Good day, and thank you for standing by. Welcome to the Stoneridge third quarter 2022 conference call. [Operator Instructions]. I would now like to hand the conference over to our speaker today, Kelly Harvey, Director of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us to discuss our third quarter results. The release and accompanying presentation was filed with the SEC yesterday evening and is posted on our website at stoneridge.com in the Investors section under Webcasts and Presentations. Joining me on today's call are Jon DeGaynor, our President and Chief Executive Officer; and Matt Horvath, our Chief Financial Officer. Before we begin, I need to inform you that certain statements today may be forward-looking statements. Forward-looking statements, including statements that are not historical in nature and include information concerning our future results or plans. Although we believe such statements are based upon reasonable assumptions, you should understand that these statements are subject to risks and uncertainties and may -- and actual results may differ materially. Additional information about such factors and uncertainties that could cause actual results to differ may be found in our 10-Q, which has been filed with the Securities and Exchange Commission under the heading Forward-Looking Statements. During today's call, we will also be referring to certain non-GAAP financial measures. Please see the appendix for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. After Jon and Matt have finished their formal remarks, we will then open up the call to questions. I would ask that you keep your question to a single follow-up. With that, I will turn the call over to Jon.

Thanks, Kelly, and good morning, everyone. Turning to Page 3. In the third quarter, we began to see the impacts of improving material availability on our top line performance, which drove significantly improved earnings performance. Excluding the impact of currency rates, adjusted sales increased by 6.2% in the quarter, while adjusted EBITDA margin improved by 580 basis points. Margin expansion was driven by fixed cost leverage on revenue growth, the continued benefit of material cost mitigation actions, including historical customer recoveries and a continued focus on strong operating performance. Each of our segments drove revenue growth and above breakeven operating performance in the quarter. Our third quarter adjusted sales of $214 million resulted in an adjusted gross margin of 23.1%, translating to an adjusted operating margin of 2.9% and adjusted EBITDA margin of 5.6%. Adjusted EPS for the quarter was $0.03. We continue to effectively offset incremental material and supply chain-related costs through pricing and supply chain actions resulting in the recovery of both current and historical costs in the quarter. While incremental material costs have started to moderate, we expect material cost headwinds to persist for the remainder of the year and into 2023. We will continue to evaluate macroeconomic conditions and expect ongoing discussions with our customers to offset cost headwinds. We remain focused on our key growth initiatives. During the quarter, customer demand continued to be strong for our first OEM MirrorEye program. Take rates were slightly improved at approximately 40%, despite being moderated by material availability. That said, we've made significant progress against those material constraints and expect continued improvement in our MirrorEye production capability for the remainder of the year. We expect to be able to support take rates on this and that are forecasted to exceed 50% in 2023 as well as additional launches…

Thanks, Jon. Turning to Slide 10. Adjusted sales in the third quarter were approximately $214 million, an increase of 4% relative to the prior quarter. Adjusted operating income was $6.1 million or 2.9% of adjusted sales, which increased by 600 basis points versus the prior quarter. The increase in margin was driven by strong operating performance, including reduced operating expenses and continued pricing and supply chain actions aimed at recovering costs and offsetting incremental material costs. As Jon discussed earlier in the call, we are adjusting our full-year 2022 guidance. Our updated guidance implies fourth quarter performance to be approximately [Technical Difficulty] to $0.27 per share, an adjusted revenue growth of over 11.5% relative to the third quarter. Our guidance also implies fourth quarter EBITDA margin of approximately 8%, which will be a 240 basis point improvement over the third quarter and a 670 basis point improvement over the fourth quarter of last year. I will discuss the specific drivers of our full year adjusted guidance in more detail later in the call. Page 11 summarizes the key items that impacted operating performance during the quarter relative to the expectations we outlined on our second quarter call. Our operating performance resulted in approximately $0.03 of our performance in the quarter relative to our prior expectations. This was driven primarily by favorable material costs as a result of continued cost recoveries as well as a favorable product mix. We continue to focus on a lean cost structure aligned with current market conditions, resulting in reduced operating expenses relative to our prior guidance driving approximately $0.03 of favorability in the quarter. Finally, historical cost recoveries drove approximately $0.05 of benefit relative to our prior guidance. Our positive operating performance more than offset the significant currency headwinds we continue to experience within the…

[Operator Instructions]. Our first question comes from the line of Justin Long with Stephens.

I wanted to start with a question on the implied fourth quarter guidance. You talked about it a few times, but it implies a pretty sizable step-up in revenue sequentially, double-digit growth. Can you talk about how much visibility you have to that step-up and maybe provide a little bit more color on how much of that sequential improvement is coming from Control Devices versus Electronics?

Yes. Thanks for the question, Justin. Obviously, we're into the fourth quarter now. So we've got some actual performance to rely on as we set our guidance. We have looked at various different scenarios for the remainder of the year, both on the top and bottom line to make sure that our guidance considers all of those potential ranges as we see them now. Obviously the market is relatively volatile. So the range is probably a little bit broader than we typically expect in the fourth quarter. But as we see it, that's kind of the expected range for the end of the year, both based on what we've seen in the quarter so far and what we can expect for the remainder. So we've got pretty good visibility to that continued step-up. As for your question on Control Devices versus Electronics, I would say the market is a little bit more volatile on the Control Devices side as the North American past car market has been a little bit more volatile than the market. Both remain stable and growing from what we can see. And we expect continued ramp up across the segments to support that overall step-up in growth. I would say it's a little bit more weighted towards electronics as we go into the fourth quarter, the growth side is, just because the CV market, we've got a little bit more makeup, I'll call it backlog, not in the traditional sense that we typically think about a 5-year backlog. But backlog of customer orders in the short term that we can fill as material availability continue to really, really improve here, and we've got some momentum. So I would say we've got pretty good visibility into the fourth quarter, given where we are in the year. And also I would expect a little bit more on the electronic side as we head towards the end of the year here.

That's very helpful. And maybe shifting to MirrorEye for my second question. Any update on the contribution from MirrorEye that's assumed in the full-year revenue guidance for 2022? And then that comment on the 50%-plus take rate into next year, is that a comment related to just the first contract or is that related to the second contract that will be kicking in as well?

I'll comment on the guidance a little bit. We have set approximately $15 million to $20 million of total MirrorEye revenue when we set our guidance at the beginning of the year. The take rate for the first OEM program has obviously been pretty strong as we continue to ramp up here. So we would expect to be kind of on the high end of that for the year, but still kind of within that range. And maybe I'll let Jon comment on the take rate for the first program there.

So Justin, the 50% take rate is specifically to that first OEM program. As we've said in our backlog, we always use the customer contractual take rates. And what we talked about in each of the earnings calls is -- what we've seen is the sequential outperformance of those, the take rates on a quarter-by-quarter basis versus the contractual take rate. And the point here is right now we're at approximately 40% take rate. And that is constrained by the supply chain. It's not constrained by demand. As we are continuing to break bottlenecks, we're seeing that take rate go up. So what we're envisioning for 2023 is thinking about 50-plus percent take rate for the first program and as we continue to break bottlenecks in the supply chain support, the new program launches as well.

And Justin, I just want to follow up on that. As you think about the trajectory for next year for that first OE program and what the take rate means incremental and all of those things, a couple of things to remember in the math of that. The ramp-up and switch over from old truck to new truck for our first customer occurred over this year. So I would expect more volume on new truck next year, relatively speaking. And also that take rate, remember, we launched early in the year, it's not -- we don't have a fully annualized number on that full-year guidance. So you'll get a little bit of benefit of incremental volume on new truck production. You'll get a little bit of benefit on annualization for a full year, and then you'll get the incremental benefit of what we expect to be stronger take rates for the full year next year. So just as you're thinking comp over comp. Hopefully, that helps the math a little bit.

And I guess, lastly is just a quick follow-up on the MirrorEye question. Could you comment on the level of retrofit activity that you're seeing today and how you're expecting that to ramp as we get into next year just based on conversations you're having with customers?

Yes. Justin, we continue to be excited about it. We look forward to being down in Nashville and talking to you a little bit more at your conference. We've got a lot of interest, nothing -- no announcements that we're prepared to make today. But we see retrofit continuing to grow. And fleets -- as some of our leading fleets are showing more of their results, additional fleets are calling and saying, "Hey, we want the same as what Maverick has or what Schneider has." So nothing from an announcement standpoint today, but retrofit is an important part of our overall MirrorEye strategy and it continues to grow. And we look forward to contributions it has in 2023.

I would now like to turn it back to Jon for closing remarks.

Well, I want to thank you all for your participation in today's call. In closing, I can assure you that our team is committed to continuing to drive shareholder value through strong operating results, profitable new business and focused deployment of our available resources. We're confident that our actions will result in continued success in 2022 and beyond, and we wish you all a very good day.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.