Full Transcript: Cooper-Standard Holdings Q2 2026 Earnings Call

Cooper-Standard Holdings (NYSE: CPS ) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. This content is powered APIs. 2% increase from the previous year, driven by favorable foreign exchange and customer price adjustments.

The company achieved $15 million in savings through cost optimization initiatives and reported a net new business award of $118 million in the quarter, contributing to a total of $246 million in new business for the first half of 2026. 8 million in Q2, the company anticipates recovering material cost increases in the second half of the year through commercial agreements and expects positive free cash flow generation for the full year. Strategically, Cooper-Standard Holdings is focused on expanding its margins and return on invested capital through cost optimizations, new program launches, and enhanced commercial agreements.

Management is optimistic about the future, maintaining full-year guidance for sales and profitability and highlighting the company's ability to adapt to flat production volumes while achieving margin expansion. Full Transcript OPERATOR Good morning, ladies and gentlemen, and welcome to the Cooper-Standard Holdings second quarter 2026 earnings conference call. During the presentation, all participants will be in listen-only mode. Following the company prepared comments, we will conduct a question and answer session.

At that time, if you have a question, you will need to press star one on your telephone keypad. To withdraw your question, please press star two. As a reminder, this call is being recorded and the webcast will be available on the Cooper-Standard Holdings website for replay later today. I would now like to turn the call over to Roger Hendrickson, Director of Investor Relations.

Please go ahead. Roger Hendrickson, Director of Investor Relations Joining our call this morning, the members of our leadership team who will be speaking with you on the call this morning are Jeff Edwards, Chairman and Chief Executive Officer, and John Bannis, Executive Vice President and Chief Financial Officer. Before we begin, I need to remind you that this presentation contains forward-looking statements. While they are made based on current factual information and certain assumptions and plans that management currently believes to be reasonable, these statements do involve risks and uncertainties.

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. This presentation also contains non-GAAP financial measures. Reconciliations of the non-GAAP financial measures compared to their most directly comparable GAAP measures are included in the appendix to the presentation. With those formalities out of the way, I'll turn the call over to Jeff Edwards.

Jeff Edwards, Chairman and Chief Executive Officer Thanks, Roger, and good morning, everyone. Thank you for joining the call this morning. To begin on slide 5, I'd like to highlight some key second quarter data points that we believe are reflective of our continued outstanding operational performance and our ongoing commitment to our core company values. In terms of operations and customer service, we continue to deliver excellent performance for product quality and service.

Ninety-nine percent of our customer scorecards were green in the quarter. For new program launches, we also continue to deliver strong performance with 97% of the customer scorecards being green. And for the most important operating metric, safety performance continues to be excellent. A shout out there to our plant employees.

Thank you all. Just further on safety, listen to these stats—pretty impressive. 17 reportable incidents per 200,000 hours worked. 35.

Importantly, 44 of our plants have maintained a perfect safety record with a total incident rate of zero for the first six months of the year. That's 75% of all of our production facilities achieving a perfect safety score and demonstrating that our ultimate goal of zero safety incidents is achievable. We're proud of our entire global team for their focus and achievement in this most important operating measure. In terms of cost optimization, we had another solid quarter with our manufacturing and purchasing teams delivering $15 million of savings through lean initiatives and other cost-saving programs.

These cost reductions and operating efficiencies are always important, but I would call them critical in periods of hyperinflation such as we just experienced this quarter. So I want to give a special shout out to our purchasing team and our manufacturing and engineering teams for their continued excellent work and achievements. We appreciate all you're doing. In addition, we did a nice job managing working capital and spending in order to optimize cash flow during the quarter.

We were pleased to deliver a solid $16 million in free cash flow, a $40 million improvement over the second quarter of last year. Finally, we're continuing to leverage our world-class service technical capabilities and our award-winning innovations to win significant new business. In fact, during the second quarter of 2026 we received $118 million in net new business awards which will drive additional profitable growth as they launch over the next few years. Turning to slide 6, putting this strong commercial performance in context, this brings the total net new business awards for the first half of the year to $246 million.

This remains ahead of our plans for the year so far, which we believe puts us in a strong position to achieve the full year goal of over $400 million in 2026 and topping $700 million when combined with last year's award. As you can see in the chart, our new business awards have been accelerating over the past few years as the financial strength of the company has been improving. And the good news is that we will have available capacity to launch much of this new business over the coming years with minimal capital investment.

We're certainly proud to be the supplier that our customers are increasingly turning to for quality components, consistency of delivery, and collaboration of critical design and development of new technologies. With these awards in hand driving incremental variable contribution margins and a strong outlook for new business wins ahead, we're increasingly confident that we'll be able to execute our plans and achieve our longer-term strategic financial targets for growth, margins, and return on capital. Now let me turn the call over to John to discuss the financial results for the quarter.

John Bannis, Executive Vice President and Chief Financial Officer Thanks, Jeff, and good morning, everyone. In the next few slides, I'll provide some details on our financial results for the quarter and discuss our cash flows, liquidity, and aspects of our balance sheet and capital structure. On slide 8, we show a summary of our results for the second quarter and first half of 2026 with comparisons to the same periods last year. 2% compared to the second quarter of 2025.

The increase was driven primarily by favorable foreign exchange and, to a lesser extent, favorable volume, mix, and customer price adjustments and recoveries. 8 million we reported in the second quarter of 2025. The year-over-year change was primarily due to higher costs for materials, duties and tariffs, and other general inflationary pressures. S.

4 million in the second quarter of 2025. 06 per share, in the second quarter of 2025. 9% of sales. This was higher than the prior-year period due to increased launch-related investments and automation, but in line with our full expected run rate of 2% to 3% of sales.

We continue to exercise discipline around our capital investments, consistent with our goals of maximizing returns on invested capital. 6 million. I'll provide some additional detail on the drivers of the year-over-year changes for the quarter and the first half in the charts on the next couple of slides. So, moving to slide 9: For second quarter sales, favorable foreign exchange was a tailwind of approximately $10 million in the quarter versus the second quarter of 2025.

Favorable volume and mix, net of customer price adjustments and recoveries, had a positive impact on sales of approximately $5 million compared to the same period a year ago. For second quarter adjusted EBITDA, lean initiatives in purchasing and manufacturing positively contributed $15 million year over year, demonstrating continued strong performance from our global teams. In addition, favorable foreign exchange added $2 million compared to the second quarter of last year.

More than offsetting these improvements were $10 million of higher material costs around rubber, metals, and resins, as well as $8 million in increased wages and general inflation, and $8 million in higher duties, tariffs, and other costs. Most of the commodity inflation was driven by higher oil prices, which averaged about $30 per barrel higher in the second quarter than before the Middle East conflict began. As discussed during our first quarter conference call earlier this year, the gross commodity inflation incurred during the second quarter is really a timing difference.

Based on the structure of our commercial agreements, we expect to recover most of these incremental input costs, as well as tariffs, in the second half of the year according to the index-based contracts and agreements we have in place, as well as through typical commercial negotiations. This is really the first time that our index-based contracts have been significantly tested since we put them in place, and we're pleased that they are working as intended. Price increases have already gone into effect in the third quarter, which will allow us to recover much of the material cost inflation we have seen.

Moving to slide 10, looking at adjusted EBITDA for the first half of the year, our teams have generated $31 million in savings or increased efficiencies in manufacturing and supply chain optimization, which continue to benefit our results. We have also seen $3 million in savings from past restructuring initiatives. Nonetheless, these positive drivers were more than offset by $15 million in wage increases and general inflation, $11 million in higher duties and tariffs, and $10 million of higher material costs, as well as $8 million of unfavorable volume and mix along with $6 million of other costs.

As mentioned, despite ongoing cost pressures from materials and tariffs, we remain confident in our ability to recover or mitigate the vast majority of these impacts through commercial recoveries and operational actions. Accordingly, we expect only a modest net effect on full-year results and will continue to proactively manage changing commodity conditions and recovery timing throughout the remainder of the year. Turning to slide 11, as Jeff mentioned earlier, we had a strong quarterly performance in terms of cash flow. 3 million in the period.

7 million compared to the second quarter of last year, driven primarily by our successful refinancing in the first quarter and our continued focus on optimizing working capital. Year to date, cash usage was higher than the prior-year period, reflecting lower first-half earnings driven by elevated material and tariff costs, volume and mix dynamics, as well as increased capital investments supporting new program launches and automation initiatives. As material cost recoveries take effect and operational efficiencies ramp up further, we continue to expect positive free cash flow generation for the full year.

6 million of availability on our ABL facility, which remains untapped. We had total liquidity of nearly $300 million as of June 30, 2026. We believe that this current level of liquidity, combined with expected future cash generation, provides us with sufficient resources to support the continuing execution of our strategic plans to deliver profitable growth, lower our net leverage, and maximize returns on our invested capital. This concludes my prepared remarks, so let me turn it back over to Jeff.

Jeff Edwards, Chairman and Chief Executive Officer Thanks, John, and in this last portion of our call, I'll comment on our high-level strategic imperatives and how we believe these are positioning us for continuing profitable growth over the next several years. Then I'll wrap up with a few comments on our outlook for the business and our industry in general in 2026. So if we can turn to slide 13, our strategies and operating plans are built around the four key strategic imperatives that you see outlined on slide 13.

By aligning the company around these common objectives, we continue to drive significant improvements in virtually every aspect of our business, and by the continuing execution of our plans and strategies, we're positioning the company to deliver continued profitable growth, further improvements in margin, and significantly improve returns on invested capital. Slide 14 — the charts on slide 14 provide a concise summary of the progress we've made in restoring the financial health of the company.

Through our successful strategic execution, we've been able to increase our gross profit margins by 160 basis points over the past two years despite reduced or flat production volumes in our two largest operating regions. This includes the impact from the significant decline in production on one of our key programs here in North America that resulted from a customer supply chain disruption beginning in the fourth quarter of last year and carrying into the first half of this year.

Because of our success in driving sustainable efficiencies and fixed cost reductions, we believe we will continue the trend of expanding margins in 2026 and beyond, even if production volumes remain flat, and we would expect to leverage any increases in production volume to drive further profitability and returns. In addition to our cost optimizations, we're benefiting from continuing launches of new programs and products with enhanced variable contribution margins. As the new programs ramp up, they're replacing older programs that have lower margins on average.

Our book of business launch cadence and the timing of run-out business give us a high degree of confidence in our expanding margin outlook. In addition, our enhanced commercial agreements with top customers allow us to recover most material and tariff cost increases such as those we experienced this quarter. This significantly reduces the risk for turbulent market conditions that might otherwise disrupt our strategic execution. Turning to slide 15, both of our business segments are continuing to execute their sound strategies to drive profitable growth and improve returns on invested capital.

Specifically, in our sealing segment, where we're already the global leader in the industry, we're leveraging our leading technologies, expertise and innovation to capture additional share and profitability. We've also deployed sophisticated digital tools, and we're in the process of implementing several automation initiatives within our manufacturing facilities to drive further efficiencies and improved asset utilization. Finally, as we continue to deliver exciting innovations that provide incremental value to our customers, we're winning more than our share of new business.

Turning to slide 16, we provide a few examples of the sealing innovations we've introduced into the market that are beginning to gain traction and drive sales. Our Flush Seal system has been very popular and is already in production on more than 20 vehicle programs. A more recent innovation, Flexicore Body Seals, is an award-winning technology that we expect will be in production on two vehicle programs later this year. In addition, we're advancing development projects for Flexifit Glass and Flexifit Hidden Outer Waist Belt technologies with several customers and expect to add these innovations to our list of new business awards very soon.

, the continuing adoption of EVs in China, and the evolving mix of hybrids and EVs in Europe. This flexibility around powertrains, combined with our ability to design and deliver engineered solutions to optimize vehicle efficiency, is creating opportunities for increasing content per vehicle and profitable new growth.