Commercial Vehicle Group, Inc.

Good morning, ladies and gentlemen, and welcome to the CVG Q2 2024 earnings conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star then zero for the operator. I would now like to turn the conference over to Andy Chung, CFO. Please go ahead.

Thank you, operator, and welcome everyone to our conference call. Joining me on the call today is James Ray, President and CEO of CVG. This morning, we will provide a brief company update as well as commentary regarding our second quarter 2024 results, after which we will open the call for questions. As a reminder, this conference call is being webcast and the Q2 2024 earnings call presentation, which we will refer to during this call, is available on our website. Both may contain forward-looking statements, including, but not limited to, expectations for future appearance regarding market trends, cost-saving initiatives, and new product initiatives, among others. Actual results may differ from anticipated results because of certain risks and uncertainties. These risks and uncertainties may include, but are not limited to, economic conditions in the markets in which CVG operates. fluctuations in the product volumes of vehicles for which CVG is a supplier, financial governance compliance and liquidity, risks associated with conducting business in foreign countries and currencies, and other risks as detailed in our SEC filings. I will now turn the call over to James to provide a company update.

Thank you, Andy. I'd like to turn your attention to the supplemental earnings presentation starting on slide three. Our second quarter results fell short of expectations with year-over-year declines in revenue and profitability as multiple factors, both internal and external, impacted our performance. Specific to our electrical systems segment, construction and agriculture markets, a key driver of growth for that segment, have continued to soften. This is a continuation of the market weakness we experienced in the first quarter of this year as higher interest rates and lower agricultural commodity prices continue to weigh on a majority of our key customers in this segment. Business margins continue to have FX headwinds and unrecovered economics from several major customers. Additionally, we have also experienced operational inefficiencies within our vehicle solutions segment, as we have incurred disruptions during the execution of a significant product launch with a large customer across multiple sites coupled with activities to optimize our cab structures facility in Kings Mountain, North Carolina, as we progress through the sale process. I'll dive deeper into the actions we're taking to strengthen our vehicle solution segment shortly. Despite challenges we experienced in the second quarter, we took multiple corrective actions to stabilize the losses and position CVG for future success in advance several key strategic initiatives. First, We executed an agreement for the profitable sale of our cap structures business in Kings Mountain, North Carolina. This transaction will serve to streamline and focus our product portfolio. I will cover this in more detail in a moment. We also made progress on our ongoing cost reduction and business optimization efforts. Year to date, we have deployed almost $7 million in restructuring expenses to optimize our cost structure, and we are reducing our headcount by more than 10%. We also continue to drive new business wins in the quarter, with approximately $32 million in awards. This brings our year-to-date total to approximately $80 million across all segments. We are updating our 2024 guidance, which we will cover later in the presentation. Turning to slide four, I will highlight the recently announced agreement to sell our cap structures business in Kings Mountain, North Carolina. The sale of cap structures is strategic in nature and marks another milestone in our mission to evolve our business towards a higher growth products and markets in line with our ongoing strategic transformation plan while simultaneously generating shareholder value. Of note, the sale price of $40 million will help further our debt pay down. In line with our long-term strategy, the sale of cap structures reduces our exposure to the cyclical Class 8 market, lowers our customer concentration, removes complexity from our business, and improves our overall return profile. We will continue to take the best actions to position CVG for future success. Now moving to slide five. I'd like to highlight our key focus areas for 2024. As I mentioned previously, we are highly focused on proactively continuing to lower our cost structure and improving our operational execution as we navigate a lower demand environment. Our priorities for the remainder of this year are to enhance our electrical systems operational efficiency and cost profile, complete the strategic evaluation of our industrial automation segment, and strengthen our vehicle solutions segment closing on the sale of our cab structures business, and by stabilizing and improving operational execution. As it relates to electrical systems, we are actively executing a restructuring program as our key end markets, particularly construction and agriculture, continue to soften. We have also experienced delayed and slower customer ramp volumes of new business originally scheduled for production launch in 2024. This includes actions such as further reducing headcount and optimizing plant capacity utilization to stabilize margins and right-size our plant production to match current demand conditions. Our two new low-cost manufacturing sites in Aldama, Mexico, and Tangier, Morocco, provide options to lower our costs in electrical systems. Also, I would like to highlight our efforts within our aftermarket segment. While we have been facing lower customer demand in recent quarters, we are working to refine our production processes to improve our seat delivery performance and reduce lead times to customers. These efforts should help CVG's wallet share with customers, as our aftermarket segment remains a key focus area for the company. Finally, within vehicle solutions, we are focused on executing a smooth transition of our cash structures business and making required improvements as we prepare to finalize the transaction. We have increased oversight and resources to stabilize the vehicle solutions business and offset inefficiencies resulting from program launches, supply chain issues, and unexpected volume changes. To help address the issues in our vehicle solutions segment, our team has deployed multiple internal and external support teams to the affected facilities. While this was a significant expense in the quarter, we expect these actions to provide greater stability for the balance of this year as we appropriately position our cost structure for a market rebound in 2025 and beyond. Now, moving to slide 6, I'd like to briefly highlight the Navistar Supplier Excellence Award, which CVG received in June of this year. Annually, Navistar recognizes four of its top performing suppliers based on quality, delivery, cost, and continuous improvement. Navistar is a key CVG customer and we are delighted to receive the award and will continue to strive to retain this achievement. As a focal point of our customer value proposition, our focus remains on delivering operational excellence and growing together with our business partners and customers. Our team's passion for cultivating strong customer relationships creates an ongoing dividend that is reflected in our new program wins. With that, I'd like to turn the call back to Andy for a more detailed review of our financial results.