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Cooper-Standard Holdings Inc (CPS) Q1 2024 Earnings Call Transcript Highlights: Strategic ...

GuruFocus Research
·4-min read

  • First Quarter 2024 Revenue: $676.4 million, a decrease of 0.9% year-over-year.

  • Gross Profit: $61.6 million or 9.1% of sales, up from $41.8 million or 6.1% of sales in Q1 2023.

  • Adjusted EBITDA: $29.3 million, compared to $12.5 million in Q1 2023.

  • Net Loss: $31.7 million on a US GAAP basis, improvement from a net loss of $130.4 million in Q1 2023.

  • Adjusted Net Loss: $30.6 million or $1.75 per diluted share, improved from $46.2 million or $2.68 per diluted share in Q1 2023.

  • Capital Expenditures: $16.8 million or 2.5% of sales, down from $29.3 million or 4.3% of sales in Q1 2023.

  • Free Cash Flow: Net free cash outflow of approximately $31 million.

  • Liquidity: Ended Q1 with approximately $282 million in total liquidity.

Release Date: May 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Cooper-Standard Holdings Inc reported a significant improvement in gross profit margin, up by 300 basis points compared to the same quarter last year.

  • The company achieved $19 million in savings through lean initiatives and other cost-saving programs.

  • Cooper-Standard Holdings Inc was awarded $66 million in net new business during the first quarter.

  • The company received the prestigious supplier of the year award from General Motors for the seventh consecutive year.

  • Cooper-Standard Holdings Inc successfully extended its ABL through May of 2029, ensuring financial flexibility for future operations.

Negative Points

  • Net sales slightly decreased by 0.9% year-over-year, primarily due to the divestiture of the technical rubber business in Europe and a smaller divestiture in Asia.

  • The company reported a US GAAP net loss of $31.7 million for the quarter.

  • Ongoing inflation headwinds in areas such as energy and labor costs continue to impact the company.

  • Unfavorable foreign exchange rates, particularly with the Mexican peso and Polish zloty, negatively affected financial results.

  • The company used approximately $14 million in operating activities due to seasonal changes in working capital and timing of compensation-related payments.

Q & A Highlights

Q: What actions are being taken by Cooper-Standard to achieve a quick payback, and what does this entail? A: Jeffrey Edwards, CEO, explained that the company is reducing costs significantly by aligning the costs of running businesses directly with those managing them. This restructuring includes reducing the support infrastructure and salaried workforce, aiming to make the company more agile and improve decision-making processes. The expected savings from these actions should help the company approach its EBITDA and ROIC targets by 2025.

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Q: Can you provide details on the percentage of global salaried headcount reductions? A: Jeffrey Edwards, CEO, stated that while the exact percentage of global salaried headcount reductions was not disclosed, it represents a substantial component of the total cost reductions.

Q: How significant is the impact of foreign exchange rates on the company's financials, particularly from Mexico and Poland? A: Jonathan Banas, CFO, noted that the strengthening of local currencies like the Mexican peso and Polish zloty against the euro and USD increases the local cost base relative to the revenue stream, impacting margins. The company hedges against some of these costs but cannot completely mitigate the impact.

Q: What is the expected content per vehicle increase for hybrids compared to ICE vehicles? A: Jeffrey Edwards, CEO, indicated that transitioning from ICE vehicles to hybrids could potentially double the content per vehicle for Cooper-Standard, with even higher increases for battery electric vehicles (BEVs).

Q: Are there any commercial settlements from prior periods included in the current financials? A: Jonathan Banas, CFO, clarified that while there are always commercial settlements each quarter, nothing significant like the previous year's settlements was included in the current quarter's financials.

Q: What is the trajectory for top-line revenue growth, and what are the main drivers? A: Jeffrey Edwards, CEO, explained that despite some transactions leading to a slight top-line decrease, the company's automotive revenue is actually up slightly when adjusted for these factors. The expectation is that this growth will continue, driven by new business wins and pricing adjustments.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.