Q3 2025 Commercial Vehicle Group Inc Earnings Call

Good morning, ladies and gentlemen, and welcome to the CVG. Third quarter 2025 earnings conference call. During today's presentation, I'll parties will be in listen-only mode. Following the presentation, the conference will be open for questions with instructions to follow at that time. As a reminder, this conference is being recorded. I would now like to turn the call over to Mr. Andy Chong, Chief Financial Officer, please go ahead, sir.

Thank you, operator. And welcome everyone to our conference call.

Joining me on the call today is James Ray, CEO of CVG.

This morning we will provide a brief company update as well as commentary regarding our third quarter 2025 results.

After which, we will open the call for questions.

As a reminder, this conference call is being webcast, and the Q3 2025 earnings call presentation, which we will refer to during this call, is available on our website.

Both may contain for looking statements including but not limited to expectations for future periods regarding market trends. Call saving initiatives and new product initiatives among others.

Actual results May differ from anticipated results because of certain risks and uncertainties.

Is with and uncertainties may include, but are not limited to economic conditions in the markets in which CVG operates.

Fluctuations in the production volumes of vehicles for which CVG is a supplier.

Financial Covenant, compliance and liquidity.

With associated with conducting business in foreign countries and currencies and other risk. As detailed in our FEC filings,

I will now turn the call over to James to provide some highlights from our third quarter performance.

Thank you, Andy.

Good morning, and thanks to all those who joined the call.

Please turn your attention to the supplemental earnings presentation, starting with slide 3.

As we have highlighted on this slide, CVG delivered continued improvement in profitability despite a very challenging market environment.

During the quarter, we delivered an adjusted gross margin of 12.1%, which is up 10 basis points on a sequential basis and up 50 basis points compared to last year.

But I just want to give a heartfelt, thanks to the entire CVG team for their contributions in driving. These operational improvements in these very challenging times.

Another highlight of the quarter is the continued performance Improvement within our Global electrical system segments.

For the quarter, we saw segment performance in flecked with revenues of 6%, compared to the prior year. Despite continuing in Market. Softness of note, we benefited from the ramp up of 2 key. New programs in the quarter.

The first is with an autonomous Vehicle Manufacturer in North America. While the other is with a major automotive manufacturer in Europe,

Both program ramp ups are in their early stages and we expect a continued strong and growing Revenue contribution from these programs moving forward.

we also delivered sequential and year-over-year margin expansion, driven primarily by the higher revenues, as well as the operational efficiency improvements we've made

Also highlighted on this slide is our strong. Year-to-date free cash generation.

For the first 9 months we've generated 25 million in free cash up 14 million from last year driven by improved working Capital Performance and lower Capital expenditures. I'll speak more about specific guidance later but we do expect to generate free cash flow in the fourth quarter of 2025.

And finally, I just want to highlight that we are not standing still in our efforts to drive further operational efficiencies and reduce costs in North America. We continue to right-size our manufacturing footprint to adjust to the current demand environment in AMEA and Asia-Pacific, where we are seeing better in-market demand. We are proactively optimizing our production capacity to lower costs and create additional capacity to meet future demand growth.

We also continue to manage headcount and flex manufacturing operations, work schedules across the company to reduce both sgna expenses and Manufacturing. Overhead costs respectively.

Turning to slide 4. I want to provide additional color as it relates to the continued sequential Improvement. We are seeing at the gross margin line.

As we highlight it, for the last two quarters, the operational efficiency improvements made related to freight labor and plant-level overhead continue to benefit our profitability.

We continue that Trend this quarter with additional margin expansion of 10 basis points versus the second quarter of 2025. Giving us a cumulative Improvement of 370 basis points versus the fourth quarter of 2024.

But is even more notable is that we were able to expand margins sequentially in the third quarter, despite an 11% drop in Revenue versus the second quarter of 2025. This clearly demonstrates, the operational efficiency improvements we've made to address our cost structure.

As a quick reminder.

The bulk of these improvements have come from a reduced reliance on expedited freight, optimized terms with our suppliers, and our improved lead times in order quantities. We have also flexed our direct labor to better align with customer volume changes. Additionally, our new segment alignment has provided a more optimal overhead structure.

Our focus is on driving operational efficiency, which is supported our financial performance in a lower demand environment. While we acknowledge the broader market and macroeconomic uncertainty, we are committed to taking the necessary. Proactive actions to drive improved financial performance.

As we look ahead to the eventual, in-market recovery, we believe we are well positioned to enhance. Shareholder value through continuing to win new business, driving a creative growth, accelerating margin expansion and increase, our Capital efficiency with that. I'd like to turn the call back to Andy for a more detailed review of our financial results.

Thank you, James, and good morning, everyone.

If you are following along in the presentation, please turn to slide 5.

Consolidated the third quarter 2025 Revenue was 152.5 Million as compared to 171.8 million in the prior year period.

The decrease in revenues is due primarily to a softening in customer demand, across our Global seating and trim systems and components primarily in North America.

Adjusted EBITDA was $4.6 million for the third quarter compared to $4.3 million in the prior year.

Adjusted ibida. Margins were 3.0% up to 50s of 2.5% in the third quarter of 2024.

Driven primarily by operational efficiency improvements and reductions in sgna expenses.

Interest expense was $4.1 million as compared to $2.4 million in the third quarter of 2024, driven by higher interest rates following our June 2025 debt refinancing.

Net loss for the quarter was 6.8 million or a loss of 20 cents per diluted share.

As compared to a net loss of 0.9 million or a loss of 3 cents per diluted share in the prior year.

It's just that that loss for the quarter was 4.6 million or a loss of 14 cents per diluter share as compared to adjusted net loss of 0.4 million or a loss of 1% per diluted share in the prior year.

Get lost and adjust that; that loss will be impacted by softer customer demand in North America, as well as higher interest and taxes offset some more by operational efficiency improvements.

Pre-cast flow from continuing operations for the quarter was negative $3.4 million, compared to positive $17.1 million in the prior year. Softer demand and the facility move in China led to an increase in inventory in the third quarter.

The China facility moved positions for lower labor costs and a more optimal manufacturing footprint moving forward.

Just a reminder that last year third quarter included the process from the sale of our cap structures business as well as another facility.

Totaling 27.4 million.

James will share more color on our free cash flow, Outlook momentarily.

at the end of the third quarter,

Our net leverage ratio, calculated as our net debt divided by our trailing 12 months adjusted EBITDA from continuing operations, was 4.9 times, up slightly from 4.8 times at the end of Q2.

Moving to the second results. Starting on, slide 6.

Our Global ceiling segment achieved revenues of 68.7 million, a decrease of 10% as compared to the year ago corner.

With the decrease primarily driven by lower loss of American new sales volume as a result of reduced customer demand.

Adjusted operating income was 2.9 Million and increase of 3.7 million compared to the third quarter of 2024.

Despite the revenue decline in this segment, we saw an improvement in adjusted operating income margin. Primarily attributable to the proactive actions taken to drive operational efficiency improvements as well as lower sgna expenses.

Turning to slide 7.

Our Global electrical system. Segments third quarter revenues was 49.5 million and increase of 6% as compared to the year ago. Quarter as the realm of new business wins more than offset weaker construction and agriculture demand.

Adjusted operating income. For the third quarter was 1.4 million and the increase of 1.6 million compared to the prior year.

Primarily attributable to increase revenues and operational efficiencies.

We are continuing to see the benefits of the restructuring actions. We have taken in this segment and we are encouraged by the return to growth resolved in this third quarter.

As we have said, before we continue to renew business here at attractive margins, and Global electrical systems remains a key area of focus for growth and cash generation moving forward.

Moving to slide 8.

Our trim systems and components revenues in the third quarter, decreased 29% to 34.3 million compared to the year ago quarter.

Due to lower sales volume as a result of decreased customer demand.

These segments solely serve the law of American market and its most directly impacted by the reduction, in class a production volumes.

According to ACT Research, Class 8 bills were down 39% year-over-year in the third quarter.

Adjusted operating loss for the third quarter was 0.3 million compared to profit of 4.1 million in the prior year.

The decrease is primarily attributable to lower sales volumes.

While it was encouraging that segment revenues declined less than the market, we are implementing further actions to rightsize this business to adjust to the lower demand environment.

we are in the process of implementing further operational improvements including spending cuts collaboration with suppliers to reduce cost and launching new programs, such as a new wiper program in Q3

or with a goal of returning this segment to profitability as quickly as possible.

That concludes my financial overview commentary.

I will now turn the call over to James to cover our Market Outlook.

Key strategic actions being taken and our updated guidance.

Thank you, Andy. I will start with our key in Market, outlooks on slide 9 according to acts Class 8 heavy truck, build forecast,

2025 estimates imply a 28% decline in year-over-year volumes.

Act is forecasting. A further decline of 14% in 2026. Before rebounding 34% in 2027,

Just a reminder that we quote ACT's North American Class 8 production outlook as a point of reference.

but our Revenue here is driven by our actual in market and geographical mix as well as our customers demand and production schedules.

Furthermore, act's outlooks have been subject to large variations as seen by the revisions they've made since we reported due to results.

Based on published reports, the U.S. has been in a freight recession over the last two years as capacity exceeds demand, following a surge of additions to meet supply challenges during and coming out of COVID.

Act is currently factoring lingering tariff impacts into their 2026 forecast but acknowledges that a more positive tariff environment provides upside to their 2026 outlook.

We have also seen North America truck, oems give more optimistic 2026, North American Class A forecast, an act, giving some indication that the current production levels are running below. Expected Market, replacement needs as a result, the spite adjusting our footprint to current demand levels, we are preserving optionality for when markets eventually improve to drive operating leverage as volumes recover.

Moving to our construction and agriculture Market Outlook based on recent commentary and outlooks from our customers and key Market players. We expect the construction Market to be down 5 to 10 percent in agriculture and markets to be down in the 5 to 15% range. As construction is fairing a bit better than agriculture this year.

The drivers in both markets, remain higher, interest rates, weaker housing starts slower, commercial real estate, activity and lower commodity prices continuing to weigh on demand.

We remain optimistic about these in markets, which most directly impact our Global electrical systems business. As we see ongoing replacement needs and underlying secular Trends driving a recovery in these markets in 2026 and Beyond.

Turning to slide 10.

I'd like to give more details on the outlook for our global electrical system segments. I'll get into the drivers momentarily, but we expect our global electrical systems segment sales to increase in the high single-digit to low double-digit percentage range in 2026. Even in the face of these weaker markets, I just discussed, this increase is driven by the continued ramp-up of new business wins, which is accelerating the utilization of our recent capacity additions.

furthermore, we have made structural improvements to our business model in this segment, which we expect to drive growth and reduce volatility

Customer satisfaction as well as upselling.

We also are accelerating our expansion and adjacent markets with strong secular growth drivers such as autonomous EVs and infrastructure markets and finally we are extending our differentiated Solutions including high voltage wire harness and power, distribution boxes to drive increased content per vehicle.

The biggest driver of Q3 performance as well as our expectations for growth of 202026, is the ramp of new business previously won. We recently launched a program where we provide low voltage wire harnesses for an autonomous vehicle customer in North America.

Autonomous vehicles have been a key Focus area for the company and we are currently working with our partners to establish a leading Market position here for CVG.

We have also launched programs providing wire harness solutions for multiple European, oems, AC, ac across various geographies. After seeing delays and push out of our new business win program. Launches during 2024, we're encouraged to see these programs ramping up and driving Topline growth.

As these programs ramp up.

We are seeing improved utilization at our new production facilities in aldama Mexico and Tangier. Morocco, helping Drive, margin expansion as the ramp up of these programs continues and other new programs. Contribute, we expect to see continued, margin Improvement, into 2026 and beyond for the global electrical system segments.

Turning to slide 11, I'd like to provide some updates on key actions, we have underway to drive free cash flow Improvement as well as mitigate the impact of tariffs and broader macroeconomic headwinds.

First, we remain focused on driving, improved cash, generation, and aligning, our sgna structure with our current Revenue base this year. As Andy mentioned, we did see a small inventory build in the third quarter. We expect working capital to return to being a source of cash for us. In the fourth quarter, we continue to expect. 30 million dollars in working capital reduction for the year focused, primarily on inventory and accounts receivable as well as a 50% reduction in planned Capital expenditures this year.

We also continue to expect 15 to 20 million dollars in cost savings this year with the focus on sgna, which should drive incremental margin expansion as our Top Line returns to growth in the future.

Second, we are seeing tangible benefits of strategic portfolio. Actions taken in 2024 to lower our cost structure as we experience lower decremental. Margins positioning us, well, to grow our earnings power as in market demand recovers.

As demonstrated this quarter, despite demand headwinds leading to a revenue decline of $19 million year-over-year, adjusted EBITDA increased by 300% compared to the prior year.

Third, we've remained in constant communication with our customers, improving our line of sight to production schedule changes, particularly in the light of current market conditions, which allows us to implement necessary cost action in the event of future changes.

In addition, our teams took immediate action in response to tariffs to mitigate potential impacts and we've made substantial progress in negotiations on price recovery terms with our customers.

Turning to slide 12, I'll share several thoughts on our updated outlook for 2025, which reflects the current estimated impact of tariffs, trade policy and economic uncertainty, as well as our proactive efforts to manage this current uncertain environment.

Most importantly, we are maintaining our free cash flow guidance to reflect our progress year-to-date, as well as our ongoing focus on cash generation.

We expect to build on our year-to-date free. Cash flow progress in the fourth quarter generating at least $30 million, free cash flow for the full year, which we expect to use to pay down debt

Our continued focus on reducing working capital and lowering Capital expenditures. Underpinning this Outlook.

Net. Leverage is expected to decline through 2026. As we work toward returning to our targeted 2 times level.

Based on current macroeconomic trends, prevailing truck, Bill forecast and ongoing softness in construction and agriculture markets. We are lowering our quantitative annual guidance for revenue and adjusted ebitda and tightening the range on both.

30 to 650 million, which is down from 650 to 670 million from our prior guidance.

We are also revising. Our adjusted Eva dog guidance, expectations to the range of 17 to 19 million for 2025, down from 21, to 25 million from our prior guidance.

With regard to the current demand Outlook. I mentioned a few minutes ago, that act research is 2025 North American class. A production forecast is down 28% year-over-year. If you look more closely, you'll see that they are forecasting. Second half 2025 volumes down 37% sequentially versus the first half of 2025.

While there is typically some seasonality to our North American classic related business, you can imagine the challenges this type of sequential decline creates

Consequently, we remain laser focused on operational efficiency improvements and reducing sgna to protect margins in the face of lower demand and position us for strong, operating leverage. When the eventual Market recovery happens with that, I will now turn the call back to the operator, and open up the line for questions, operator.

Thank you, ladies and gentlemen, we will now begin the question and answer session. Should you have a question please? Press star followed by the 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process? Please press star followed by the 2. If you are using a speaker-phone, please lift the handset. Before pressing any Keys? Your first question comes from Joe ghouls with Noble Capital, your line is now open.

Good morning. Thanks for taking my questions.

Morning.

I wanted to start out on some of the efficiency improvements, the headcount reductions, the reduced capex.

Um, obviously I understand why that's going on, but, you know, how much more can we wring out of those? Um, before you have to start spending more money on cap backs, or are you starting to cut into muscle, so to speak, with some of these headcount reductions? I'm just trying to get a little handle on what more is possible there.

Thanks for your question Joe this is James. Um yeah we continue to prioritize our reduction areas so that we take advantage of the higher growth and uh also cut restructure reorganize where we're seeing much slower growth. So from a head count standpoint, it's not just sgna but it's also the manufacturing overhead account. Uh as we look at our facilities and our footprint, there are opportunities to create synergies

IES between sites, uh, to minimize the manufacturing overhead. We continue to focus on uh, execution, items and quality, scrap premium Freight. Those things that we made headwind in we still are entitled to additional uh operational efficiency improvements. So we're not done yet. And as you know, as volumes change and as mixed changes that creates other opportunities. The 1 thing that we did um in Q3 and we started it in Q2 was really engaging with our supply chain partners and our supply base, to look for additional opportunities as suggested by them, that are mutually beneficial to both the supplier and to us. And we've really generated a good funnel of, uh, incremental opportunities to go after we obviously continue to work with our customers to make sure we're aligned with their schedule changes, as well as their approvals for mitigating, uh, tariffs as well as approvals for making changes to designs and other cost savings initiatives. So we're there's still opportunity.

To reduce more the bottom line to your question without significantly impacting our ability to respond to market changes. We have seen fluctuations both up and down, so, um, we're very careful and, uh, very surgical in how we flex those. So we don't leave opportunity on the table by not being able to respond to demand, and that's on a global basis. Uh, so that's pretty much, uh, where we are right now. Uh, we're not finished, and as the market continues to fluctuate.

And we deal with the volatility. Uh, we have a playbook that we're going after to make sure our costs are aligned and we don't sacrifice the future for recovery.

We've invested a lot in our electrical system capacity over the last couple of years, so major fixed costs are in place. When new business and revenues come in, we may need to add some equipment. That's when we expect to see a climb in CapEx a little bit, maybe sometime later next year.

Okay, thanks for that. And question on the the updated guidance, you know you, you took Revenue down

Um, you know, as as you stated, it looks like, you know, it's a bigger reduction and and adjusted ibida. Um, based on on the numbers that you're providing just wondering, you know why the bigger reduction in adjusted ebita, there is that just the leveraging or or is there anything else behind that?

Yeah, Joe, I would say that the majority of that is the delivering uh and part of the changes, will you have to consider the mix of the reduction as James mentioned? Right now, what we are facing the most sharp reduction is in our law of America Class, 8 business, which is really affecting our trim and component business. And that is a business. That is a very fixed cost driven business that you can imagine our business product lines uh, thermal forming, uh, a lot of equipments already put in place. So there's a higher margin contribution margin and that business. So that 30, some 40% reduction is really hurting our

Margin from a mixed standpoint.

Okay. And what more for me if I met, um,

So I understand the ACT numbers are not the be all end all but let's let's assume, you know, there there are forecasts is is somewhat accurate here and and you're looking at that, you know, 14% uh reduction in 26 in class. 8 can the expectation of of on the electrical system, the new products and uh generating more Revenue their offset. A continued decline in the class, 8, business for 2026 is that possible.

Yes, Joe that's our expectation. Uh, as we look into our customer schedules for q1 and also Q2 where some of the other programs are starting to ramp up in a more significant rate in the back half. Uh, we feel and we expect to offset the, uh, forecasted downturn. And, and when you look at the sequentially, the q1 to Q4, uh, build rate isn't, uh, substantially different. It's somewhat flattish. Going into q1 and then lingering in the Q2 and then the back half when you look at act's numbers, it starts to to ramp back up. So the key is getting through the next quarter or 2, uh, with our cost structure changes. We've made and

Are improved operational efficiency. We expect to have better operating leverage as the quarters role in with higher production numbers. So margin expansion is a focused cash. Generation is a focus and paying down debt as a result of additional cash and margin expansion. Is our priority

And and Joel has a little too early for us to guide 26, we already mentioned a little bit about our expectation for our electrical business Topline next year where somewhere close to a double digit uh Improvement. So we believe that next year, overall, with the class a reduction, we likely see a fetish weapon use for the Enterprise but we'll know more uh, in a couple of months. Uh, when we go out for guidance, uh, and in our Q4 earnings call,

Great. Thanks for that. I'll get back in queue. Thank you.

Thanks Joe.

your next question comes from John Fraze with sedoti company, your line is now open

Um, good morning, everyone. Thanks for taking the questions. Um, I got to start with you just left off Andy. Uh, when you think when you're thinking about, um, the new program wins in electrical, when does that ramp be, you know, become the full annualized rate, is that a 2026 event? Is that a 2027 event? How should we be thinking about that?

Normal course, we make sure we manage the risk of delays as well as the opportunity that ramps may occur faster. So we've built in some flexibility to to go either way uh to make sure we stay focused on margin uh preservation as well as cash generation.

Yeah, short answer uh John will be late, 27. 28, is what we're expecting. As James mentioned, typically our customer will require somewhere around a year or so to Ram their production. So, second half 26 is what we starting to see and then it will likely take another year. So but again, little bit difficult for us to speculate our customer production schedule sometime can be lumpy, but this is what we've been told uh um, around this time.

Nope, that's that's exactly what I'm kind of looking for. Appreciate that both of you.

Um, and when you think about the, uh, the cost savings take out of 20 to 25 million dollars. Are you fully done those cost outs or how much remains in in the fourth quarter?

Of the cost out process and following we have John is is ongoing. Uh, we do have opportunities this quarter to continue the part of the challenge is when we, uh, Dimension and quantify potential projects that role in as volumes change from our customers in, in delays or reduce volume, that does impact the amount of

Cost out. So we have to offset that with additional measures. So we continue to maintain the projection that we're that we're uh forecasting the engagement of the supply base, as well as the customers also help us have a better Sion or Sales, Inventory operations planning process so that we make sure that we valve cost to achieve in the cost savings that we plan to harvest. So, we're trying to have better alignment with the cost to achieve and the cost that we're going to harness based on volume Outlook and based on, uh, schedule fluctuations in new project launches. But I feel like we're we're much better positioned going into finishing out the fourth quarter, going into 26th and we've been uh, from the standpoint of mitigating. Some of the inefficiencies and unplanned leakage that we had in Prior periods.

Okay. James, thank you. And

I guess I'm kind of curious.

Um,

where you stand on on tariffs, not only in negotiations with your customers, but also with with these suppliers. And if I missed that and you prepared remarks, I apologize.

Yeah. Yeah, no problem. Uh, tariffs obviously are a moving pin, right? Every month there's a different dynamic. But what I will say is that we engage immediately with customers, and there are two...

2 paths here, 1 is the discussions around the data required to prove that we've had impact from terrorists and our customers are very fact-based. And and we provide data that shows what our impact is, so that can translate into potential price adjustments or term changes. The other area is mitigation, and this can be almost as significant. And this is reassuring, onshoring, uh, changing suppliers, uh, coming up with um, onshore distribution warehouses where we don't, uh, incur the Tariff with the supplier does and then we negotiate with the suppliers. But, um, we feel that both of those work streams, have yielded a pretty good progress through the year. It took us a quarter to to really get traction on it, but now we've got agreements in place. We also have a, a roadmap of, um, mitigation actions, uh, whether it's technology product changes, or whether it's the, as I mentioned,

The reassuring and the supply chain.

Changes that will mitigate some of the country, uh, reciprocal tariffs as well as the 232 steel tariffs. Uh, but again, that's a changing road map from um, our trade policy and we stay pretty close to that as well with our customers. So we, we have much much better alignment right now going into this quarter and and going into next year.

Okay, got it. And 1. Last question. I just sneak it in. I just want to. I'm just curious about the revenue sensitivity and and the trim segment, is that a short lead time business? I mean, should we look look for that to, you know, to be the canary in the coal mine, when that, when things start to improve in class 8, I'm just curious. It's been down, you know, 2x, you know, compared to Global seating all year long and maybe just some thoughts about that.

Focus into the class 8 and Market, um, we have adjusted our shift patterns and our plant utilization. There is more work to do there, but 1 of the bright spots in that business, is that we have

good capacity available uh in dealing with our customers and dealing with other uh, interested parties. We can onshore Nearshore some of what they're importing into our capacity. So the focus right now is really, uh, looking at opportunities for, uh, ensuring and and helping our customers mitigate tariffs where they're importing product. But the leverage, when that business, the in Market does come back, that's going to provide pretty substantial operating leverage as compared to some of the other businesses because we already have the investments in place. And if you look back in Prior periods prior years, the trim portion of the business, the wipers, and Plastics, and and trim products had very attractive margins compared to some of our other segments. So we expect to see that inflection, as that volume increases, but also we're not waiting for it either. So, we have, uh, fuel sales, rep organizations.

That we use to Market our capacity that we have in Flight. Uh, we have a very significant funnel of opportunities that we're going after not just in class 8 but other in Market uh adjacent markets. So uh it is a a very key Focus for us to fill some of that capacity and and absorb some of this excess cost as well as look at additional restructuring and realignment of those plants.

No problem. Thank you.

Ladies and gentlemen, as a reminder, should you have a question please? Press star 1. Your next question comes from Gary, prestipino with Barrett barington research, your line is now open.

Good morning. Uh, James and Mandy, um,

questions here. Hey, Andy, first of all, um, interest expense year-over-year was up

and I'm just wondering if there was some 1-time in that number since you refinanced, I think you did something with your credit facility.

Yeah, if I read your right, if you remember, we completed our refinancing at the end of June. So Q3 is actually a full year that reflected the new interest rate for us.

And as we, uh, communicated after the refinancing the interest effective interest rate is actually gone up, uh, from our prior, uh, financing structure. So every quarter, we're adding about a million to million and a half based on the current borrowing that we have. So that's why you see the uh, year-over-year increase in interest expense.

So that's that's a good quarterly run rate is what you're saying. There isn't anything in there, in terms of that you backed in that were 1-time related to the refinancing

No, there's no 1-time there uh but as you can see as we guide that as well that we continue to use our free cash flow to pay down debt. So we continue to see next few quarters that that level will come down so that will help us bring down the overall interest expense.

Okay. Um, and then I just to be clear. Um,

You know, it looks like you're obviously you're seeing the the the the work of your driving efficiencies and your adjusted gross margin. Um, it looks like your sgna this quarter was flat.

Uh for the 9-month period. Um it looks like it was down 3 million but there was also a 3 and a half million dollar gain on the sale of of the unit, the business unit or factory or something in in last year that was added in to sgna. So the the real level of sgna would've been about 58 million. Is that correct?

That that's about right. If you if you think about it last year we were running at around 20 million dollars a quarter, it's a sgna as Enterprise and now you can see 17-inch is our run rate so you can see a 15% reduction year-over-year. If you look at quarter to quarter sometime, there's some timing of expenses, but between the 20 to, the 17, is where we bring down our sgna run rate.

Okay, so when you talk about headcount reductions that you put in place on that that's going to that's really more at the factory level. So it's going to be uh, more of an impact on gross margin versus your sgna run rate. Is that correct?

Reduced by a similar amount in terms of uh, heads percentage. So what James mentioned about our productivity programs, we actually work on both on the factory side and gross margin as well as, uh, in the sgna side. Yeah, Gary. So the um, the focus on the re segments and the organizational design efficiency, we continue to see benefit from that as we've navigated through the year. And again, there's additional opportunity as we look at, uh, where we need to write size with with the, in markets, so we're not standing still, uh, again, it's, you know, the old saying, more parts per person per day and sgna is more services per person per day. So looking at, um, how we just get more out of what we have and looking at our processes, uh, as well as the people expense. So, some of the outside services that we use previously, uh, We've really ramped that down quite a bit and not so dependent on it and just improving the capability of our organization.

to do more on our own and and harvest that opportunity and to margin and cash flow and and paying down that

thank you. And then could in terms of the global electrical, the new business that's coming on stream in 2026. Could you just reiterate those programs again for me? I I I wasn't able to

Write them down as quickly. Go ahead. Sure. There there are a number of programs. Uh, Gary 2 of the major ones though that are having we're starting to see a benefit in Q4, but more significant benefit as we navigate through 26 and then the back half. And as Andy mentioned, ramping up the full volume in 2728. 1 of those is with, uh, an autonomous vehicle OEM, uh, where we have a portion of the, the wiring system there is opportunity to expand while it's share, uh, not just with the new customers, but also our existing customers, and we've gotten good indication from our core markets and and conag where we have opportunity to expand share in those in markets, plus the launching of the new program. The second program is European, um, OEM where we're utilizing our Morocco facility as well as our existing Eastern European facilities to launch that business. And that's coming on toward mid to late next year.

And that's a European OEM for EVS. That's correct. Uh, know it's icy. Yeah, internal combustion engine but we do have EV opportunities in Europe, but the the driver is a is ice internal combustion engine vehicle.

And the autonomous vehicle OEM is that on North American Centric?

Yes, that's correct. And we're utilizing our Alamo Mexico facility, uh, to ramp that up. So in in Prior quarters and prior periods, we've talked about, uh, the the lag between getting the capacity online and, and the ramp starting. So, in a couple of cases, ramps have been delayed or have been, uh, slower to ramp, but they're starting to hit now. And, uh, we're seeing key leading indicators from our customers, where the fact, their factories are in place to build the vehicles. Uh, and their launch planning is, is very uh, meticulous to make sure we're in line from a capacity standpoint. So we've got some good leading indicators that if the ramp is starting and and it it will come

Okay, thank you very much.

Welcome.

Ladies and gentlemen, as a reminder, should you have a question please? Press star 1.

Darn no further questions at this time. I will now turn the call over to James for closing remarks.

I'd like to thank you all for joining today's call. We continue to take necessary proactive steps to support our customers in this very dynamic environment. Also, we are driving operational efficiency improvements as well as ultimately delivering better results financially, and for our customers more importantly. We are managing the elements under our control to set CVG up for the future, and we look forward to updating CVG's progress in the next quarter. Thank you all, and have a great day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating in, s that you please disconnect your lines.