CVG (NASDAQ: CVGI), a diversified industrial products and services
company, today announced financial results for its first quarter
ended March 31, 2023.
First Quarter
2023 Highlights (Compared with
prior-year period, where comparisons are noted)
- Revenues of $262.7
million, up 7.5% due to improved demand, price realization and new
business win revenue.
- Operating income of
$14.6 million, up 74%; adjusted operating income of $15.4 million,
up 62%. Improved operating income was driven by improved pricing
and cost management.
- Net income of $8.7
million, or $0.26 per diluted share. Adjusted net income of $9.2
million, or $0.28 per diluted share.
- Adjusted EBITDA of
$19.8 million, up 47% with an adjusted EBITDA margin of 7.5%,
tracking towards the Company's long-term profitability
targets.
- Net new business
wins in the quarter were approximately $85 million. The majority of
new business awards were within the Electrical Systems
segment.
- Cost reduction
program is on track to deliver at least $30 million of cost
reduction in 2023 through footprint and organizational
streamlining, and a global slate of 350+ projects.
Harold Bevis, President and Chief Executive
Officer of CVG, said, “In the first quarter, we delivered record
revenue and new business wins on multiple new vehicle platforms.
Our profits improved due to new and existing business volumes,
improved pricing, and lowered costs. Our balance sheet improvement
efforts also delivered with improved working capital efficiency and
reduced leverage.”
“Our first quarter performance is evidence that
our growth, profitability and free cash flow initiatives are
working. We plan to continue these efforts during the remainder of
this fiscal year. We are underway with a measured program to expand
our capacity in concert with ramping up of production for our new
business wins. We will continue to manage capacity as sales growth
and new business programs ramp up. We are also using these
opportunities to reorganize our production footprint into
low-cost-countries as well as modernizing our operational
processes. We are pleased with our first quarter results and we
believe that CVG is firmly on track to deliver improved performance
in fiscal 2023 compared to last year.”
“We believe our first quarter margin performance
is sustainable for fiscal 2023 given the current vehicle production
outlook. We expect that our current revenue run rate, combined with
new wins that are still ramping up, puts us on track to deliver our
2027 revenue target of $1.5 billion. Additionally, our
continued focus on inflation management, cost reduction, price
maintenance and the accretive margin profile of our new business
wins, gives us confidence as we work toward achieving a 9% EBITDA
margin target by 2027.”
Andy Cheung, Chief Financial Officer, added,
“The continued pace of new business awards is driving an exciting
period of growth for CVG. Our focus on price and cost has allowed
us to deliver significant margin expansion. As our revenues grow in
the coming years, CVG expects continued improvement in operating
leverage driving EBITDA margins higher. We continue to invest as
needed in growth-based working capital and low-cost production
capacity to support our business transformation. We expect free
cash flow to drive our net leverage ratio lower by the end of
2023.”
First Quarter Financial
Results(amounts in millions except per share data and
percentages)
|
First Quarter |
|
|
|
|
2023 |
|
|
|
2022 |
|
|
Change |
Revenues |
$ |
262.7 |
|
|
$ |
244.4 |
|
|
|
7.5 |
% |
Gross profit |
$ |
35.2 |
|
|
$ |
25.4 |
|
|
|
38.6 |
% |
Gross margin |
|
13.4 |
% |
|
|
10.4 |
% |
|
|
Adjusted gross profit1 |
$ |
35.9 |
|
|
$ |
26.3 |
|
|
|
36.5 |
% |
Adjusted gross margin1 |
|
13.7 |
% |
|
|
10.8 |
% |
|
|
Operating income |
$ |
14.6 |
|
|
$ |
8.4 |
|
|
|
73.8 |
% |
Operating margin |
|
5.6 |
% |
|
|
3.4 |
% |
|
|
Adjusted operating
income1 |
$ |
15.4 |
|
|
$ |
9.5 |
|
|
|
62.1 |
% |
Adjusted operating margin1 |
|
5.9 |
% |
|
|
3.9 |
% |
|
|
Net income |
$ |
8.7 |
|
|
$ |
4.0 |
|
|
|
117.5 |
% |
Adjusted net income1 |
$ |
9.2 |
|
|
$ |
5.3 |
|
|
|
73.6 |
% |
Earnings per share,
diluted |
$ |
0.26 |
|
|
$ |
0.12 |
|
|
|
116.7 |
% |
Adjusted earnings per share, diluted1 |
$ |
0.28 |
|
|
$ |
0.16 |
|
|
|
75.0 |
% |
Adjusted EBITDA1 |
$ |
19.8 |
|
|
$ |
13.5 |
|
|
|
46.7 |
% |
Adjusted EBITDA margin1 |
|
7.5 |
% |
|
|
5.5 |
% |
|
|
1See Appendix A
for GAAP to Non-GAAP reconciliation |
|
|
Consolidated Results
First Quarter 2023 Results
- First quarter 2023 revenues were
$262.7 million compared to $244.4 million in the prior year period,
an increase of 7.5%. The increase in revenues was primarily driven
by increased pricing to offset material cost increases and
increased sales volume, offset by sales volume decreases in the
Industrial Automation segment. Foreign currency translation also
unfavorably impacted first quarter of 2023 revenues by $3.6
million, or 1.5%.
- Operating income
for the first quarter 2023 was $14.6 million compared to operating
income of $8.4 million in the prior year period. The increase was
driven by higher margins, partially offset by higher SG&A. The
first quarter of 2023 adjusted operating income was $15.4
million.
- Interest associated
with debt and other expenses was $2.9 million and $2.0 million for
the first quarter ended March 31, 2023 and 2022,
respectively.
- Net income was $8.7
million, or $0.26 per diluted share, for the first quarter 2023
compared to net income of $4.0 million, or $0.12 per diluted share,
in the prior year period.
At March 31, 2023, the Company had $11.0
million outstanding borrowings on its US revolving credit facility
and $4.4 million outstanding under the newly established China
credit facility. The Company had $41.5 million of cash
and total $146.5 million of availability from the US and China
revolving credit facilities, resulting in liquidity of $188.0
million as of March 31, 2023.
First Quarter 2023 Segment
Results
Vehicle Solutions Segment
- Revenues were
$160.6 million compared to $140.2 million for the prior year
period, an increase of 14.6% primarily resulting from increased
sales volume and increased pricing to offset material cost
increases.
- Operating income
for the first quarter 2023 was $13.4 million compared to operating
income of $6.3 million in the prior year period, an increase of
112.0%. Adjusted operating income increased 106.6%, to $13.5
million, primarily attributable to increased pricing, lower freight
costs and overhead reduction.
Electrical Systems Segment
- Revenues were $54.7
million compared to $39.9 million in the prior year period, an
increase of 37.3% due to volume, increased pricing to offset
material cost pass-through and new business wins.
- Operating income
was $6.1 million compared to operating income of $1.8 million in
the prior year period. The increase in operating income is
primarily attributable to volume, increased pricing and
manufacturing efficiencies.
Aftermarket & Accessories
Segment
- Revenues were $37.6
million compared to $30.2 million in the prior year period, an
increase of 24.5% due to increased sales volume and increased
pricing to offset material cost pass-through.
- Operating income
was $5.6 million compared to operating income of $2.6 million in
the prior year period. The increase in operating income is
primarily attributable to increased pricing offsetting moderating
cost inflation.
Industrial Automation
Segment
- Revenues were $9.7
million compared to $34.1 million in the prior year period, a
decrease of 71.4%.
- Operating loss was
$0.9 million compared to operating income of $3.7 million in the
prior year period. The decrease in operating income is primarily
attributable to volume reduction and restructuring expenses.
Adjusted operating loss was $0.2 million.
2023 Demand OutlookAccording to
ACT Research, 2023 North American Class 8 truck production levels
are expected to be at 312,000 units and Class 5-7 production are
expected to be at 242,000 units. Estimates from FTR for 2023 are
320,000 units, slightly higher than ACT Research for Class 8 truck
builds. The 2022 actual Class 8 truck builds according to the ACT
Research was 315,128 units.
The global commercial and automotive vehicle wire harness
market is growing at approximately 4.5%. The global
electric truck market expected to grow approximately 15%
CAGR. Half of all Class 4-8 truck
sales are estimated to be battery-powered EV by 2035. (ACT Feb
22)
According to Interact Analysis, the Global
Off-Highway vehicle market is expected to increase approximately 4%
to 6.2 million units in 2023 from 5.9 million units in 2022. Beyond
2023, the Off-Highway vehicle market is expected to grow in the
4-5% range. We expect our legacy business growth rates to be in
line with this outlook.
Industry forecasts are expecting at least 4%
growth in 2023 for North American aftermarket truck parts.
Compounded annual growth of at least 4% is forecasted for
2023-2027.
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 Wednesday, May 3, 2023, at 10:00 a.m. ET.
Management intends to reference the Q1 2023 Earnings Call
Presentation during the conference call. To participate, dial (888)
886-7786 using conference code 74688048. International participants
dial (416) 764-8658 using conference code 74688048.
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 (877) 674-7070 using access code 688048 and
international callers can dial (416) 764-8692 using access code
688048.
Company Contact
Andy CheungChief Financial
OfficerCVGIR@cvgrp.com
Investor Relations Contact
Ross Collins or Stephen PoeAlpha IR GroupCVGI@alpha-ir.com
About CVG
At CVG, we deliver real solutions to complex
design, engineering and manufacturing problems across a range of
global industries by innovating, constantly adding value, and
treating our customer's bottom line as if it were our own.
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 its plans to improve financial results, the future of
the Company’s end markets, including the short-term and long-term
impact of the COVID-19 pandemic on our business, changes in the
Class 8 and Class 5-7 North America truck build rates, performance
of the global construction 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.
COMMERCIAL VEHICLE GROUP, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONSThree Months
EndedMarch 31,
2023and2022(Unaudited)(Amounts
in thousands, except per share amounts) |
|
|
|
Three Months Ended March 31, |
|
|
2023 |
|
|
|
2022 |
|
Revenues |
$ |
262,709 |
|
|
$ |
244,374 |
|
Cost of revenues |
|
227,500 |
|
|
|
218,991 |
|
Gross profit |
|
35,209 |
|
|
|
25,383 |
|
Selling, general and
administrative expenses |
|
20,565 |
|
|
|
16,999 |
|
Operating income |
|
14,644 |
|
|
|
8,384 |
|
Other (income) expense |
|
(202 |
) |
|
|
1,041 |
|
Interest expense |
|
2,890 |
|
|
|
1,961 |
|
Income before provision for income taxes |
|
11,956 |
|
|
|
5,382 |
|
Provision for income taxes |
|
3,256 |
|
|
|
1,400 |
|
Net income |
$ |
8,700 |
|
|
$ |
3,982 |
|
Earnings per Common
Share: |
|
|
|
Basic |
$ |
0.26 |
|
|
$ |
0.12 |
|
Diluted |
$ |
0.26 |
|
|
$ |
0.12 |
|
Weighted average shares
outstanding: |
|
|
|
Basic |
|
32,868 |
|
|
|
32,065 |
|
Diluted |
|
33,182 |
|
|
|
32,685 |
|
COMMERCIAL VEHICLE GROUP, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS(Unaudited)(Amounts in
thousands, except per share amounts) |
|
|
|
|
ASSETS |
March 31, 2023 |
|
December 31, 2022 |
Current assets: |
|
|
|
Cash |
$ |
41,484 |
|
|
$ |
31,825 |
|
Accounts receivable, net |
|
171,878 |
|
|
|
152,626 |
|
Inventories |
|
139,553 |
|
|
|
142,542 |
|
Other current assets |
|
20,112 |
|
|
|
12,582 |
|
Total current assets |
|
373,027 |
|
|
|
339,575 |
|
Property, plant and equipment,
net |
|
68,939 |
|
|
|
67,805 |
|
Intangible assets, net |
|
13,791 |
|
|
|
14,620 |
|
Deferred income taxes, net |
|
10,996 |
|
|
|
12,275 |
|
Other assets, net |
|
31,087 |
|
|
|
35,993 |
|
Total assets |
$ |
497,840 |
|
|
$ |
470,268 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
119,057 |
|
|
$ |
122,091 |
|
Accrued liabilities and other |
|
47,340 |
|
|
|
42,809 |
|
Current portion of long-term debt and short-term debt |
|
16,399 |
|
|
|
10,938 |
|
Total current liabilities |
|
182,796 |
|
|
|
175,838 |
|
Long-term debt |
|
149,221 |
|
|
|
141,499 |
|
Pension and other post-retirement
benefits |
|
8,470 |
|
|
|
8,428 |
|
Other long-term liabilities |
|
23,564 |
|
|
|
24,463 |
|
Total liabilities |
|
364,051 |
|
|
|
350,228 |
|
Stockholders’ equity: |
|
|
|
Preferred stock |
|
— |
|
|
|
— |
|
Common stock |
|
330 |
|
|
|
328 |
|
Treasury stock |
|
(15,278 |
) |
|
|
(14,514 |
) |
Additional paid-in capital |
|
263,142 |
|
|
|
261,371 |
|
Retained deficit |
|
(86,895 |
) |
|
|
(95,595 |
) |
Accumulated other comprehensive loss |
|
(27,510 |
) |
|
|
(31,550 |
) |
Total stockholders’ equity |
|
133,789 |
|
|
|
120,040 |
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
497,840 |
|
|
$ |
470,268 |
|
COMMERCIAL VEHICLE GROUP, INC. AND
SUBSIDIARIESBUSINESS SEGMENT FINANCIAL
INFORMATION(Unaudited)(Amounts in
thousands) |
|
|
|
Three Months Ended March 31, |
|
VehicleSolutions |
|
ElectricalSystems |
|
Aftermarket &Accessories |
|
IndustrialAutomation |
|
Corporate /Other |
|
Total |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenues |
$ |
160,584 |
|
|
$ |
140,157 |
|
|
$ |
54,749 |
|
|
$ |
39,876 |
|
|
$ |
37,629 |
|
|
$ |
30,215 |
|
|
$ |
9,747 |
|
|
$ |
34,126 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
262,709 |
|
|
$ |
244,374 |
|
Gross profit |
|
19,471 |
|
|
|
12,907 |
|
|
|
8,297 |
|
|
|
3,401 |
|
|
|
7,227 |
|
|
|
4,086 |
|
|
|
214 |
|
|
|
4,991 |
|
|
|
— |
|
|
|
(2 |
) |
|
|
35,209 |
|
|
|
25,383 |
|
Selling, general &
administrative expenses |
|
6,077 |
|
|
|
6,588 |
|
|
|
2,227 |
|
|
|
1,640 |
|
|
|
1,650 |
|
|
|
1,465 |
|
|
|
1,076 |
|
|
|
1,324 |
|
|
|
9,535 |
|
|
|
5,982 |
|
|
|
20,565 |
|
|
|
16,999 |
|
Operating income |
$ |
13,394 |
|
|
$ |
6,319 |
|
|
$ |
6,070 |
|
|
$ |
1,761 |
|
|
$ |
5,577 |
|
|
$ |
2,621 |
|
|
$ |
(862 |
) |
|
$ |
3,667 |
|
|
$ |
(9,535 |
) |
|
$ |
(5,984 |
) |
|
$ |
14,644 |
|
|
$ |
8,384 |
|
COMMERCIAL VEHICLE GROUP, INC. AND
SUBSIDIARIESAppendix A: Reconciliation of GAAP to
Non-GAAP Financial Measures
(Unaudited)(Amounts in thousands, except
per share amounts and percentages) |
|
|
|
Three Months Ended |
|
March 31, 2023 |
|
March 31, 2022 |
Gross profit |
$ |
35,209 |
|
|
$ |
25,383 |
|
Restructuring |
|
690 |
|
|
|
906 |
|
Adjusted gross profit |
$ |
35,899 |
|
|
$ |
26,289 |
|
% of revenues |
|
13.7 |
% |
|
|
10.8 |
% |
|
Three Months Ended |
|
March 31, 2023 |
|
March 31, 2022 |
Operating income |
$ |
14,644 |
|
|
$ |
8,384 |
|
Restructuring |
|
713 |
|
|
|
989 |
|
Deferred consideration purchase accounting |
|
— |
|
|
|
78 |
|
Total operating income (loss) adjustments |
|
713 |
|
|
|
1,067 |
|
Adjusted operating income |
$ |
15,357 |
|
|
$ |
9,451 |
|
% of revenues |
|
5.8 |
% |
|
|
3.9 |
% |
|
Three Months Ended |
|
March 31, 2023 |
|
March 31, 2022 |
Net income |
$ |
8,700 |
|
|
$ |
3,982 |
|
Operating income adjustments |
|
713 |
|
|
|
1,067 |
|
Hryvnia fair value adjustments on forward exchange contracts |
|
— |
|
|
|
675 |
|
Adjusted provision for income taxes1 |
|
(178 |
) |
|
|
(436 |
) |
Adjusted net income |
$ |
9,235 |
|
|
$ |
5,288 |
|
|
|
|
|
Diluted EPS |
$ |
0.26 |
|
|
$ |
0.12 |
|
Adjustments to diluted EPS |
$ |
0.02 |
|
|
$ |
0.04 |
|
Adjusted diluted EPS |
$ |
0.28 |
|
|
$ |
0.16 |
|
1 Reported Tax (Benefit) Provision adjusted for tax effect of
special charges at 25% |
|
|
Three Months Ended |
|
March 31, 2023 |
|
March 31, 2022 |
Net income |
$ |
8,700 |
|
|
$ |
3,982 |
|
Interest expense |
|
2,890 |
|
|
|
1,961 |
|
Provision for income taxes |
|
3,256 |
|
|
|
1,400 |
|
Depreciation expense |
|
3,430 |
|
|
|
3,575 |
|
Amortization expense |
|
832 |
|
|
|
857 |
|
EBITDA |
$ |
19,108 |
|
|
$ |
11,775 |
|
% of revenues |
|
7.3 |
% |
|
|
4.8 |
% |
|
|
|
|
EBITDA adjustments |
|
|
|
Restructuring |
$ |
713 |
|
|
$ |
989 |
|
Hryvnia fair value adjustments on forward exchange contracts |
|
— |
|
|
|
675 |
|
Deferred consideration purchase accounting |
|
— |
|
|
|
78 |
|
Adjusted EBITDA |
$ |
19,821 |
|
|
$ |
13,517 |
|
% of revenues |
|
7.5 |
% |
|
|
5.5 |
% |
COMMERCIAL VEHICLE GROUP, INC. AND
SUBSIDIARIESAppendix B: Segment Reconciliation of
GAAP to Non-GAAP Financial
Measures(Unaudited)(Amounts in
thousands, except percentages) |
|
|
|
Three Months Ended March 31, 2023 |
|
VehicleSolutions |
|
ElectricalSystems |
|
Aftermarket & Accessories |
|
Industrial Automation |
|
Corporate/Other |
|
Total |
Operating income |
$ |
13,394 |
|
|
$ |
6,070 |
|
|
$ |
5,577 |
|
|
$ |
(862 |
) |
|
$ |
(9,535 |
) |
|
$ |
14,644 |
|
Restructuring |
|
83 |
|
|
|
8 |
|
|
|
— |
|
|
|
622 |
|
|
|
— |
|
|
|
713 |
|
Adjusted operating income |
$ |
13,477 |
|
|
$ |
6,078 |
|
|
$ |
5,577 |
|
|
$ |
(240 |
) |
|
$ |
(9,535 |
) |
|
$ |
15,357 |
|
% of revenues |
|
8.4 |
% |
|
|
11.1 |
% |
|
|
14.8 |
% |
|
(2.5) % |
|
|
|
|
5.8 |
% |
|
Three Months Ended March 31, 2022 |
|
VehicleSolutions |
|
ElectricalSystems |
|
Aftermarket & Accessories |
|
Industrial Automation |
|
Corporate/Other |
|
Total |
Operating income |
$ |
6,319 |
|
|
$ |
1,761 |
|
|
$ |
2,621 |
|
|
$ |
3,667 |
|
|
$ |
(5,984 |
) |
|
$ |
8,384 |
|
Restructuring |
|
204 |
|
|
|
— |
|
|
|
435 |
|
|
|
350 |
|
|
|
— |
|
|
|
989 |
|
Deferred consideration purchase accounting |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
78 |
|
|
|
— |
|
|
|
78 |
|
Adjusted operating income |
$ |
6,523 |
|
|
$ |
1,761 |
|
|
$ |
3,056 |
|
|
$ |
4,095 |
|
|
$ |
(5,984 |
) |
|
$ |
9,451 |
|
% of revenues |
|
4.7 |
% |
|
|
4.4 |
% |
|
|
10.1 |
% |
|
|
12.0 |
% |
|
|
|
|
3.9 |
% |
Use of Non-GAAP Measures
This earnings release contains financial
measures that are not calculated in accordance with U.S. generally
accepted accounting principles (“GAAP”). In general, the non-GAAP
measures exclude items that (i) management believes reflect the
Company’s multi-year corporate activities; or (ii) relate to
activities or actions that may have occurred over multiple or in
prior periods without predictable trends. Management uses these
non-GAAP financial measures internally to evaluate the Company’s
performance, engage in financial and operational planning and to
determine incentive compensation.
Management provides these non-GAAP financial
measures to investors as supplemental metrics to assist readers in
assessing the effects of items and events on the Company’s
financial and operating results and in comparing the Company’s
performance to that of its competitors and to comparable reporting
periods. The non-GAAP financial measures used by the Company may be
calculated differently from, and therefore may not be comparable
to, similarly titled measures used by other companies.
The non-GAAP financial measures disclosed by the
Company should not be considered a substitute for, or superior to,
financial measures calculated in accordance with GAAP. The
financial results calculated in accordance with GAAP and
reconciliations to those financial statements set forth above
should be carefully evaluated.
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