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 condensed consolidated financial statements and notes related thereto and other financial information included elsewhere herein.
Segments
In January 2026, we completed the sale of the Control Devices segment, which is reflected as discontinued operations in all periods presented. As a result, we now operate our business in two reportable business segments, which are the same as our two operating segments.
We are organized by products produced and markets served. Under this structure, our operations have been reported using the following segments:
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.
Second Quarter Overview
The Company had net loss from continuing operations of $5.3 million, or $(0.19) per diluted share, for the three months ended June 30, 2026.
Net loss from continuing operations for the quarter ended June 30, 2026 decreased by $5.9 million, or $0.21 per diluted share, from net loss from continuing operations of $11.1 million, or $(0.40) per diluted share, for the three months ended June 30, 2025. Net sales increased by $23.8 million, or 15.1%, compared to the three months ended June 30, 2025, due to increased sales volumes in our North American vehicle market and higher sales resulting from the Mexico Manufacturing Agreement related to the sale of Control Devices and higher Brazilian OEM sales from the launch of an infotainment product. Gross margin for the quarter ended June 30, 2026 decreased to 20.3% from 23.1% for the three months ended June 30, 2025 from higher direct material costs as a percentage of sales due to adverse foreign currency losses and excess inventory charges as well as adverse sales mix from lower Smart 2 tachograph product sales from the end of a regulatory retrofit campaign in 2025 in our Electronics segment. SG&A expense increased primarily due to higher incentive compensation and legal expenses, which were offset by lower D&D expense from 2025 business realignment costs and higher customer reimbursements in our Electronics segment. In addition, non-operating foreign currency gains favorably impacted results for the quarter ended June 30, 2026.
Our Electronics segment net sales increased by 12.8% compared to the second quarter of 2025 primarily due to an increase in our North American commercial vehicle market and higher sales of $7.1 million resulting from the Mexico Manufacturing Agreement related to the sale of Control Devices. Additionally, sales were impacted by favorable euro and Swedish krona foreign currency translation. Segment gross margin decreased compared to the second quarter of 2025 from higher direct material costs due to adverse foreign currency losses and excess inventory charges as well as adverse sales mix from lower Smart 2 tachograph product sales from the end of a regulatory retrofit campaign in 2025. Operating income for the segment increased compared to the second quarter of 2025 because of lower SG&A expense from lower royalties and professional services and lower D&D from lower business realignment costs and higher customer reimbursements.
Our Stoneridge Brazil segment net sales increased by 37.6% compared to the second quarter of 2025 primarily from higher OEM product sales including the sales from the launch of an infotainment product and favorable foreign currency translation. Segment gross margin increased due to favorable variances from U.S. denominated material purchases and higher contribution from higher sales levels. Operating income increased due to favorable variances from U.S. dollar denominated material purchases and higher contribution from higher sales levels. Offsetting these favorable variances was an increase in SG&A expense from higher incentive compensation and selling costs reduced by a favorable Brazilian indirect tax claim settlement.
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In the second quarter of 2026, SG&A expenses increased by $0.4 million compared to the second quarter of 2025 primarily because of higher incentive compensation and legal costs offset by a favorable Brazilian indirect tax claim settlement.
In the second quarter of 2026, D&D costs decreased by $2.9 million compared to the prior year second quarter primarily in our Electronics segment because of lower business realignment costs and higher customer reimbursements.
At June 30, 2026 and December 31, 2025, we had cash and cash equivalents balances primarily held at our foreign locations of $71.5 million and $53.1 million, respectively, and we had $151.1 million and $180.9 million, respectively, in borrowings outstanding on our Credit Facility. The 2026 decrease in Credit Facility borrowings and the increase in cash and cash equivalents was mostly due to proceeds received from the sale of Control Devices.
Outlook
Stoneridge's portfolio, after the sale of the Control Devices business, is focused on technology solutions primarily for the global commercial vehicle and off-highway end markets. More specifically, Stoneridge serves three primary product categories: vision and safety, connectivity, and vehicle intelligence and electronic controls, each with their own significant growth opportunities. We expect continued expansion of our vision and safety systems, including MirrorEye® and adjacent products and advanced technologies, through maturity of our existing products and the introduction of new products to the market, including our connected trailer and surround-view capabilities. As we continue to invest in these capabilities, we have generated a comprehensive technology roadmap that we expect will both enhance and expand on our existing products and bring new products and technologies to the market. We expect this will drive growth that significantly outpaces our weighted-average end markets resulting in shareholder value creation.
Our financial performance has been affected by increasing costs of materials, labor, and other inputs used to manufacture and sell our products, including higher costs for memory and other semiconductor components. To minimize the impact of these incremental costs, we continue to take mitigation actions, including negotiating price increases and cost recoveries with our customers, improving manufacturing performance and optimizing our global cost structure to both reduce costs and improve operational efficiency. While we expect these actions will benefit financial performance by offsetting cost pressures, there can be no assurance that our mitigation efforts will fully offset the impact of these cost increases.
In February 2026, the U.S. government imposed new tariffs on imported products from China and Mexico, in addition to tariffs imposed during 2025, and in April 2026 announced additional broad-based tariffs on imports from most U.S. trading partners. The Company has manufacturing and supply chain exposure from materials sourced from other countries and products produced in Mexico. If existing or proposed tariffs are sustained or expanded, they could materially increase our cost of goods sold and adversely affect our results of operations and cash flows. We continue to implement mitigation actions to reduce the impact of tariffs, including negotiating cost recoveries and price adjustments with our customers, evaluating alternative sourcing arrangements and assessing opportunities to adjust our manufacturing footprint. However, there can be no assurance that these actions will fully offset the incremental costs, and the ultimate impact will depend on the scope and duration of the tariffs and our ability to pass costs through to customers.
Based on IHS Markit production forecasts, in 2026 the European and North American commercial vehicle end market volumes are forecasted to increase 1.8% and 12.8%, 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 July 2026, the International Monetary Fund forecasted the Brazil gross domestic product to grow 2.4% in 2026. We expect our served market channels to moderately improve 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 infotainment product in the second quarter of 2026. Stoneridge Brazil will focus on continuing to grow our OEM capabilities in-region to better support our global customers. This focus will provide opportunities for future growth and provide a platform to continue to rotate our local portfolio to align with our global business more closely.
In 2026, we expect net D&D spend to increase driven by spend for quality improvement, product cost optimization, and the development of next generation products. We continue to evaluate and optimize our engineering footprint to enhance capabilities and capacity for the most efficient return on our engineering spend including increasing the utilization of our Stoneridge Brazil engineering function and dedicated engineering partners in India to support Electronics segment projects.
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While we expect continued supply chain challenges associated with memory and other electronic component pricing and availability in 2026, we continue to focus on operating performance and enterprise-wide cost reduction. We remain focused on improving cash generation and the reduction of debt through efficient operating performance, structural cost savings and targeted actions to reduce our inventory levels. However, we anticipate working capital investment in the second half of 2026 related to the mid-2027 launch of a new off-highway vision product.
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 material purchases are denominated in U.S. dollars and, therefore, movements in foreign currency exchange rates can also have a significant effect on our results of operations. In the second quarter of 2026, the U.S. Dollar weakened against the Brazilian real favorably impacting our financial results while it strengthened against the Swedish krona and weakened against the Mexican peso which had an unfavorable impact to our reported results. In the second quarter of 2025, the U.S. dollar weakened against the Swedish krona unfavorably impacting 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 the performance of our businesses and their cost structures, including personnel, and make necessary changes thereto to optimize our results. We also evaluate the required skill sets of our personnel and periodically make strategic changes. Because of these actions, we incur severance and resignation related costs that we refer to as business realignment charges. Business realignment costs of $0.0 million and $1.4 million were incurred in the three months ended June 30, 2026 and 2025, respectively. Business realignment costs of $0.4 million and $3.9 million were incurred during the six months ended June 30, 2026 and 2025, respectively. For the three and six months ended June 30, 2025, we incurred $1.4 million and $3.0 million, respectively, in business realignment costs related to operational efficiency initiatives at our Juarez facility. We may incur additional realignment costs in the future.
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 manage our production costs through a combination of negotiated cost recoveries with customers, material cost reduction initiatives and optimization of our global manufacturing footprint, the net impact of which to date has not been material to our results of operations. However, these efforts may not be sufficient to fully offset future pricing pressures, particularly in light of current macroeconomic conditions, including tariffs and supply chain disruptions, and if we are unable to effectively manage production costs, our results of operations could be adversely affected.
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Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025
Condensed consolidated statements of operations as a percentage of net sales are presented in the following table (in thousands):
Three months ended June 30, 2026 2025 Dollar increase / (decrease)
Net sales $ 181,384 100.0 % $ 157,541 100.0 % $ 23,843
Costs and expenses:
Cost of goods sold 144,551 79.7 121,192 76.9 23,359
Selling, general and administrative 26,061 14.4 25,704 16.3 357
Design and development 11,960 6.6 14,841 9.4 (2,881)
Operating loss (1,188) (0.7) (4,196) (2.7) 3,008
Interest expense, net 2,404 1.3 3,233 2.1 (829)
Equity in earnings of investee (222) (0.1) (50) — (172)
Other (income) expense, net (649) (0.4) 2,222 1.4 (2,871)
Loss before income taxes from continuing operations (2,721) (1.5) (9,601) (6.1) 6,880
Provision for income taxes from continuing operations 2,555 1.4 1,542 1.0 1,013
Loss from continuing operations (5,276) (2.9) (11,143) (7.1) 5,867
Discontinued operations:
Loss (income) from discontinued operations, net of tax — — (1,784) (1.1) 1,784
Loss on disposal, net of tax — — — — —
Total loss (income) from discontinued operations — — (1,784) (1.1) 1,784
Net loss $ (5,276) (2.9) % $ (9,359) (5.9) % $ 4,083
Net Sales. Net sales for our reportable segments, excluding inter-segment sales, are summarized in the following table (in thousands):
Three months ended June 30, 2026 2025 Dollar increase Percent increase
Electronics $ 160,930 88.7 % $ 142,681 90.6 % $ 18,249 12.8 %
Stoneridge Brazil 20,454 11.3 14,860 9.4 5,594 37.6 %
Total net sales $ 181,384 100.0 % $ 157,541 100.0 % $ 23,843 15.1 %
Our Electronics segment net sales increased $18.2 million because of an increase in our North American commercial vehicle market of $10.0 million including higher MirrorEye system sales and $7.1 million resulting from the Mexico Manufacturing Agreement related to the sale of Control Devices as well as favorable euro and Swedish krona foreign currency translation of $2.6 million. These increases were partially offset by decreases in our China commercial vehicle and North American off-highway markets of $1.0 million and $0.7 million, respectively.
Our Stoneridge Brazil segment net sales increased $5.6 million from higher OEM product sales of $4.4 million including sales from the launch of an infotainment product and favorable foreign currency translation of $1.8 million.
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Net sales by geographic location are summarized in the following table (in thousands):
Three months ended June 30, 2026 2025 Dollar increase Percent increase
North America $ 61,998 34.2 % $ 45,605 28.9 % $ 16,393 35.9 %
South America 20,454 11.3 14,860 9.4 5,594 37.6 %
Europe and Other 98,932 54.5 97,076 61.7 1,856 1.9 %
Total net sales $ 181,384 100.0 % $ 157,541 100.0 % $ 23,843 15.1 %
The increase in North American net sales was due to an increase in production volumes in our commercial vehicle market of $10.0 million including higher MirrorEye system sales and an increase in sales of $7.1 million resulting from the Mexico Manufacturing Agreement related to the sale of Control Devices.
The increase in net sales in South America was from higher OEM product sales including sales from the launch of an infotainment product of $4.4 million and favorable foreign currency translation of $1.8 million.
The increase in net sales in Europe and Other was due to higher European off-highway sales of $0.7 million and favorable foreign currency translation of $2.6 million offset by lower commercial vehicle sales of $1.4 million including lower Smart 2 tachograph product sales from the end of a regulatory retrofit campaign in 2025.
Cost of Goods Sold and Gross Margin. Cost of goods sold increased compared to the second quarter of 2025 and our gross margin decreased to 20.3% in the second quarter of 2026 from 23.1% in the second quarter of 2025. Our material cost as a percentage of net sales increased to 57.7% in the second quarter of 2026 from 56.8% in the second quarter of 2025. The increase in material cost percentage was due to the unfavorable foreign exchange material variances and excess inventory charges as well as adverse sales mix from lower Smart 2 tachograph product sales from the end of a regulatory retrofit campaign in 2025 in our Electronics segment offset by a benefit from the Mexico Manufacturing Agreement because under this contract manufacturing agreement only direct labor and overhead expenses are recognized. Overhead as a percentage of net sales increased from 16.2% in the second quarter of 2025 to 17.2% in the second quarter of 2026 due to the impact of the Mexico Manufacturing Agreement spend offsetting favorable leverage of fixed costs from higher sales levels.
Our Electronics segment gross margin decreased compared to the prior year second quarter from higher material costs due to unfavorable foreign exchange material variances and excess inventory charges as well as adverse sales mix from lower Smart 2 tachograph product sales from the end of a regulatory retrofit campaign in 2025 partially offset by favorable leverage of fixed costs from higher sales levels.
Our Stoneridge Brazil segment gross margin increased from the favorable material variances from U.S. dollar denominated material purchases and higher contribution from higher sales levels.
Selling, General and Administrative. SG&A expenses increased by $0.4 million primarily because of higher incentive compensation and legal expenses offset by a favorable Brazilian indirect tax claim settlement.
Design and Development. D&D costs decreased by $2.9 million compared to the second quarter of 2025 because of lower business realignment costs and higher customer reimbursements in our Electronics segment.
Operating Loss. Operating (loss) income by segment is summarized in the following table (in thousands):
Three months ended June 30, 2026 2025 Dollar increase / (decrease) Percent increase / (decrease)
Electronics $ 4,855 $ 2,739 $ 2,116 77.3 %
Stoneridge Brazil 2,575 969 1,606 165.7 %
Unallocated corporate (8,618) (7,904) (714) (9.0) %
Operating loss $ (1,188) $ (4,196) $ 3,008 (71.7) %
Our Electronics segment operating income increased because of reductions in D&D from lower business realignment costs and higher customer reimbursements and in SG&A from lower royalties and professional services. These increases were offset by lower gross margin from higher material costs due to unfavorable foreign exchange material variances and excess inventory charges as well as adverse sales mix from lower Smart 2 tachograph product sales from the end of a regulatory retrofit campaign in 2025.
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Our Stoneridge Brazil segment operating income increased due to favorable variances from U.S. dollar denominated material purchases and higher contribution from higher sales levels. Offsetting these favorable variances was an increase in SG&A expense from higher incentive compensation and selling costs offset by a favorable Brazilian indirect tax claim settlement.
Our unallocated corporate operating loss increased from higher SG&A related to higher incentive compensation and legal fees offset by lower D&D spending.
Operating (loss) income by geographic location is summarized in the following table (in thousands):
Three months ended June 30, 2026 2025 Dollar increase / (decrease) Percent increase /(decrease)
North America $ (7,015) $ (8,897) $ 1,882 21.2 %
South America 2,575 969 1,606 165.7 %
Europe and Other 3,252 3,732 (480) (12.9) %
Operating loss $ (1,188) $ (4,196) $ 3,008 (71.7) %
Our North American operating loss improved due to higher gross margin from higher sales levels and lower D&D from lower business realignment expense offset by higher SG&A from higher incentive compensation and legal expense. Operating income in South America increased from higher gross margin from favorable variances from U.S. dollar denominated material purchases and favorable leverage of fixed costs from higher sales levels offset by higher SG&A from higher incentive compensation and selling expenses. Our operating results in Europe and Other decreased because of lower margin from higher material costs due to unfavorable foreign exchange material variances offset by lower D&D expense from higher customer reimbursements.
Interest Expense, net. Interest expense, net was $2.4 million and $3.2 million for the three months ended June 30, 2026 and 2025, respectively. The decrease for the quarter ended June 30, 2026, was the result of lower outstanding Credit Facility borrowings offset by higher Credit Facility interest rates.
Equity in Earnings of Investee. Equity earnings for Autotech Fund II was $(0.2) million and $(0.1) million for the three months ended June 30, 2026 and 2025, respectively.
Other (Income) Expense, net. We record certain foreign currency transaction (gains) losses as a component of other (income) expense, net on the condensed consolidated statement of operations. Other income, net of $0.6 million increased by $2.9 million compared to the second quarter of 2025 due to foreign currency transaction gains in our SRB segment from the strengthening of the U.S. dollar and lower foreign currency transactions losses in our Electronics segment.
Provision for Income Taxes. For the three months ended June 30, 2026, income tax expense from continuing operations of $2.6 million was attributable to the mix of earnings among tax jurisdictions, tax credits and incentives, and valuation allowances in certain jurisdictions. The effective tax rate of (93.9)% varies from the statutory tax rate primarily due to tax credits and incentives and valuation allowances in certain jurisdictions.
For the three months ended June 30, 2025, income tax expense from continuing operations of $1.5 million was attributable to the mix of earnings among tax jurisdictions, foreign withholding taxes, and tax credits and incentives offset by U.S. taxes on foreign earnings. The effective tax rate of (16.1%) varies from the statutory tax rate primarily due to foreign withholding taxes and tax credits and incentives offset by U.S. taxes on foreign earnings.
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Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
Condensed consolidated statements of operations as a percentage of net sales are presented in the following table (in thousands):
Six months ended June 30, 2026 2025 Dollar increase / (decrease)
Net sales $ 342,231 100.0 % $ 306,598 100.0 % $ 35,633
Costs and expenses:
Cost of goods sold 270,442 79.0 234,998 76.6 35,444
Selling, general and administrative 58,590 17.1 51,569 16.8 7,021
Design and development 23,365 6.8 28,533 9.3 (5,168)
Operating loss (10,166) (2.9) (8,502) (2.9) (1,664)
Interest expense, net 6,089 1.8 6,475 2.1 (386)
Equity in loss (earnings) of investee 9 — (344) (0.1) 353
Other (income) expense, net (179) — 1,396 0.6 (1,575)
Loss before income taxes from continuing operations (16,085) (4.7) (16,029) (5.4) (56)
Provision for income taxes from continuing operations 3,969 1.2 3,118 1.0 851
Loss from continuing operations (20,054) (5.9) (19,147) (6.4) % (907)
Discontinued operations:
Loss (income) from discontinued operations, net of tax 3,322 1.0 (2,592) (0.8) 5,914
Loss on disposal, net of tax 9,817 2.9 — — 9,817
Total loss (income) from discontinued operations 13,139 3.9 (2,592) (0.8) 15,731
Net loss $ (33,193) (9.8) % $ (16,555) (5.6) % $ (16,638)
Net Sales. Net sales for our reportable segments, excluding inter-segment sales, are summarized in the following table (in thousands):
Six months ended June 30, 2026 2025 Dollar increase Percent increase
Electronics 305,778 89.3 277,464 90.5 28,314 10.2 %
Stoneridge Brazil 36,453 10.7 29,134 9.5 7,319 25.1 %
Total net sales $ 342,231 100.0 % $ 306,598 100.0 % $ 35,633 11.6 %
Our Electronics segment net sales increased $28.3 million because of favorable euro and Swedish krona foreign currency translation of $15.0 million and higher sales of $10.9 million resulting from the Mexico Manufacturing Agreement related to the sale of Control Devices. Additionally, sales increased in our North American commercial vehicle market by $11.1 million from higher production volumes including higher MirrorEye system sales. These increases were offset by lower sales in our European commercial vehicle market of $8.2 million, including lower sales for the Smart 2 tachograph product resulting from the end of a retrofit campaign in 2025 offset by higher MirrorEye system sales, and lower China commercial vehicle sales of $1.6 million
Our Stoneridge Brazil segment net sales increased $7.3 million from higher OEM product sales of $4.8 million including sales from the second quarter launch of an infotainment product and favorable foreign currency translation of $3.4 million.
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Net sales by geographic location are summarized in the following table (in thousands):
Six months ended June 30, 2026 2025 Dollar increase Percent increase
North America $ 108,891 31.8 % $ 88,372 28.8 % $ 20,519 23.2 %
South America 36,453 10.7 29,134 9.5 7,319 25.1 %
Europe and Other 196,887 57.5 189,092 61.7 7,795 4.1 %
Total net sales $ 342,231 100.0 % $ 306,598 100.0 % $ 35,633 11.6 %
The increase in North American net sales was due to higher production volumes in our commercial vehicle market of $11.1 million including higher MirrorEye system sales and sales of $10.9 million from the Mexico Manufacturing Agreement related to the sale of Control Devices.
The increase in net sales in South America was from higher OEM product sales of $4.7 million including sales from the second quarter launch of an infotainment product and favorable foreign currency translation of $3.4 million.
The increase in net sales in Europe and Other was due to favorable foreign currency translation of $15.0 million and an increase in off-highway sales of $2.6 million. This increase was offset by lower sales in our European commercial vehicle market of $8.2 million, including lower Smart 2 tachograph product sales from the end of a regulatory retrofit campaign in 2025 offset by higher MirrorEye system sales, and lower sales in our China commercial vehicle market of $1.6 million.
Cost of Goods Sold and Gross Margin. Cost of goods sold increased compared to the six months ended June 30, 2025 and our gross margin decreased to 21.0% in 2026 from 23.4% in the first six months 2025. Our material cost as a percentage of net sales increased from 56.5% in the first six months of 2025 to 58.0% in the first six months of 2026. The increase in material cost percentage was due to unfavorable sales mix in our Electronics segment from unfavorable foreign exchange variances and excess inventory charges as well as adverse sales mix from lower Smart 2 tachograph sales from the end of a regulatory retrofit campaign in 2025 offset by a benefit from the Mexico Manufacturing Agreement because under this contract manufacturing agreement only direct labor and overhead expenses are recognized. Overhead as a percentage of net sales was 16.2% and 16.4% for the first six months of 2026 and 2025, respectively. The decrease in overhead as a percentage of sales was attributable to favorable leverage of fixed costs from higher sales levels and lower business realignment costs in our Electronics segment mostly offset by the impact of the Mexico Manufacturing Agreement spend.
Our Electronics segment gross margin decreased compared to the prior year from higher direct material costs as a percentage of sales from unfavorable sales mix, unfavorable foreign exchange variances and excess inventory charges offset by lower business realignment costs.
Our Stoneridge Brazil segment gross margin increased from the favorable variances from U.S. dollar denominated material purchases and higher contribution from higher sales levels.
Selling, General and Administrative. SG&A expenses increased by $7.0 million primarily because of higher share-based compensation from retirement-related accelerated vesting, incentive compensation and legal expenses offset by lower business realignment costs and royalties.
Design and Development. D&D costs decreased by $5.2 million primarily related to our Electronics segment as a result of higher customer reimbursements, lower business realignment costs and non-capital tooling expenses.
Operating (Loss) Income. Operating (loss) income by segment is summarized in the following table (in thousands):
Six months ended June 30, 2026 2025 Dollar increase / (decrease) Percent increase / (decrease)
Electronics $ 8,588 $ 8,244 $ 344 4.2 %
Stoneridge Brazil 3,896 1,554 2,342 150.7 %
Unallocated corporate (22,650) (18,300) (4,350) (23.8) %
Operating loss $ (10,166) $ (8,502) $ (1,664) (19.6) %
Our Electronics segment operating income increased because of lower D&D from higher customer reimbursements and lower business realignment costs and lower SG&A from lower royalties offset by lower gross margin.
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Our Stoneridge Brazil segment operating income increased due to higher gross margin from favorable variances from U.S. dollar denominated material purchases and higher contribution from higher sales levels offset by higher SG&A from higher incentive compensation and selling expenses.
Our unallocated corporate operating loss increased from higher SG&A related to higher share-based compensation from retirement-related accelerated vesting, incentive compensation and legal fees offset by lower business realignment expenses as well as lower D&D spending.
Operating (loss) income by geographic location is summarized in the following table (in thousands):
Six months ended June 30, 2026 2025 Dollar increase / (decrease) Percent increase / (decrease)
North America $ (21,087) $ (20,366) $ (721) (3.5) %
South America 3,896 1,554 2,342 150.7 %
Europe and Other 7,025 10,310 (3,285) (31.9) %
Operating loss $ (10,166) $ (8,502) $ (1,664) (19.6) %
Our North American operating loss increased due to higher SG&A from higher share-based compensation from retirement-related accelerated vesting, incentive compensation and legal expenses offset by higher gross margin from higher sales levels including tariff recoveries and lower D&D from lower business realignment costs. Operating income in South America increased from higher gross margin from favorable variances from U.S. dollar denominated material purchases and higher contribution from higher sales levels offset by higher SG&A from higher incentive compensation and selling expenses. Our operating results in Europe and Other decreased because of lower margin from adverse sales mix and unfavorable foreign exchange variances offset by lower D&D expense from higher customer reimbursements and lower SG&A from lower royalties.
Interest Expense, net. Interest expense, net was $6.1 million and $6.5 million for the six months ended June 30, 2026 and 2025, respectively. The decrease was the result of lower outstanding Credit Facility borrowings offset by higher Credit Facility interest rates.
Equity in Loss (Earnings) of Investee. Equity loss (earnings) for Autotech Fund II was $0.0 million and $(0.3) million for the six months ended June 30, 2026 and 2025, respectively.
Other (Income) Expense, net. We record certain foreign currency transaction (gains) losses as a component of other expense (income), net on the condensed consolidated statement of operations. Other income, net of $(0.2) million increased by $1.6 million compared to the first six months of 2025 due to foreign currency transaction gains in our SRB segment from the strengthening of the U.S. dollar and lower foreign currency transactions losses in our Electronics segment.
Provision for Income Taxes. For the six months ended June 30, 2026, income tax expense from continuing operations of $4.0 million was attributable to the mix of earnings among tax jurisdictions, tax credits and incentives, and valuation allowances in certain jurisdictions. The effective tax rate of (24.7%) varies from the statutory tax rate primarily due to tax credits and incentives and valuation allowances in certain jurisdictions.
For the six months ended June 30, 2025, income tax expense of $3.1 million was attributable to the mix of earnings among tax jurisdictions, foreign withholding taxes, and tax credits and incentives offset by U.S. taxes on foreign earnings. The effective tax rate of (19.5)% varies from the statutory tax rate primarily due to foreign withholding taxes and tax credits and incentives offset by U.S. taxes on foreign earnings.
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Liquidity and Capital Resources
Summary of Cash Flows:
Six months ended June 30, 2026 2025
Net cash provided by (used for) from continuing operations:
Operating activities $ 816 $ 18,996
Investing activities 53,843 (9,219)
Financing activities (31,841) (41,363)
Cash (used for) provided by discontinued operations: (3,322) 2,592
Effect of exchange rate changes on cash and cash equivalents (1,039) 6,934
Net change in cash and cash equivalents $ 18,457 $ (22,060)
Cash provided by operating activities decreased compared to 2025 because of a higher net loss and higher working capital levels primarily accounts receivable and to a lesser extent inventory, partially offset by higher accounts payable. Cash used by receivables increased due to the recognition of receivables resulting from manufacturing and transition service agreement transactions related to the sale of Control Devices in the first quarter of 2026, however overall collection terms have remained consistent.
Net cash provided by investing activities increased compared to 2025 due to the proceeds from the sale of Control Devices offset by lower capital expenditures.
Net cash used for financing activities decreased compared to 2025 due to a decrease in Credit Facility repayments.
As outlined in Note 7 to our condensed consolidated financial statements, the Credit Facility permitted borrowing up to a maximum level of $275.0 million. This variable rate facility had an accordion feature which allowed the Company to increase its availability by up to $150.0 million upon the satisfaction of certain conditions and lender consent through its expiration in November 2026. 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 $151.1 million at June 30, 2026.
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 provided 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, defined as 100% of North American and 65% of foreign cash balances, 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 amended the Credit Facility and provided for certain covenant relief and restrictions through the Credit Facility's termination date of November 2, 2026. Amendment No. 2 superseded 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 amended certain Credit Facility terms and provided covenant relief as follows:
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•borrowing capacity was 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 remained 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 was 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.
Our Credit Facility matures on July 1, 2027, which is within twelve months of the issuance of the accompanying unaudited condensed consolidated financial statements, and will become current in the third quarter of 2026. The Company expects to refinance its Credit Facility. While there can be no assurance that the Company will refinance the current Credit Facility, the Company anticipates that the refinancing will occur prior to the issuance of the financial statements for the year ending December 31, 2026. The Company’s ability to continue as a going concern is contingent upon its ability to refinance its Credit Facility.
The Company was in compliance with all covenants at June 30, 2026 and 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 due to the adverse impact of significantly lower global demand in our markets and challenging macroeconomic conditions. 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.
The Company’s wholly owned subsidiary located in Stockholm, Sweden, has an overdraft credit line that allows overdrafts on the subsidiary’s bank account up to a daily maximum level of 20.0 million Swedish krona, or $2.1 million and $2.2 million at June 30, 2026 and December 31, 2025, respectively. At June 30, 2026 and December 31, 2025, there were no borrowings outstanding on this overdraft credit line. During the six months ended June 30, 2026, the subsidiary borrowed and repaid 40.4 million Swedish krona, or $4.2 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.
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. As of June 30, 2026, the Company’s cumulative investment in the Autotech Fund II was $9.4 million. The Company contributed less than $0.1 million to Autotech Fund II during each of the six months ended June 30, 2026 and June 30, 2025.
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 locations, especially in Brazil, Argentina, Mexico, Sweden, Estonia and the Netherlands. Our future results could also be unfavorably affected by increased commodity prices and material cost inflation as these fluctuations impact the cost of our raw material purchases.
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At June 30, 2026, we had a cash and cash equivalents balance of approximately $71.5 million, of which 79.1% was held in foreign locations. The Company has approximately $23.9 million of undrawn commitments under the Credit Facility as of June 30, 2026, which results in total undrawn commitments and cash balances of approximately $95.4 million. However, it is possible that future borrowing flexibility under our Credit Facility may be limited as a result of our financial performance.
The principal sources of liquidity available for our future cash requirements are expected to be (i) cash flows from operations, (ii) cash and cash equivalents on-hand and (iii) borrowings from our Credit Facility. We expect to refinance our Credit Facility prior to it becoming due, and, assuming such refinancing is completed on satisfactory terms, we believe that our overall liquidity and operating cash flow will be sufficient to meet our anticipated cash requirements for capital expenditures, working capital and other commitments during the next twelve months. While uncertainty surrounding the current economic environment could adversely impact our business, based on our current financial position, we believe it is unlikely that any such effects would preclude us from maintaining sufficient liquidity, assuming the successful completion of the anticipated refinancing.
Commitments and Contingencies
See Note 11 to the condensed 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.
Critical Accounting Policies and Estimates
The Company’s critical accounting policies, which include management’s best estimates and judgments, are included in Part II, Item 7, to the consolidated financial statements of the Company’s 2025 Form 10-K. These accounting policies are considered critical as disclosed in the Critical Accounting Policies and Estimates section of Management’s Discussion and Analysis of the Company’s 2025 Form 10-K because of the potential for a significant impact on the financial statements due to the inherent uncertainty in such estimates. There have been no material changes in our significant accounting policies or critical accounting estimates during the second quarter of 2026.
Information regarding other significant accounting policies is included in Note 2 to our consolidated financial statements in Item 8 of Part II of the Company’s 2025 Form 10-K.
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 fluctuations in certain commodity prices, we believe that an increase in such items could significantly affect our profitability. See Note 6 to the condensed consolidated financial statements for additional details on the Company’s foreign currency exchange rate risks.