Earnings call transcript Q2 2023

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Operator

Good morning, ladies and gentlemen, and welcome to the Cooper-Standard’s Second Quarter 2023 Earnings Conference Call.

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

Following the company’s prepared remarks, 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.

to Investor call Relations. like Hendriksen, to now of Director would turn over the Roger I Please ahead. go

Roger Hendriksen

Thanks, Rocco, members Executive Jon and you Edwards, spending Financial team some Chairman good Chief will Vice on morning, everyone. with who Executive morning Officer. this President Thank the us and call and morning. are speaking Chief Banas, The be of this leadership time our with you Jeff for and Officer;

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

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

filings For ask this with that and more Exchange X we company’s of statements, presentation Slide on information you and refer periodic statements the Commission. forward-looking Securities to the in included

non-GAAP financial This GAAP comparable to are of measures. financial their to presentation most the Reconciliations also appendix measures the directly the contains presentation. included in measures non-GAAP

to out turn Edwards. I’ll formalities of Jeff way, those With the call the over

Jeff Edwards

everyone. second morning, forward. To opportunity an we business performed of going outlook Good how results key to and or update on the on our Roger. Slide provide highlights quarter second We in provide begin X, and Thanks, quarter. indicators our our review the some operations appreciate

product quarter. to in XX% We’ve our green our In customers and of around employees workplaces were delivering maintained and our scorecards the safe and quality, our exceptional focus dedication world. the keeping products customer quality service to in our

We new also launches. had green XX% scorecards for program

customers. from operations, We continue delivering our value to achieve to our outstanding performance

our the be performance outstanding. of addition, to continues safety In plants

that incidents XXX,XXX outstanding X.XX. months maintained X benchmark had of a through a safety the of reported below months six the hours plants quarter. incidents just we worked, quarter perfect first have the safety of total X.XX year, second the well the of the During through were XX this six the first and incident record performance, Leading per rate reportable world-class of

their overall. KPI. the these of team goal world-class as important continue ongoing this be commitment for recognize proud not we for ultimate plants could and teams to for to continued company the strive I want in most global I achievements their incidents commitment and at safety X our more the leadership of

volumes letting our As commitment and we’re become and up maximize improving, lean are on operational not to efforts production market as and as possible. conditions efficiency

in the During lean million initiatives manufacturing our teams improving $XX savings efficiencies. and second purchasing delivered quarter, and through

than sales. We’re expense, also consider as fixed on focus maintaining our decline you X a a percentage as of low more pleased point and non-manufacturing And we keeping SGA&E as when costs, percentage were see them to possible.

Finally, $XX.X customer wins business customers we’re vehicle platforms. advanced us engineering design continuing and to win vehicle of capabilities, These innovative electric and technical and new on million In quarter, relationships our result awards, world-class a strong the provide second we through million business value service. awards, the $XX.X especially their our in are on awarded net including new our solutions upcoming electric programs.

agreements, our leveraged combination production to pleased is results. leaner cost commercial in our of hard see drive structure a very across financial in powerful. we’re improvement meaningful So The enhanced work our increasing volumes

to the you the for turn Jon quarter. over details now will I financial call to the give

Jon Banas

the our balance everyone. Jeff, results of I’ll aspects our provide financial some morning, and slides, quarter, the liquidity on Thanks, few next flows, our In good and cash for sheet. details discuss

XXXX prior of same to summary results our with quarter the period the X, Slide On we of last year. comparisons for second show a

million or a currency. offset of to sales. second gross The primarily $XX.X was only of XXXX. quarter X.X% the by volume in sales volume or million for Second Gross partially of was commercial were in profit This just positive and The enhanced unfavorable quarter and our $XX.X and were across compared sales favorable driven second quarter increase XX.X% XXXX. compares of mix increase by mix quarter second XX.X% foreign an XXXX profit all million, agreements the $XXX.X Europe. to the of regions of

lean and such last foreign Adjusted of manufacturing chain, driven the energy agreements as offset all costs by in mix, EBITDA achieved year-over-year labor in of in the and improvement savings The headwinds quarter was by $XX.X and inflation year. the in primarily and million impact $XX.X ongoing partially favorable well areas supply negative volume compared unfavorable was enhanced quarter as as second exchange. to commercial million

to our remains progress are opened. customers further results. in we inflation certain overall, During quarter, positive are sustainable the impact the the with second ongoing negotiations and for timing Negotiations on establish and recover our we and made commercial seeing pricing that incremental concluding

the similar last the And period. expected, third the these impact after the did did we reporting end in of full some conclude we as the see retroactive QX quarter, pricing to of originally report recognize So will we on negotiations but result, results negotiations in quarter. not when as we our a shortly benefit

see concluded to improvements growth As quarters and expect the expansion year. further line are negotiations top we remaining the margin successfully, remaining in in of

was for quarter to GAAP The current costs. XXXX. restructuring a the $X.X the net of On basis, a $XX.X million net million second compared US in in loss million, quarter loss of quarter $XX.X included

of of both to quarter the share adjusted $X.XX quarter or the tax the was items of Excluding second second or compared per in $XX.X million XXXX. from net loss for special and net related XXXX the diluted periods, share million diluted $XX $X.XX adjusted per impact loss

higher resulted and by gross The improved year-over-year offset from sales primarily partially improvement profit, interest expense. higher

expenditures capital in X% second compared year. quarter million second the sales totaled last million of of sales or quarter in $XX the Our or $XX.X X.X% of to

customer have readiness. disciplined focus launch which remain on investments primarily capital around to continue We

billion, of $XXX.X the keep in the around XXXX. our first CapEx we We year $X.X In increase as expect totaled sales of XX.X% an committed of sales first the or half year, to for our our X% million at full versus XXXX, guidance. of half

the XXXX. million $XX.X continuing This was year-over-year first of half Adjusted $XX increase $X.XX compared the first EBITDA was $XX.X progress. share for per share again the half X% or a net CapEx months million approximately of in half, to loss our the is with in million loss in target negative $X.XX year Adjusted of million X.X% sales, full or million or compared XXXX. is six which first a million line $XX.X net sales. of $XX.X was first of of clear of sign per our in $XXX.X to in

quarter. X. impacting The to factors Slide insights Slide the additional into key Moving charts results X provide on our second for some

customer also revenue, price the For versus the biggest driver, volume net year-over-year volumes by adjustments, price XXXX. sales in including period Net reduced exchange, million the foreign to sales related customer and year. the mix, category. million volume quarter net of Chinese RMB increased the mix and favorable a production were mainly versus benefiting Improving customer and same adjustments last with $XXX by second the $X the quarter Canadian dollar,

quarter. For price cost manufacturing combined for energy, EBITDA and exchange adjusted the of the transportation These costs to the the of related purchasing wages net and million in $X contributed improvements quarter. a benefit partially The offset efficiencies zloty. and mix in of million were and were positive dollar $XX was drove Canadian adjustments the $XX $XX initiatives by EBITDA, adjusted improvement volume, material foreign a in Lean in and year-over-year by million certain contributors ongoing quarter. General impact quarter. salaries, million Mexican peso, reduced and million, other Polish inflation, $X headwinds primarily including

Moving to Slide X.

the half the for analysis the first at Looking of year.

volume, adjustments period million and For $XXX added sales, favorable same mix, versus last net price the year.

was an foreign exchange million. While $XX offset of

were purchasing These Manufacturing million $X Adjusted and to added million million. item impacts. $XX adjustments volume, efficiencies exchange, in costs, positive added various other economics mix, transportation material partially such labor, favorable million of and factors $XX and $X offset $XX EBITDA, last general compared were For inflationary favorable year. utilities headwinds by as and net and $XX of million, price a foreign million for

Slide XX. to Moving

$XX liquidity. Looking related operations used XXXX, and in second capital, reflected at Cash in compensation changes payout payments of year the interest all quarter improved approximately income. of cash other made in offset flow operating prior which cash accruals semiannual working the million in which and June, was

of $XX cash ended approximately quarter, program approximately a activity. $XX balance with the quarter. million of With million. timing reflecting the we in the outflow this As second June cash $XX in CapEx Free mentioned an cash approximately primarily free earlier, launch was result, flow was of million

facility cash point on was of and payments quarter our XXth. end. We balance the and on million we revolving from as cash the likely quarter sales the the of undrawn at credit low at a Our for With solid ABL, our on availability total the $XXX based year seasonality, the of customers. had volume timing of approximately sheet, $XXX that million June the believe increasing was end of liquidity balance

important it’s balance significantly that June to expect year, the XXth. do second July, in we the from stronger our So, had of and half flow during cash already improved cash note

subject expected Based ongoing flow completion to for on and Further, support we credit to and and believe agreements and light expectations for the year. our flexible to operations. We efficiencies commercial outlook cash the our current customers. second believe the full from on sufficient generation, cash from provide positive in operating resources production, cash there the half enhanced benefit successful of further facilities be current our will hand, access will our vehicle and improving

concludes That my comments.

me back hand Jeff. let it to over So

Jeff Edwards

Jon. Thanks,

year in continuing few remainder next we year, other minutes, are to few with a I’ll our and for our a of increasing comments the outlook commercial value including our in conclude provide executing initiatives full ahead. the years on near-term and the Then update with the drive on you Over status strategic negotiations I’ll guidance. the

So please XX. Slide turn to

all on quality of quarter, costs, priority creation and from to long-term. pricing for negotiations accounts exposure limit and the successfully inflationary our commodity material well customers. as We’re dynamics earnings recover fair our to we concluded as over and and value that our for year, value incremental that Having costs those continuing globally. now to pricing market enhance current is input customers will with early achieving our work commercial establish our to the was pressures Last deliver costs risk focus sustainable this in of reduce related sustainable

in unsustainable negative first customers and we results We in prioritized progressing of the been with negotiations concluded customers positive have Commercial regions to our our as majority margins the to quarter. them. negotiations and in saw negotiations European third conclude the with Most segment for supportive other quarter. business mentioned, European our impact more the successfully flow. We Jon cash we’ve already expect of are address

our improve flow. We’re cash commercial also to advancing efforts

and to-date more supplier-funded tooling. receivables well on includes payment tooling as terms of favorable progress Our trade implementation customer-owned

going We expect our flow forward. a positive these changes meaningful cash will impact have on

Slide to with our Concurrent XX. commercial Turning initiatives.

facilities production continuing further to of improve is opportunities time value footprint our reducing improve We to profitability. new labor portfolio still structure business to We our optimize business advantage directing high-classed there to and markets. and our cost to over more creation accelerate operating are by and exposure our believe

will we non-core similar We consider future don’t minimum that rates to ROI also divesting done have businesses growth, what our for margins, before. or strategic meet

or exiting our commitment either to our underperforming Our businesses double-digit margins invested central to remain restore fixing on and levels. returns to part strategy capital a of

XX. Slide to Turning

our our automotive ceiling our while is of of and provides in with products go-to-market lower our to rate performance and element footprint in businesses strategy able MicroDense even Fortrex business applications. competitive In carbon profitability superior now extend further advantage and through which leverage providing reduction expand Another technology applications, systems. to we’re automotive to Fortrex portfolio market diverse

further process we improvements to we drive automotive further it penetration optimize production early begin rollout the advantage will will installation and customers. of equipment materials Fortrex manufacturing year. In next to Fortrex over market give traditional our with and expect addition, The competitive expect

is to sale in available Beyond stores new automotive we’re shoes that finally line with running of markets, report Fortrex a a and for online. mid-sole foam high-end pleased

new the Our of remains production that with of have new shoes, we’re now and determine technology pleased the consumers footwork will publicly. to them future shoes the excited and Ultimately try they praised consumers customer will demand the line out. and able be levels

progress we’ve in I’m of the Slide half company. pleased to XX. morning, the and the proud our of team’s let me made that accomplishments our of with in reiterate our profitability improving To Turning year first conclude presentation the this

than better a But improvement. far with way were position a still much objective we ago. in for we’re more long from are our We year room

early full higher quarters. production few with come to the as in we our are next our of the improvement ranges continued the and we results agreements over we believe efforts production forecast and provided original be schedule current commercial inflection all margin in guidance. our cost enhanced holdup, expect industry If together stage volumes within We year

possibility not to factors, to there some If there that downside our predicting or for be including due the ranges upside But timing given did actual any as that could to thank products. production or any the be and achieved and levels other program market with outlook. number quality and trust, existing risks exceed of the continued closing also OEM continue we’re expectations, agreements, our in support. time, at they always, implementing exciting QX, could them this and I and or confidence extended and design committed for commercial remain customers labor We disruptions. negotiations launches of services, their to as engineering want to flawless innovations, world-class supporting

This concludes our prepared comments.

let’s the open Q&A. So for call

Operator

you. Please [Operator go Ward Instructions]. Today’s Michael first Thank comes Benchmark. from ahead. question with

Michael Ward

good everyone. things. A morning, Thank of you very couple much. And

with think the the that the all prioritized retro, about like sounds like sounds it talked new we’re There looking commercial agreements. parts suppliers the is and then that are have it. it of dealing benefit there there pricing you You pricing two what I to specifically. is is And regionally you are different the at? And limit retro and

Jeff Edwards

in didn’t and Yeah. that, was our if about, right. said burn and you is Good was And it priority that flow it were at year that fixed, get between year remember, million to Jeff. as see it we’ve $XX burning why and we we you talking we the Mike, can would cash priority this this the rate morning, gotten fixed get numbers. so a position we Clearly in that that a that’s we our next year, to wasn’t Europe if Europe started cash

the for but Europe. most in of the place here the done has job A rest few at a take really everybody part year, good will negotiations more

that’s know the the the in address and the of done executed during and about basically that volatility experienced that with all You indexing we’ve so everywhere material past. exercised the our we first half year customers of that

sustainable finally, it what then forward. we call the, going And was pricing

are bridge a with was accept years Obviously years including know regarding the board acceptable. record of, I across short straight three call, longer suppliers that one, payments term I gap pass this So you when sum think some lump would try to to could you inflation. inflation no

So we and sustainable with going address the to as bucket put a out place referred customer the in to every pricing pricing. in that’s world negotiation forward, virtually we set to

retros the be tell by of part What that I basically and most third should the for end completed accounted quarter, would you is Mike, the be the for all will accordingly.

our quarter, see it talk much will of look third that I’m easier much thing you a quite So an at view. end when thing to sure you results at me easier be the accounting point the for from of a to about for and

how would all that to going your equally see and of in you’ll an here of more second that quarter, to be is guess, much the us, XXXX for as is, I important what I at then carry gotten relates wait answered was into we’ve So, explanation think what Hopefully is XXXX. those and here for least just importantly over should I questions. you clearer everything in results it encourage pricing everybody saw to much much but

Michael Ward

the a know Perfect, got first back. you’ve $XX quarters normalized closer bit? levels the think yeah. then as in below had type seen delta or great it little chart XX% a you to look positive we’re chunk normalized as go is as And to that it the does levels. to get several there, levels. starting were that as or I of of this we’ve far still Jon talking forward, cools can industry million you you and up And far it more for we to at Is down And impact like been in as XX% in if And normalized get first then we volume be more maybe we your that got know magnitude more half. – delta

Jeff Edwards

guess. and than here to predictable you that next last in expect those reached accurate we very have customers we would we less on slight the that This over is about years, Jeff. that been I’m the have we’re see are saying I about in what what But couple tried will increase time. of to is increase that over point we XXXX a a Mike, now of predict think and all find as that’s volumes volumes I it, volumes where volumes of encouraged couple know continue based period are the to starting the our years

your So, we’re clear get lot will become all need be we of confident always year better that we couple of for quarter encouraged will we’re ’XX us lot able than we a that end of doing hopeful January we the and February it, been as or or rollout the to whole be predict to by of this think as do that have see that and it question I to I’m we year guidance years. a will that so as in a any this two

up. and we’re by what expect that’s encouraged to So it I go

Michael Ward

So Europe, ‘XX-‘XX operating the in expect that time already more North back China type China, or production to levels that getting get talking got, in of if the you’re you or America, to well and double-digit income can of about? $XXX walk North just we we period Europe, know income EBITDA million has margins closer north America

Jeff Edwards

Yeah, Mike.

is continuing of done fixed costs have that take a job down. to see ways what know to company we reducing we that, great You is you find costs, our those believe other our

I’ve clearly in on of EBITDA, our here back So fall those yes. several double-digit to bottom-line. as as years said to increase, return publicly be over as the expect corner those couple to we see we increase, volumes that double-digit volumes next expect times, the And capital invested

Michael Ward

XX as to page two relates things it There on know. were lastly And Okay. Fortrex. just to

the sneaker on Is the with congratulations get the APL? Is finally the markets. company one that sneakers, brand? First on

Jeff Edwards

the What didn’t I your was specifics? question. Mike hear Sorry,

Michael Ward

to it the relates shoes, Is it sneakers. the brand? that As the APL? Is

Jeff Edwards

No.

Michael Ward

Okay. Can are still us restricted? is? what you tell Or you the brand

Jeff Edwards

that. still We’re restricted, on we’re but working

Michael Ward

Okay.

Jeff Edwards

a you can bought I that. tell I pair,

Michael Ward

find be I’d to able them. to love

mentioned with if lastly, super tire? Just seen time you back – that. days I’ve at Where there applications. partner to that gone what don’t Is a know I is looking with that? maybe the tire first – you’re your

Jeff Edwards

about manufacturers the a Fortrex help can asked big of we is tires address to tire a customer related utilizing that forward component by that produce tire with couple battery go as application compound a Yeah, the if and has we life. EVs, the work that, for is tell what to issue in friction see you us can to the they

projects so, advanced on refers And that’s that we’re some working there, to. so what

The that already ceiling that. with we Today, other in today and we’re conversation related in Fortrex you had or have, call it, Fortrex ceiling to about industry. automotive extremely I let’s regarding so million excited the $XX was automotive

move $XXX you I this apply we revenue somewhere discussed the see forward morning, of just million. As we or there with and the opportunity in neighborhood what

we next So it for reduce of that really product also the customers. in tripling product the the only addresses weight, year excited, to that’s relates that the years help engineered here into we’re will couple amount going have beginning product producing but starting, over because of not be that marketplace in as to it us emissions our

be our benefit XX. I as a there’s of going improved the customers of world product think January all to introduce for we in each So that here around of them to big

So discussions the are Fortrex. regarding two those

Michael Ward

everyone. you, Thanks Jeff. you, Thank

Operator

Please comes Thank with DiRubbio you. ahead. from question go Brian next today’s [Operator Baird. Instructions]

Brian DiRubbio

there the other over see call, that Jeff, was can on year on Good you. the what opportunities or earlier you on now so? a week. not small A any there’s you you I disclose or Jon to next Maybe know you’re going divestiture few you the starting small that off that divestiture are but morning, proceeds gentlemen. just this questions guess for enact

Jeff Edwards

that take I’ll Yeah, one.

amount. this not we’re correct is you’re disclose going So the to Jeff. But,

So done this someplace fixed what either going have regions, what we’ve addressed non-strategic always is, end them or up And certain the identify else. also get businesses that’s we in so is. they underperforming we

hopeful we into answer foreseeable at that South we’re the this is, we category. answer results be future at that end industry. you’ve work hopeful way China in North in least them and think for are make of And them stabilized we we’ve results, America fall of here, we’re right we’ve that that now. the some short you’ve as the as year, our regain that in the – But the are the stabilized still our those will yes, and that’s type where the and that America of so, there seen as seen Europe I And volumes leaders business always the to kind through we in the and are expected

at wouldn’t expect as many for see the next forward year. I least head more to we So

Brian DiRubbio

color that Appreciate there. Understood.

got Just you on catchup you make the commercial number to have? absent Is just safe know it were assume XXXX negotiating, be on to know be payments received results correct. then that agreements commercial you want those know this will of XXXX just in you I the in agreements you sure you I that the go-forward and it’ll the

Jeff Edwards

again. This is Jeff

be a forward. continue improving way, lump point material type deal into year just for that that reached and those referring buckets, index to we’ve business where two negotiated carry the to, contracts we sustainable with a and ‘XX the I any That’s than sum clear, that. the book couldn’t the in don’t anything keep to price increases we raw of beyond. that and us sustainable that So, products, for create obviously that why will recoveries The other goes particular we

that to very hopeful end things have be most to and quarter conversation of We’ve and and allows the That’s stage. explained a quarter. our will third the intelligent and the it’s results at it the out end I for mentioned that’s we fourth customers. then it will out ‘XX and the our for that smooth work be for the quarter third portion how quarter we’re hits within to about I at that going in the of third most think that of will us why been, able it that explain of extremely that the before the part, They clarified to retro supportive I have of think

Brian DiRubbio

That would phenomenal. be clarity Great.

slightly just guidance. Just didn’t to vehicle you better seeing know guidance effort in at the in US, you’re your but you on this here Europe point time? just light conservative production It’s – and be the change the

Jeff Edwards

This is Jeff. Yes.

Brian DiRubbio

Okay. just my what operate? I liquidity you then can is guys just you the find remind can’t And enough. finally, on notes. minimum that to Fair me that Jon need

Jon Banas

What Yeah, talked past ABL in I facility a well minimum to Brian. about cash we’ve on facilities to as balance include XXX access the around when having that the revolving define our And credit world. liquidity. I sheet as the of is, XXX and other smaller the

I look today. how that’s at would perspective. it that in continue Nothing’s really So changed

Brian DiRubbio

all you. Thank Excellent. always. Appreciate the colors

Jon Banas

Thanks, Brian.

Operator

it And no you. Thank appears questions are time. this there more at

I turn over Hendriksen. the call Roger to to back So would like

Roger Hendriksen

the the and in That this you. engagement Okay. Thanks, like if are there to feel would participation. appreciate a free the you call you’d environment, different Thank We morning appreciate other reach ask that ask and please and to conclude didn’t like. everybody. and we questions call for know we’ll that you morning. out today again directly, joining call your Thanks any will discussion to this me have in our

Operator

This call. all presentation. We you sir. attending thank Thank conference today’s you, today’s concludes for

You your and a day. wonderful have disconnect may now lines

Cooper-Standard (CPS) 4 Aug 232023 Q2 Earnings call transcript