Commercial Vehicle Group (CVGI) Q4 2024 Earnings Call March 11, 2025 08:30 AM ET Company Participants Andy Cheung - Executive VP & Chief Financial OfficerJames Ray - President, CEO & Non-Independent DirectorGary Prestopino - Managing DirectorDouglas Dethy - President Of RegistrantSteven L. Martin - President Conference Call Participants Joe Gomes - Senior Research AnalystJohn Franzreb - Senior Equity Analyst Operator Good morning. Ladies and gentlemen, welcome to CVG's Fourth Quarter twenty twenty four Earn ...

Financial Performance - Full Year 2024 revenue was $723.4 million, a decrease of 13.4% compared to the previous year, primarily due to a global softening in customer demand [5]. - Fourth Quarter 2024 revenue was $163.3 million, down 15.7% from $193.7 million in the prior year period, attributed to lower sales in Vehicle Solutions and Electrical Systems segments [10]. - Net loss from continuing operations for Q4 2024 was $35.0 million, or $(1.04) per diluted share, compared to net income of $22.6 million, or $0.67 per diluted share in the prior year [10]. - Adjusted EBITDA for Q4 2024 was $0.9 million, down 89.2% from $8.3 million in Q4 2023, with an adjusted EBITDA margin of 0.6% [8]. - Adjusted EBITDA for the twelve months ended December 31, 2024, was $23,204 thousand, down from $54,632 thousand in the previous year, indicating a decrease of 57.5% [33]. - Adjusted operating income for the twelve months ended December 31, 2024, was $6,482 thousand, down from $41,673 thousand in 2023, a decrease of 84.4% [36]. - Free cash flow from continuing operations for Q4 2024 was $798 thousand, a decrease from $4,330 thousand in Q4 2023 [38]. - The company reported a diluted EPS of $(1.04) for Q4 2024, compared to $0.67 in Q4 2023 [31]. - Adjusted diluted EPS for Q4 2024 was $(0.15), a decline from $(0.01) in Q3 2024 [42]. Business Outlook - The company anticipates 2025 net sales to be between $670 million and $710 million, reflecting expected stabilization in key end markets [13]. - New business wins are projected to exceed $97 million when fully ramped, primarily in the Electrical Systems segment [7]. - Construction and Agriculture end markets are expected to decline by approximately 5-10% in 2025, but new business wins are expected to mitigate this decline [14]. Organizational Changes - The company closed the sale of its Industrial Automation business on October 30, 2024, allowing a focus on core segments [5]. - A new organizational structure will be implemented effective January 1, 2025, aimed at enhancing alignment with customers and end markets [15]. Liquidity and Assets - The company had total liquidity of $111.0 million at the end of Q4 2024, with $50.5 million in outstanding borrowings on its revolving credit facility [10]. - Total current assets decreased to $303.300 million in 2024 from $327.742 million in 2023, a decline of 7.4% [27]. - Total liabilities decreased to $288.981 million in 2024 from $310.282 million in 2023, a reduction of 6.9% [27]. - The total stockholders' equity decreased to $135.592 million in 2024 from $172.932 million in 2023, a decline of 21.5% [27]. Operational Performance - Gross profit for Q4 2024 was $13.075 million, down 46.4% from $24.377 million in Q4 2023 [25]. - Operating loss for Q4 2024 was $(5.271) million, compared to an operating income of $4.068 million in Q4 2023 [25]. - Adjusted gross profit for Q4 2024 was $13.643 million, representing 8.4% of revenues, compared to 12.8% in Q4 2023 [31]. - Adjusted operating loss for Q4 2024 was $(4.256) million, with an adjusted operating income of $5.435 million in Q4 2023 [31]. - Operating income (loss) for the Aftermarket and Accessories segment in Q4 2024 was $3,161 thousand, while the Electric Systems segment reported a loss of $(1,685) thousand [36]. - Cash flows from operating activities for total company in Q4 2024 were $(26,617) thousand, compared to $8,286 thousand in Q4 2023 [38]. - The company recorded a loss on early extinguishment of debt amounting to $509 thousand in Q4 2024 [42]. - The company reported a restructuring expense of $10,784 thousand for the twelve months ended December 31, 2024, compared to $1,800 thousand in the previous year [36]. - The company experienced a restructuring expense of $1,777 million for the three months ended March 31, 2024, impacting overall financial performance [43]. Historical Performance - Revenues for Q4 2024 were $163.292 million, a decrease of 15.7% compared to $193.721 million in Q4 2023 [25]. - Total revenues for Q4 2024 were $163,292 thousand, compared to $171,772 thousand in Q3 2024, reflecting a decline of 4.3% [41]. - Net income from continuing operations for Q4 2024 was $(34,998) million, compared to $22,571 million in Q4 2023, representing a significant decline [33]. - Net income from continuing operations for the three months ended March 31, 2024, was $1,446 million, a significant decrease compared to a net loss of $34,998 million for the three months ended December 31, 2024 [43]. - Total revenues for the three months ended March 31, 2023, were $218,051 million, with the Vehicles Solutions segment contributing $126,671 million, the Electrical Systems segment $54,749 million, and Aftermarket and Accessories $36,631 million [44]. - Gross profit for the three months ended June 30, 2023, was $35,517 million, with an adjusted gross profit of $35,823 million [44]. - Operating income for the three months ended March 31, 2023, was $12,399 million, while adjusted operating income was $12,489 million [44]. - Interest expense for the three months ended March 31, 2023, was $2,749 million, with a provision for income taxes of $2,706 million [45]. - EBITDA for the three months ended March 31, 2023, was $15,969 million, accounting for 7.3% of revenues, while adjusted EBITDA was $16,059 million, or 7.4% of revenues [45]. - The company reported a diluted EPS of $0.22 for the three months ended March 31, 2023, with an adjusted diluted EPS of $0.22 [44].

Core Insights - CVG has reported significant operational changes and financial results for the fourth quarter and full year ended December 31, 2024, indicating a year of meaningful transformation for the company [2][6] - The company anticipates that the benefits from strategic portfolio actions and restructuring will become more evident in 2025, despite facing market headwinds [6][14] Financial Performance - Fourth quarter 2024 revenue was $163.3 million, a decrease of 15.7% compared to $193.7 million in the prior year, primarily due to lower demand in Construction and Agriculture sectors [7][8] - The operating loss for the fourth quarter was $5.3 million, compared to an operating income of $4.1 million in the previous year, driven by lower sales volumes and operational inefficiencies [7][13] - Net loss from continuing operations was $35.0 million, or $(1.04) per diluted share, compared to net income of $22.6 million, or $0.67 per diluted share in the prior year [7][8] - Adjusted EBITDA for the fourth quarter was $0.9 million, down 89.2% from $8.3 million in the previous year, reflecting a significant decline in operational performance [7][8] Segment Performance - The Vehicle Solutions segment reported revenues of $91.4 million, down 14.7% from the prior year, primarily due to decreased customer demand [13] - The Electrical Systems segment generated revenues of $40.3 million, a decrease of 28.3%, attributed to global softening in the Construction and Agriculture end-markets [13] - The Aftermarket and Accessories segment saw revenues increase slightly to $31.6 million, up 4.0% from the previous year, driven by higher customer demand [21] Strategic Actions and Outlook - The company has completed divestitures of non-strategic assets, including the Industrial Automation segment, to focus on core segments [3][6] - CVG expects net sales for 2025 to be in the range of $670 million to $710 million, with adjusted EBITDA projected between $25 million and $30 million [14][15] - The company plans to implement a new organizational structure effective January 1, 2025, aimed at enhancing alignment with customers and improving operational efficiency [16] Liquidity and Financial Position - As of December 31, 2024, CVG had $50.5 million in outstanding borrowings on its revolving credit facility and $26.6 million in cash, resulting in total liquidity of $111.0 million [10]

Core Viewpoint - Commercial Vehicle Group (CVG) is scheduled to hold its quarterly conference call on March 11, 2025, to discuss the financial results for the fourth quarter and full year of 2024 [1]. Group 1: Conference Call Details - The conference call will take place at 8:30 a.m. ET [1]. - Toll-free participants can dial (800) 549-8228, while international participants can call (289) 819-1520, both using conference code 45919 [2]. - The call will be webcast and accessible through the "Investors" section of CVG's website, where it will be archived for one year [2]. Group 2: Replay Information - A telephonic replay of the conference call will be available until March 25, 2025 [3]. - Toll-free callers can access the replay by dialing (+1) 888 660 6264 with access code 45919, while toll callers in North America and other locations can call (+1) 289 819 1325 [3]. Group 3: Company Overview - CVG focuses on delivering solutions to complex design, engineering, and manufacturing challenges, aiming to create positive change for customers, industries, and communities [4]. - Additional information about the company and its products can be found on its website [4].

Core Viewpoint - Commercial Vehicle Group (CVG) has appointed Scott Reed as Chief Operating Officer, effective February 13, 2025, bringing over 30 years of experience in industrial and manufacturing sectors [1][3]. Group 1: Leadership Changes - Scott Reed will oversee global manufacturing and supply chain operations, focusing on operational excellence and cross-functional alignment [2]. - Mr. Reed's previous role was as President of Arrow Tru-Line Inc., and he has held leadership positions in various companies, recognized for achieving operational and profit growth [3]. - The company also announced the departure of Don Fishel, President of Trim Systems and Components, after 14 years, with Andy Cheung temporarily overseeing this division [6]. Group 2: Compensation and Incentives - As an inducement for joining CVG, Mr. Reed has been granted 58,331 shares of time-vesting restricted stock and 87,497 performance shares, aligning his interests with those of shareholders [5]. Group 3: Company Mission and Vision - CVG aims to deliver solutions to complex design, engineering, and manufacturing challenges while creating positive change for customers and communities [7].

Core Viewpoint - Commercial Vehicle Group (CVG) has announced a new organizational structure aimed at enhancing alignment with customers and end markets, effective January 1, 2025 [1] Group 1: Organizational Changes - CVG will reorganize its vertical business units into three operating divisions and reporting segments [2] - The Aftermarket & Accessories business unit will be integrated into the three new segments, with its seating and electrical portfolios transitioning to Global Seating and Global Electrical Systems, respectively [3] - Wiper systems will be included in the newly formed Trim Systems and Components business unit, alongside trim and components from the previous Vehicle Solutions segment [3] Group 2: Leadership Appointments - Russell Ketteringham will lead the seating business as President of Global Seating, transitioning from his previous role as President of Global Vehicle Solutions [4] - Donald Fishel will head the new Trim Systems and Components business as President, while also managing Business Development responsibilities [4] - Peter Lugo will continue to lead the Electrical Systems segment [4] Group 3: Strategic Objectives - The new structure is expected to enhance clarity and focus, allowing each business unit to meet specific strategic and operational objectives [5] - CVG aims to lower corporate and administrative costs to align with its current revenue profile while positioning itself for future growth [5] - The transformation is intended to create a more agile company that prioritizes customers and markets, with expectations of accelerating operational momentum and driving higher growth [6] Group 4: Reporting Changes - CVG plans to report results under the new segment structure starting with the first quarter of 2025, including historical quarterly segment results at that time [6]

Core Viewpoint - Commercial Vehicle Group (CVG) has elected Jeffrey S. Niew as an independent director, effective December 16, 2024, which is expected to enhance the Board's capabilities with his extensive experience in multi-unit operations and leadership in large organizations [1][3]. Group 1: Company Overview - CVG is a diversified industrial products and services company focused on delivering solutions to complex design, engineering, and manufacturing challenges [4]. - The company aims to create positive change for its customers, industries, and communities [4]. Group 2: New Board Member Profile - Jeffrey S. Niew has been the President & CEO of Knowles Corporation since 2013 and has a strong background in semiconductor and electronic components technologies [2]. - Niew's previous roles include Vice President of Dover Corporation and President and CEO of Dover Communication Technologies, where he led the spin-off of Knowles from Dover [2]. - He has held various positions in product management, sales, and engineering at Littelfuse, Inc. and Hewlett-Packard Company prior to joining Knowles [2]. Group 3: Board Member Statements - Robert Griffin, Chair of the Board, expressed enthusiasm about Niew's election, highlighting his extensive operational experience as a significant asset to the Board [3]. - Niew expressed honor in being elected to the CVG Board and looks forward to collaborating with the Board's leaders to guide the company [3].

| --- | --- | --- | --- | |-------------------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | Q3-2024 Earnings | | | | | | | | | | Presentation | | | | James Ray – President & Chief Executive Officer Andy Cheung – Executive Vice President & Chief Financial Officer November 5, 2024 Forward Looking Statements and Non-GAAP Financial Measures These slides contain forward-looking statements that are subject to risks and uncertainties. These statements often include words such as "believe", "a ...

Financial Data and Key Metrics Changes - Consolidated third quarter 2024 revenue was $171.8 million, down from $202.9 million in the prior year period, primarily due to lower sales from softening customer demand in Vehicle Solutions and Electrical Systems segments [27][28] - Adjusted EBITDA for the third quarter was $4.3 million, compared to $12.2 million in the prior year, with adjusted EBITDA margins decreasing to 3.5% from 6% [28][29] - Net loss for the quarter was $0.9 million, or a loss of $0.03 per diluted share, compared to a net income of $4.7 million, or $0.14 per diluted share in the prior year [29] Business Line Data and Key Metrics Changes - Electrical Systems segment revenues decreased by 19% to $43.4 million, primarily due to a global softening in construction and agricultural end markets [32] - Vehicle Solutions segment revenues decreased by 16% to $97.3 million, attributed to lower sales volume and operational inefficiencies related to production consolidation [34][36] - Aftermarket & Accessories segment revenues decreased by 8% to $31.1 million, primarily due to lower sales volume and operational inefficiencies [38] Market Data and Key Metrics Changes - The Class 8 heavy truck market is projected to decline by 7% in 2024, with a further 10% drop anticipated in 2025, although a rebound of nearly 25% is expected in 2026 [40] - The construction equipment market is expected to see a 10% decline, while agricultural markets are facing a 15% year-over-year decline due to high interest rates and lower commodity prices [41][42] Company Strategy and Development Direction - The company has focused on reshaping its operating model to create a lower cost and more agile foundation, including the sale of non-core businesses to streamline operations [6][7][19] - New leadership appointments aim to enhance operational excellence and drive growth, particularly in the Electrical Systems segment [21][23] - The company is committed to reducing complexity and improving capital efficiency to enhance shareholder value [20] Management's Comments on Operating Environment and Future Outlook - Management expressed dissatisfaction with third quarter results, citing operational inefficiencies and continued weakness in end markets [13][14] - The company is lowering its full-year 2024 revenue guidance to a range of $710 million to $740 million, down from $730 million to $780 million, and adjusted EBITDA guidance to $20 million to $25 million [44][45] - Management remains optimistic about long-term growth potential in construction and agricultural markets despite current challenges [43] Other Important Information - The company has eliminated approximately 1,200 roles, or roughly 15% of its workforce, to create a more efficient organization [12] - Free cash flow from continuing operations for the quarter was $17 million, supported by proceeds from the Cab Structures sale [30] Q&A Session Summary Question: Plans for adjusted continuing operating results for the first and second quarter - Management confirmed that adjusted results for the first half will be provided in Q4 filings [55] Question: Status of portfolio reshaping and restructuring - Management indicated that significant restructuring is largely complete, with a focus now on stability and margin improvement [64] Question: Fourth quarter revenue expectations and adjusted EBITDA outlook - Management noted that Q4 is typically the smallest quarter due to seasonality, impacting revenue and EBITDA [66] Question: Current interest rate expense and debt repayment - Interest expense is around 7% to 8%, with the majority of proceeds from the second payment used for debt repayment [71] Question: Competitive pressures in the agricultural and construction market - Management acknowledged competitive pressures but stated they have not materially changed [73] Question: Impact of production inefficiencies on gross margins - Management estimated the impact of production inefficiencies on gross margins to be in the upper single-digits to low-double-digits millions [77]

Commercial Vehicle Group (CVGI) came out with a quarterly loss of $0.01 per share versus the Zacks Consensus Estimate of $0.04. This compares to earnings of $0.22 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -125%. A quarter ago, it was expected that this supplier of products for heavy duty trucks would post earnings of $0.17 per share when it actually produced earnings of $0.06, delivering a surprise of -64.71%.Over the la ...