Commercial Vehicle Group, Inc.

Good morning, ladies and gentlemen, and welcome to CVG's first quarter 2025 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions with instructions to follow at that time. As a reminder, this conference is being recorded. I would now like to turn the call over to Mr. Andy Chu, Chief Financial Officer. Please go ahead, sir.

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 first quarter 2025 results, after which we will open the call for questions. As a reminder, this conference call is being webcast and the Q1 2025 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. and uncertainties may include, but not limited to, economic conditions in the markets in which CVG operates, fluctuations in the production volumes of vehicles for which CVG is a supplier, financial covenant compliance and liquidity, risk associated with conducting business in foreign countries and currencies, and other risk 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 first quarter results reflect the strategic steps we have taken to refine our business model over the last several quarters. More recently, we completed the shift to our new segment structure, which has provided enhanced clarity and focus within each business unit. while more closely aligning CVG with our customers and in markets. Enhancing that connection with our customers is critical, especially in the current market conditions. Our three operating segments, global seeding, global electrical systems, and trim systems and components, are now better positioned to serve our customers in a lower cost structure. We have seen early benefits from this resegmentation, And we continue to believe this structure will accelerate the operational momentum we have created year to date. Also highlighted on this slide is the 10.8% adjusted gross margin we achieved during the quarter, which is a 240 basis point sequential improvement compared to Q4 2024. This improved profitability was largely driven by the operational efficiency initiatives We executed and have spoken about previously, including but not limited to the divestiture of non-core businesses, as well as the conclusion of one-time costs from last year, including outside consulting expenses. We expect our gross margin to be supported by further operating leverage going forward as we continue to benefit from the strategic actions taken in 2024. Along with improved profitability, We also delivered an almost $18 million improvement in free cash flow compared to last year. As we alluded to last quarter, working capital management is a critical focus for us this year, and we expect to reduce our working capital closer to historical levels over the course of this year with a specific focus on inventory. I will provide more detail regarding our gross margin and free cash flow performance in a moment. But our strong performance on both helped to drive a net debt reduction of $11.7 million and a gross debt reduction of $18.1 million in the first quarter. Before I move on, I'd like to comment on our decision to discontinue reporting new business wins. Given the current macroeconomic environment, as well as our customers' challenges in predicting future program ramps, We don't believe we have the necessary clarity to accurately predict the timing and magnitude of total wins, particularly as to when they will begin flowing through to our revenue. For these reasons, we believe our annual guidance is the best way to contextualize and model our future results. Importantly, while we will not be providing forward-looking projections for new business, This does not mean we are any less focused on pursuing and securing new business awards. This remains the lifeblood of this company, and we are still seeing a robust pipeline of new business opportunities. Turning to slide four, I want to take you through the sequential gross margin improvement we saw in the first quarter. Reflecting back to the strategic actions taken in 2024, we've been focused on reducing freight, labor and overhead costs. In particular, we reduced our reliance on expedited freight, optimized our terms with suppliers, and improved our lead times and order quantities. We are also flexing our direct labor to align with any customer volume changes and continue shifting our production to lower cost facilities. We're also addressing plant salaries, and our new segment alignment allows for a more optimized overhead structure. As evidenced by the margin improvement, our focus on operational efficiency improvements as well as our restructuring and footprint rationalization efforts are clearly paying off. This focus on improving our operating model is clearly helping our performance in this lower demand environment, but also positions us well into the eventual end market recovery. We believe we have the right approach for CBG to drive accretive growth, accelerate margin expansion, increase our capital efficiency, and ultimately enhance shareholder value. Now, moving to slide five, I'd like to revisit a graphic we shared in our Q4 earnings call. While we believe our strategic portfolio actions position us better for the future, they led to cash flow headwinds in 2024, namely through cash burn and our discontinued operations, restructuring spend, and inventory build. We mentioned on the Q4 call that we expected each of these three headwinds to ease and in some case reverse in 2025. Considering the decline in market demand, I'm pleased to report solid progress in each area. In the first quarter, our discontinued operations were net cash generative. We also had minimal restructuring spend in the quarter at less than $1 million. And finally, we saw a $5 million improvement in inventory versus the end of the year. Improvement in these three areas helped drive free cash generation of $11 million in the quarter and positions us well for further improvement in this key metric throughout 2025. With that, I'd like to turn the call back to Andy for a more detailed review of our financial results.