Q1 2024 Cooper-Standard Holdings Inc Earnings Call
Operator: Good morning, ladies and gentlemen, and welcome to the Cooper-Standard First Quarter 2024 Earnings Conference Call. During the presentation, all participants will be in listen-only mode.
Good morning, ladies and gentlemen, and welcome to the Cooper standard first quarter 'twenty 'twenty four earnings conference call. During the presentation, all participants will be in a listen only mode.
Operator: Following company-prepared comments, we will conduct a question-and-answer session. At that time, if you have a question, you will need to press a star, then one on your telephone keypad. To withdraw your question, please press star, then two. 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. Please go ahead.
Following company prepared comments, we will conduct a question and answer session.
At that time, if you have a question you will need to press Star then one on your telephone keypad she'll be draw. Your question. Please press Star then two.
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'd now like to turn the call over to Roger Hendriksen.
Roger S. Hendriksen: That's true of Investor Relations. Please go ahead.
Roger S. Hendriksen: Thanks Chloe, and good morning everyone. We appreciate you taking the time to join our call today. The members of our leadership team who will be speaking with you on the call this morning are Jeff Edwards, Chairman and Chief Executive Officer, and John Banas, Executive Vice President and Chief Financial Officer. Before we begin, I need to remind you that this presentation contains forward-looking statements. While they are made based on current factual information and certain assumptions and plans that management currently believes to be reasonable, these statements do involve risks and uncertainty.
Roger S. Hendriksen: Thanks, Paul and good morning, everyone. We appreciate you taking the time to join our call today.
Roger S. Hendriksen: The members of our leadership team, who will be speaking with you on the call. This morning are Jeff Edwards, Chairman and Chief Executive Officer, and Jon Banas, Executive Vice President and Chief Financial Officer.
Roger S. Hendriksen: For more information on forward-looking statements, we ask that you refer to Slide 3 of this presentation and the company's statements included in periodic filings with the Securities and Exchange Commission. This presentation also contains non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to their most directly comparable GAAP measures are included in the appendix to the presentation. With those formalities out of the way, I'll turn the call over to Jeff Edwards.
Speaker Change: Before we begin I need to remind you that this presentation contains forward looking statements.
Speaker Change: While they are made based on current factual information and certain assumptions and plans that management currently believes to be reasonable. These statements do involve risks and uncertainties.
Roger S. Hendriksen: For more information on forward looking statements, we ask that you refer to slide three of this presentation and.
Roger S. Hendriksen: And the company statements included in periodic filings with the Securities and Exchange Commission.
Roger S. Hendriksen: This presentation also contains non-GAAP financial measures.
Roger S. Hendriksen: Reconciliations of the non-GAAP financial measures to their most directly comparable GAAP measures are included in the appendix to the presentation.
Roger S. Hendriksen: With those formalities out of the way I'll turn the call over to Jeff Edwards.
Jeffrey S. Edwards: Thanks, Roger. And good morning, everyone. How are you doing?
Jeffrey S. Edwards: Thanks, Roger and good morning, everyone. How are you doing we appreciate the opportunity to review our first quarter results and provide an update on our business and the outlook going forward.
Jeffrey S. Edwards: We appreciate the opportunity to review our first quarter results and provide an update on our business and the outlook going forward. So, to begin on slide five, I'd like to highlight some key first quarter data points that we believe are reflective of our continued strong commitment to operational excellence and our core company values. In terms of product quality, 97% of our customer scorecards were green in the quarter. For new program launches, our customer scorecards were 96%.
Jeffrey S. Edwards: So to begin on slide five I'd like to highlight some key first quarter data points that we believe are reflective of our continued strong commitment to operational excellence in our core company values.
Roger S. Hendriksen: In terms of product quality, 97%.
Roger S. Hendriksen: Of our customer scorecards, where green in the quarter.
Roger S. Hendriksen: For new program watches our customer scorecards, we're 96%.
Jeffrey S. Edwards: We continue to achieve outstanding operational performance, and this is allowing us to deliver exceptional value to our customers. In addition, the safety performance of our plants continues to be excellent as well. During the first quarter, we had a total incident rate of.38 reportable incidents per 200,000 hours worked.
Roger S. Hendriksen: So we continue to achieve outstanding operational performance this is allowing us to deliver exceptional value to our customers.
Roger S. Hendriksen: In addition, the safety performance of our plants continues to be excellent as well.
Jeffrey S. Edwards: That's well below the world-class benchmark of.47. Leading this outstanding safety performance were the 39 plants that had a perfect safety record of zero incidents through the first three months of the year. I want to recognize the teams at these plants for their ongoing commitment and leadership as we continue to strive for our ultimate safety goal of zero incidents for the entire company. In terms of cost optimization, we had another solid quarter, with our manufacturing and purchasing teams delivering $19 million of savings through lean initiatives and other cost-saving programs. This improved efficiency, combined with our enhanced commercial agreements, enabled us to improve our gross profit margin by a solid 300 basis points compared to the first quarter of last year.
Roger S. Hendriksen: During the first quarter, we had a total incident rate of 0.38 reportable incidents per 200000 hours worked that's well below the world class benchmark of 0.47.
Roger S. Hendriksen: Leading this outstanding safety performance.
Roger S. Hendriksen: Where the 39 plants that had a perfect safety record of zero incidents through the first three months of the year.
Roger S. Hendriksen: I want to recognize the teams at these plants for their ongoing commitment and leadership as we continue to strive for our ultimate safety goal of zero incidents for the entire company.
Roger S. Hendriksen: In terms of cost off some optimization, we had another solid quarter.
Roger S. Hendriksen: With our manufacturing and purchasing teams delivering $19 million of savings through lean initiatives and other cost saving programs.
Roger S. Hendriksen: This improved efficiency combined with our enhanced commercial agreements enabled us to improve our gross profit margin by a solid 300 basis points compared to the first quarter of last year.
Roger S. Hendriksen: Yeah.
Jeffrey S. Edwards: While we have more work to do, we continue to make progress toward our profitability target. Finally, we're continuing to leverage world-class service, technical capabilities, and our award-winning innovations to win new business. During the first three months of 2024, we were awarded $66 million in net new business awards. Importantly, we continue to partner with our customers to design and develop new technologies for some of their most important new vehicle platforms, including ICE, hybrid, and battery electric vehicles. Turning to slide six.
Roger S. Hendriksen: While we have more work to do we continue to make progress toward our profitability targets.
Roger S. Hendriksen: Finally, we're continuing to leverage World class service.
Roger S. Hendriksen: Technical capabilities, and our award winning innovations to win new business during.
Roger S. Hendriksen: During the first three months of 'twenty 'twenty four we were awarded $66 million and net New business Awards importantly, we continue to partner with our customers to design and develop new technologies for some of their most important new vehicle platforms, including ice hybrid and battery electric vehicles.
Roger S. Hendriksen: Turning to slide six.
Jeffrey S. Edwards: Another indication of our customer relationships. Valued technology and world-class service are the product and service awards we frequently receive. We're very pleased, once again, to be named a Supplier of the Year for General Motors. One of our top global customers, and I think probably one of the most coveted awards in our industry. While the award was announced and presented during the first quarter, it's an annual award that is reflective of our performance throughout the past year.
Roger S. Hendriksen: Another indication of our customer relationships.
Roger S. Hendriksen: Valued technology and World class service or the product and service awards, we frequently frequently receive.
Roger S. Hendriksen: We're very pleased once again to be named as a supplier of the year for General Motors, one of our top global customers and I think probably one of the most coveted awards in our industry.
Roger S. Hendriksen: While the award was announced and presented during the first quarter. It's an annual award that is reflective of our performance throughout the past year.
Jeffrey S. Edwards: This is the seventh consecutive year that we've received this prestigious GM Award, and we look forward to continuing and expanding our relationship with them going forward. Slide 7 While providing our customers with world-class products, technology, and service, that's certainly what we do. But our commitment to doing business the right way, with uncompromised honesty, transparency, integrity, and maintaining a continual focus on being a good corporate citizen, says even more about who we
Roger S. Hendriksen: This is the seventh consecutive year that we've received this prestigious GM Award and we look forward to continuing and expanding our relationship with them going forward.
Roger S. Hendriksen: Slide seven while providing our customers with world class products technology and service that's certainly what we do.
Roger S. Hendriksen: Our commitment to doing business, the right way with Uncompromised honesty, transparency integrity, and maintaining a continual focus on being a good corporate citizen.
Roger S. Hendriksen: So there's even more about who we are.
Jeffrey S. Edwards: We're pleased to announce that in just a few weeks, we will once again be publishing our annual Corporate Responsibility Report. It covers a wide range of topics, including products, financial performance, corporate governance, and Environmental Stewardship, among others. We hope that you will take the opportunity to read through the report and provide any feedback you might have or you might like to share. Your input will be helpful to us as we strive toward our company purpose of creating sustainable solutions together. Now, I will turn the call over to John to review the financial details of the quarter.
Roger S. Hendriksen: We're pleased to announce that in just a few weeks, we will once again be publishing our annual corporate responsibility report it covers a wide range of topics, including products financial performance corporate governance.
Roger S. Hendriksen: And environmental stewardship among others.
Roger S. Hendriksen: We hope that you will take the opportunity to read through the report and provide any feedback you might have where you might like to share your input will be helpful to us as we strive toward our company purpose of creating sustainable solutions together.
Roger S. Hendriksen: Now, let me turn the call over to John to review the financial details of the quarter.
Jonathan P. Banas: Thanks, Jeff, and good morning, everyone. In the next few slides, I'll provide some details on our financial results for the quarter and discuss our cash flows, liquidity, and aspects of our balance sheet. Before I get into the financials, as you may have seen in our press release, effective from the beginning of this year, we changed our operating management structure and reporting segments to a product line basis rather than the former geographic basis. We believe the new structure will be more efficient, and we expect it to help us increase value creation going forward. Jeff, we'll talk more about this in a few minutes.
Roger S. Hendriksen: Yes.
John: Thanks, Jeff and good morning, everyone.
John: And the next few slides I'll provide some details on our financial results for the quarter and discuss our cash flows liquidity and aspects of our balance sheet.
John: Before I get into the financials as you may have seen in our press release effective from the beginning of this year, we changed our operating management structure and reporting segments to a product line basis, rather than the former geographic basis.
Roger S. Hendriksen: We believe the new structure will be more efficient and we expect it to help us increase value creation going forward.
Roger S. Hendriksen: Jeff will talk more about this in a few minutes.
Jonathan P. Banas: Now looking at the first quarter's results. On slide 9, we show a summary of our results for the first quarter of 2024 with comparisons to the same period last year. First quarter 2024 sales were $676.4 million, a slight decrease of 0.9% compared to the first quarter of 2023. The decrease was driven primarily by the divestiture of our technical rubber business in Europe during the third quarter of last year and a smaller divestiture of our stake in a joint venture in Asia, excluding the impact of these divestitures, which represented $13 million of sales in the first quarter of 2023.
Jeffrey S. Edwards: Now looking at the first quarter's results.
Jeffrey S. Edwards: On slide nine we show a summary of our results for the first quarter of 2024 with comparisons to the same period last year.
Jeffrey S. Edwards: First quarter 2024 sales were $676 $4 million.
Jeffrey S. Edwards: A slight decrease of 0.9% compared to the first quarter of 2023.
Jeffrey S. Edwards: The decrease was driven by primarily by the divestiture of our technical rubber business in Europe during the third quarter of last year.
Jeffrey S. Edwards: And a smaller divestiture of our stake in a joint venture in Asia.
Jeffrey S. Edwards: Excluding the impact of these divestitures, which represented $13 million of sales in the first quarter of 2023.
Jonathan P. Banas: Net sales for the first quarter of last year would have been $669 million. On that basis, our sales for the first quarter of 2024 would have been up around 1% year over year, outpacing global automotive production. Gross profit for the first quarter was $61.6 million, or 9.1% of sales.
Jeffrey S. Edwards: Net sales for the first quarter of last year would have been $669 million.
Jeffrey S. Edwards: On that basis, our sales for the first quarter of 2024 would have been up around 1% year over year outpacing global automotive production.
Jeffrey S. Edwards: Gross profit for the first quarter was $61 $6 million or nine 1% of sales.
Jonathan P. Banas: This compares to a gross profit of $41.8 million, or 6.1% of sales, in the first quarter of 2023. Adjusted EBITDA in the quarter was $29.3 million, compared to $12.5 million in the first quarter of last year. The year-over-year improvement was driven primarily by favorable volume and mix.
Jeffrey S. Edwards: This compares to a gross profit of $41 8 million or six 1% of sales in the first quarter of 2023.
Jeffrey S. Edwards: Adjusted EBITDA in the quarter was $29 $3 million compared to $12 $5 million in the first quarter of last year.
Jeffrey S. Edwards: The year over year improvement was driven primarily by favorable volume and mix enhanced commercial agreements.
Jonathan P. Banas: Enhanced Commercial Agreements, and Lean Savings Achieved in Manufacturing and Supply Chain, all partially offset by ongoing inflation headwinds in areas such as energy and labor costs, as well as the impact of unfavorable foreign exchange. On a U.S. GAAP basis, the net loss for the quarter was $31.7 million compared to a net loss of $130.4 million in the first quarter of 2023. As you recall, our results for the first quarter of 2023 included a significant loss on refinancing and extinguishing debt, excluding this and other special items and the related tax impact from both periods.
Jeffrey S. Edwards: And lean savings achieved in manufacturing and supply chain.
Jeffrey S. Edwards: All partially offset by ongoing inflation headwinds in areas, such as energy and labor costs as well as the impact of unfavorable foreign exchange.
Jeffrey S. Edwards: On a U S GAAP basis, the net loss for the quarter was $31 7 million.
Jeffrey S. Edwards: Compared to a net loss of $134 million in the first quarter of 2023.
Jeffrey S. Edwards: As you will recall our results for the first quarter of 2023 included a significant loss on refinancing and extinguishment of debt.
Jeffrey S. Edwards: Excluding this and other special items and their related tax impact from both periods.
Jonathan P. Banas: Adjusted net loss for the first quarter of 2024 was $30.6 million, or $1.75 per diluted share, compared to adjusted net loss of $46.2 million, or $2.68 per diluted share, in the first quarter of 2023. Our capital expenditures in the first quarter totaled $16.8 million, or 2.5% of sales, compared to $29.3 million, or 4.3% of sales, for the first quarter of last year. We continue to have discipline around capital investments, which remain primarily focused on customer launch readiness and maximizing returns on invested capital. Moving to slide 10.
Jeffrey S. Edwards: Adjusted net loss for the first quarter of 2024 was $30 6 million.
Jeffrey S. Edwards: Or $1 75 per diluted share.
Jeffrey S. Edwards: Compared to adjusted net loss of $46 $2 million or $2 68 per diluted share in the first quarter of 2023.
Jeffrey S. Edwards: Our capital expenditures in the first quarter totaled $16 $8 million or two 5% of sales compared to $29 3 million or four 3% of sales for the first quarter of last year.
Jeffrey S. Edwards: We continue to have discipline around capital investments, which remain primarily focused on customer launch readiness and maximizing returns on invested capital.
Jonathan P. Banas: The charts on slide 10 provide additional insights and quantification of the key factors impacting our results for the quarter. Favorable volume and mix, including net customer price adjustments, increased sales by $8 million versus the first quarter of 2023. The impact of the technical rubber divestiture was $13 million in the quarter, and foreign exchange, mainly related to the Chinese RMB and the Euro, further reduced sales by a net $1 million versus the same period last year.
Jeffrey S. Edwards: Moving to slide 10.
Jeffrey S. Edwards: The charts on slide 10 provide additional insights and quantification of the key factors impacting our results for the quarter.
Jeffrey S. Edwards: For revenue.
Jeffrey S. Edwards: Favorable volume and mix, including net customer price adjustments increased sales by $8 million versus the first quarter of 2023.
Jeffrey S. Edwards: The impact from the technical rubber divestiture was $13 million in the quarter and foreign exchange mainly related to the Chinese RMB and the euro further reduced sales by a net $1 million versus the same period last year.
Jeffrey S. Edwards: For adjusted EBITDA.
Jonathan P. Banas: Lean Initiatives in Purchasing and Manufacturing contributed $19 million year over year; favorable volume, mix, and net price adjustments, as well as other cost recoveries, drove a combined $15 million of profit improvement for the quarter; and material cost improvements were a further benefit of $1 million. These positive contributors were partially offset by general inflation, including energy.
Jeffrey S. Edwards: Lean initiatives and purchasing and manufacturing contributed $19 million year over year.
Jeffrey S. Edwards: Favorable volume mix and net price adjustments as well as other cost recoveries.
Jeffrey S. Edwards: Drove a combined $15 million of profit improvement for the quarter.
Jeffrey S. Edwards: And material cost improvements were a further benefit of $1 million.
Jeffrey S. Edwards: These positive contributors were partially offset by general inflation, including energy.
Jonathan P. Banas: Salaries and wages, transportation, and other costs amounting to $9 million in the quarter, and another $9 million of unfavorable foreign exchange, primarily related to the strengthening of the Mexican peso and the Polish zloty against the U.S. dollar. Moving to slide 11, in terms of cash flow and liquidity. Cash used in operating activities was approximately $14 million in the first quarter of 2024, as seasonal changes in working capital and the timing of compensation-related payments offset improved cash earnings.
Jeffrey S. Edwards: Salaries and wages.
Jeffrey S. Edwards: Transportation and other costs.
Jeffrey S. Edwards: Amounting to $9 million in the quarter.
Jeffrey S. Edwards: And another $9 million of unfavorable foreign exchange, primarily related to the strengthening of the Mexican peso and the Polish zloty against the U S dollar.
Jeffrey S. Edwards: Yeah.
Jeffrey S. Edwards: Moving to slide 11.
Jeffrey S. Edwards: In terms of cash flow and liquidity.
Jeffrey S. Edwards: Cash used in operating activities was approximately $14 million in the first quarter of 2024 as seasonal changes in working capital and the timing of compensation related payments offset improved cash earnings.
Jonathan P. Banas: As mentioned earlier, CapEx was around $17 million in the first quarter of 2024, resulting in a net free cash outflow of approximately $31 million. We ended the first quarter with a cash balance of approximately $114 million, combined with $167 million of availability under ABL, which remained undrawn. We had solid total liquidity of approximately $282 million as of March 31st, 2024.
Jeffrey S. Edwards: As mentioned earlier Capex was around $17 million in the first quarter of 2024.
Jeffrey S. Edwards: Resulting in a net free cash outflow of approximately $31 million.
Jeffrey S. Edwards: We ended the first quarter with a cash balance of approximately $114 million.
Jeffrey S. Edwards: Combined with $167 million of availability on our ABL.
Jeffrey S. Edwards: Which remained undrawn we.
Jeffrey S. Edwards: We had solid total liquidity of approximately $282 million as of March 31, 2024.
Jonathan P. Banas: Regarding our credit facilities, we are pleased to announce that we have just signed an extension of our ABL through May of 2029. The agreement and extended term ensures that we have the flexibility we need to continue executing our plans and initiatives to improve the financial strength of the company, drive profitable growth, and enhance value over the long term. Based on our current outlook and expectations for light vehicle production, we are focusing on improving operating efficiencies, further cost reduction initiatives, and the continuing benefit from enhanced commercial agreements with our customers.
Jeffrey S. Edwards: Regarding our credit facilities, we are pleased to announce that we just signed an extension on our ABL through may of 2029.
Jeffrey S. Edwards: The agreement and extended term ensures that we have the flexibility we need to continue executing our plans and initiatives to improve the financial strength of the company drive profitable growth and enhanced value over the long term.
Jeffrey S. Edwards: Based on our current outlook and expectations for light vehicle production.
Jeffrey S. Edwards: Our improving operating efficiencies further cost reduction initiatives and the continuing benefit from enhanced commercial agreements with our customers.
Jonathan P. Banas: We expect to generate positive free cash flow for the full year. And based on that outlook, and our current total equality position, we believe we have sufficient resources to execute the business and pursue our growth objectives for the foreseeable future. Let me turn it back over to Jeff.
Jeffrey S. Edwards: We expect to generate positive free cash flow for the full year.
Jeffrey S. Edwards: And based on that outlook, our current total liquidity position.
Jeffrey S. Edwards: We believe we have sufficient resources to execute the business and pursue our growth objectives for the foreseeable future.
Jeffrey S. Edwards: Let me turn it back over to Jeff.
Jeffrey S. Edwards: Thanks, John, and over the next few minutes, I'd like to provide you with some insights into our change in operational management structure from a regional basis to a product line basis and how this change fits in with the overall strategy and how it will drive some significant cost improvements in our business. So please turn to slide 13.
Jeffrey S. Edwards: Thanks, John and over the next few minutes I'd like to provide you with some insights into our change in operational management structure from a regional basis to a product line basis.
Jeffrey S. Edwards: How this change fits in the overall strategy.
Jeffrey S. Edwards: And how it will drive some significant cost improvements in our business. So please turn to slide 13.
Jeffrey S. Edwards: Last year, our global leadership team outlined and refined four key strategic imperatives to accelerate growth and maximize the long-term value of our company. Based on these imperatives and a lot of hard work, we are definitely making progress, but we know we have to be more aggressive, more agile, and certainly more responsive to our markets and our customers if we're going to get to the next level and achieve our long-term objectives. The change to product-based management is intended to do just that; please turn to slide 14.
Speaker Change: Last year, our global leadership team outlined in refined four key strategic imperatives to accelerate growth and maximize the long term value of our company.
Jeffrey S. Edwards: Through relentless focus on these imperatives in a lot of hard work.
Jeffrey S. Edwards: We are definitely making progress, but we know we have to be more aggressive more agile certainly more responsive to our markets and our customers. If we're going to get to the next level and achieve our long term objectives.
Jeffrey S. Edwards: The change to product base management is intended to do just that so please turn to slide 14.
Jeffrey S. Edwards: The new structure, which was put in place effective January 1, is already providing key benefits, including establishing complete P&L ownership and accountability for each product line. Optimizing the Allocation of Human and Capital Resources Streamlining Operations and Engineering Execution and enabling us to more quickly deliver value-add innovations to our customers. In addition, the new structure will allow each product group to more fully develop and execute separate customized strategies suited to the needs of their specific market. Turning to slide 15.
Jeffrey S. Edwards: The new structure, which was put in place effective January one is already providing key benefits.
Jeffrey S. Edwards: Including establishing complete P&L ownership and accountability for each product line.
Jeffrey S. Edwards: Optimizing allocation of human and capital resources.
Jeffrey S. Edwards: Streamlining operations and engineering execution.
Jeffrey S. Edwards: And enabling us to more quickly deliver value add innovations to our customers.
Jeffrey S. Edwards: In addition, the new structure will allow each product group to more fully develop and execute separate customized strategies.
Jeffrey S. Edwards: Suited to the needs of their specific markets.
Jeffrey S. Edwards: Turning to slide 15.
Jeffrey S. Edwards: In our ceiling business, we're certainly working from a position of strength as the global leader in the market. We will look to expand our market share and competitive advantage through technology and customer service, enhancing customer relationships, as well as pursuing opportunistic market opportunities in support of our customers. We expect to improve profitability and return on assets by right-sizing costs within our operations while aligning capital investments with high growth opportunities. Turning to slide 16, we see greater opportunity for accelerated profitable growth in hybrid and electric vehicles.
Jeffrey S. Edwards: In our sealing business, we're certainly working from a position of strength as the global leader in the market.
Jeffrey S. Edwards: We will look to expand our market share and competitive advantage through technology and customer service.
Jeffrey S. Edwards: Enhancing customer relationships as well as pursuing opportunistic market opportunities in support of our customers.
Jeffrey S. Edwards: We expect to improve profitability and return on an asset by right sizing costs within our operations, while aligning capital investments with high growth opportunities.
Jeffrey S. Edwards: Turning to slide 16.
Jeffrey S. Edwards: In our fluids business, we see greater opportunity for accelerated profitable growth given the highly technical requirements for thermal management in hybrid and electric vehicles.
Jeffrey S. Edwards: As we bring some of our recently announced innovation to market, we expect to significantly increase our average content per vehicle, as well as expand our total addressable market. Patented innovations will also improve our competitive advantage and enable market share gains. We believe we can be competitive and build a solid fluid handling business in China based on the proprietary technology enhancements we provide to electric vehicles. Turning to slide 17.
Jeffrey S. Edwards: As we bring some of our recently announced innovations to market, we expect to significantly increase our average content per vehicle.
Jeffrey S. Edwards: As well as expand our total addressable market.
Jeffrey S. Edwards: Patented innovations will also improve our competitive advantage.
Jeffrey S. Edwards: Enable market share gains.
Jeffrey S. Edwards: We believe we can be competitive and building a solid at fluid handling business in China based on the proprietary technology enhancements, we provide to electric vehicles.
Jeffrey S. Edwards: Turning to slide 17.
Jeffrey S. Edwards: Finally, with a new organizational structure in place, our operations are already becoming more streamlined and more efficient. As automotive production levels have not rebounded as quickly as many had expected, it's certainly an imperative that we do so. We've identified opportunities to further optimize costs by eliminating redundancies, Automating Processes, and Leveraging Technology.
Jeffrey S. Edwards: Finally, with the new organization structure in place our operations are already becoming more streamlined and.
Jeffrey S. Edwards: And more efficient.
Jeffrey S. Edwards: As automotive production levels have not rebounded as quickly as many had expected, but certainly an imperative that we do so.
Jeffrey S. Edwards: We've identified opportunities to further optimize costs by eliminating redundancies.
Jeffrey S. Edwards: Automating processes and leveraging technology.
Jeffrey S. Edwards: Beginning later this quarter, we'll be implementing a plan to reduce our salary-to-workforce globally. The actions are expected to save between $20 and $25 million in 2024 and between 40 and 45 million dollars on a full year annualized basis next year. The anticipated savings are expected to provide a payback on related restructuring costs within six months. Further, we expect the savings will enable both operating segments to approach, if not achieve, double-digit EBITDA margins as we exit 2025, as these initiatives were not contemplated when we developed our initial plan for the year.
Jeffrey S. Edwards: Beginning later this quarter, we'll be implementing a plan to reduce our salaried workforce globally.
Jeffrey S. Edwards: The actions are expected to save between 20 and $25 million in 2024.
Jeffrey S. Edwards: And between 40% and $45 million on a full year annualized basis next year.
Jeffrey S. Edwards: The anticipated savings are expected to provide a payback on related restructuring costs and six months.
Jeffrey S. Edwards: Further we expect the savings will enable both operating segments to approach if not achieve double digit EBITDA margins as we exit 'twenty 'twenty five.
Jeffrey S. Edwards: As these initiatives were not contemplated when we developed our initial plan for the year success.
Jeffrey S. Edwards: Successful implementation and the related cost savings could represent an upside to our 2024 four-year guidance, certainly assuming industry production volumes hold at planned levels. As we typically do, we expect to provide a formal update on guidance in conjunction with our second quarter results. So we want to thank our customers and all of our stakeholders for your continued confidence as we support and encourage each other as we work through these turbulent times in our industry. And we thank you all for joining the call today. This concludes our prepared remarks, so let's move into Q&A.
Jeffrey S. Edwards: The successful implementation and the related cost savings could represent upside to our 'twenty 'twenty four full year guidance.
Jeffrey S. Edwards: Certainly assuming industry production volumes hold at planned levels.
Jeffrey S. Edwards: As we typically do we expect to provide a formal update on.
Jeffrey S. Edwards: On guidance in conjunction with our second quarter results.
Jeffrey S. Edwards: So we want to thank our customers and all of our stakeholders for your continued confidence as we support and support as we work through these turbulent times in our industry.
Speaker Change: And we thank you all for joining the call today. This concludes our prepared remarks, so let's move into Q&A.
Operator: Thank you. Ladies and gentlemen, if you would like to ask a question, please press star, followed by 1 on your telephone. If you are using a speakerphone, please pick up your handset before entering your request. If you would like to withdraw, please press star 2. Our first question comes from the line of Michael Ward from Freedom Capital. Your line is now open.
Speaker Change: Thank you, ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your telephone.
Speaker Change: A speaker phone please pick up your handset before answering your question.
Speaker Change: I would like to withdraw please press star two.
Speaker Change: Our first question comes from the line of Michael Ward from Freedom Capital. Your line is now open.
Michael Patrick Ward: Thank you very much good morning, everyone.
Michael Patrick Ward: Thank you very much. Good morning, everyone. Jeff, when you look at this, the actions you're taking, it sounds like more details will come in the second quarter, but there's a very quick payback. Is that because the nature of it is just salary hit count reductions?
Michael Patrick Ward: Jeff when you look at this the.
Michael Patrick Ward: Actions you are taking it sounds like more details will come in the second quarter, but theres a very quick payback is that because of the nature of it it's the salary head count reductions.
Jeffrey S. Edwards: Yeah, thanks. Good morning, Mike.
Jeffrey S. Edwards: Yes. Thanks, Good morning, Mike I appreciate the question, yes, that's that's the fact.
Jeffrey S. Edwards: I appreciate the question. Yes, that's the truth. Obviously, a lot of changes within our company but continued challenges within the industry, right. And we've done a lot of things to realign with today's reality. The new organization structure really has put the cost of running these businesses directly in the hands of those that are running them. The support infrastructure, say down the left-hand side of the chart, certainly isn't as required as it once was as we were building the organization.
Speaker Change: Obviously, a lot of changes within our company, but continued.
Speaker Change: Challenges within the industry right and we've done a lot of things to to realign with today's reality.
Speaker Change: The new organization structure really has.
Speaker Change: Put the costs of running these businesses directly in the hands of those that are running it so.
Speaker Change: The support infrastructure say down the left hand side of the chart.
Speaker Change: Certainly isn't as required as it once was as we were building the.
Jeffrey S. Edwards: And so we're taking these measures to dramatically reduce our costs, make ourselves a lot more agile, make our decision-making what it needs to be to support our customers, and frankly, move us a lot closer to the double-digit EBITDA and double-digit ROIC objectives that we have to a point where we'll be there next year with those particular objectives as we certainly exit 2025. That's what we believe.
Speaker Change: The organization and so.
Speaker Change: We're taking these measures to dramatically reduce our costs make ourselves a lot more.
Speaker Change: Agile.
Speaker Change: Our decision making.
Speaker Change: What it needs to be to support our customers and frankly move us a lot closer to the double digit EBITDA and double digit ROIC objectives that we have to.
Speaker Change: To a point that will be there next year with those.
Speaker Change: With those particular objectives as certainly we exit 2025, that's what we believe.
Jeffrey S. Edwards: And what percentage of your global salaried income?
Speaker Change: And what percentages of your global salaried head count.
Jeffrey S. Edwards: We haven't announced that detail, Mike, but it's a substantial component of the total cost. I would tell you that. I just assume not to get into the percentages, you know; we're talking about folks here, so I'll just keep it the way I answered it.
Speaker Change: We haven't we haven't announced that that detail Mike.
Speaker Change: But it's a substantial it's a substantial.
Speaker Change: <unk> of the total cost I would tell you that.
Speaker Change: I, just assume not get into the percentages.
Speaker Change: That's fine.
Speaker Change: We're talking about folks here, so I'll just keep it.
Speaker Change: I got yesterday.
Michael Patrick Ward: So given your initial guidance of adjusted EBITDA out of 180 to 210, now if all things are equal, we could be looking at somewhere in the 200 to 235 range is what you're saying when you get this thing done this year. Yeah, we'll describe that to you like we always do as we exit Q2. But yeah, you're you, your range would be accurate as we sit here today. I guess the biggest issue that everybody has, we're not the Lone Ranger here, obviously, is what are the volumes going to be? I mean, if we knew that, then I could answer your question.
Speaker Change: So and then so given your current your initial guidance of adjusted EBITDA to 180 to 210 now if all things being equal we could be looking at somewhere in the 200 to 235 range is what you are saying when you get this thing done this year.
Speaker Change: Yes, we'll describe that to you like we always do is we.
Speaker Change: As we exit <unk>.
Speaker Change: Q2, but yes you are.
Speaker Change: Your range would be would be accurate as we sit here today I guess the biggest issue that everybody has we're not the lone Ranger here. Obviously is what are the volume is going to be I mean, if we knew that then I can answer your question.
Jeffrey S. Edwards: Now, and I assume the cash costs for that restructuring are in line with, it sounds like you're looking at a $25 million charge, and that'll be the cash costs as well, but a pretty quick payback. Yeah.
Speaker Change: Now and I assume the cash cost for that restructuring are in line with it sounds like Youre looking at about $25 million charge and that'll be the cash cost as well, but a pretty quick payback.
Michael Patrick Ward: Yeah, actually, from a cash point of view, it'll be a cash flow positive event even for 24.
Speaker Change: Yeah actually from a cash point of view cash flow it'll be a cash flow positive is that even for 'twenty four.
Jonathan P. Banas: Okay. John, on the FX.
Speaker Change: Okay.
Speaker Change: John on the FX.
Jonathan P. Banas: You mentioned Mexico and Poland. That seems like a pretty big hit, on a relative basis. As far as the impact, I mean, it took off almost a point and a half a margin. What were some of the circumstances there, and has that continued in 2Q?
Speaker Change: You mentioned, Mexico, and Poland that seems like a pretty big hit.
Speaker Change: On a relative basis as far as the impact I mean, it took off almost a point and a half of margin.
Speaker Change: What were some of the circumstances, there and has that continued into Q.
Jonathan P. Banas: Thanks for the question, Mike. The dynamic here is that, you know, we operate in various countries where the local cost base isn't tied to the revenue stream. So, for example, in Poland, we manufacture our products there locally, so the cost base is in Zloty. However, the regional trading currency is the euro, so we sell in the euro base, right? So, as the zloty appreciates against the euro and or the US dollars, our costs go up in relative terms, and that's really what's driving it.
John: Thanks for the question Mike.
Speaker Change: The dynamic here is that we operate in the various countries, where the local cost base isn't tied with the the revenue stream. So for example in Poland, we manufacture our products there locally so the cost base is in Lodi. However, they.
Speaker Change: The regional <unk>.
Speaker Change: Trading currency is the euro so we sell in the Euro base right. So as the as these Lodi would appreciate against the Euro <unk>. The U S dollars our costs go up in a in relative terms and that's really what's driving it similar to the peso.
Jonathan P. Banas: Similar to the peso, whereas we manufacture in Mexico for certain of our shipments back into the US, the revenue is tied to the US dollar as opposed to the peso. So, when you think about coming into last year...
Speaker Change: Whereas we manufacture in Mexico for certain of our our shipments back into the U S.
Speaker Change: We the revenue is tied to the U S dollar as opposed to the peso.
Speaker Change: So when you when you think about coming into last year.
Jonathan P. Banas: The peso was averaged at about $18.66 in the quarter, 18 pesos to the dollar. It's now down to average $16.97. So as the peso continues to strengthen, again, our cost base rises relative to the selling currency, and similar on the Zloty. Check Corona to a minor extent. In the RMB, I mentioned on the top line as well. So that's really what's going on. We do place hedges against our fixed costs, but you don't hedge against 100% of that. So it takes a little bit of a bite out of it, but not completely.
Speaker Change: The peso was average in the quarter about $18 66, 18 pesos to the dollar it's now down the average $16 97.
Speaker Change: As that as the peso continued to strengthen again, our cost base rises relative to the to the selling currency.
Speaker Change: Similar on the zloty check Corona to a minor extent.
Speaker Change: And the RMB I mentioned on the top line as well.
Speaker Change: That's really what's going on we do we do.
Speaker Change: Place hedges against our fixed costs.
Speaker Change: You don't hedge against the 100% of that so it takes a little bit bite out of it but.
Speaker Change: But not completely.
Jonathan P. Banas: Is that something you can recover, or do you just adjust with price? Certain of our commercial arrangements have FX components to them as far as indices in recovery, but not all of them. So we'll never be able to recover 100% of that, but we're going back to our customers as these things exacerbate or continue to stay elevated to re-engaging conversations.
Speaker Change: Is there is that something you can recover or do you just adjust with price.
Speaker Change: Going forward for you.
Speaker Change: Certain of certain of our commercial arrangements have have FX.
Speaker Change: Components to them as far as indices and recovery.
Speaker Change: But not not all of them, so we'll never be able to recover 100% of that but.
Speaker Change: We're going back to our customers as these things exacerbate or continue to stay elevated to to Reengage in conversations.
Michael Patrick Ward: And just one last thing, Jeff, you kind of alluded to it, but it sounds like there's a push from the industry trying to push and accelerate the production of hybrids. I think you used to provide some sort of a content walk between ICE vehicles, hybrids, and all electric. What type of content are we looking at as a push for these hybrids, particularly, I guess, for the fluid side of it? relative to ICE in what you're over the next, say, 12 to 18 months?
Speaker Change: And just one last thing, Jeff you kind of alluded to it but it sounds like there is a.
Speaker Change: With the industry trying to push and accelerate production of hybrids.
Speaker Change: I think you used to provide some sort of a content walk between ice vehicles hybrids and.
Speaker Change: All electric.
Speaker Change: What type of content are we looking at with as a push on these hybrids, particularly I guess for the fluid side of it.
Speaker Change: Relative to ice and what your over the next 12 to 18 months.
Jeffrey S. Edwards: That's a good question, Mike. So if we use ICE as the baseline for your question, and if we would go from an ICE vehicle to a hybrid vehicle, meaning our customers would, and then we would be supplying the fluid handling for that particular hybrid, it would almost double our content per vehicle.
Speaker Change: Yes, that's a good question, Mike So if we use Isis that baseline to your question.
Speaker Change: And if we would do from an ice vehicle to a hybrid vehicle, meaning our customers would and then we would be supplying the fluid handling for that particular hybrid it would almost double our content per vehicle.
Speaker Change: Okay.
Jeffrey S. Edwards: So hybrids are 2x the ice, and then BEVs are even higher than that.
Speaker Change: Hybrids <unk> device and then be Evs.
Speaker Change: Even higher than that.
Michael Patrick Ward: We actually, no, the EV would be about 20%; 20-30% higher is the number we've used with you.
Speaker Change: We actually know the EV would be about 20%.
Speaker Change: 20% to 30% higher as the number we've used with you in the in the past.
Jeffrey S. Edwards: higher, higher relative to ICE or hybrid. Yeah, so hybrid is definitely, yeah, hybrid is definitely the higher content per vehicle solution for Cooper-Standard. And so the fact that we're talking about more hybrids out there is good news for us. Very good. Thank you.
Speaker Change: Higher relative too right.
Speaker Change: So hybrid properly.
Speaker Change: Hybrid is definitely the the.
Speaker Change: The higher content per vehicle solution for Cooper standard and so the fact that that we're talking about more hybrids out there.
Speaker Change: That's good news for us.
Speaker Change: Very good.
Speaker Change: Thank you.
Speaker Change: Okay.
Operator: Our next question comes from the line of Kirk Ludtke from Imperial Capital. Your line is open.
Speaker Change: Our next question comes from the line of Kurt <unk> from Imperial Capital. Your line is now open.
Kirk Ludtke: Good morning, Jeff, John, Roger. I appreciate the call.
Kurt: Good morning, Jeff John Roger I appreciate the call.
Kirk Ludtke: Just with respect to the March quarter, were there any commercial settlements from prior periods in there?
Kurt: Just with respect to the the <unk>.
Kurt: March quarter, where there any commercial settlements from prior periods in there.
Jeffrey S. Edwards: No, Kurt, I think we're, you know, as we talked on the last call, we've detailed all that for you. Look, as we get into 24 and beyond, there's always commercial conversations going on. So we'll have settlements each quarter, and there always are, but nothing to the magnitude of what we talked to you about last year. So I would say, let's just call it business as usual in 24 as it relates to pricing.
Jeffrey S. Edwards: No Kurt I think we're as we talked in our last call. We detailed all of that for you.
Speaker Change: Look as we get in that 24 and beyond Theres always commercial conversations going on so we will have.
Kurt: We will have settlements each quarter and there always is.
Kurt: But nothing to the magnitude of what we what we've talked to you about last year. So I would say, let's just call it business as usual.
Kurt: In 2004.
Kurt: Is it.
Kurt: It relates to pricing.
Kirk Ludtke: Got it. Perfect. I appreciate it. And then with respect to the, you mentioned that there's some, some upside to the earlier 24 guidance. Are you still using the same production estimates that you gave us last quarter?
Speaker Change: Got it perfect I appreciate it and then with respect to the you mentioned that there is you see some some upside to that.
Kurt: Earlier 24 guidance are you still using the same.
Kurt: Production.
Kurt: Estimates that you gave us last quarter.
Jeffrey S. Edwards: Yeah, the volumes that we talked about are unchanged. As you know, the first quarter was a bit challenging as it got started from a volume point of view, but then we saw some recovery in February, and March was, I guess, what we were hoping March would be. That's how I would describe it. So a little bit of a slow start, but a strong March helped the overall numbers.
Speaker Change: Yes, the volumes that we talked about are are unchanged.
Jeffrey S. Edwards: And then our comments related to the rest of the year. We typically take a shot at that after the second quarter. We have a little bit better view of quarters three and four at that point, and then we'll adjust. Anything for you at that stage is how we we've done it for a decade. So we'll continue to do it that way.
Speaker Change: As you know the first quarter was a bit challenging as it got started from a volume point of view, but then.
Speaker Change: And then we saw some recovery in February and March was.
Speaker Change: I guess, what we were hoping March would be is how I would describe it it's a little bit of a slow start but a strong march helped the overall.
Kurt: Number.
Kurt: And then our comments related to the rest of the year, we typically.
Kurt: Take a shot at that after the second quarter.
Kurt: We have a little bit better view of quarter, three and four at that point and then we will adjust.
Kurt: Thing for you at that at that stage is how we've done it for a decade. So we'll continue to do it that way.
Speaker Change: Got it thank you.
Speaker Change: With respect to the geographic reporting where you where you EBITDA positive in all the regions again this quarter.
Speaker Change: Yes.
Speaker Change: Great and then and then lastly.
Speaker Change: On the new business it appears to be ramping our U.
Speaker Change: Ken can you provide the percentage of your first quarter revenues that were generated from <unk>.
Speaker Change: Electric hybrid.
Speaker Change: Or both.
Speaker Change: Vehicles.
Ken: Yes, I don't have that in front of me occurred at this point I mean, we certainly can can provide it sure Roger can get back to you with that.
Ken: Okay is it is it meaningful.
Speaker Change: I think we continue to progress well.
Speaker Change: As we as we manage.
Speaker Change: What that future is I mean, it certainly.
Speaker Change: It has been moving around on us, but we havent seen a whole lot of our of our core business Cannibalized, if I could say it that way. So that's good and as we have been told by our customers that certain evs are being pushed out as much as two years on some new business that.
Speaker Change: We already have been awarded.
Speaker Change: That wasn't.
Speaker Change: Significant hit to us just because we hadn't spent a bunch of money yet and so we're just on hold there and in the meantime, we will continue to run.
Speaker Change: We already run longer so that's probably going to be a bit of a benefit too from an.
Speaker Change: An asset point of view so.
Speaker Change: I guess, there's there's puts and takes but overall im not.
Speaker Change: I'm not complaining.
Speaker Change: Awesome I appreciate it thank you very much.
Speaker Change: Okay.
Speaker Change: Thanks Kurt.
Speaker Change: Our next question comes from the line of Ben <unk> from stellar next financial Inc. Please go ahead.
Kirk Ludtke: Got it. Thank you.
Ben: Good morning, guys. Thank you for taking the questions. So I just wanted to touch on topline revenue growth for a minute I know that on a GAAP basis. This quarter. Your revenue was down let's call it 1% year over year, but there is a little bit of noise in there and if you call it on a.
Speaker Change: Same customer revenue line, you guys were actually up a little bit.
Speaker Change: Can you give me a little bit more clarity on what the trajectory of call. It that same customer customer revenue should look like and what the drivers are going to be is it going to be pricing is going to be more new business wins or is it can be.
Speaker Change: A combination of both.
Speaker Change: Okay.
Kirk Ludtke: With respect to the geographic reporting, was EBITDA positive in all the regions again this quarter? Yes. Great. And then lastly, on the new business, it appears to be ramping. Can you... Uh, can you provide the percentage of your first quarter revenues that were generated from that? [inaudible]
Speaker Change: Yes. This is Jeff So I think what John went through with you was we had a couple of transactions. So.
Jeffrey S. Edwards: Yeah, I don't have that in front of me, Kurt, at this point. I mean, we certainly can provide it. I'm sure Roger can get back to you with that. OK.
Jeffrey S. Edwards: So we sold a couple of businesses that resulted in a bit of a top line down, but when you compare apples to apples and you look at the industry of automotive versus our automotive revenue we were actually up.
Jeffrey S. Edwards: For the quarter slightly and so I think as we look without getting into.
Jeffrey S. Edwards: Any more details about second and third or fourth quarter. This year I think that is what we think is going to continue to.
Jeffrey S. Edwards: To be like so I would say our business plan is pretty much spot on it.
Jeffrey S. Edwards: At this at this stage.
Jeffrey S. Edwards: I wouldn't think the numbers are going to drift much differently as we go through second third and fourth quarter, obviously, each months changes a bit but overall, we still expect to outgrow.
Jeffrey S. Edwards: The markets that we serve in automotive I think thats the key point.
Kirk Ludtke: Okay, is it, is it meaningful?
Jeffrey S. Edwards: Okay.
Speaker Change: Helpful. Thank you. So since your revenue is outgrowing the markets that you serve is it fair to say that you are winning market share.
Jeffrey S. Edwards: I think we continue to progress well as we manage what that future is. I mean, it certainly has been moving around on us, but we haven't seen a whole lot of our core business cannibalized, if I could say it that way. So that's good. And as we have been told by our customers that certain EVs are being pushed out as much as two years on some new business that we have already been awarded, that wasn't a significant hit to us just because we hadn't spent a bunch of money yet.
Jeffrey S. Edwards: And so we're just on hold there, and in the meantime, we'll continue to run what we already run longer. So that's probably going to be a bit of a benefit too from an asset point of view. So I guess there are positives and negatives, but overall, I'm not complaining.
Speaker Change: Yes, I think Thats, what were what were saying and we with the announcement here around sealing and fluid handling going forward given the innovation, we have and given the customers' excitement about it and what I just talked.
Speaker Change: So the previous caller about in terms of content per vehicle going up, especially on our fluids business, we expect to continue to gain share.
Speaker Change: Great. That's helpful moving on to gross margins you guys are obviously up.
Speaker Change: You know call it 300 basis points on a year over year basis.
Speaker Change: Down a little bit, but let's call. It close to flat sequentially do you guys see gross margin hitting double digits call. It 10 plus percent.
Speaker Change: During the current fiscal year or is that something that we should think about more 2025 and beyond.
Speaker Change: Hi, This is Jeff the answer is yes.
Jeffrey S. Edwards: And then I was pretty clear about what I think 25 is going to be so we should be back to double digit EBITDA and ROIC as a company as we exit 'twenty five.
Speaker Change: Alright, great.
Speaker Change: That's very helpful. And then last thing from me is I know that your June.
Jeffrey S. Edwards: On the third liens. The June interest payment you guys elected to pay cash there when do you need to formally elect whether your December interest payments will be cash or pik.
Jeffrey S. Edwards: Hey, Ben this is John.
John: Have to elect that six months in advance so really by June 1st essentially we'll be making that election on both the first lien and the third lien notes.
John: Okay.
Speaker Change: Thanks, very much I appreciate you guys taking the questions.
Pam: Alright, Thanks Pam.
Kirk Ludtke: Awesome. I appreciate it. Thank you very much. Okay.
Pam: Again, if you would like to ask a question. Please press star followed by one on your telephone.
Speaker Change: I would like to re John Please press star two thank you.
Pam: Yeah.
Pam: Our next question comes from the line of Brian <unk> from Baird. Please go ahead.
Unknown Attendee: Good morning, guys. Thank you for taking the questions. So I just want to touch on top line revenue for a minute. I know that on a gap basis.
Brian: Good morning, gentlemen, a couple of questions for you just John are you going to put out.
Speaker Change: The segment results with the new segment structure in place.
Jeffrey S. Edwards: Yeah, this is Jeff. So I think what John went through with you was we had a couple of transactions. So we sold a couple of businesses that resulted in a bit of a top line decline. But when you compare apples to apples and you look at the industry for automotive versus our automotive revenue, we were actually up for the quarter slightly. And so I think as we look, without getting into any more details about the second through fourth quarters this year, I think that is what we think is going to continue to.., be like.
John: Yes, when we issue our 10-Q later today, Brian Youre going to see the the segue.
Jeffrey S. Edwards: So I would say our business plan is pretty much spot on at this stage. I wouldn't think the numbers are going to drift much differently as we go through the second, third, and fourth quarters. I mean, obviously, each month changes a bit, but overall, we still expect to outgrow the markets that we serve in the automotive industry. I think that's the key point.
Pam: Segment results for not only this first quarter of this year, but also.
Unknown Attendee: Okay, that's helpful. Thank you. So since your revenue is outgrowing the markets that you serve, is it fair to say that you're winning market share?
Jeffrey S. Edwards: I think that's what we're saying, and with the announcement here around sealing and fluid handling going forward, given the innovation we have and given the customer's excitement about it, and what I just talked to the previous caller about in terms of content per vehicle going up, especially in our fluid business, we expect to continue to gain share.
Pam: 2023, and then each each subsequent quarter will put in the the historical frame of reference for you on those.
Unknown Attendee: Great, that's helpful. Moving on to gross margins, you guys are obviously up, you know, call it 300 basis points on a year over year basis, down a little bit, but let's call it close to flat sequentially. Do you guys see gross margin hitting the double digits, call it 10 plus percent during the current fiscal year? Or is that something that we should think about more in 2025 and beyond?
Jeffrey S. Edwards: This is Jeff. The answer is yes, and then I was pretty clear about what I think 25 is going to be. So we should be back to double-digit EBITDA and RYC as a company as we exit 25.
Unknown Attendee: All right, great. That's very helpful. And then the last thing for me is I know that your June on the third lanes, the June interest payment, you guys elected to pay cash there. When do you need to formally elect whether your December interest payments will be cash or not?
Operator: Again, if you would like to ask a question, please press star followed by 1 on your telephone. And if you would like to withdraw, please press star 2. Thank you. Our next question comes from the line of Brian DiRubbio from Barrett. Please go ahead.
Jonathan P. Banas: Hey Ben, this is John. We have to elect that six months in advance, so really, by June 1st, essentially, we'll be making that election on both the first lane and the third lane.
Pam: We're going to obviously get to once we get to the 10-K there'll be a full three years and there will go all the way back to 2022.
Ben Briggs: Thanks very much. I appreciate you guys taking the questions. All right. Thanks, Ben.
Brian DiRubbio: Good morning, gentlemen. A couple of questions for you. John, are you going to put out a recast of the segment results with the new segment structure in place?
Jonathan P. Banas: Yeah, when we issue our 10-Q later today, Brian, you're going to see the segment results for not only this first quarter of this year but also 2023. And then each subsequent quarter, we'll put in a historical frame of reference for you on those. We're going to obviously get to, once we get to the 10-K, there'll be a full three years in there. We're going to go back to 2022 just because of the comparative rules from the SEC standpoint. So you'll see those coming as we publish our upcoming financials. Got it.
Pam: Because of the comparative rules from FCC standpoint, so you'll see those coming as we as we publish our upcoming financials.
Speaker Change: Got it.
Speaker Change: Excuse me and then.
Pam: Yes.
Pam: Sorry go ahead.
Jonathan P. Banas: Now, I was just going to point out that you also see the previous years in the press release that we issued last night as well. So you have the historical record.
Speaker Change: No I was just going to point out that you also see the the previous years in the press release that we issued last night as well. So you have the history that I got to be one of Austria.
Brian DiRubbio: Oh, no, no. Yeah. That I got. Yeah. Mm-hmm. Yeah. No, that I got. Just got to rewrite my model now, which is fine.
Speaker Change: Yes, no that I got it.
Pam: Sure.
Speaker Change: Just got a rewrite my rewrite my model now.
Speaker Change: Just fine.
Brian DiRubbio: So just on, you know, the PIC versus cash pay, I guess my question for you on that is, you know, if you had cash paid your coupons this year, would you still be free cash or positive? Well, I gave you the general idea that we expect to be free cash flow positive. We don't get into the details of what the magnitude of that is. We don't give free cash flow guidance. So I'll just leave it at that.
Speaker Change: Just on the.
Speaker Change: The pik versus cash pay I guess my question for you on that is if you were if you would have cash paid your coupons. This year would you still be free cash flow positive.
Speaker Change: Okay.
Speaker Change: Well I gave you the general that we expect to be free cash flow positive, we don't get into the details of what the magnitude of that is we don't give free cash flow guidance.
Speaker Change: So I'll just leave it at that.
Brian DiRubbio: We're continuing to work towards obviously not having to elect that. We only have it for the rest of this year through the Q4 payment, and then that rolls off in 25 forward. Clearly, the goal is to not add to the quantum of debt and be able to straight pay all that. So I won't give you the adjusted pro forma guidance on that, but we'll just leave it at that.
Speaker Change: We're continuing to work towards obviously, not having to elect that where you only have it for the rest of this year through the through the Q4 payment and then that rolls off in 'twenty five forward, but clearly the goal is to to not add to the quantum of debt and be able to straight pay all that so.
Speaker Change: I won't give you the.
Speaker Change: Adjusted pro forma guidance on that but we'll just leave it at that.
Jonathan P. Banas: Fair enough. Is it your expectation that you'd still like to do a global refi next year?
Speaker Change: Fair enough, but is it your expectation that you would still like to do a global refi next year.
Jonathan P. Banas: That's our current thinking. But, of course, that all depends on the production environment, the interest rate environment, and the like. But certainly, with our trajectory, what we're thinking about in terms of continued improvements in the cost base of the business, improvements in free cash flow that Jeff and I have been talking about here today, we think that sets us up very well to be in the market next year. But a lot of factors go into that.
Speaker Change: That's our current thinking of course that all depends on the production environment, the interest rate environment and the like but certainly with our trajectory what we're thinking about in terms of continued.
Speaker Change: Improvements in the cost base of the business improvements in free cash flow that Jeff and I have been talking about here today.
Speaker Change: That sets us up very well.
Speaker Change: To be in the market next year, but a lot of factors go into that.
Brian DiRubbio: Got it. And the final question is just on raw materials, you know, natural rubber and butadiene prices have been trending upward. Are we, are those mostly on a lag basis in terms of your pricing resets?
Speaker Change: Got it and then final question is just on raw materials natural rubber butadiene prices.
Speaker Change: Turning upward.
Speaker Change: We are those mostly on a lag.
Speaker Change: Basis in terms of your pricing resets.
Jonathan P. Banas: Yeah, Brian, it's Jon again. Typically, they're on a quarter or perhaps a two-quarter lag. Same thing with our steel and aluminum buys as well. Typically, you see a quarter or two there.
Speaker Change: Yeah.
Speaker Change: Yes, Brian it's John again, typically they are on a quarter or perhaps a two quarter lag.
John: Same thing with our steel and aluminum buys as well typically you see a quarter or two there. So we are seeing what you described on the rubber side, but also on the steel cold rolled steel side, we're seeing some headwinds when we came into 2024, we thought we'd have a slight tailwind but now.
Brian DiRubbio: So we are seeing what you described on the rubber side, but also on the steel, cold rolled steel side, we're seeing some headwinds. When we came into 2024, we thought we'd have a slight tailwind, but now that's kind of been mitigated by recent commodity trends, and we're back to kind of a flat commodity environment overall for the year. That's our current outlook.
Brian DiRubbio: Got it. And final one for me, could you remind me what your cost recovery payments were in aggregate last year?
Speaker Change: That's kind of been mitigated by by recent commodity trends and we're back to kind of a flat commodity environment overall for the year, that's our current outlook.
Speaker Change: Got it and final one for me could you remind me what your.
Speaker Change: Cost recovery payments were last year in aggregate.
Speaker Change: Alright.
Brian DiRubbio: Are you talking about the cost we were able to take out of the business?
Speaker Change: Are you talking about the cost we were able to take out of the business.
Brian DiRubbio: Note what the OE sort of compensated you for the prior year of inflation pressures.
Speaker Change: No.
Speaker Change: Are we sort of compensate you for for the prior year.
Speaker Change: Inflation pressures.
Jeffrey S. Edwards: This is Jeff. We haven't revealed that, and we'll keep that to ourselves, I guess, from a pricing point of view. We feel like we have done a really good job. Our customers have certainly stood up for and supported Cooper-Standard's requests.
Jeffrey S. Edwards: Hi, This is Jeff.
Jeffrey S. Edwards: We haven't revealed that and we'll keep that to ourselves I guess from a pricing point of view.
Jeffrey S. Edwards: We feel like we have done a really good job our customers have certainly stood up and supported Cooper standard's requests.
Jeffrey S. Edwards: We talked about the impact at the end of last year, and you can see the impact that that has had during the first quarter. Obviously, our bullish comments today about what we think 24 could be and certainly 25. And clearly, we've got our own lifting to still do. This isn't about just, you know, how much money we negotiated in price increases. Frankly, most of it reflects the cost increases that the business went through.
Jeffrey S. Edwards: We've talked about the impact at the end of last year, you can see the impact.
Jeffrey S. Edwards: That that's had during the first quarter, obviously are our bullish comments today about what we think 'twenty four.
Jeffrey S. Edwards: It could be in and certainly 25.
Jeffrey S. Edwards: And clearly we've got we've got our own lift.
Jeffrey S. Edwards: Lifting to still do this isn't about just how much money did we negotiate and price increases frankly, most of it is rich.
Jeffrey S. Edwards: <unk> the cost increases that the business went through but.
Jeffrey S. Edwards: But I think we're in a good position to be successful. We're in a good position to return to the level of profitability that we need to be and to generate the type of cash we need to be generating in order to provide our customers with the consistent, ongoing support we've always done. And certainly, continuing to improve for our shareholder base is part of that whole equation as well. So we'll keep the amount to ourselves at this stage. Fair enough, but I still had to ask. I appreciate the...
Jeffrey S. Edwards: I think we're we're in a good position to be.
Jeffrey S. Edwards: Successful we are in a good position to return ourselves to the level of profitability that we need to be.
Jeffrey S. Edwards: And to generate the type of cash we need to be generating in order to provide our customers with the consistent ongoing support we've always done and certainly.
Jeffrey S. Edwards: Continuing to improve for our shareholder basis as part of that whole equation as well so.
Jeffrey S. Edwards: We'll keep to.
Jeffrey S. Edwards: To ourselves at this stage.
Brian DiRubbio: Fair enough. I still had to ask. I appreciate the color. Thank you.
Speaker Change: Fair enough still had to ask I appreciate the color. Thank you.
Speaker Change: Thanks, Brian.
Roger S. Hendriksen: It appears that there are no more questions. I would now like to turn the call over back to Mr. Roger Hendriksen. Please go ahead.
Speaker Change: It appears that there are no more questions I would now like to turn the call over back to Mr. Roger Hendriksen. Please go ahead.
Roger S. Hendriksen: Okay, thanks everybody for joining the call. We appreciate your questions and the engagement. Please feel free to reach out to me directly if there are other questions that we didn't cover or you'd like to address in more detail. Thanks again.
Roger S. Hendriksen: Okay. Thanks, everybody for joining the call. We appreciate your questions and engagement.
Roger S. Hendriksen: Please feel free to reach out to me directly if there are other questions that we didn't cover or we'd like to address in more detail. Thanks again. This concludes our call.
Operator: This concludes our call. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Okay.
Speaker Change: Yeah.