Research News and Market Data on CVGI
EPS of $(0.05), Adjusted EPS of $0.06, reflecting additional restructuring activity
Adjusted EBITDA of $10.0 million, free cash flow of $6.4 million
Strategic actions taken to strengthen Vehicle Solutions Business
Provides updated guidance for full year 2024
NEW ALBANY, Ohio, Aug. 05, 2024 (GLOBE NEWSWIRE) — CVG (NASDAQ: CVGI), a diversified industrial products and services company, today announced financial results for its second quarter ended June 30, 2024.
Second Quarter 2024 Highlights (Compared with prior year, where comparisons are noted)
- Revenues of $229.9 million, down 12.3%, due primarily to a global softening in customer demand.
- Operating income of $0.8 million, down 95.2%; adjusted operating income of $5.7 million, down 65.9%. The decrease in operating income was driven primarily by lower sales volumes, partially offset by reduced SG&A.
- New business wins in the quarter of approximately $32 million when fully ramped, bringing the year-to-date total to $80 million; these wins were concentrated in our Electrical Systems segment, and includes meaningful wins in our Vehicle Solutions segment.
- Net loss of $1.6 million, or $(0.05) per diluted share and adjusted net income of $2.1 million, or $0.06 per diluted share, compared to net income of $10.1 million, or $0.30 per diluted share and adjusted net income of $10.7 million, or $0.32 per diluted share.
- Adjusted EBITDA of $10.0 million, down 51.9%, with an adjusted EBITDA margin of 4.3%, down from 7.9%.
James Ray, President and Chief Executive Officer, said, “CVG continues to drive its strategic transformation, despite second quarter results that were challenged due to multiple factors. In particular, we witnessed continued softening in the construction and agricultural end markets and reduced volumes in our new business win launches, impacting our key growth segment in Electrical Systems. We also experienced operational inefficiencies in our Vehicle Solutions segment resulting from a new product launch with a major customer across multiple sites as well as activities to prepare our Cab Structures Business for sale. We made incremental investments in both internal and external support teams deployed to the affected facilities and expect to achieve more stability during the balance of the year. These market dynamics and operational activities weighed on second quarter profitability. While we are disappointed with our second quarter performance, we are taking proactive steps to right-size our cost structure and improve operational execution as we navigate a lower demand environment.”
Mr. Ray concluded, “Despite these challenges in the second quarter, we continue to position CVG for future success. We maintained our strong track record of procuring new business wins in the quarter and recently announced the sale of our Cab Structures Business, that is expected to close in the second half of 2024, which will serve to further streamline our product portfolio and aligns with our transformation strategy to reduce cyclicality, balance customer concentration, and strengthen our Vehicle Solutions business. We expect the trend of OEM’s insourcing components of their cab manufacturing to continue, so monetizing the facility now will create value for shareholders and will allow us to redeploy capital in key areas to improve our operating model. Strategic actions like this one, combined with our ongoing cost reduction and business optimization efforts, are expected to position CVG to benefit from the anticipated improvement in market conditions.”
Andy Cheung, Chief Financial Officer, added, “We are taking swift action to respond to the end market and operational challenges through restructuring and headcount reduction efforts to improve profitability. We’ve incurred $6.8 million in restructuring expenses year-to-date and have reduced our headcount by more than 10%. Additionally, we have made progress on the strategic evaluation of our Industrial Automation segment, which we believe will culminate in the third quarter of this year and is reflected in our guidance. We are adjusting our annual guidance ranges for fiscal year 2024 to reflect current market trends to include the deterioration in global construction and agriculture markets, and we are providing an adjusted version of the updated guidance for the Cab Structures and Industrial Automation businesses. Following closing, we anticipate that the majority of the disposition proceeds will support debt paydown as we further strengthen our balance sheet.”
Second Quarter Financial Results
(amounts in millions except per share data and percentages)
Consolidated Results
Second Quarter 2024 Results
- Second quarter 2024 revenues were $229.9 million, compared to $262.2 million in the prior year period, a decrease of 12.3%. The overall decrease in revenues was due to a softening in customer demand impacting all segments and the wind-down of certain programs in our Vehicle Solutions segment.
- Operating income in the second quarter 2024 was $0.8 million compared to $15.9 million in the prior year period. The decrease in operating income was attributable to the impact of lower sales volumes, operational inefficiencies and increased restructuring charges. Second quarter 2024 adjusted operating income was $5.7 million, compared to $16.7 million in the prior year period.
- Interest associated with debt and other expenses was $2.5 million and $2.8 million for the second quarter 2024 and 2023, respectively.
- Net loss was $1.6 million, or $(0.05) per diluted share, for the second quarter 2024 compared to net income of $10.1 million, or $0.30 per diluted share, in the prior year period.
On June 30, 2024, the Company had $7.0 million of outstanding borrowings on its U.S. revolving credit facility and no outstanding borrowings on its China credit facility, $39.3 million of cash and $152.9 million of availability from the credit facilities, resulting in total liquidity of $192.2 million.
Second Quarter 2024 Segment Results
Vehicle Solutions Segment
- Revenues were $140.9 million compared to $152.7 million for the prior year period, a decrease of 7.7%, due to lower customer demand and the wind-down of certain operations.
- Operating income was $5.1 million, compared to $14.1 million in the prior year period, a decrease of 64.1%, primarily attributable to lower customer demand, operational remediation investments, and increased freight costs partially offset by lower SG&A. Second quarter 2024 adjusted operating income was $8.3 million compared to $14.5 million in the prior year period.
Electrical Systems Segment
- Revenues were $50.2 million compared to $63.6 million in the prior year period, a decrease of 21.2%, primarily due to a global softening in the Construction & Agriculture end-markets and the phase out of certain lower margin business.
- Operating income was $0.5 million compared to $7.7 million in the prior year period, a decrease of 93.4%. The decrease in operating income was primarily attributable to lower customer demand, restructuring costs, labor inflation, and unfavorable foreign exchange impacts. Second quarter 2024 adjusted operating income was $1.9 million compared to $7.7 million in the prior year period.
Aftermarket & Accessories Segment
- Revenues were $33.9 million compared to $36.8 million in the prior year period, a decrease of 8.1%, primarily as a result of lower sales volume due to decreased customer demand and the reduction of backlog in the prior period.
- Operating income was $4.5 million compared to $5.5 million in the prior year period, a decrease of 19.4%. The decrease in operating income was primarily attributable to lower sales volumes, product mix and higher labor and benefit costs. Second quarter 2024 adjusted operating income was $4.7 million compared to $5.5 million in the prior year period.
Industrial Automation Segment
- Revenues were $5.0 million compared to $9.0 million in the prior year period, a decrease of 44.6%, as a result of lower sales volume due to decreased customer demand.
- Operating loss was $1.0 million, compared to $2.1 million in the prior year period. The decrease in operating loss was primarily attributable to benefits from recently implemented restructuring programs. Second quarter 2024 adjusted operating loss was $0.9 million, compared to $1.7 million in the prior year period.
Outlook
CVG issued the following outlook for the full year 2024 which reflects both market developments and pending strategic portfolio actions:
| Metric | Prior 2024 Outlook | Revised 2024 Outlook | Adjusted Revised 2024 Outlook (1) |
| Net Sales | $915 – $1,015 | $900 – $960 | $730 – $780 |
| Adjusted EBITDA | $60 – $73 | $42 – $52 | $28 – $36 |
(1) This Adjusted Revised outlook excludes any contribution from CVG’s Cab Structures or Industrial Automation businesses in 2024. On July 31, 2024, CVG signed an asset purchase agreement for the sale of the Cab Structures business with closing expected in the second half of 2024. Separately, CVG is currently exploring strategic alternatives for the Industrial Automation business.
This outlook reflects, among others, current industry forecasts for North America Class 8 truck builds. According to ACT Research, 2024 North American Class 8 truck production levels are expected to be at 308,000 units. The 2023 actual Class 8 truck builds according to the ACT Research was 340,247 units.
Agriculture and construction market conditions have deteriorated relative to our prior update in March 2024. Based on industry data, we now project segments within global agriculture market demand to be down 15% to 20% and construction market demand to be down 10% to 15% in 2024.
GAAP to Non-GAAP Reconciliation
A reconciliation of GAAP to non-GAAP financial measures referenced in this release is included as Appendix A to this release.
Conference Call
A conference call to discuss this press release is scheduled for Tuesday, August 6, 2024, at 8:30 a.m. ET. Management intends to reference the Q2 2024 Earnings Call Presentation during the conference call. To participate, dial (800) 549-8228 using conference code 11335. International participants dial (289) 819-1520 using conference code 11335.
This call is being webcast and can be accessed through the “Investors” section of CVG’s website at ir.cvgrp.com, where it will be archived for one year.
A telephonic replay of the conference call will be available for a period of two weeks following the call. To access the replay, dial (+1) 888 660 6264 using access code 11335#.
Company Contact
Andy Cheung
Chief Financial Officer
CVG
IR@cvgrp.com
Investor Relations Contact
Ross Collins or Stephen Poe
Alpha IR Group
CVGI@alpha-ir.com
About CVG
At CVG, we deliver real solutions to complex design, engineering and manufacturing problems while creating positive change for our customers, industries and communities we serve. Information about the Company and its products is available on the internet at www.cvgrp.com.
Forward-Looking Statements
This press release contains forward-looking statements that are subject to risks and uncertainties. These statements often include words such as “believe”, “anticipate”, “plan”, “expect”, “intend”, “will”, “should”, “could”, “would”, “project”, “continue”, “likely”, and similar expressions. In particular, this press release may contain forward-looking statements about the Company’s expectations for future periods with respect to closing of the recently announced sale of its Cab Structures Business, its plans to improve financial results, the future of the Company’s end markets, changes in the Class 8 and Class 5-7 North America truck build rates, performance of the global construction and agricultural equipment business, the Company’s prospects in the wire harness, warehouse automation and electric vehicle markets, the Company’s initiatives to address customer needs, organic growth, the Company’s strategic plans and plans to focus on certain segments, competition faced by the Company, volatility in and disruption to the global economic environment and the Company’s financial position or other financial information. These statements are based on certain assumptions that the Company has made in light of its experience as well as its perspective on historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. Actual results may differ materially from the anticipated results because of certain risks and uncertainties, including those included in the Company’s filings with the SEC. There can be no assurance that statements made in this press release relating to future events will be achieved. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by such cautionary statements.
Other Information
Throughout this document, certain numbers in the tables or elsewhere may not sum due to rounding. Rounding may have also impacted the presentation of certain year-on-year percentage changes.