Commercial Vehicle Group, Inc.

Good morning, ladies and gentlemen, and welcome to the CBGI third quarter 2024 earnings conference call. At this time, all lines are in a 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 zero for the operator. This call is being recorded on Tuesday, November 5th, 2024. 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 Wei, President and CEO of CVG. This morning, we will provide a brief company update as well as commentary regarding our third quarter 2024 results. After which, we will open the call for questions. As a reminder, this conference call is being webcast in a Q3 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 periods 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 market in which CVG operates, fluctuations in the production volumes of vehicles for which CVG is a supplier, financial confidence, 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. Since taking over as CEO 11 months ago, my focus has been on reshaping CVG's operating model, creating a lower cost and more agile foundation for the company. As is highlighted on the right-hand side of this page, we have taken several strategic steps this year in order to refine our business model and create a more customer-focused company. Specifically, the sale of Finish Tech, our cab structures business, Chillicothe, Ohio facility, and industrial automation segment have streamlined our core capabilities, resulting in a more focused portfolio with an improved cost structure, a heightened focus on operational excellence, and a more deliberate commercial strategy. I will cover the benefits of each transaction in a moment. But we expect these transactions, as well as our restructuring efforts, to create a more streamlined operating model and drive margin expansion as we continue to execute and look to drive future growth, particularly within our electrical systems segment. Not only have these actions accelerated our near-term operating priorities, but they have helped us pay down debt of $13 million to date. We also received an additional $20 million in proceeds associated with our cap structure sale in October. This was the final payment of the $40 million . As I mentioned, we remain focused on a return to growth, and new business wins will play a key role in reaching that goal. We procured another $18 million in new business wins in the third quarter, bringing the year-to-date total new business wins to approximately $95 million across all segments. As a reminder, our estimates of the peak value of new business wins once fully ramped represent a risk-adjusted assessment of our customers' estimate of their ultimate production rates. These programs can often take years to fully ramp, And our customers vary in their ability to predict their peak production rates. Over time, we've gotten more rigorous in vetting those estimates, resulting in the numbers that you're seeing today. Keep in mind that these numbers purely reflect new business added and do not include any current programs winding down or business we voluntarily ended due to profitability reasons. We've also taken action on the headcount front. eliminating approximately 1,200 roles or roughly 15% of our organization's workforce from continuing operations compared to the prior year through both restructuring and ongoing continuous improvement efforts. We believe these actions create a lower cost, more efficient, and agile company positioned for future success. While we expect these portfolio actions to drive future margin expansion and facilitate growth, we are not happy with our third quarter results. They were below internal expectations as our revenues and profitability were impacted by operational inefficiencies related to the strategic portfolio actions, continued softness in our end markets, customer production schedule changes, and elevated launch costs to support new program wins. Andy will cover the details in a few minutes, but the bottom line is, at a time When we are seeing continued weakness in construction and agriculture markets in our electrical segment, we also absorb additional significant facility improvement costs and production inefficiencies ahead of the strategic transactions and vehicle solutions and industrial automation segments. We believe with the strategic actions behind us and the operating model changes we are proactively making, we can navigate fluctuating production schedules more effectively moving forward. If you turn to slide four, I want to highlight in detail some of our key strategic actions taken to improve CVG's operating model. First, we closed the sale of our finished tech business, a hydrographic and paint decorator in January, which was identified as an area where we could streamline our product portfolio to improve our operational focus in the near term. As previously discussed, we also completed the sale of our cap structures business in Kings Mountain, North Carolina. The transaction closed on October 1st. Although there were some incremental costs associated with facility improvement and production inefficiencies ahead of deal closing, the majority of the $40 million in proceeds was used to pay down debt. The transaction aligns with our long-term goals of reducing cyclical classic market exposure and lowering the capital intensity of our vehicle solutions segment. Additionally, the sale of our production facility in Chillicothe, Ohio closed in the third quarter after consolidating the facility's production into other CVG manufacturing locations. This led to some short-term production headwinds as production plans were optimized, but the consolidation will ultimately improve capacity utilization with a lower cost to serve our customers, driving improved margins for the company. You've heard me talk in prior calls about our goal to strengthen our vehicle solutions business. These three transactions are great examples of how we're doing that, simplifying, improving profitability and efficiency, and upgrading our revenue mix. Finally, our most recent strategic portfolio action involves the sale of our industrial automation business. This closed on October 30th. Our industrial automation business has been challenged in recent quarters, So after evaluating different strategic options, we retained an investment banker and sold this non-strategic business, removing its operating losses and allowing our team to focus on our core vehicle business within electrical systems, vehicle solutions, and aftermarket and accessories. While some of these actions have caused short-term financial pressures, we remain confident in the value CVG is poised to create and believe these efforts will bridge the gap between where we are and where we want to be. In addition to reducing complexity, the improved operating model resulting from these actions, we believe will drive accretive growth, accelerate margin expansion, increase our capital efficiency, and ultimately enhance shareholder value. With a more focused portfolio, we also expect to better leverage our SG&A through our continuous improvement process. aligning our support functions with our revised footprint. Now moving on to slide five. I'd like to highlight two exciting leadership additions that we feel will align well with our focus on an improved operating model. First, we're happy to welcome Peter Lugo, our new leader of our electrical system segment. Peter brings a proven track record of driving growth across multiple diverse end markets with over 30 years of relevant experience in electrical systems and industrial products across various industrial market segments. His background positions him well to execute our goal of returning electrical systems to growth and ultimately being the long-term growth engine of our company. Peter's near-term priorities will be to help CVG navigate demand pressures in our construction and agriculture end markets with an eye towards achieving full utilization of our new facilities in Mexico and Morocco. Additionally, we announced the hiring of Carlos Jimenez as Executive Vice President of Global Operations and Supply Chain. Carlos is a respected, experienced executive who will bring a sharp focus on execution into our improved business model. He will be responsible for all aspects of CVG's global operations, including manufacturing, supply chain, procurement, logistics, continuous improvement, and quality. He will also lead the work being done by our Global Operations Council to drive consistency and continuous improvement into our global plans. As part of Carlos's hiring, we are consolidating manufacturing and supply chain under global leadership, elevating those functions from the business units, which should lead to greater sourcing benefits across the company and allowing our business leaders to focus more directly on commercial success. The addition of Peter and Carlos to our senior leadership team further demonstrates our commitment to fundamentally reshaping CVG, setting the tone from the top down as we emphasize operational excellence in all three segments and greater focus on growth within our electrical systems. The efficiency of our supply chain and manufacturing operations will allow us to scale customer production wind demand rebounds, driving incremental profitability across CBG as a whole, while our focus in electrical systems will facilitate margin expansion and reduce cyclicality. These leaders have a proven track record of doing just that, and we look forward to providing an update on the progress we make. With that, I'd like to turn the call back to Andy for a more detailed review of our financial results.