Full Transcript: Commercial Vehicle Group Q2 2026 Earnings Call

Commercial Vehicle Group (NASDAQ: CVGI ) released second-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

0 million in the prior-year period. 3 times in Q2 2026, aided by an at-the-market equity program and a sale-leaseback transaction. Future outlook remains positive with increased revenue guidance for 2026 to $725-$755 million and adjusted EBITDA guidance to $26-$31 million, driven by new business wins and expected growth in Class 8 truck production. 8% growth in the Electrical Systems segment, driven by the ramp-up of new business wins like Zoox, and a significant debt reduction effort.

Management remains focused on operational efficiency and diversification, with expectations for continued margin expansion and positive free cash flow, despite some SG&A cost pressures due to incentive compensation. Full Transcript OPERATOR Good morning, ladies and gentlemen, and welcome to Commercial Vehicle Group's second quarter 2026 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions, and instructions will follow at that time.

As a reminder, this conference is being recorded. I would now like to turn the call over to Michelle Hartz, Vice President of Investor Relations. Please go ahead. Michelle Hartz, Vice President of Investor Relations Thank you, operator, and welcome everyone to our second quarter 2026 conference call.

Joining me on the call today are James Ray, President and CEO, and Angie O'Leary, Interim Chief Financial Officer. This morning we will provide a brief company update as well as commentary regarding our second quarter 2026 results, after which we will open the call for questions. As a reminder, this conference call is being webcast and the Q2 2026 earnings call presentation, which we will refer to during this call, is available on our website. Both may contain forward-looking statements including, but not limited to, expectations for future periods regarding market trends, cost savings initiatives and new product initiatives, among others.

Actual results may differ from anticipated results because of certain risks and uncertainties. These risks and uncertainties may include, but are not limited to, economic conditions in the markets in which Commercial Vehicle Group operates, fluctuations in the production volumes of vehicles for which Commercial Vehicle Group is a supplier, financial covenant compliance and liquidity risks associated with conducting business in foreign countries and currencies, and other risks as detailed in our SEC filings. I will now turn the call over to James to provide some highlights from our second quarter performance. James Ray, President and CEO Thank you, Michelle.

Good morning, and thanks to all those who joined the call. Please turn your attention to the supplemental earnings presentation starting on slide three. As we have highlighted on this slide, Commercial Vehicle Group delivered year-over-year revenue growth across all three segments. This reflects our ongoing efforts to reduce our end market concentration in cyclical North American Class 8 truck exposure through geographic and end market diversification.

While there are still macroeconomic uncertainties to monitor, Commercial Vehicle Group is hitting its stride as our new business wins are ramping, coincident with a recovery in our key end markets. 9%, up 90 basis points compared to last year and 70 basis points sequentially from the first quarter of 2026. The continued year-over-year and sequential improvement in profitability was again driven by our focus on improvements in operational efficiency and the operating leverage we are seeing from improved volumes. 8% growth in segment revenues in the quarter.

This growth has been driven by the ramp of previously mentioned programs across North American and international markets, particularly Zoox in North America and the ramp of our key wins in the EMEA region. This growth is going a long way to increase capacity utilization at our Aldama, Mexico and Tangier, Morocco facilities. While we are adding labor to handle the additional volumes, we continue to see margin expansion in this segment. Another highlight in the last quarter was the continued debt and leverage reduction we delivered.

Angie will give you more details shortly, but the at-the-market equity program we announced and executed a portion of during the quarter is not only accretive but provides us additional capacity to continue to invest for growth opportunities going forward. 3 times at the end of the second quarter. Our goal remains to bring leverage back down to the two times level over time. As we look ahead, we will continue to monitor potential macroeconomic uncertainty, but we are encouraged by the growth we are seeing across all three segments as we head into expected end market improvement.

Class 8 truck production is projected to accelerate throughout the year, and we are also benefiting from the ramp up of new business across our three segments. We are focused on disciplined execution, driving operational efficiency and positioning Commercial Vehicle Group to drive further shareholder value going forward. Turning to slide four, I will provide more detail on the ramp of the Zoox program. As I'm sure you've seen, Zoox made a major announcement in June.

They have locked in the design and are moving to commercial scale production. As a result, they are preparing for large-scale manufacturing at their Hayward, California facility, which will shift them from the trial and testing phase into fleet deployment. Zoox also recently announced they have received NHTSA approval to begin charging for their robotaxi services and will be rolling that out in Las Vegas in August. As a result of the expected Zoox momentum, we began adding staffing in Q2 and continue to add into Q3 at Aldama to support the production ramp, and we'll be investing in planned incremental capital to support the ramp.

Also, as Zoox and other programs continue to ramp up, we are seeing further utilization increases at our production facilities in Aldama and Tangier, helping fuel gross margin expansion. These state-of-the-art, low-cost facilities position us to support continued new business wins ramp-ups and drive further margin improvement throughout 2026 and beyond for the Global Electrical Systems segment. With that, I would like to turn the call over to Angie for a more detailed review of our financial results. Angie, Chief Financial Officer Thank you, James, and good morning, everyone.

If you're following along in the presentation, please turn to slide 5. 0 million in the prior-year period. The increase in revenues was primarily due to increased customer demand in international markets and the ramp of previously awarded new business wins across all three of our segments. After challenges we experienced in the second half of 2024 and throughout 2025, we're encouraged that now we are seeing much better top-line performance and, as you'll see from the guidance James will share in a few minutes, we expect that trend to continue.

2 million in the prior-year period. 0% in the second quarter of 2025, as higher SG&A expenses and foreign exchange headwinds more than offset improved gross margins. SG&A expense increased year over year, primarily reflecting higher incentive compensation. Our long-term performance awards are tied to stock price performance, which has been favorable, while our annual incentive plans are benefiting from improved financial performance compared with the prior year.

To help offset these increases, we continue to tightly manage discretionary SG&A spending. 3 million in the second quarter of 2025, driven by higher interest rates resulting from our refinancing completed in the second quarter of 2025. 12 per diluted share, in the prior-year period. 4 million pre-tax warrant liability revaluation expense.

09 per diluted share, in the prior-year period. Adjusted net loss was impacted by higher sales and improved gross margin performance, offset by higher SG&A and interest expense. 3 million in the prior-year period, reflecting higher working capital investment to support the growth in revenues. While we are encouraged by the strong top-line inflection we're seeing, that also requires additional direct and indirect labor, as well as capital spending for new business launches to support the revenue growth.

We remain committed to driving operating leverage and free cash flow generation, but I believe it's worth noting the growth requirements of the business as the end markets recover. 1 times at the end of 2025. We calculate net leverage as net debt divided by trailing twelve-month adjusted EBITDA from continuing operations, and the improvement demonstrates meaningful progress toward our long-term target of approximately two times. Turning to slide 6, I want to highlight the year-over-year and sequential adjusted gross margin improvement we saw in the second quarter.

Our actions to remove costs, mitigate transitory impacts from macroeconomic and geopolitical developments, and position the business for the end-market recovery now emerging across our segments are beginning to show results. These efforts have enabled us to support higher production volumes while also improving margins. 9% this quarter, up 90 basis points year over year and 70 basis points sequentially. As volumes continue to recover, we remain focused on driving additional operating leverage through disciplined execution and operational improvement.

Turning to slide 7, I'd like to highlight our continued progress on our deleveraging efforts. 1 times at the end of 2025. This improvement was supported by both the sale-leaseback transaction announced in Q1 and the recently announced at-the-market equity program. 6 million in net proceeds from the ATM program.

6 million of total debt paydown since the end of 2025 and demonstrate our commitment to cash generation and deleveraging. They also provide improved balance sheet flexibility to support future growth and shareholder value. This is important because our June 2025 refinancing increased our average interest rate notably compared with our prior term loan. 2 million of the term loan year to date is accretive through reduced interest expense.

Because the ATM proceeds were received at the end of the quarter, the related term loan paydown will further reduce interest expense going forward. 5% compared to the prior-year period, with the increase primarily driven by increased customer demand in international markets, again showing the benefits of our geographical diversification. 9 million compared to the second quarter of 2025, as we delivered expanded margins on higher sales volumes in the quarter. We also saw benefits from our recent footprint consolidation efforts in the Asia Pacific region.

8% compared to the prior-year period, primarily due to the ramp of previously awarded new business wins in North America and internationally. 5 million compared to the prior-year period, primarily attributable to volume and product mix. As production continues to ramp in 2026, boosted by the Zoox robotaxi program and the ramp of additional wins across the globe, we remain well positioned to accelerate overall segment revenue growth in the second half of 2026. 2 million compared to the prior-year period due to higher sales volumes from increasing customer demand in North America.

As we've mentioned previously, this segment solely serves the North American market and is the most directly impacted by Class 8 production volumes, which were down 6% year over year in the second quarter based on ACT data. Despite that decline, we delivered strong year-over-year top-line growth driven by an improved product mix. 3 million in the prior-year period. The increase is primarily attributable to improved volume leverage.

Taken collectively, we delivered strong revenue growth and gross margin expansion in the quarter. We are ramping new business wins and beginning to see end-market improvement. While we are investing to support growth and working capital in the near term, we are encouraged by the opportunities we see ahead for Commercial Vehicle Group. That concludes my financial overview commentary.

I will now turn the call back over to James to cover our end-market outlook, key strategic actions, and a review of our 2026 guidance. James Ray, President and CEO Thank you, Angie. I will start with our key end-market outlook on slide 11. According to ACT's Class 8 Heavy Truck Build Forecast, 2026 estimates continue to imply a 9% increase in year-over-year volumes.

The big change since last quarter is that ACT is now forecasting another 9% increase in 2027 versus a prior expectation of a 2% decline. They currently expect strong growth of 13% in 2028. Similar to prior quarters, we are showing you a more granular look into the quarterly ACT data and outlook. Q2 2026 production came in, as currently estimated, at 68,000, with expectations for further uptick in Q3 and Q4.

Moving to our construction market outlook, based on recent commentary and outlooks from our customers, we expect the construction market to be up in the mid-single-digit percentage range, primarily driven by stronger industrial production and fiscal stimulus initiatives for 2026. And finally, we are including a new geographical revenue breakdown chart this quarter. This chart highlights the success we've had in balancing our exposure to cyclical North American Class 8 truck market and capturing growth opportunities globally through customer diversification and new business wins.

We are excited about the increased volumes in the Class 8 truck market and look forward to supporting our Class 8 customers as they grow their business. Turning to slide 12, I will share a few thoughts on our updated outlook for 2026. As always, our guidance ranges are based on current macroeconomic trends, forecasted Class 8 truck build rates, demand levels in construction markets, and the ramp of new business. Based on our solid first-half performance, as well as the continued ramp of new business and the recovery we're seeing in the end-market demand, we are increasing our revenue and adjusted EBITDA guidance ranges.

For 2026, we are increasing our revenue guidance range to $725 to $755 million, which now represents a growth of approximately 14% over 2025 results at the midpoint. This remains supported by strong growth across all three business segments. Our increased adjusted EBITDA guidance range of $26 to $31 million represents a growth of approximately 60% over 2025 results at the midpoint of the range, reflecting the operating leverage on the gross margin line as end markets recover, offset by the expense pressures we're seeing in SG&A.

Finally, we continue to expect to generate positive free cash flow in 2026, further supported in the quarter by the proceeds from our equity ATM program. As evidenced by our recent actions, we continue to prioritize free cash flow for debt paydown, reducing interest expense, and driving net leverage toward our targeted leverage ratio of two times.