CPS - Earnings call transcript Q1 2019 | Cooper-Standard Holdings Inc.

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Operator

Good morning ladies and gentlemen and welcome to the Cooper-Standard First Quarter 2019 Earnings Conference Call.

During the presentation, all participants will be in listen-only mode.

Following company prepared comments, we will conduct a question-and-answer session. [Operator Instructions] As a reminder this conference call is being recorded and the webcast will be available on the Cooper-Standard website for replay later today. I would now like to turn the call over to Roger Hendriksen, Director of Investor Relations.

Roger Hendriksen

Great. morning, good and Joey, everyone. Thanks, spending Thank with today. time you for us some Executive Vice President team of be this are, and members our who the Officer. morning Jon Chief Executive Chairman Edwards, The and Chief leadership Jeff call on will Officer; Banas, and you speaking Financial with Also Senior President morning and Group. President DeBest, this joining Technology Jeff of us is Vice our Advanced

we be be Q&A. While our will answer of won't he part available Mr. get questions when DeBest presentation, prepared to to

remind to statements. need that this I forward-looking begin, we you presentation contains Before

that While and factual they these are information and made risks currently based uncertainties. on certain current assumptions believes and management involve reasonable, be to statements do plans

the turn of company's GAAP Securities ask to measures Reconciliations I'll This said, measures more measures. over included you this slide contains their refer statements on comparable and the presentation periodic in are also to financial the non-GAAP of the included appendix with filings to Exchange statements, Jeff the For most That in directly information Edwards. Commission. the financial we that X non-GAAP call and forward-looking presentation. presentation to

Jeff Edwards

exchange than mix-specific material key but Unfavorable Okay. mix, in in our Adjusted for to in quarter. $XX points expectations reductions EBITDA soft good volume offset Thanks original I'd was few everyone. year-over-year to million. was These from decline. contributed weakness and by on related in businesses. the China million, rates. quarter. last and demand foreign non-automotive Roger, price the essentially partially automotive market were the and recent year, sales well higher slide quarter a and some with our with lower North the as morning, begin first both costs incremental were line for to the quarter as acquisitions Sales X continued in like $XXX and data reflecting unfavorable Europe, and America This

future generated our to engineering, these than tooling program improved of we efficiencies. cost and offset more related initiatives and million addition, the prototype through development, had for lean increased that $XX launches. we In operating Combined savings cost

we quarter, plans with the XXX for the year. program in line During launches, new executed launches more full our successfully in than XX

ramp expect to of the new have on course a impact up them successive over margins sales in year, we programs positive the the As quarter. each and

recognized Our with providing service recognized employees' quality products commitment more to customers highest-quality But services by awards. with be to and business continues awards. our we're the importantly, and being new

new first quarter, awards totaled business $XX During our the net million.

contributing Technology our increased Our in Automotive product our in and also to and demand, are both material business innovations Advanced science Group.

During the sales, $XX XXXX. is up first both in received quarter annualized totaling XX% awards first including our contract to quarter replacement business, million and products, and the we new of this related versus innovation

certain demand call. generally, and programs, in first material weakening market was high and a expected, at we volumes we quarter. on our in So business continue said costs higher level, largely key the the with have lower what consistent to our what previous This impact

margins reduce and to launches we've the These side, progress been year throughout with have positive incremental customers efforts impact also make proactive the continue commercial negotiations, new should On our from our positive we with successful with volume forward. further to a our on combined on costs. going

detailed call on discussion Now more I'd to for the financial like to turn Jon, our over results.

to come diversification remainder few of growth, for topics on related strategy and back for cover I'll our Following to the also the outlook our profitable his year. presentation, a

Jon Banas

to the structure. our X, of our summary the profile, the slides, quarter, In comparisons and Jeff, On some for of and year. a sheet liquidity, also we Thanks, on quarter slide financial good few next prior I'll everyone. our capital first detail and provide first on results results for morning, Okay. the XXXX comment show with balance

recent sales, period Gross regions, First by X% were partially and million, for million EBITDA $XXX.X first quarter $XXX exchange, acquisitions. quarter or customer million compared of driven down in first year-over-year from to by X.X% unfavorable $XX.X quarter all ago. The was $XXX.X of year in increased the volume a foreign the to million was sales profit change our the mix $XXX.X were was reductions. the Adjusted sales same compared offset These quarter of first in unfavorable XXXX. versus XXXX. million, and price

related year-over-year. industry expense initiatives. and negative activity more tooling of costs, inflation, higher general than engineering material reductions from costs volume were weaker AVS These future and Our quarter, mix. inflationary and sale ongoing cost the with offset associated businesses, price general pressure from launches, the newly customer partially in of primarily increased first and offset Higher reduction acquired our utilities, additional and business. due headwinds savings recent reduction factors also cost our SG&A to wages efforts expenses were the by by ongoing divestiture-related to on were

to effective recorded. This tax we was across profits, expense net in relates quarter, we tax tax jurisdictions tax of rate earnings As In unusual or million. resulted a tax taxes before expense it This various an a in GAAP ETR the earned of mix U.S. had on million our $X.X $X.X where is due of to income of jurisdictions. negative income the loss XXX%.

to recognize where allowances. not valuation able we due tax While in to benefits we jurisdictions were incurred losses,

XX% down rate we $X.XX $X.X versus driven by income higher a of $XX.X significantly our first to per quarter On year, XX%, expected XXXX. full full tax in anticipate incurred we for CapEx the full quarter and XX%. our from by in expectations line GAAP This than consistent sales year. or mix EPS in same the our million free a the or an quarter XX%, impacted From in a X% ETR again million $XX.X the in million quarter period in diluted of with the million Adjusted loss net improved in X.X% rate basis, net the of $XX.X For quarter of share. was year net the CapEx spending and was This XX% the and of to reduce year plans an or the higher On of in of to earnings. basis, the $X.XX. range adjusted sales income perspective was ETR million of cash with adjusted first our a ago. was flow drive $XX.X

significant adjusted Moving charts X. our and quarter. on the for The out in first X to slide slide lay year-over-year sales of the change the EBITDA drivers

year of acquisitions. all-time additional impact and customer recent performance These was million year-over-year the mix given $XX a offset FX adjustments last an of was net price $XX us, making to Volume million $XXX sales by comparison record for an and in sales For related market by partially reduced conditions. challenging sales for QX negative. current sales million were

beginning production Europe cases issue third as was changeovers quarter volumes the than of adjusted were faster most offset were unfavorable our year to experienced efficiency million lean see of America overall what certain by industry last in discontinued and $XX These anticipated. by of more efforts in volume margin some important mix weak cost For had North quarter. related continue operational $XX programs we reduced mix year. drove going EBITDA the the Asia and in to volume than consistent manufacturing was and savings impacted savings with ongoing were the reduced million for we we and In model or production price. and through in net

rents, incremental volume wages, to the inflation to engineering and General addition prototype incremental activity million had utilities costs. primarily other accounted we another million tooling In cost million commodity related launches in as and such mix expenses in also for higher $X unfavorable $X and $X future year-over-year. in and

Moving X. to slide

to first and with continue on solid strong maintain entered $XXX We We quarter of profile. million balance hand. cash a sheet credit the

cash the time million debt and was This of million. to of XXXX. at $XXX revolver total March the Our million we on solid end year. net debt our was $XXX last net on million hand same at availability of had $XXX and as March liquidity of $XXX compares With debt

end adjusted the These adjustments trailing sale was $XXX our debt was while proceeds from reflect range closed in and quarter figures ratios the the XX reported of the as of net months and Not to quarter net the or proceeds after balance taxes already was sale on debt in X.X at times. be The million. $XXX.X the $XXX sheet. fees first these EBITDA million million X.X business to sale significantly which end AVS certain X. announced will at EBITDA customer enhance don't from and the April debt will of gross our our to Our applicable cash balance transaction price strong time,

result payments in the balance and capital improved an earlier. period, have lower and favorable XXXX, as the the and first on thoughts few to accounts continued plans cash adequate Offsetting customer earnings. spending tooling first $XX the launches. receivables a for priorities overall in in delays strong Finally and of our mentioned drivers liquidity Asia going support cash these by capital and profile, lower increase strategic flow our credit the positive and structure, on of believe sheet we With customer timing ahead despite we quarter was payable million in This were compared forward. primarily to free quarter accruals flow of

In whether growth or priority. strategic terms organic of top remains acquisition profitable the and investment capital allocation, our through

call let back Jeff. turn over the Now, to me

Jeff Edwards

Thanks, Okay. Jon.

strategy. on to what our do advance next few and to profitable the growth For to going want focus our minutes, I near-term we're outlook

to So let's XX. slide move

As profit awards activity left. and customers. leading the that us wins priority. increase be net the in programs right. can traditional the business to bringing capital market those see on production top in innovations investment inorganic his new to in Jon record in go the this years to our into providing net and new new for These replace. this of to They're is beginning clearly mentioned year few that discussion both The on margins Part you our allocation, increase launch also contributed chart the and on growth focused to on on shown as continues the business higher past over value significant innovations as than in provide products XXXX organic chart they the investment is

third us and will for to peak second revenue these production quarters run and expect as to this drive incremental activity the profits up we year year, represent new on and ramps of The for the platforms. rate launch full these of launches

significant the start XX. the of a programs On XX production that show Moving to slide few in of with launching XXXX. we're we slide

in know significant Explorer latest the with slide. the on historically. a year. over full-static the to In it's X ceiling this you total, important for vehicle year, Evoque launches include China us the Series now for the technology. the has you program execute other and Fortrex in see new Range we the with particularly that major model Europe expect BMW along Other launches Rover as first XXX with Ford vehicles this is important been us The made an As system

XX. slide to Moving

Another of key component of our outside profitable the automotive growth diversification is strategy industry.

agreements have We are we technology new commercialize announce and to applications for develop signed pleased industry. outside to to Fortrex automotive license custom-blended the that materials two

is with first sportswear The leading manufacturer. the Chinese

and American building with is manufacturer second materials construction the The the industry. for of major North

the wide of licensing potential is applications sales our licensing royalty In versatility these of materials in the will the chemistry Fortrex addition which these model. They to indicative platform also the range of arising are evolution compound Fortrex products technology. technology for agreements next-generation under the of supply in Fortrex to and companies technology, the addition use agreements. strategy to These any business and delivery of also towards we demonstrate for

we're material that future quickly As expected logistics commercialization, these volume, the drive. to demand anticipating strategy are new advance agreements and agreements our for developing mixing towards high

slide So to XX. turning

As structure, measures and already to to we more need taken We've the recognize IT but functions costs operations, manage look result in ahead concentrate XXXX administrative required. proactive XXXX to will in to management many our the countries, eliminate more. has aggressively significant remainder streamline our rationalize been and be best and of headcount projects reduction cost cost The many structure. non-essential we already,

and we two we two Given targeting production opportunities. and volumes North future one of already America, China the impacts we savings had America. where for and opportunities in and are footprint additional operating year. and closed facilities XXXX and in closures are for fixed reduce us production our XXXX These scheduled more optimization $XXX current than initiatives We've million cost North the position being evaluate initiatives typical lean will In XXXX. for of this are in and our closure customer offset closure. into to to planned the we're The China accelerating cost. help improving efficiencies, environment Including of moved better more plant the continue total now today, demand for year are

We year-over-year. spending our free successful the record the capital same will capital on number through reductions heavy team The remains of quarter this the of us on begin execution benefit our the of also continue focus At on new flow improve focused time, third and and discussed. production working in half carry lower launches cash the that volumes activity launch we've to year. should will increased to back

Turning to slide XX.

Given major consistent year to-date we on our deliver these to initial results our and for our with believe track view adjusted the we're sales. progress our lowering despite full initiatives generally, automotive for EBITDA markets of guidance, outlook on

launches As gain year. to we to improve quarter expect our sequentially and cost-saving margins each continue of ramp-up, initiatives our new traction the

prepared our with balance our growth we're proceeds our AVS to well addition, In consider sheet This the the business, strategy. strong acquisition positioned additional and comments. concludes with consistent our strategic from of profitable opportunities sale

now open phone we'll Q&A. for So lines the

Operator

it like question with Partners. Please And our first Capital line Instructions] come of [Operator Koranda will go ahead. you. looks Matt the Roth Thank from

now is open. line Your

Matt Koranda

Hey, guys. Good morning.

Jeff Edwards

Matt. Good morning,

Jon Banas

Hey, Matt.

Matt Koranda

the I as start. to wanted just cover a outlook XXXX

taking So revenue at I can closures not are the your there call noted guide. out you're about changing I in prepared in I confidence million limited remarks helpful to or be decrementals? the on what -- actions give EBITDA you actions out taking EBITDA. you revenue any get other guess, thoughts facility that, the referenced but that from the line, further million But, that. It'd actions incremental $XXX details -- out that $XXX that guess, holding everything. -- you've just about you're of and midpoint guess, the

Jeff Edwards

Yes, Matt. Jeff. This is

I replaced. on think, very they've are new launch programs higher, we're that said, than we our ones these we obviously, as most of as new margins ones confident the that the

of think, that have confidence that's level So, there. I we a

in In continued of SG&A actions for as course. have last some improvements which first quarter, of addition, you But pay imagine. and might will we we impact there were taking had many to year, substantial going that forward those were some on the

investments Of our business course, additional that the ramp in we up. ATG we're making that have to

of it's ramp up. some So paying that for

you and long. part been acquired business those, our of as haven't and year the within in business a last ATG core brake. addition, remember for our companies And Automotive In we obviously, within couple one fuel portfolio

the and year. So to into we after of there's those continue little and this rest bit when companies identified that take we to still opportunities year acquired get synergies will a place next that

the summary were a on that on is we're what this in able of sort it's So we're the to the top we but think, our and we is EBITDA for. hold looking That's -- and at I cost can we we're and controlling again, And top basically the what the side. hopefully, line, same ups industry that's why control there's to that's recognize we're the time pressure related feeling line. the downs

have to and are So, as we to teams confidence surprises a the none job, second I gives those related think, all a launches. that doing are won't of level us well. great executing launches It's that on

Matt Koranda

the you that. $XX restructuring enough. guess, I guide. QX, And roughly spent in plant much I China closures But pretty did had of North incremental already the highlight it in already holding then, stuff midpoint in And some think so some you're and cash Fair forward America. you pulling like looks Okay. at guys million

just there high thought going us at the range? on could we to Or process you in are out help So your of end of be that terms that?

Jon Banas

I closer range set so thought other year, we outgoing this actions probably pull range, wide, exactly as right, should end might those the $XX year. this cash we of additional at And When into million in Jon. top -- for it's be XXXX. you're forward it's the Matt, that Yes, to coming say it because left there we about we or

Matt Koranda

at then, sheet, about I from of AVS one. of do guess, And your the sort and but thought low I mean, relatively the to do choppiness sort place. in that a of I mentioned about a all the M&A, think the decent in toward Okay. last here Is issue X leverage prudent move balance immediate use how buyback some process is forward. when going for range times think global capital how multiple I you're debt cycle, proceeds pretty but know here, mean, we the stuck business? obviously, and in authorization allocation the deploy got not about we you an you paydown? sustained of net we think

Jon Banas

move Hey, Matt, I initially But I'll go for over I Jon any prudent other for us to again. debt first the then Jeff paydowns. thoughts. it's and can some turn is think

and If on of million those we to collectively year you tune facility do about ABL did last back think tap deals. of acquisitions we to the to did QX in our the $XX QX

traditionally we on as the a ABL we're you So not borrower know facility.

that had paydown lines that to so. cash the that about region, fund may borrowing So the or opportunity well. those needs ongoing we some over borrowing we're initially pay level in down at then million thinking Asia-Pacific as to And $XX of take also local we've

to generally about go we other will then out the half and half of in year paying the for variety down previous of needs. different acquisitions debt took think the proceeds a do down left the be So will that over to

Jeff Edwards

this I would Matt, Jeff. just add. is

over as China near us in the able frankly As time. areas of you've to we the of years weren't within Europe at to that past as strong North America we wanted do listened consolidation everything much one the several because and our and sectors was use discuss proceeds going same

the consolidation that seeing Europe sense view. segment the pressure impacting a see make themselves also opportunities in from you and of entire that really point may we're Now China present

that if offense, all we the company be allow sitting sense to should balance have find sheet the with here stakeholders. we to for our opportunity play for an So makes us will and today

as those to well paying what addition said. very close Jon we So attention in are opportunities to

Matt Koranda

there. leave will guys. Thanks it I right. All

Operator

you, [Operator Seaport queue Thank next Ward question Michael Our come will line from Global. Matt. Please Instructions] the in ahead. with go of

now is Your line open.

Michael Ward

on when slide the are a you go X through everyone. Thanks, that couple good morning analysis there Jon of things. bridge

First on adjusted off on impact mix EBITDA. the revenue and volume and

are think And so, million and QX, roughly looks right, it million. $XX my in closer $XX $XX like if I in it numbers to QX million was now

Jon Banas

yes. million $XX

Michael Ward

that What impact a mean given revenue. huge seems the Yes. on it I just in putting impact the you number? are like

Jon Banas

seems conclusion When close to XX-some agree percent with Yes. do you math unusual. there. Mike be the I the to your

numbers. for saying the the - our be and those price both the And levels very, in region, those But Asia around you the by production you there's think now and so average XX% And Europe stories the see we've helpful. six overall last similar. break what at down months. of driving volume pull-through just I it'll affect that rate It's very across-the-board in And down. it are if regions. or so are degradation can And been

Jeff Edwards

Some customer's It zero. production… close a to is

Jon Banas

Yes exactly.

there. them of some -- close players zero Some to are global

Michael Ward

Okay.

that in your Or your now So -- soften? begin that starting start to -- start commercial does start kick-in, -- right? impact commercial negotiations in to the does for benefit of negotiations XQ the to kick

Jon Banas

take are you They're yes, right. year the They'll progresses. then, as ramp-up starting root to And QX. in

Michael Ward

Okay.

So the on as should or we look if adjusted get should forward year? through impact -- we so as decline the have EBITDA we even that lessen

Jon Banas

did significant new the Mike driver… remarks, on most as the as and I year, is in rate my well America our help offer as those in to It later incremental well. North want launch will Jeff like Yes. But being we I alluded to prepared margins said product portfolio as the

Michael Ward

Sure.

Jon Banas

there. …

So want add color there. some to I did

Michael Ward

And that's changeover of a lot right?

Jon Banas

balancing of that changeover. as well. are A that out programs some also absolutely is But there's lot

Michael Ward

Okay.

Jon Banas

improvement of launched, the half in new see has as namely the then on the platform the Fortrex year products And as well. Explorer the we'll margin there back the business

Michael Ward

$XX corresponding but chart, Okay. EBITDA. acquisition that impacted it Also any the see Is that million, impact I adjusted on means? insignificant? Is that what on don't if

Jon Banas

below As is our automotive of now, the long-term range business year-over-year effect overall Mike. there

it So pull-through the on revenue, that. around $XX call XX% million in a

number in there. just So that's and volume net mix included the

Michael Ward

Okay.

what million and acquired you the what and you SG&A? items then looks that that tooling? three prototype the cited engineering Is that that and alluded in that SG&A like cost, is -- -- impact: $X it had to lastly, the that's businesses is Just inflation

Jon Banas

we of incremental said, Part numbers acquired build SG&A are also that business engineering businesses, it synergies still we And But going in business related some we the as QX well. Jeff AVS find ran up the is those to there. SG&A made as The Material we Science the were new the infrastructure, business come well. acquisitions, year-over-year portion we But like When there believe as are there's for the down. case. the as is. to that -- Applied

kind of SG&A those in well. that's as overall included numbers So,

numbers naturally declining see forward. should as no numbers is you going that in So longer business our

Michael Ward

Jeff brand you sportswear manufacturer question a Okay. If on the on I one a with that the award the Chinese is -- contract could name? that or ask manufacturer, is

Jeff Edwards

Mike Yeah is this Jeff Edwards.

Jeff DeBest appreciate us room on little give he'll So overview if here on to what the here that were bit him with asking there you questions we in asked with an details a I've the of which just you is.

I'll so call And Jeff back to the DeBest. turn

Jeff DeBest

It's Mike. of a sportswear produce will question. the Yes. Thanks for more And the announcement of May. Yeah for brand. formal making we China. agreement be in a in here recognized middle that a global brand It's Thanks.

Michael Ward

Okay. China? what Could is? in material that the be company it Is U.S.-based has that it a produced

Jeff DeBest

not. It's No.

Michael Ward

and company -- China-based Chinese So it's that buyer? is manufacturer the a

Jeff DeBest

correct. That's

Michael Ward

very you thank much. Okay,

Operator

I'd to the Thanks turn the Roger time Mike. no call additional to showing And Hendriksen. presenters questions am queue. over at I this in back like

Roger Hendriksen

our And future And call everybody. questions to we as Thanks we as you forward in joining engagement. appreciate usual. Okay. joining appreciate look our certainly you usual. And call your

the we If on coming or you This forward look soon. as concludes speaking our with you weeks, to call. goes should have day or other Thanks days in again. the questions,

Operator

all This call. to conclude participants of today's you for team joining our does today. us you, Thank and thank

now wonderful You disconnect. have day. And a may

Cooper-Standard (CPS) 3 May 192019 Q1 Earnings call transcript