoperational FX impact, it makes sense out of your control, but it was a bigger impact in 2Q. I guess given where FX rates have moved, should there be another headwind in 3Q just because year-over-year FX is still unfavorable? And if so, is that baked into the guidance? Or how should we think about just the puts and takes there?

Yes. Thanks for the question, Daniel. The way to think about it versus our guidance forward is we use FX rates that are current to think about our forward guidance. The only reason that we had the change was because the nonoperating FX in the second quarter is the change from Q1 to Q2. So there shouldn't be any incremental headwinds, at least as FX rates sit right now. We're really just incorporating what we've incurred year-to-date on that nonoperating FX. And again, the $3 million headwind there is below the line. It's nonoperating, it's intercompany loans. So although it's obviously numerically a reduction in our midpoint, it's not operating performance-related reduction in any way.

This concludes our question-and-answer session. I would now like to turn the conference back over to Jim Zizelman for any closing remarks.

Well, thank you, everyone, for joining us for the call. I know your time is very important. And as always, we truly appreciate your willingness to engage us. We are operating with an unrelenting focus on our key priorities, driving significant earnings expansion as we grow, and today's announcements regarding record-setting business bookings exemplify the clear effectiveness of our approach. We will continue to deliver on our commitments by focusing on quality improvements and material and manufacturing cost reductions, all while maintaining a clear focus on market dynamics and any necessary mitigating actions. In addition, we are laser-focused on our long-term strategy, driving increased shareholder value. And in support of that, we have announced our review of strategic alternatives for our Control Devices business. We expect that our performance, along with our unique mix of industry-changing product platforms as well as our consideration of strategic alternatives for control devices will continue to drive strong shareholder value. Thank you.