Commercial Vehicle(CVGI) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net sales of $232 million in Q1 2024, down from$ 263 million in the prior year period, reflecting a decrease in revenues due to softening customer demand globally [127][118] - Adjusted EBITDA was $12.7 million for the first quarter compared to$ 19.8 million in the prior year, with adjusted EBITDA margins decreasing to 5.5% from 7.5% [119][122] - Net income for the quarter was $2.9 million or$ 0.09 per diluted share, down from $8.7 million or$ 0.26 per diluted share in the prior year [19] Business Line Data and Key Metrics Changes - The vehicle solutions segment's revenues decreased by 14% to $137.9 million due to lower customer demand and the wind-down of unfavorable programs [7][8] - The industrial automation segment's revenues fell by 56% to$ 4.3 million, attributed to challenging market conditions and reduced demand from legacy customers [9] - The electrical system segment achieved revenues of $55.8 million, an increase of 1.9%, primarily due to increased pricing, although sales volume saw a slight decline [20][22] Market Data and Key Metrics Changes - Industry forecasts project a decline in North American Class A truck bills of approximately 10% for the year, a slight improvement from a previous estimate of a 16% decline [11] - The construction and agriculture end markets are expected to be flat to down 10% in 2024, impacting overall demand [11] Company Strategy and Development Direction - The company is focused on strengthening its core business in vehicle solutions, reducing costs, and driving operational improvements [8] - A transformation is underway to shift from a contract manufacturing model to a more engineered product, serialized production business with longer-term contracts [18] - The company is actively exploring new end markets and developing new highly engineered products, such as the Stack product showcased at the MODEX Trade Show [23] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of inflation and foreign exchange headwinds, particularly from labor increases in Mexico and the strengthening of the peso [75][96] - The company remains optimistic about generating positive free cash flow and is prepared to pursue debt pay down or inorganic growth opportunities [12] - Management reaffirmed guidance for 2024 revenues in the range of$ 915 million to $1.015 billion, citing confidence in the diversification strategy and resource allocation [133][134] Other Important Information - The company executed approximately$ 2 million in restructuring costs in Q1, primarily related to headcount reductions and facility closures [16] - The second Morocco facility is on track for completion by Q4 2024, enhancing the company's footprint in Europe [129] Q&A Session Summary Question: Impact of program wind downs on revenue - Management indicated that the majority of the wind down has been completed, with a single-digit million level of impact for the quarter [14] Question: Restructuring actions and anticipated savings - Management stated that restructuring actions are ongoing, with approximately $2 million in costs executed in Q1, and they expect to complete most activities by Q3 [16][31] Question: Outlook for electrical systems segment - Management noted that the electrical systems segment is facing challenges due to reduced demand in construction and agriculture, but they remain confident in long-term growth opportunities [39][61] Question: Guidance for EBITDA and potential risks - Management highlighted that the guidance range for adjusted EBITDA remains solid, but risks include potential downturns in the electrical segment and supply chain disruptions [40][42] Question: New business wins and annual targets - Management confirmed that they are on track to achieve$ 100 million in new business wins for the year, with a strong funnel of opportunities across various segments [46][81]