Commercial Vehicle Group (CVGI) Q1 2025 Earnings Call May 07, 2025 08:30 AM ET Company Participants Andy Cheung - EVP, CFO & Information TechnologyJames Ray - President, CEO & Non-Independent DirectorGary Prestopino - Managing Director Conference Call Participants Joe Gomes - Senior Generalist AnalystJohn Franzreb - Senior Equity Analyst Operator Good morning, ladies and gentlemen, and welcome to CVG's First Quarter twenty twenty five Earnings Conference Call. During today's presentation, all parties will b ...

Financial Data and Key Metrics Changes - Consolidated revenue for Q1 2025 was $169.8 million, down from $194.6 million in the prior year, primarily due to softening in global construction and agriculture end markets as well as North American Class eight truck demand [12] - Adjusted EBITDA for the first quarter was $5.8 million, compared to $9.7 million in the prior year, with adjusted EBITDA margins at 3.4%, down 160 basis points from 5% in Q1 2024 [12][13] - The company reported a net loss of $3.1 million or a loss of $0.09 per diluted share, compared to a net income of $1.4 million or $0.05 per diluted share in the prior year [13] - Free cash flow from continuing operations was $11.2 million, a significant improvement from negative $6.5 million in the prior year [14] Business Line Data and Key Metrics Changes - Global Seating segment revenues decreased by 9% to $73.4 million, with adjusted operating income of $2.7 million, a decrease of $0.1 million compared to the previous year [15] - Global Electrical segment revenues fell 14% to $50.5 million, with adjusted operating income of $200,000, down $1.3 million from the prior year [17] - Trim Systems and Components revenues decreased by 17% to $45.9 million, with adjusted operating income of $1.6 million, a decrease of $3.1 million compared to the prior year [19] Market Data and Key Metrics Changes - The Class eight heavy truck build forecast for 2025 indicates a 23% decline in year-over-year volumes, with a projected 19% increase in 2026 [20] - The construction market is expected to decline by approximately 5% to 15%, while the agriculture market is anticipated to decline in the same range due to higher interest rates and lower commodity prices [21] Company Strategy and Development Direction - The company has shifted to a new segment structure to enhance clarity and focus within each business unit, aiming to better align with customers and end markets [5] - Strategic actions taken in 2024 are expected to lower costs and improve operational efficiency, with a focus on reducing working capital and capital expenditures [22][23] - The company is actively pursuing new business opportunities while managing costs and improving cash generation [8][22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the current macroeconomic challenges and the impact on customer demand, emphasizing the importance of operational efficiency and cost management [7][20] - The company remains optimistic about long-term recovery in construction and agriculture markets despite current softness [21] - Management expects to generate at least $20 million of free cash flow in 2025, which will be used to pay down debt [26] Other Important Information - The company has decided to discontinue reporting new business wins due to the current macroeconomic environment and customer challenges in predicting future program ramps [7] - The company is focused on mitigating the impact of tariffs and broader macroeconomic headwinds through strategic portfolio actions and improved cash generation [22][23] Q&A Session Summary Question: What is the potential for gross margin improvement in a normalized environment? - Management indicated that they see potential for gross margins to reach around 15% in a normalized environment, with a focus on operational improvements [29][31] Question: How does the current market outlook compare to previous downturns? - Management acknowledged the current extended downturn but emphasized their preparedness and actions taken to stabilize operations and improve margins [36][38] Question: What percentage of COGS is impacted by tariffs? - Management noted that the largest exposure is related to tariffs from Mexico and Canada, with a smaller percentage from China, estimated to be less than 10% of the cost structure [48][49] Question: What are the covenant levels for the company's net leverage ratio? - The net leverage ratio is currently at five times, with covenant levels around four times, gradually stepping down throughout the year [54][55]

Q1-2025 Earnings Presentation James Ray – President & Chief Executive Officer Andy Cheung – Executive Vice President & Chief Financial Officer May 7, 2025 Forward Looking Statements and Non-GAAP Financial Measures These slides contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. For this purpose, any statements contained herein that are not statements of historical fact, including w ...

Group 1 - Commercial Vehicle Group (CVGI) reported a quarterly loss of $0.08 per share, better than the Zacks Consensus Estimate of a loss of $0.15, and compared to earnings of $0.13 per share a year ago, representing an earnings surprise of 46.67% [1] - The company posted revenues of $169.8 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 3.85%, but down from year-ago revenues of $232.07 million [2] - The stock has lost approximately 63.3% since the beginning of the year, while the S&P 500 has declined by 3.9% [3] Group 2 - The earnings outlook for Commercial Vehicle Group is mixed, with the current consensus EPS estimate for the coming quarter at -$0.05 on revenues of $168.22 million, and -$0.08 on revenues of $674.75 million for the current fiscal year [7] - The Zacks Industry Rank for Automotive - Original Equipment is currently in the bottom 26% of over 250 Zacks industries, indicating potential challenges for the stock's performance [8]

Financial Performance - Consolidated revenues decreased by 12.8% to $169.8 million for the three months ended March 31, 2025, compared to $194.6 million in the same period of 2024[110]. - Gross profit fell by 23.2% to $17.8 million, with a gross profit margin of 10.5% in Q1 2025, down from 11.9% in Q1 2024[110][112]. - Net loss from continuing operations was $3.1 million for Q1 2025, compared to net income of $1.4 million in Q1 2024, reflecting a decrease of $4.6 million[110][116]. - The Global Seating Segment reported revenues of $73.4 million, a decrease of 9.1% from $80.8 million in Q1 2024, primarily due to decreased customer demand[117]. - The Global Electrical Systems Segment experienced a revenue decline of 14.1%, with revenues of $50.5 million compared to $58.7 million in the prior year[121]. - The Trim Systems and Components Segment saw revenues drop by 16.6% to $45.9 million, attributed to decreased customer demand[126]. Expenses and Cash Flow - Selling, general and administrative expenses decreased by 12.2% to $16.4 million in Q1 2025, down from $18.7 million in Q1 2024[110][113]. - Net cash provided by operating activities was $15.2 million for Q1 2025, a significant improvement compared to net cash used of $2.4 million in Q1 2024[132]. - Net cash used in investing activities was $3.8 million, an increase from $1.9 million for the same period in 2024, primarily due to $3.2 million proceeds from the sale of the FinishTEK business in Q1 2024[133]. - Net cash used in financing activities for the three months ended March 31, 2025, was $18.1 million, compared to net cash provided of $14.2 million in the same period of 2024, mainly due to partial repayment of the revolving credit facility[134]. Capital and Future Outlook - Capital expenditures for 2025 are expected to be in the range of $10 million to $15 million[133]. - The company anticipates future growth in the wire harness, warehouse automation, and electric vehicle markets, along with plans to improve financial results and address customer needs[138]. - The company is focused on strategic plans that include organic growth and potential acquisitions to enhance market position[138]. Market and Risk Factors - The company is navigating external factors such as geopolitical dynamics and fluctuating foreign exchange rates, which may impact costs and pricing strategies[109]. - The company acknowledges that various economic and competitive factors could cause actual results to differ materially from forward-looking statements made[139]. - There have been no material changes in the company's exposure to market risk as of March 31, 2025, compared to disclosures in the 2024 Form 10-K[140]. - As of March 31, 2025, there have been no material changes to the company's critical accounting estimates from those disclosed in the 2024 Form 10-K[137].

Financial Performance - First quarter 2025 revenues were $169.8 million, a decrease of 12.7% compared to $194.6 million in the prior year[5] - Net loss from continuing operations was $3.1 million, or $(0.09) per diluted share, compared to net income of $1.4 million, or $0.05 per diluted share in the prior year[11] - Adjusted EBITDA for the first quarter was $5.8 million, down 40.2% from $9.7 million in the prior year, with an adjusted EBITDA margin of 3.4%[3] - Operating income for the first quarter was $1.4 million, down 68.9% from $4.5 million in the prior year[5] - The company reported a decrease in adjusted operating income to $2.1 million from $6.3 million in the prior year[5] - Revenues for the three months ended March 31, 2025, were $169.8 million, a decrease of 12.7% compared to $194.6 million for the same period in 2024[24] - Gross profit for the same period was $17.8 million, down 23.3% from $23.2 million year-over-year[24] - Adjusted gross profit was $18.3 million, representing 10.8% of revenues, down from 12.7% in the prior year[31] - The company reported an EBITDA of $5.1 million, which is 3.0% of revenues, down from 4.1% in the same quarter of 2024[31] Cash Flow and Outlook - Free cash flow improved to $11.2 million, an increase of $17.7 million due to better working capital management[3] - The company updated its full year 2025 outlook for net sales to a range of $660 million to $690 million, and adjusted EBITDA to a range of $22 million to $27 million[13] Market Trends and Projections - The North American Class 8 truck production levels are expected to be 255,000 units in 2025, down from 332,372 units in 2024[13] - Construction and Agriculture end markets are projected to decline approximately 5-15% in 2025, but new business wins in Electrical Systems are expected to soften this decline[14] Balance Sheet and Liabilities - Total assets decreased to $419.8 million as of March 31, 2025, from $424.6 million at the end of 2024[26] - Current liabilities increased to $138.6 million, up from $125.8 million at the end of the previous year[26] Historical Comparisons - Total revenues for the three months ended March 31, 2024, were $194,626 million, a decrease from $218,051 million in the same period of 2023, representing a decline of approximately 10.7%[35] - Gross profit for the three months ended June 30, 2024, was $20,568 million, down from $35,618 million in the same period of 2023, indicating a decrease of about 42.3%[35] - Adjusted operating income for the three months ended September 30, 2024, was a loss of $387 million, compared to an adjusted operating income of $12,489 million in the same period of 2023, reflecting a significant decline[36] - Operating income for the three months ended December 31, 2024, was a loss of $2,442 million, compared to a profit of $15,602 million in the same period of 2023, showing a substantial decrease[36] - The company incurred restructuring costs of $1,777 million for the three months ended March 31, 2024, compared to $90 million in the same period of 2023, indicating a significant increase in restructuring efforts[35] Expenses and Interest - Selling, general & administrative expenses for the three months ended June 30, 2024, were $16,680 million, up from $18,033 million in the same period of 2023, showing a slight decrease of about 7.5%[35] - Interest expense for the three months ended September 30, 2024, was $2,371 million, compared to $2,672 million in the same period of 2023, indicating a reduction of approximately 11.3%[36] - The company reported a loss before provision for income taxes of $6,395 million for the three months ended December 31, 2024, compared to a profit of $9,853 million in the same period of 2023, marking a significant downturn[36] Segment Performance - Revenues for the Global Seating segment for the three months ended March 31, 2024, were $80,797 million, down from $95,877 million in the same period of 2023, a decline of approximately 15.7%[35] - The company’s total cost of revenues for the three months ended June 30, 2024, was $173,097 million, compared to $185,182 million in the same period of 2023, reflecting a decrease of about 6.5%[35] Non-GAAP Measures - The company emphasizes the use of non-GAAP measures to provide supplemental metrics for assessing financial performance[40] - Non-GAAP financial measures are used internally for performance evaluation and may differ from similar measures used by other companies[42]

Core Viewpoint - CVG reported a challenging first quarter for 2025, with a significant decline in revenues and net loss, but improved free cash flow and operational efficiency initiatives are underway to address these challenges [1][4][5]. Financial Performance - First quarter revenues were $169.8 million, down 12.7% from $194.6 million in the prior year, primarily due to softening demand in global construction and agriculture markets, as well as decreased North American Class 8 truck demand [5][10]. - Operating income decreased to $1.4 million from $4.5 million year-over-year, with adjusted operating income at $2.1 million compared to $6.3 million [5][10]. - The net loss from continuing operations was $3.1 million, or $(0.09) per diluted share, compared to a net income of $1.4 million, or $0.05 per diluted share, in the prior year [5][10]. - Adjusted EBITDA was $5.8 million, down 40.2% from $9.7 million, with an adjusted EBITDA margin of 3.4%, down from 5.0% [5][10]. Cash Flow and Debt Management - Free cash flow improved to $11.2 million, an increase of $17.7 million, attributed to better working capital management [5][10]. - Net debt decreased by $11.7 million compared to the end of 2024, indicating progress in debt paydown [5][10]. Strategic Initiatives - The company completed a strategic reorganization into three segments: Global Seating, Global Electrical Systems, and Trim Systems and Components, aiming to enhance operational efficiency [2][4]. - Management emphasized the importance of cash generation and debt reduction as key priorities, alongside ongoing efforts to improve margins and reduce capital expenditures [4][5]. Outlook - CVG updated its full-year 2025 guidance, projecting net sales between $660 million and $690 million, down from the previous outlook of $670 million to $710 million [14]. - Adjusted EBITDA is now expected to be between $22 million and $27 million, revised from $25 million to $30 million [14]. - The company anticipates a decline of approximately 5-15% in construction and agriculture end markets for 2025, but expects new business contributions in Electrical Systems to mitigate this decline [15].

Group 1 - Commercial Vehicle Group (CVG) will hold its quarterly conference call on May 7, 2025, at 8:30 a.m. ET to discuss first quarter 2025 financial results [1] - A press release and presentation will be issued prior to the conference call [1] - The conference call will be accessible via a toll-free number for participants and will also be webcasted on CVG's website [2] Group 2 - A telephonic replay of the conference call will be available until May 21, 2025, with specific access codes for toll-free and international callers [3] - CVG focuses on delivering solutions to complex design, engineering, and manufacturing problems while positively impacting customers and communities [4] - Additional information about CVG and its products can be found on the company's website [4]

Core Points - Robert C. Griffin will retire from the Board of Directors of Commercial Vehicle Group, Inc. effective May 15, 2025, and will not stand for re-election at the 2025 annual meeting of stockholders [1][2] - Griffin has been a Director since 2005 and is currently the Chairman of the Board; his retirement is not due to any disagreements with the Company or its management [2] - William C. Johnson is expected to succeed Griffin as Chairman of the Board following his retirement [2] - Michael Nauman, Chairman of the Nominating, Governance and Sustainability Committee, expressed gratitude for Griffin's contributions and leadership during his tenure [3] - Griffin stated it has been a privilege to serve the shareholders of CVG for 20 years and expressed his best wishes for the Company's future success [3]

Financial Performance - For the year ended December 31, 2024, the company recorded revenues of $723.4 million, a decrease of 13.4% compared to $835.5 million in 2023[248]. - The gross profit for 2024 was $73.1 million, down from $121.1 million in 2023, reflecting a gross margin of 10.1%[248]. - The company reported a net loss of $27.9 million for 2024, compared to a net income of $49.4 million in 2023[248]. - Operating income for 2024 was a loss of $0.8 million, a significant decline from an operating income of $39.9 million in 2023[248]. - The company recorded a loss from continuing operations of $35.7 million in 2024, compared to a profit of $43.6 million in 2023[248]. - Comprehensive loss for 2024 totaled $40,926 thousand, contrasting with a comprehensive income of $50,677 thousand in 2023[251]. - Net income for 2024 was a loss of $27,867 thousand, compared to a profit of $49,411 thousand in 2023, indicating a significant decline in profitability[259]. - The company reported a pre-tax loss of $8,241 million for 2024, a decrease from a pre-tax income of $28,430 million in 2023[331]. - Basic earnings per share from continuing operations for 2024 was $(1.07), a decline from $1.32 in 2023[375]. - The company reported a total other comprehensive loss of $(13.059) million for the year ended December 31, 2024, compared to a total other comprehensive income of $1.266 million for 2023[378]. Assets and Liabilities - Total assets decreased from $483,214 thousand in 2023 to $424,573 thousand in 2024, reflecting a reduction of approximately 12.1%[254]. - Current assets fell from $327,742 thousand in 2023 to $303,300 thousand in 2024, a decrease of about 7.4%[254]. - Cash reserves decreased from $37,848 thousand in 2023 to $26,630 thousand in 2024, representing a decline of approximately 29.5%[254]. - Total liabilities decreased from $310,282 thousand in 2023 to $288,981 thousand in 2024, a decline of approximately 6.9%[254]. - Stockholders' equity decreased from $172,932 thousand in 2023 to $135,592 thousand in 2024, reflecting a decrease of about 21.6%[254]. - The carrying amount of long-term debt obligations was $135,500 million in 2024, with a fair value of $134,863 million, compared to a carrying amount of $141,514 million and a fair value of $139,213 million in 2023[325]. Cash Flow and Investments - Cash flows from operating activities resulted in a net cash outflow of $33,452,000 in 2024, down from an inflow of $38,276,000 in 2023[259]. - The company reported a net cash inflow from investing activities of $30,896,000 in 2024, a turnaround from a cash outflow of $19,696,000 in 2023[259]. - The company had outstanding letters of credit of $1.1 million under the Revolving Credit Facility as of December 31, 2024[303]. - The company divested its cab structures business and Industrial Automation segment, which are classified as discontinued operations, impacting the overall financial results[264]. Debt and Interest - Interest expense for 2024 was $9.2 million, slightly lower than $10.2 million in 2023[248]. - The company had total long-term debt of $127.1 million as of December 31, 2024, compared to $126.2 million in 2023[295]. - The term loan facility was reduced to $85 million and the revolving credit facility commitments were decreased to $125 million as of December 19, 2024[301]. - The company recognized a loss on extinguishment of debt of $0.5 million due to the fourth amendment of the credit agreement[302]. - Cash payments for interest for the twelve months ended December 31, 2024, were $11.7 million, a decrease from $12.8 million in 2023[312]. Foreign Currency and Inflation - The company is exposed to foreign currency risks, with significant revenues derived from operations outside the U.S., affecting the translation of financial results into U.S. Dollars[230]. - Inflation impacts the company through increased material costs and labor, with limited ability to pass these costs onto customers due to competitive market conditions[233]. - The effect of currency exchange rate changes resulted in a cash outflow of $1,540,000 in 2024, contrasting with a cash inflow of $172,000 in 2023[259]. Restructuring and Operations - The company incurred a loss of $2,454 million on foreign exchange contracts designated as hedging instruments in 2024, contrasting with a gain of $5,339 million in 2023[323]. - The company incurred $10.8 million in restructuring expenses during the year ended December 31, 2024, primarily for workforce reductions ($8.4 million) and facility exit costs ($2.4 million)[381]. - The restructuring program approved during the quarter ended December 31, 2023, included workforce reductions and footprint optimization across segments[379]. Taxation - The provision for income taxes for 2024 was $27,493 million, compared to a benefit of $(15,203) million in 2023[331]. - The company recorded a valuation allowance of $26.6 million in 2024 primarily related to U.S. deferred tax assets due to a cumulative three-year loss position[333]. - The total net deferred tax asset was $10.76 million, a decrease from $33.29 million in 2023[332]. Segment Performance - The company has three reportable segments for 2024: Vehicle Solutions, Electrical Systems, and Aftermarket & Accessories, following the divestiture of the cab structure business[392]. - Revenue from Vehicle Solutions for the twelve months ended December 31, 2024, was $404.2 million, down from $470.3 million in 2023, representing a decline of 14.1%[294]. - The Vehicle Solutions segment generated revenues of $404,164 million in 2024, a decrease of 13.9% from $469,962 million in 2023[396]. - Revenues from the Industrial Automation segment were $16,468 million in 2024, down from $38,900 million in 2023[406].