Cooper Standard(CPS) - 2024 Q3 - Quarterly Results

Executive Summary & Highlights This section provides an overview of Cooper Standard's third quarter 2024 performance, emphasizing operational savings and the maintenance of full-year financial outlook despite market challenges Third Quarter 2024 Highlights Cooper Standard reported third quarter 2024 results, highlighting $24.5 million in savings from lean operations and cost initiatives. Despite headwinds from lower production volume and unfavorable foreign exchange, the company maintained its full-year outlook for profit and cash flow - Savings of $24.5 million realized from lean operations and cost initiatives[1] Third Quarter 2024 Financial Highlights (Millions of US Dollars) | Metric | Q3 2024 | Q3 2023 | | :----------------------------- | :-------------- | :-------------- | | Net loss | $(11.1) | $11.4 | | Adjusted net loss | $(12.0) | $15.0 | | Adjusted EBITDA | $46.1 | $79.1 | | Net new business awards | $44.0 | N/A | - Management is pleased that continued operational excellence has enabled the company to keep its full year outlook for profit and cash flow essentially in line with original expectations, despite weaker market conditions[1] Financial Performance Overview This section details Cooper Standard's consolidated financial results, including sales, net income, and Adjusted EBITDA, along with key factors influencing year-over-year changes Consolidated Financial Results The company experienced a decline in sales and a shift from net income to net loss in Q3 2024 compared to Q3 2023, with similar trends observed for the nine months ended September 30 Consolidated Financial Results Summary (Millions of US Dollars) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Sales | $685.4 | $736.0 | $2,070.1 | $2,142.2 | | Net (loss) income | $(11.1) | $11.4 | $(119.0) | $(146.8) | | Adjusted net (loss) income | $(12.0) | $15.0 | $(53.9) | $(51.2) | | (Loss) income per diluted share | $(0.63) | $0.65 | $(6.78) | $(8.47) | | Adjusted (loss) income per diluted share | $(0.68) | $0.85 | $(3.07) | $(2.95) | | Adjusted EBITDA | $46.1 | $79.1 | $126.4 | $139.5 | Factors Affecting Financial Performance The year-over-year changes in sales, net loss, and Adjusted EBITDA were primarily driven by the timing of commercial settlements in Q3 2023, unfavorable foreign exchange, continuing general inflation, and lower overall production volumes. These negative impacts were partially mitigated by savings from lean manufacturing, purchasing initiatives, and restructuring actions - Third quarter sales decrease primarily due to the timing of commercial settlements in Q3 2023 (including ~$30 million related to Q1/Q2 2023) that did not recur at the same level in Q3 2024, unfavorable foreign exchange, and lower production volume and mix[2] - Net loss for Q3 2024 was $(11.1) million, including $1.5 million in restructuring charges and a $2.2 million pension settlement credit. Adjusted net loss was $(12.0) million in Q3 2024, compared to adjusted net income of $15.0 million in Q3 2023[3] - Adjusted EBITDA for Q3 2024 was $46.1 million, down from $79.1 million in Q3 2023. The decline was mainly due to commercial settlement timing, unfavorable foreign exchange, inflation, and lower production volumes, partially offset by lean manufacturing savings and restructuring[4] Operational Highlights This section outlines Cooper Standard's operational achievements, including new business awards and segment-specific performance in sales and Adjusted EBITDA New Business Awards Cooper Standard secured $44.0 million in net new business awards during the third quarter of 2024, with a significant portion attributed to battery electric and hybrid vehicle platforms, leveraging its engineering and innovation capabilities - Net new business awards totaled $44.0 million in anticipated future annualized sales during Q3 2024[6] Net New Business Awards by Platform Type (Q3 2024, Millions of US Dollars) | Platform Type | Net New Business Awards (Q3 2024, Millions of US Dollars) | | :-------------- | :------------------------------------------------ | | BEV Platforms | $32.3 | | Hybrid Platforms | $7.9 | Segment Results of Operations Both Sealing systems and Fluid handling systems segments experienced declines in sales and Adjusted EBITDA in Q3 2024 compared to Q3 2023, primarily driven by volume/mix and foreign exchange impacts, though cost decreases provided some offset Sales by Segment Sales to external customers decreased across both Sealing systems and Fluid handling systems segments in Q3 2024, with the majority of the variance attributed to changes in volume/mix and unfavorable foreign exchange Sales by Segment (Thousands of US Dollars) | Segment | Q3 2024 Sales (Thousands of US Dollars) | Q3 2023 Sales (Thousands of US Dollars) | Change (Thousands of US Dollars) | Variance Due To: Volume/Mix* (Thousands of US Dollars) | Variance Due To: Foreign Exchange (Thousands of US Dollars) | | :-------------------------- | :-------------------------------------- | :-------------------------------------- | :------------------------------- | :------------------------------------------------- | :-------------------------------------------------- | | Sealing systems | 353,365 | 370,958 | (17,593) | (15,279) | (2,314) | | Fluid handling systems | 313,739 | 341,817 | (28,078) | (26,795) | (1,283) | | Total for reportable segments | 667,104 | 712,775 | (45,671) | (42,074) | (3,597) | | Consolidated | 685,353 | 736,038 | (50,685) | (42,012) | (3,597) | Adjusted EBITDA by Segment Adjusted EBITDA declined for both segments in Q3 2024, primarily due to negative volume/mix and foreign exchange impacts, partially offset by cost decreases Adjusted EBITDA by Segment (Thousands of US Dollars) | Segment | Q3 2024 Adjusted EBITDA (Thousands of US Dollars) | Q3 2023 Adjusted EBITDA (Thousands of US Dollars) | Change (Thousands of US Dollars) | Variance Due To: Volume/Mix* (Thousands of US Dollars) | Variance Due To: Foreign Exchange (Thousands of US Dollars) | Variance Due To: Cost Decreases/(Increases)** (Thousands of US Dollars) | | :-------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------- | :------------------------------------------------- | :-------------------------------------------------- | :-------------------------------------------------------------------- | | Sealing systems | 29,904 | 39,620 | (9,716) | (16,863) | (6,578) | 13,725 | | Fluid handling systems | 23,089 | 41,292 | (18,203) | (25,670) | (2,746) | 10,213 | | Total for reportable segments | 52,993 | 80,912 | (27,919) | (42,533) | (9,324) | 23,938 | | Consolidated | 46,145 | 79,103 | (32,958) | (42,441) | (11,011) | 20,494 | Financial Position & Outlook This section reviews Cooper Standard's cash and liquidity position, and provides updated full-year 2024 guidance considering market conditions and strategic initiatives Cash and Liquidity As of September 30, 2024, Cooper Standard maintained a cash balance of $107.7 million and total liquidity of $280.8 million, which the company believes is sufficient to support ongoing operations and strategic initiatives Cash and Liquidity (As of September 30, 2024, Millions of US Dollars) | Metric | As of September 30, 2024 (Millions of US Dollars) | | :-------------------- | :---------------------------------------- | | Cash and cash equivalents | $107.7 | | Total liquidity | $280.8 | - The Company believes it has sufficient financial resources, including current cash, flexible credit facilities, and expected future positive cash generation, to support ongoing operations and strategic initiatives for the foreseeable future[11] Outlook and Guidance The company anticipates continued softening in global light vehicle production and persistent headwinds from inflation and unfavorable foreign exchange. Despite this, aggressive lean cost structure initiatives are expected to drive improvements in profit margins and cash flow in Q4 2024 and into 2025, leading to updated full-year 2024 guidance Market and Operational Outlook Industry projections for full-year global light vehicle production in 2024 have softened, now slightly lower than 2023 levels. The company expects to leverage new program launches and commercial agreements for growth, while lean cost initiatives are projected to improve profit margins and cash flow despite ongoing inflation and foreign exchange headwinds - Industry projections for full-year global light vehicle production in 2024 have been softening and are now slightly lower than 2023 levels[12] - Inflation and unfavorable foreign exchange are expected to continue as headwinds[12] - Savings from implemented aggressive lean cost structure initiatives are expected to drive improvements in profit margins and cash flow in Q4 2024 and continuing into 2025[12] Full-Year 2024 Guidance Update Cooper Standard has updated its full-year 2024 guidance, revising sales and Adjusted EBITDA ranges downwards, while also reducing capital expenditures and increasing cash restructuring and net cash interest estimates Full-Year 2024 Financial Guidance (Millions of US Dollars) | Metric | Initial 2024 Guidance (Millions of US Dollars) | Current 2024 Guidance (Millions of US Dollars) | | :---------------------------------------- | :------------------------------------ | :------------------------------------ | | Sales | $2,800 - $2,900 | $2,700 - $2,750 | | Adjusted EBITDA | $180 - $210 | $180 - $195 | | Capital Expenditures | $75 - $85 | $45 - $50 | | Cash Restructuring | $15 - $20 | $25 - $30 | | Net Cash Interest | $70 - $75 | $95 - $100 | | Net Cash Taxes | $20 - $25 | $20 - $25 | Key Light Vehicle Production Assumptions (Millions of Units) | Region | Initial 2024 Guidance (Millions of Units) | Current 2024 Guidance (Millions of Units) | | :------------ | :---------------------------------------- | :---------------------------------------- | | North America | 15.8 | 15.5 | | Europe | 17.4 | 17.1 | | Greater China | 28.9 | 29.3 | | South America | 3.0 | 2.9 | Corporate Information This section provides essential corporate details, including conference call information, company overview, forward-looking statements, and contact information Conference Call Details Cooper Standard will host a conference call and webcast on November 1, 2024, to discuss its third quarter 2024 results and provide a business update - Conference call and webcast scheduled for November 1, 2024, at 9 a.m. ET[15] - Access via online webcast at https://ir.cooperstandard.com/events or by phone (toll-free 800-836-8184 for US/Canada, international 646-357-8785)[15][16] - A replay of the webcast will be available on the investors' portion of the Cooper Standard website[17] About Cooper Standard Cooper Standard is a global supplier of sealing and fluid handling systems and components, headquartered in Northville, Michigan, with operations in 21 countries and approximately 22,000 employees - Headquartered in Northville, Mich., with locations in 21 countries[18] - Leading global supplier of sealing and fluid handling systems and components[18] - Approximately 22,000 employees globally[18] Forward-Looking Statements & Disclaimers This section contains standard forward-looking statements, subject to significant risks and uncertainties that may cause actual results to differ materially. The company disclaims any obligation to publicly update or revise these statements, and notes that estimates based on industry publications have not been independently verified - Includes 'forward-looking statements' subject to safe harbor provisions, identified by words like 'estimate,' 'expect,' 'anticipate,' 'project,' 'plan,' 'intend,' 'believe,' 'outlook,' 'guidance,' 'forecast,' or future/conditional verbs[19] - Forward-looking statements are not guarantees of future performance and are subject to significant risks and uncertainties that may cause actual results to be materially different[19] - The press release contains estimates and information based on industry publications, surveys, and forecasts, which have not been independently verified for accuracy or completeness[20] Contact Information Contact details are provided for analysts and media inquiries Analyst and Media Contact Information | Role | Name | Contact Information | | :------- | :--------------- | :------------------------------------------ | | Analysts | Roger Hendriksen | (248) 596-6465, roger.hendriksen@cooperstandard.com | | Media | Chris Andrews | (248) 596-6217, candrews@cooperstandard.com | Financial Statements This section presents Cooper Standard's condensed consolidated statements of operations, balance sheets, and cash flows for the reported periods Condensed Consolidated Statements of Operations The condensed consolidated statements of operations show a net loss attributable to Cooper-Standard Holdings Inc. of $(11.1) million for Q3 2024, a decrease from net income of $11.4 million in Q3 2023, primarily due to lower sales and operating income Condensed Consolidated Statements of Operations (Thousands of US Dollars) | Metric | Three Months Ended Sep 30, 2024 (Thousands of US Dollars) | Three Months Ended Sep 30, 2023 (Thousands of US Dollars) | Nine Months Ended Sep 30, 2024 (Thousands of US Dollars) | Nine Months Ended Sep 30, 2023 (Thousands of US Dollars) | | :------------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Sales | 685,353 | 736,038 | 2,070,140 | 2,142,236 | | Gross profit | 76,312 | 106,534 | 220,895 | 226,076 | | Operating income | 23,470 | 52,658 | 38,099 | 50,495 | | Net (loss) income attributable to CooperStandard Holdings Inc. | (11,057) | 11,363 | (118,960) | (146,833) | | Diluted (Loss) income per share | (0.63) | 0.65 | (6.78) | (8.47) | Condensed Consolidated Balance Sheets The balance sheet as of September 30, 2024, shows a decrease in total assets and total equity compared to December 31, 2023, primarily driven by a significant increase in retained deficit and accumulated other comprehensive loss Condensed Consolidated Balance Sheets (Thousands of US Dollars) | Metric | September 30, 2024 (Thousands of US Dollars) | December 31, 2023 (Thousands of US Dollars) | | :--------------------------------- | :----------------------------------- | :---------------------------------- | | Cash and cash equivalents | 107,734 | 154,801 | | Total current assets | 872,036 | 900,586 | | Total assets | 1,797,538 | 1,872,299 | | Total current liabilities | 648,190 | 653,243 | | Total liabilities | 1,960,588 | 1,962,032 | | Total Cooper-Standard Holdings Inc. equity | (155,104) | (81,300) | | Total equity | (163,050) | (89,733) | Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2024, net cash provided by operating activities significantly decreased compared to the prior year, while net cash used in investing activities also decreased. Financing activities shifted from providing cash in 2023 to using cash in 2024, resulting in a substantial reduction in cash and cash equivalents Condensed Consolidated Statements of Cash Flows (Thousands of US Dollars) | Metric | Nine Months Ended Sep 30, 2024 (Thousands of US Dollars) | Nine Months Ended Sep 30, 2023 (Thousands of US Dollars) | | :-------------------------------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net cash provided by operating activities | 1,647 | 37,616 | | Net cash used in investing activities | (38,727) | (47,475) | | Net cash (used in) provided by financing activities | (6,790) | 39,370 | | Changes in cash, cash equivalents and restricted cash | (46,439) | 21,204 | | Cash, cash equivalents and restricted cash at end of period | 116,622 | 214,011 | Non-GAAP Financial Measures & Reconciliations This section defines and reconciles various non-GAAP financial measures, including EBITDA, Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow, to their most comparable GAAP measures Non-GAAP Measures Definition This section defines various non-GAAP financial measures used by Cooper Standard, including EBITDA, Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted EPS, Free Cash Flow, and Net New Business, explaining their relevance as key indicators of operating performance and their limitations - Non-GAAP measures (EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income (loss), adjusted earnings (loss) per share, free cash flow, and net new business) are used as key indicators of operating performance and are widely used by investors and analysts[28] - EBITDA is defined as net income (loss) adjusted for income tax expense (benefit), interest expense, depreciation, and amortization[28] - Adjusted EBITDA further adjusts EBITDA for items management does not consider reflective of core operating performance. Free cash flow is defined as net cash provided by operating activities minus capital expenditures[28] Reconciliation of EBITDA and Adjusted EBITDA The reconciliation shows a decrease in both EBITDA and Adjusted EBITDA for Q3 and the nine months ended September 30, 2024, compared to the prior year, primarily due to the factors impacting net income, partially offset by adjustments for non-recurring items Reconciliation of EBITDA and Adjusted EBITDA (Thousands of US Dollars) | Metric | Three Months Ended Sep 30, 2024 (Thousands of US Dollars) | Three Months Ended Sep 30, 2023 (Thousands of US Dollars) | Nine Months Ended Sep 30, 2024 (Thousands of US Dollars) | Nine Months Ended Sep 30, 2023 (Thousands of US Dollars) | | :---------------------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net (loss) income attributable to Cooper-Standard Holdings Inc. | (11,057) | 11,363 | (118,960) | (146,833) | | EBITDA | 46,845 | 76,723 | 61,405 | 43,702 | | Adjusted EBITDA | 46,145 | 79,103 | 126,406 | 139,499 | | Adjusted EBITDA margin | 6.7% | 10.7% | 6.1% | 6.5% | Reconciliation of Adjusted Net (Loss) Income and Adjusted (Loss) Income Per Share The reconciliation highlights a shift from adjusted net income in Q3 2023 to an adjusted net loss in Q3 2024, and an increased adjusted net loss for the nine months ended September 30, 2024, after accounting for restructuring, pension settlement, and other special items Reconciliation of Adjusted Net (Loss) Income and Adjusted (Loss) Income Per Share (Thousands of US Dollars) | Metric | Three Months Ended Sep 30, 2024 (Thousands of US Dollars) | Three Months Ended Sep 30, 2023 (Thousands of US Dollars) | Nine Months Ended Sep 30, 2024 (Thousands of US Dollars) | Nine Months Ended Sep 30, 2023 (Thousands of US Dollars) | | :-------------------------------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net (loss) income attributable to Cooper-Standard Holdings Inc. | (11,057) | 11,363 | (118,960) | (146,833) | | Adjusted net (loss) income | (12,012) | 14,953 | (53,891) | (51,181) | | Adjusted (loss) income per share: Basic | (0.68) | 0.86 | (3.07) | (2.95) | | Adjusted (loss) income per share: Diluted | (0.68) | 0.85 | (3.07) | (2.95) | Reconciliation of Free Cash Flow Free cash flow for the nine months ended September 30, 2024, was a negative $(37.4) million, a significant decrease from the prior year, primarily due to lower net cash provided by operating activities Reconciliation of Free Cash Flow (Thousands of US Dollars) | Metric | Three Months Ended Sep 30, 2024 (Thousands of US Dollars) | Three Months Ended Sep 30, 2023 (Thousands of US Dollars) | Nine Months Ended Sep 30, 2024 (Thousands of US Dollars) | Nine Months Ended Sep 30, 2023 (Thousands of US Dollars) | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net cash provided by operating activities | 27,859 | 20,466 | 1,647 | 37,616 | | Capital expenditures | (10,937) | (16,424) | (39,014) | (63,184) | | Free cash flow | 16,922 | 4,042 | (37,367) | (25,568) |