CVG Reports First Quarter 2023 Results


Record quarterly revenues of $263 million, up 7.5% year-over-year
EPS of $0.26, adjusted EBITDA of $19.8 million or 7.5% of revenue
Strategy execution and operational excellence driving improvement in results

NEW ALBANY, Ohio, May 02, 2023 (GLOBE NEWSWIRE) -- 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 Outlook
According 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 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 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 SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three 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 SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in thousands, except per share amounts)
    
ASSETSMarch 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 SUBSIDIARIES

BUSINESS SEGMENT FINANCIAL INFORMATION

(Unaudited)

(Amounts in thousands)
  
 Three Months Ended March 31,
 Vehicle
Solutions
 Electrical
Systems
 Aftermarket &
Accessories
 Industrial
Automation
 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 SUBSIDIARIES

Appendix 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 SUBSIDIARIES
Appendix B: Segment Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

(Amounts in thousands, except percentages)
  
 Three Months Ended March 31, 2023
 Vehicle
Solutions
 Electrical
Systems
 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
 Vehicle
Solutions
 Electrical
Systems
 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.