Full Year 2024 Cooper-Standard Holdings Inc Earnings Call
Good morning, ladies and gentlemen, and welcome.
Speaker Change: Did the Cooper standard fourth quarter and full year 2024 earnings conference call.
Speaker Change: During the presentation, all participants will be in a listen only mode.
Speaker Change: Oh linked company prepared comments, we will conduct a question and answer session.
Speaker Change: At that time, if you have a question you will need to press star followed by one.
Speaker Change: As a reminder, this conference call is being recorded and the webcast will be available for replay later today.
Speaker Change: I would now like to turn the conference call over to Roger Hendriksen Director of Investor Relations.
Speaker Change: Thanks, Jenny and good morning, everyone. We appreciate your continued interest in Cooper standard and we thank you for taking the time to participate in our call. This morning.
Speaker Change: 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.
Speaker Change: Before we begin I need to remind you that this presentation contains forward looking statements. While they are made based on current factual information.
Speaker Change: And certain assumptions and plans that management currently believes to be reasonable. These statements do involve risks and uncertainties.
Speaker Change: For more information on forward looking statements. We ask that you refer to slide three of this presentation and the company's statements included in periodic filings with the Securities and Exchange Commission.
Speaker Change: This presentation also contains non-GAAP financial measures.
Speaker Change: Reconciliations of the non-GAAP financial measures to their most directly comparable GAAP measures.
Speaker Change: Included in the appendix to the presentation.
Speaker Change: With those formalities out of the way I'll turn the call over to Jeff.
Jeff Edwards: Thanks, Roger and good morning, everyone.
Jeff Edwards: Certainly appreciate the opportunity to review, our fourth quarter and full year results.
Jeff Edwards: This morning, and we'll provide an update on our outlook for 2025 and beyond so I'm going to begin here on slide five just to highlight some key data points that we believe are reflective of our continued strong commitment to operational excellence and driving increasing value for all of our shareholders in 2000.
Thank you for your time. Thank you. Thank you.
Jeff Edwards: Most importantly for setting the stage for an even more successful 2025 now let me turn the call over to John to review the financial details of the quarter.
Jeff Edwards: Yes.
John: Thanks, Jeff and good morning, everyone. In the next few slides I'll cover the details of our quarterly and full year financial results.
John: Put some context around some of the key items that impacted our earnings and then provide some color on our cash flow balance sheet and liquidity.
John: So please turn with me to slide eight.
John: On slide eight we show a summary of our results for the fourth quarter and full year 2024 with comparisons to the prior year.
John: Fourth quarter 2024 sales totaled $668 million, a decrease of one 9% versus the fourth quarter of 2023.
John: As we continue to be impacted by weaker than expected production volumes and unfavorable foreign exchange.
John: On a more positive note despite the lower sales our margins improved considerably.
John: Adjusted EBITDA for the fourth quarter, 2024 was $54 $3 million or eight 2% of sales.
John: An increase of 96, 8% and more than 410 basis points of margin versus the fourth quarter of 2023.
John: On a U S. GAAP basis, we generated net income of $40 $2 million in the fourth quarter.
John: This included the reversal of certain deferred tax asset valuation allowances.
John: Small gains on the sales of assets and businesses and.
John: And noncash charges for restructuring and asset impairments.
John: Excluding these and other special items, we recorded a slight adjusted net loss of $2 $9 million or <unk> 16 cents per diluted share for the fourth quarter of 2024.
John: This was an improvement of over $28 million compared to the fourth quarter of last year.
John: For the full year 2024, our sales totaled $2 7 billion, a decrease of 3% versus 2023.
John: The main drivers of the decline were unfavorable volume and mix divested.
John: Divestitures and foreign exchange.
John: Adjusted EBITDA for the year came in at $187 million compared to $167 $1 million for the full year 2023.
John: Improved operational efficiencies and savings from restructuring more than offset the impacts of a weak volume and unfavorable exchange rates.
John: On a GAAP basis full year net loss was $78 $7 million compared to a net loss of $202 million in 2023.
John: After adjusting for special items in their tax impacts we incurred an adjusted net loss for the year of $56 $7 million or $3 23 per diluted share.
John: Again this is a significant improvement when compared to the adjusted net loss of $82 million or $4.74 per diluted share we recorded in 2023.
John: From a capex perspective, we spent $55 million due during 2024 or one 8% of sales.
John: We continue to optimize asset utilization throughout the company and focus our spend on customer launch readiness and new business growth.
John: By comparison, our Capex was $87 million or two 9% of sales in 2023.
John: Moving to slide nine.
John: The charts on both slides nine and 10 I quantify the significant drivers of the year over year changes in our sales and adjusted EBITDA for the fourth quarter and full year respectively.
John: For sales in the fourth quarter unfavorable volume and mix, including customer price adjustments reduced sales by $5 million.
John: The impacts of foreign exchange further reduced sales by $8 million.
John: For adjusted EBITDA manufacturing and purchasing efficiencies drove $26 million in savings during the quarter.
John: The restructuring initiatives, we implemented in the second quarter of 2024, resulting in an additional $11 million of cost improvement during the fourth quarter.
John: And we also had a slight tailwind on raw materials amounting to $2 million in the period.
John: These improvements were offset by $9 million of general inflation, such as wage increases and higher energy expense.
John: $8 million of unfavorable foreign exchange.
John: And $5 million from weaker volume mix and net price adjustments.
John: Lower compensation related expenses year over year was the primary component of other improvements.
John: Moving to slide 10.
John: For the full year unfavorable volume and mix net of customer price adjustments reduced our sales by $32 million.
John: Unfavorable foreign exchange impacted sales by $21 million, while the divestiture of our technical rubber business in Europe in the third quarter of 2023 reduced our year over year sales in 2024 by another $33 million.
John: For the full year adjusted EBITDA.
John: The positive factors included $76 million from improved manufacturing and purchasing efficiencies.
John: $24 million in restructuring savings and.
John: And $5 million and lower material costs.
These improvements were partially offset by $43 million and higher costs due to unfavorable foreign exchange.
John: $34 million and higher wages and other general inflation.
John: And $25 million in unfavorable volume mix and net price adjustments.
John: Moving to slide 11, and an update on our liquidity and balance sheet.
John: We were pleased to end the year with a strong free cash flow of $63 $2 million in the fourth quarter.
John: And positive cash flow of $25 $9 million for the full year.
John: Net cash provided by operating activities in the fourth quarter was $74 $7 million.
John: A slight decrease of $4 $9 million compared to the same period last year.
John: Higher cash interest payments offset improved cash earnings and positive working capital.
John: Capex came in at 11, and a half million dollars for the quarter as we continue our intense focus on cash preservation and optimizing asset utilization.
John: As a reminder.
John: Minder for our fourth quarter interest payments, we elected to make full cash payments on our first and third lien notes rather than taking the pick options on our December installments.
John: Considering this our positive free cash flow performance was an outstanding result by our entire organization as we remain focused on improving our liquidity and our debt service.
John: With cash on hand of $178 million as of December 31.
John: On an adjusted sorry, and an additional $169 million of availability on our revolving credit facility.
John: We ended the year with total liquidity of nearly $340 million.
John: Despite our expectations for a continuing weak production environment based on our current outlook and expectations for improving operational efficiencies and savings initiatives.
John: We expect our free cash flow in 2025 will again be positive.
John: We believe our current cash on hand expected future cash generation and access to flexible credit facilities will provide ample resources to make required interest payments and support our ongoing operations.
John: In conclusion, I want to offer some thoughts on our debt and how we're looking at our financing options going forward.
John: With the recent expiry of the no call provision on our first lien and third lien notes, we are continuing to monitor the credit markets to assess opportunities for potential refinancing in order to improve our capital structure.
John: To be clear, we are not obligated to take any actions imminently.
John: We believe that as we continue to improve our financial performance in the coming quarters with margins expected to return to 10% in the fourth quarter of this year.
John: And return on invested capital and cash flows continuing to improve.
John: We expect to have a variety of options available to us to manage our debt and improve our overall cost of capital.
We intend to be proactive, but prudent as we consider all options and the timing of any potential actions.
Jeff Edwards: That concludes my prepared comments, so let me turn it back over to Jeff.
Jeff Edwards: Thanks, John and to wrap up our discussion this morning, I want to share a few thoughts regarding our near term and longer term outlook and why I remain extremely optimistic about our opportunities ahead, and that's putting it mildly moved.
Jeff Edwards: Move to slide 13.
Jeff Edwards: The first reason for optimism as our World class manufacturing engineering and product development teams and the award winning innovations they continue to bring to the market.
Jeff Edwards: Leveraging new digital tools and technology, our team is truly delivering more value for our customers at lower cost than ever before.
Jeff Edwards: I'm confident this is a clear competitive advantage and we're just beginning to see the benefits as many of the innovative products have not fully ramped to full production.
Jeff Edwards: On this slide we're highlighting a couple of our most recent innovation award winners our fluids manifold and our flex a core thermal plastic body seal technology.
Jeff Edwards: The coolant hub product was recognized by the society of plastic engineers as one of the top innovations in 2024.
Jeff Edwards: This new technology yields up to a 30% reduction in customer made connections.
Jeff Edwards: It improves vehicle assembly cycle time.
Jeff Edwards: It also optimizes routing to reduce pressure drop and minimize airflow blockage.
Jeff Edwards: And that's also adaptable to all vehicle powertrains and is currently in production in a high profile EV platform.
Jeff Edwards: Our flex a core technology was recently recognized by the society of automotive analysts is a winner and light weight innovation.
Jeff Edwards: This is a groundbreaking solution that replaces traditional metal components on the odd acos, where they more eco friendly lightweight plastic.
Jeff Edwards: By offering a total weight reduction of up to 44% flex.
Jeff Edwards: Flex a core seals can improve vehicle efficiency, while maintaining durability and performance.
Jeff Edwards: Additionally, the seal is fully recyclable.
Jeff Edwards: Making it environmentally sustainable option for the entire automotive industry.
Jeff Edwards: Our innovations continue to focus on providing value to our customers by helping them meet their targets for key measures such as light weighting ease of assembly.
Jeff Edwards: System efficiency.
Jeff Edwards: Overall cost efficiency and Recyclability.
Turning to slide 14.
Jeff Edwards: Combined with World Class service, our innovations have allowed us to partner with our customers on some of the most important high profile vehicle platforms.
Jeff Edwards: On this slide in particular, we showed top 10 platforms for 2025 based on expected Cooper standard revenue.
Jeff Edwards: These 10 programs represent approximately 45% of our planned revenue for the year based on current production volume estimates and an expected average content per vehicle of approximately $190.
Jeff Edwards: Also important eight of these 10 platforms offer multiple powertrain options, which allows for flexibility.
Jeff Edwards: Reduces risk related to changes in customer preference.
Jeff Edwards: Or the changing regulatory environment.
Jeff Edwards: So it also it almost goes without saying go buy some of these hopefully you can find something to buy.
Jeff Edwards: Our portfolio of products and technologies are well suited to any of the powertrain options on the market today.
Jeff Edwards: Hybrid and battery electric vehicles represent significant opportunities for us to increase our overall content per vehicle.
Owing to the higher complexity of the vehicle architecture.
The upside of battery electric vehicles has been in the range of 20% higher than traditional vehicles and hybrids represent as much as 80% higher content as we provide components for thermal management and the engine and also the electric motor.
Jeff Edwards: Battery and also other electrical components.
Jeff Edwards: So, let's turn to slide 16.
Jeff Edwards: Okay.
Jeff Edwards: With the higher content per vehicle opportunities in mind global trends in vehicle powertrains are certainly favorable for us.
Jeff Edwards: Brick vehicles are still leading glue.
Jeff Edwards: Global growth, especially in China and Europe.
Jeff Edwards: However, the rate of growth has slowed especially in the U S where government incentives have been pulled back.
As demand for battery electric vehicles is that we're seeing an increased demand for hybrids, which frankly is in our sweet spot for all optum more content per vehicle.
Jeff Edwards: In fact over the past two years, 40% of all our net new business awards were related to hybrid vehicle platforms, that's 40% of all of our new business related to hybrid vehicle platforms.
Jeff Edwards: In addition to opportunities for increased content or innovations are opening doors for us with new customers in diverse markets.
Jeff Edwards: We expect the combination of increased market penetration and higher content per vehicle will allow us to grow our fluids business by 50% over the next five years.
Jeff Edwards: Increased market penetration in China, and particularly new business with Chinese Oems will be a big part of this growth.
Jeff Edwards: Now, let's turn to slide 17.
Jeff Edwards: This solid growth outlook is reflective of a very successful execution of our core strategic imperatives.
Jeff Edwards: As we've described in our presentation today, we're making progress toward financial strength by improving profit margins and cash flow despite ongoing weak production levels in our key markets.
Jeff Edwards: We have consistently demonstrated world class operational excellence.
Jeff Edwards: This is helping to lower our cost while simultaneously garnering customer accolades and supporting new business wins.
Jeff Edwards: We continue to deliver award winning innovations that our customers value.
Jeff Edwards: And we've established a strong track record for our consistent environmental stewardship.
Jeff Edwards: As a company we believe we are poised to accelerate our profitability and return on capital in 2025.
Jeff Edwards: In addition, we believe our continued successful execution on these core strategic initiatives will drive profitable growth and value creation in the years ahead.
Jeff Edwards: Turning to slide 18 to conclude this morning, let me provide a little color on the guidance, we published in our press release yesterday afternoon.
Jeff Edwards: And perhaps a few comments on our longer term strategic outlook.
Jeff Edwards: To be clear our expectations for 2025 for increased profitability and further margin expansion and this is despite flat or slightly lower sales. The flat sales outlook is being driven by weak production volume.
Jeff Edwards: Current forecasts suggest the global light vehicle production will be down another 5% in 2025 after declining one 1% in 2024.
Jeff Edwards: The production declines are expected to be greater in our largest markets here.
Speaker Change: Here in North America and in Europe.
Speaker Change: To offset these production headwinds, we expect to further drive cost savings through improved operating efficiencies and additional lean initiatives, including.
Speaker Change: Including specific actions to drive raw material cost lower as a percent of sales.
Speaker Change: We also expect to benefit from a full year of savings related to the restructuring we implemented in the second quarter of last year.
Speaker Change: In addition.
Speaker Change: <unk>.
Speaker Change: Continuing launches of new higher margin business will be a positive driver during the year.
Speaker Change: We're confident that the combination of increased operating efficiency and the ramp up of higher margin business.
Speaker Change: We will enable us to lift our strategic target of double digit EBITDA margins as we exit 2025.
Speaker Change: Looking beyond our 2025 guidance, we believe we are beginning to.
Speaker Change: We're beginning an exciting period of growth and prosperity the actions we've taken.
Speaker Change: And the improvements we've achieved over the past four years have clearly made us a better and a stronger company.
Speaker Change: We believe we're better positioned now than ever before to leverage future increases in production volume.
Speaker Change: We're also better positioned to expand into high growth markets and partner with new dynamic customers, who have aggressive growth plans around the world.
Speaker Change: And we're doing that.
Speaker Change: We believe the benefits of these new and expanded relationships will become more evident in coming years as new programs launch.
Speaker Change: Even at the base case of current estimates for global production volumes for 25 to 2027, we believe the implied growth and our expanding margins will enable us to reduce our net leverage ratio to something in the range of two times or lower over that time for.
Speaker Change: Same.
Speaker Change: So again I want to thank our employees for their hard work and commitment to helping make Cooper standard of Premier automotive supplier.
Speaker Change: And the first choice of all of our stakeholders.
Speaker Change: I also want to thank our customers around the world for their continued trust and partnership this concludes our prepared remarks.
Speaker Change: Okay.
Speaker Change: Jenny can we open it up for Q&A.
Speaker Change: Sure.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one I know touched on <unk>.
Speaker Change: Questions will be taken into your order receipt.
Speaker Change: Should you wish to cancel your request. Please press the star followed by the two.
Speaker Change: You're using a speaker phone please lift the handset before pressing any tier.
Speaker Change: Once again that is star one did you wish to ask a question.
Speaker Change: Your first question comes from the line of Kirk Ludtke.
Tom Imperial: Tom Imperial capital Your line is now open.
Kirk Ludtke: Hello, Jeff John Roger. Thank you. Thank you for the call.
Speaker Change: Good morning, Kurt Good morning, Kurt Good morning.
Speaker Change: On slide 16 this is a.
Speaker Change: This is interesting the you mentioned that the content per vehicle and.
Speaker Change: In fluid handling would be up 30%.
Speaker Change: In the next five years does that.
Speaker Change: Is.
Speaker Change: Is there are.
Speaker Change: Any guidance as to what content per vehicle and ceiling will be.
Jeff Edwards: Hi, Chris This is Jeff. Thanks for the question certainly the fluid the fluid business as I mentioned.
Speaker Change: We will continue.
Jeff Edwards: To climb as hybrid and electric.
Jeff Edwards: Vehicles become more predominant in the in the marketplace at least as it relates to the mix. So that's that's the comment there related to ceiling, it's pretty pretty much the same across all of those powertrains.
Jeff Edwards: Clearly there are opportunities for for some of our higher tech sealing systems to be utilized on on the electric vehicles going forward in particular, when you think about nor.
Jeff Edwards: Noise management and the ability to.
Jeff Edwards: To manage that inside the cabin, so theyre looking for ceiling to play a role in helping reduce the decibel level there.
Jeff Edwards: But overall I would say, it's pretty consistent across each powertrain with the ceiling content per vehicle. So it's still an.
Jeff Edwards: <unk> opportunity for us to grow share because our technology is demonstrating that it will allow us to do that but a little bit different than our fluid business.
Speaker Change: Got it that's helpful and it seems as though that there are new products driving that increase in content per vehicle.
Speaker Change: Yes, I think not only new products, but the way our engineering teams are working with our customers.
Speaker Change: To integrate and to help improve the overall fluid management.
Speaker Change: Of the new vehicles, making them more efficient.
Speaker Change: <unk> them as.
Speaker Change: I mentioned earlier and reducing the amount of cycle time, it takes our customers to assess.
Speaker Change: Assemble these vehicles.
Speaker Change: We're working very closely with them upstream to.
Speaker Change: To make our systems more efficient.
Speaker Change: That's driving value in content for us in helping take cost out of the overall system for the customer so it's a win win for both.
Speaker Change: Got it thank you and how does how does that.
Speaker Change: Shift in mix effect the overall.
Speaker Change: Gross margin.
Speaker Change: Okay.
Speaker Change: Positive note, we're continuing yes, it's extremely positive we continue to see enhanced margin as I mentioned earlier as we build out.
Speaker Change: Some of these these programs that have been with us for five or six years and launched the newer ones.
Speaker Change: Virtually in all cases, our margins are going up and a lot of reason for that but one of the reasons is because we're able to help do more for our customers. So they are giving us more content, helping take their overall costs down helping drive our content up so we make more money they take their costs down everybody is happy.
Speaker Change: Got it thank you and you did reiterate the the.
Speaker Change: The margin of a double digit margin exiting 2020 that that's an adjusted EBITDA margin.
Speaker Change: Correct, and yes, I reiterated it a few times.
Speaker Change: Got it thank you and.
Speaker Change: And how should we think about I know this is a super fluid maybe a little bit early.
Speaker Change:
Speaker Change: But how should we think about.
Speaker Change: Tariffs.
Speaker Change: To what extent are you.
Speaker Change: How are you.
Speaker Change: Selling product into the U S from Mexico that type of thing.
Speaker Change: Yeah.
Speaker Change: Yeah. We clearly are are like everybody else are paying attention to that we have.
Speaker Change: Product that's being produced in the regions that are that are being discussed.
Speaker Change: Clearly, if if something like that does happen.
Speaker Change: We'll work with our customers to to offset it.
Speaker Change: That's our expectation I think it's the expectation of most of the supply base certainly our customers have been very open to those conversations early so there arent any surprises they know clearly what what we're producing and we're in the overall impact of what that would would mean to us and to them.
Speaker Change: I really tip my hat to the customers they have been very proactive in communicating with us.
Speaker Change: And we have with them.
Speaker Change: I'm also hopeful that if it does happen it will be short term with with not a whole lot of a major impact to our industry.
Speaker Change: That's my that's my hope our strategy is obviously to to over communicate what our situation is with each and every one of our customers and then make sure that we're prepared to manage it if it does happen.
Speaker Change: Fantastic so there seems to be some.
Speaker Change: At least at this point understanding that the costs will be passed on to the <unk>.
Speaker Change: Yeah.
Speaker Change: That's correct.
Speaker Change: Got it I appreciate it that's all very encouraging thank you.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question is from Michael Ward.
Speaker Change: From capital your line is now open.
Michael Ward: Thanks, very much good morning, everyone.
Michael Ward: Hey, Michael finally bigger picture.
Speaker Change: There are two things we're not here.
Michael Ward: The industry well we sure.
Michael Ward: Tomorrow I haven't heard anybody really on the supplier side talking about price downs from the vehicle manufacturers and you're also hearing from the vehicle manufacturers much more so in the past.
Michael Ward: Willing to pay for innovation.
Michael Ward: I'm just wondering what your thoughts are on those two things.
Michael Ward: Yeah, I'll take the second one first.
Michael Ward: Related to innovation.
Michael Ward: I think the key for us has been that our innovation.
Michael Ward: From the very.
Michael Ward: Ideation.
Michael Ward: Early stage has always been about what can we deliver.
Michael Ward: For our customers that will help them.
Michael Ward: Deliver on their overall strategies and if you had <unk>.
Michael Ward: Listen to what I said this morning as it relates to light weighting as it relates to reducing cycle time as it as it relates to the Recyclability.
These are all thing is not only important to <unk>.
Michael Ward: Standard, but important to every single one of our customers and so yes. They are willing to pay for innovation as long as there's a return.
Michael Ward: For them and not only has that been have been positive for for us related to new business, but.
Michael Ward: We're reducing the complexity of their systems by better designing an overall system that Cooper standard ultimately ends up delivering to each of those customers and so our content is going up.
Michael Ward: Their costs are coming down our margins are also increasing in that transaction. So.
Michael Ward: Everybody wins I think that's the secret to how we've been innovating over the last several years and why we're seeing such a positive impact.
Michael Ward: In new business and also in top and bottom line performance.
Speaker Change: And related to Tim Weiss sorry.
Speaker Change: Related to your price.
Speaker Change: Question, I mean, clearly, it's a competitive environment out there for for everyone, whether we're talking the oes or whether youre talking to supply base. So.
Speaker Change: I wouldn't say much has changed in that front, there's still an expectation that the.
Speaker Change: You have to be competitive certainly when youre delivering high quality product when you're delivering on your launches when youre delivering on innovation when youre delivering just on that most basic execution.
Speaker Change: I think you you certainly begin to separate from those who haven't been able to do that and clearly everybody is trying to take costs out of their business right, Mike and so we've been very very careful to to.
Speaker Change: Make sure we take costs out, but we don't want to do anything that's going to disrupt that competitive advantage. We have as it relates to how were executing for for each and every one of our customers in the 21 countries that we reside so it's a little bit like that kids game, where you pull out the sticks and hope the thing doesn't fall over but we've been pretty good at it over the last four or five years.
Speaker Change: And I think it's served us well our customers are happy.
Speaker Change: And our margins are getting better so I'm happy.
Speaker Change: That makes sense, but those are.
Speaker Change: Two pretty big changes from what we've seen historically historically.
Speaker Change: They can get you will stick in the one 5% and now it seems like within productivity parameters.
Speaker Change: On the cornerstone side.
Speaker Change: Yeah, I'm, not I'm, not suggesting all that sticks or Alberta up I mean, there's still some.
Speaker Change: Going on but yes.
Speaker Change: They know where to find it if they need it but I think in our case, we've we've been able to grow.
Speaker Change: Positively and by growing positively I mean.
Speaker Change: By by doing the most basic things well and then offering solutions that help them.
Speaker Change: Versus just that that given take conversation related to that bucket of money sitting in the middle of year and who gets to keep most of it. Yes. Those are short those are short conversations and make for a very long days when the when the conversation is about your product and how you can help them.
Speaker Change: Youre going to make more money as a resolve.
Speaker Change: Those are much better days.
John: John two things the first one on.
Speaker Change: The pic.
Speaker Change: It looks like is my math right, if I look last year.
Speaker Change: You pick the.
Speaker Change: The interest.
Speaker Change: And it was roughly a positive $58 million I think on the cash flow statement $59 million.
Speaker Change: And this year was just 12, so is that to say that you.
Speaker Change: Okay.
Speaker Change: Whatever that difference there was $40 million or so.
Speaker Change: Cash interest rather than pick.
Speaker Change: Yes, I think your I think your math is right. So the total cash interest for the year was $97 million so up considerably from 2023.
Speaker Change: Because with the outlook that we had for the year.
Speaker Change: We were able to elect back in June the <unk>.
Speaker Change: Affordability of pain straight cash in doing that was better economics, instead of adding to the mountain of debt that we've got.
Speaker Change: <unk> a straight pay on that pick collection for Q4 on both tranches.
Speaker Change: It was not only affordable, but made more sense for us as a company.
Speaker Change: And it looks like for your 25, Youre expecting to continue to pay the cash rather than tech.
Speaker Change: Well to be clear the pic election.
Speaker Change: We can't elected any longer we were unable to collect that.
Speaker Change: It's only through 'twenty, two where we're able to electric.
Speaker Change: That's correct, yes, the first four quarters only.
Speaker Change: Okay.
Speaker Change: This year was a headwind and.
Speaker Change: Wondering if there's any way you can remedy that or maybe you have because it looks like it's.
Speaker Change: $60 million swing in the bridge on the EBITDA going from 24% to 25.
Speaker Change: Yeah, that's right, Mike So youll see in the guidance bridge, we're expecting a $20 million tailwind.
Speaker Change: For the year on FX.
Speaker Change: And later in Q4 of 24, we started to see some of our cost currencies.
Speaker Change: Revert from where they had been trending all all year of 24, So think where we manufacture a product but don't sell in that same currency. There is not a natural hedge for those so Mexican peso Polish zloty check Corona exposures like that that are where the main kantar.
Speaker Change: Tributary to the $43 million of headwind that we faced in all of 2024 with many of those reverting in the U S dollar strengthening against those cost currencies, we do see that flipping and.
Speaker Change: And we also actively manage that and put hedges in place where they make sense to to protect the planned expenditures for the year.
Speaker Change: And just one last thing following on with currency questioning on on the tariffs side when I look at the 23, K and I look at the revenue from the different countries and then the property and equipment from the countries. When you have revenue from Mexico of $774 million is that could that be components, both produced in Mexico.
Speaker Change: In the United States put on vehicles in Mexico, then shipped to the United States is that by area of vehicle manufacturer or area of where your components are manufactured.
Speaker Change: That's where our.
Speaker Change: Our components are manufactured and sold to the customers from those those locations. Okay. Okay. So as far as tariff exposure.
Speaker Change: But who knows where it goes.
Speaker Change: Roughly $770 million from operations in Mexico, and then you have another $170 million Thats, what youre looking at.
Speaker Change: But as you mentioned, Jeff mentioned that Youre working with your customers.
Speaker Change: Yes keep in mind that.
Speaker Change: Keep in mind some of those sales in both Canada, and Mexico could stay in that country.
Speaker Change: Customers that are actually manufacturing vehicles, there right, So Mexico for Mexico product Gotcha.
Speaker Change: Our exports from Mexico.
Speaker Change: Correct Yep.
Speaker Change: Okay. So that those those are the levers they can pull okay.
Speaker Change: Very good thank you very much.
Speaker Change: You got it thank you.
Speaker Change: Thank you and your next question is from Brian <unk> from Baird. Your line is now open.
Brian: Good morning, gentlemen couple of questions for me.
Speaker Change: Pulling receivables.
Speaker Change: Some headway in the last couple of years.
Speaker Change: Going back to my model lowest we've seen since 2010 on those that number you'd be able to are you going to be able to squeeze any more cash out of tooling receivables over the next year or is that going to be a headwind at some point just trying to understand the dynamics there.
Jeff Edwards: Hi, This is Jeff I think.
Speaker Change: While there is still opportunity of course.
Speaker Change: Where we've ended up.
Jeff Edwards: It's probably.
Where we're going to be as we as we head forward into 'twenty five theres always some variance based on when new products are launching.
Jeff Edwards: And the timing associated with that and so each year the answer will be a little bit different frankly.
Jeff Edwards: As we look at 2025, I think it'll be fairly close to the same numbers you saw in 2004.
Jeff Edwards: Got it that's helpful. There and then just on Capex guidance that you gave.
Jeff Edwards: Are we now thinking about capex to sales is permanently lower than 2% of sales.
Jeff Edwards: This is Jeff again, I think that for 2025, yes.
Jeff Edwards: As we go forward.
Jeff Edwards: As I think I mentioned in previous calls we will have certain years that.
Jeff Edwards: That maintenance costs on facilities and things like that could could bump it up but clearly.
Jeff Edwards: In that.
3% range I think is what I told you so 2% to 3%.
Jeff Edwards: Is probably the more the more normal.
Jeff Edwards: At least for the for the next couple of years I can tell you that much we certainly don't have plans.
Jeff Edwards: To get back up to five or 6% like we were that youre, probably referring to historically we've got.
Jeff Edwards: We've got footprint now in China as an example.
We've invested in over the last several years and as we transition as I mentioned in our earlier conversation as we transition from the Western Oems in China to the the Chinese domestic and I'm talking about significant changeover theyre not.
Jeff Edwards: And not just <unk>.
Jeff Edwards: A rising with the docs, either we're gaining a lot of a lot of new business from the Chinese domestics.
Jeff Edwards: <unk>.
Jeff Edwards: And not having to invest in facilities, because we're able to convert the capital that we already have in place. So as an example, it there than other places in the world. The reuse is really going up our manufacturing team is working closer with our product development team is doing a much better job of of reusing capital going.
Jeff Edwards: Forward. So that's what's reflected in those numbers.
Jeff Edwards: Got it that's helpful. There.
Jeff Edwards: One of the costs that I know a couple of companies are experiencing in western Europe is just to get to the higher energy costs.
Speaker Change: That's something that you're able to get mitigated or is that something youll get half the deal on your own.
Speaker Change: Yes, the last couple of years, where it's been.
Speaker Change: Kind of a significant outlier.
Speaker Change: We tend to get help on a quarterly basis for those type of <unk>.
Speaker Change: Of course.
Speaker Change: As it relates to raw material costs, we've got indexes in place really with all customers in the world.
Speaker Change: To help us deal with that but if if energy costs during the winter in Europe.
Speaker Change: Ended up being a significant penalty to us we've been able to negotiate those on a on a quarterly basis and then if it happens again the following areas negotiated again thats kind of how we're dealing with it.
Speaker Change: Understood and I guess final question for me just as I look at the chart on page 14 about the top 10 platforms maybe.
Speaker Change: Asking you.
Speaker Change: About your business mix in a different way how much of your business has shifted to the domestic Chinese.
Speaker Change: Auto companies over the last two to three years.
Speaker Change: Yes, it's a great question and thank you we have as most of you know when you look at the let's call. It the 2012 to two.
Speaker Change: For 2020 period of time.
Speaker Change: We were probably 80%.
Speaker Change: What I call the western Oems.
Speaker Change: And 20% Chinese domestic.
Speaker Change: By 26 by 2026, which is right around the corner.
Speaker Change: We will be about <unk>.
Speaker Change: 65, 35 by 'twenty seven it'll be.
Speaker Change: Oser to $80 <unk> the other way.
Speaker Change: And again.
Speaker Change: Thats with significantly higher revenue.
Speaker Change: In 2006, and 2007 than in any of those previous years.
Speaker Change: So the teams have done a great job of.
Speaker Change: Growing both our fluid as well as our <unk>.
Speaker Change: Sealing business with Chinese domestics, and it's interesting because the dynamic there.
Speaker Change: As you know most of the Chinese car.
Speaker Change: Car manufacturers have have expectations for four building vehicles are exporting vehicles around the world and so theyre very interested in and our technology.
Speaker Change: And therefore willing to put our product in their vehicles in China, but also very interested in our ability to to help them be successful other places in the world. So.
Speaker Change: We're very bullish on on our China footprint and very excited that that we don't have to make it much investment in it.
Any of our plants to.
Speaker Change: To absorb all of this so it's a good thing.
Speaker Change: Great. That's all I have for now thank you so much.
You bet.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Thank you. Your next question is from Greg <unk> from Sterne Agee.
Speaker Change: Your line is now open.
Speaker Change: Yeah.
Speaker Change: Morning, guys and thank you for taking my call and congratulations on the quarter and the strong guidance.
Speaker Change: Thanks Pat.
Speaker Change: Yeah of course vast majority of mine got answered.
Speaker Change: Thank you one question I had so in your prepared remarks, you guys indicated that you've got a roughly two times net leverage target in the long run, but I hear that correctly.
Speaker Change: Yes, we actually said if you if you just look at our three year business plan and the the volumes, albeit in my opinion still forecasted fairly low.
Speaker Change: For $25 26 in 2007 with with the enhanced margin and the new business that we're launching this year and next year.
Speaker Change: We can see our way to 27.
Speaker Change: Fairly clearly and we've got worse as we sit here today, we have it.
Almost 90% of that business is booked so this isn't a real difficult thing to project or look around the corner based.
Speaker Change: Based on that that profitability the numbers that I talked to you about two times or less.
Speaker Change: In our sites.
Speaker Change: Okay, Great and can you give that again, that's one that's on relatively conservative volumes that.
Speaker Change: That the folks that I guess get paid to do that are.
Speaker Change: We're doing it.
Speaker Change: And then just to add to that it's.
Speaker Change: Conservative volume assumption.
Speaker Change: Assumption like Jeff just syndicated but also assumes no refinancing activity. That's just on the base cap structure and the outlook that we have for the business.
Speaker Change: Okay, great great. Thank you. So do you think if I were going to try to pin a date on that do you think 2027 area would be the goal for that.
Speaker Change: So that two times target or do not want to put a date on it quite yet.
Speaker Change: Now I'll put a date on it 27 is the date and Thats with with.
Speaker Change: What I call the Morticians forecast for volume.
Speaker Change: Assuming that volume does better than we will do better.
Okay, Great. That's very helpful. Thank you.
Speaker Change: And just.
Speaker Change: You had mentioned that there is there is youre growing share rapidly in the Chinese domestic OEM market can you give any insight as to what margins. There look like are they comparable to the rest of the business with a stronger.
Speaker Change: What does that look like.
Speaker Change: Yes, they're comparable.
Speaker Change: Clearly the.
Speaker Change: The amount of innovation, sometimes that's going into those vehicles might be a little bit less.
Speaker Change: I don't want to make that sound like there isn't any because there certainly is.
Speaker Change: So if you'd compare the highest margins in the rest of the world to China I Suppose you would say were probably a little bit less but so is our investment in.
Speaker Change: So when you look at the returns.
Speaker Change: We're pretty pleased with where we are there we have very clear hurdle rates in each of the regions.
Speaker Change: And we're having no trouble clearing them.
Speaker Change: Okay, Alright, that's very helpful. Thank you guys for taking the questions.
Speaker Change: That's on the quarter again.
Beth: Thank you thanks Beth.
Speaker Change: Okay.
Speaker Change: Once again, please press star one should you wish to ask a question.
Speaker Change: Your next question is from Curt <unk> with Keybanc.
Speaker Change: Your line is now open.
Speaker Change: Hi, just a couple of follow ups with respect to the <unk>.
Speaker Change: Fiscal 'twenty five guidance.
Speaker Change: You mentioned you'd be cash flow positive do you.
Speaker Change: Is whats the expectation with respect to working capital and any other <unk>.
Speaker Change: Sources of cash.
Kurt: Hey, Kurt.
Speaker Change: John.
Speaker Change: With respect to.
Speaker Change: The math, we don't put a number on the page, but we certainly give you all the key components to to derive your model on free cash flow and you look either the lower the high end, we're right around that.
Speaker Change: Positive territory, we do expect.
Speaker Change: Some further.
Speaker Change: Working capital benefits as we continue to refine.
Speaker Change: Jeff has already addressed the tooling.
Speaker Change: The topic, but for.
Speaker Change: For the rest of the balance sheet think about days payable outstanding Theres some opportunity there as the supply of <unk> strengthens and we can get negotiated terms more improved.
Speaker Change: We still haven't.
Speaker Change: <unk> gotten to the absolute floor on inventory levels. So we think theres some opportunity there for the team to continue to drive working capital and cash out of the balance sheet. So.
Speaker Change: Not going to be as significant as it was probably in 'twenty four but certainly there is there is more opportunities that would would help in that free cash flow positive generation.
Speaker Change: Great. Thank you and then just.
Lastly.
Speaker Change: You've been.
Speaker Change: EBITDA positive in both North America, and Europe for a while I just wanted to confirm that was the case again in the fourth quarter.
Speaker Change: Yes, Thats correct in fact, all four of our major regions.
Speaker Change: Got it. Thank you that's it from me thank you.
Kurt: Thanks Kurt.
Kurt: Thank you.
Kurt: There are no further questions at this time I will now hand, the call back over to Roger Hendriksen.
Speaker Change: Alright, Thanks, everybody. We appreciate your participation your engagement.
And the insightful questions. If there are any questions that didn't get answered or that you'd like to bring up later on please feel free to reach out to me directly.
Speaker Change: This will conclude our call. Thank you very much.
Speaker Change: Thank you ladies and gentleman. The conference has now ended thank you all for joining you may all disconnect your lines.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Yes.