Good morning, ladies and gentlemen. And welcome to the Cooper-Standard Holdings Inc. First Quarter 2025 Earnings Conference Call. During the presentation, all participants will be in listen-only mode. Following company-prepared comments, at that time, if you have a question, you will need to press star then one on your telephone keypad. To withdraw your question, please press star then two. As a reminder, this conference call is being recorded. And the webcast will be available on the Cooper-Standard Holdings Inc. website for replay share today. I would now like to turn the conference call over to Roger Hendriksen, Director of Investor Relations. Please go ahead.

Thanks, Jenny, and good morning, everyone. We appreciate you spending some time with us 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 Jon Banas, Vice President and Chief Financial 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 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 to their most directly comparable GAAP measures are included in the appendix to the presentation. So with those formalities out of the way, I'll turn the call over to Jeff Edwards.

Thanks, Roger. Good morning, everyone. Certainly appreciate the opportunity to review our first quarter results and provide an update on our business and the outlook going forward. To begin on Slide five, I'll just highlight some key first-quarter data points that we believe are reflective of our continuing outstanding operational performance and certainly our ongoing commitment to our core company values. This quarter was arguably the best ever in terms of operations and customer service. With 99% of our product quality scorecards being green. For new program launches, we continue to provide outstanding service levels with 97% customer scorecards being green. These are amazing operational statistics that any company would be proud of. They reflect our ongoing commitment to providing the best possible value for our customers as well as our internal commitment to excellence in all we do. Also in our plant operations, safety performance, I'm proud to say, continues to be world-class. During the first quarter, we had a total incident rate of 0.30 reportable incidents per 200,000 hours worked. Well below the world-class benchmark of 0.47. Importantly, 47 of our plants had a perfect safety record in the quarter with a total incident rate of zero. That's 82% of all of our production facilities achieving a perfect safety score. And demonstrating that our ultimate goal of zero safety incidents is achievable. As I mentioned, we're proud of our entire team for their focus and achievement in this most important operating measure. And as I say often, a special shout out to our plant managers. You continue to be one of the cornerstones of our company, and I'm very proud of you all. In terms of cost optimization, we had another solid quarter with our manufacturing and purchasing teams delivering $20 million of savings through lean initiatives and…

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. On Slide nine, we show a summary of our results for the first quarter of 2025 with comparisons to the same period last year. First-quarter 2025 sales were $667.1 million, a slight decrease of 1.4% compared to the first quarter of 2024. The decrease was driven primarily by unfavorable foreign exchange, which was partially offset by favorable volume and mix including net customer price adjustments. Adjusted EBITDA in the quarter was $58.7 million compared to $29.3 million in the first quarter of last year. The year-over-year doubling was driven primarily by our manufacturing and purchasing lean initiatives, savings related to the restructuring initiative we implemented in the second quarter of last year, and the timing of certain royalty payments received in the quarter. These positive factors were partially offset by ongoing general inflation, higher costs for customs, duties, and tariffs, and other items. On a US GAAP basis, we reported positive net income of $1.6 million in the first quarter of 2025. Compared to a net loss of $31.7 million in the first quarter of 2024. Adjusting for restructuring and other smaller noncash items and the related tax impacts, Adjusted net income for the first quarter of 2025 was $3.5 million or $0.19 per diluted share compared to an adjusted net loss of $30.6 million or $1.75 per diluted share in the first quarter of 2024. Our capital expenditures in the first quarter were $17.5 million or 2.6% of sales. Which was essentially in line with our investment levels for the first quarter of last year. We continue to exercise discipline around capital investments, in order…

Thanks, Jon. And for the next few minutes we have remaining in the call this morning, I'd like to comment on the high-level strategic imperatives and a few related notable activities and achievements. Then I'll wrap up with a few comments on our outlook for the rest of the year. That slide probably should be titled Never a Dull Moment, but we'll talk about that in a few. So please, turn to slide 13. Our global team has become truly aligned around our four key strategic imperatives that you see outlined on this slide. This alignment is driving significant improvements in virtually every aspect of our business, and the transformation certainly has been exciting to watch and experience. Jon already commented on our improving profitability, and I believe we are poised to return to double-digit adjusted EBITDA margins and double-digit returns on invested capital. And it's certainly no surprise that our improved profitability this quarter was led primarily by significant improvements in operating efficiencies and lean initiatives. We continue to operate at world-class levels, and I again want to recognize our plant managers and the approximately 20,000 employees that work directly for them for their relentless drive for excellence and value creation. The next couple of slides speak to the imperatives of innovation and corporate responsibility. Let's turn to slide 14, please. Our Sealing team is focused on driving profitable growth by developing and delivering product solutions that enhance sustainability for us and our customers. Sustainable technologies that reduce weight, improve vehicle efficiency, reduce carbon footprint, and improve recyclability are critical to this strategy. At the same time, our production teams are finding new and innovative ways to deliver these products with less scrap, reduced energy consumption, and driving improved margins at the plant level. Consistent with our company values,…

Thank you. Ladies and gentlemen, if you would like to ask a question, to withdraw your question, may press 2. One moment please as we assemble the queue for questions. Your first question is from Kirk Ludtke from Imperial Capital. Your line is now open.

Hello, Jeff, Jon, Roger. Thank you for the call. Good morning. Good morning, Kirk. Morning, Kirk. Hey, Kirk. Slide 10, I noticed the $2 million in duties and tariffs. Is this a timing issue? Do you expect to recover that? And is that something we should expect to reverse in the future? Future quarters? Or how do how should we think about those? That that category of cost?

Yeah. Kirk, that's exactly right. This is the minor couple day impact of tariffs that we had in the middle of the quarter when there was some uncertainty about the exact implementation date, and then it was paused. So this is just a two or three-day impact. Overall for us. And you're right. It's a gross amount that we fully expect to be able to work to recover.

Kirk, this is Jeff. Let me just add. As I mentioned in the last call with you all, and as I highlighted today regarding tariffs, I mean, we have incredible systems. I mean, we should. We spend enough money on them. So the financial systems, the IT systems that we have allow us in a very granular real-time way to understand each and every moving part, if you will, that is either underneath the free trade agreement or not. And we're really, really confident in our data. We've provided it to our customers. They're really confident in our data as well. And that's why I believe that as it relates to whatever they end up being, we believe that we will continue to recover the vast majority of those costs. So, as I mentioned in the last call, I don't believe it's going to be significant for us going forward with that approach. And I don't feel any different sitting here today with more knowledge than I had in the last call. So, hopefully, that kinda reflects on some of the tariff questions that are out there and you guys were thinking about it. I thought I would use your lead to summarize what my thoughts are there.

Thank you. That's very encouraging. What would the lag be?

I think that as we talk to our customers about this, you know, I would just say, we expect it to be real-time. So, as the parts are picked up, we expect to be paid and reimbursed if there's anything out there that needs to be reimbursed. And, again, I think what's very important for everybody to understand is the vast majority of our parts do come under the free trade umbrella. So for us, while it's not something we aren't paying attention to for sure, I mean, we need to recover whatever those costs are. But it's probably not as large and significant as some of the other folks out there. So I'll just leave it at that, but it'll be you know, we don't anticipate you know, a quarterly true-up or something like that. It'll be ongoing.

Interesting. Thank you. Slide 15 is really interesting. Is the trajectory of hybrids coming at the expense of electric or why is this happening? Why do you think this is happening?

Yeah. I guess, you know, I tend to not wanna get out ahead of my blockers. And in this case, it's the customer, the OEMs that are probably better to answer that. But at least in our view, as a supplier into that space, clearly, consumers are voting. Right? And they prefer the hybrid approach. Versus ICE and versus EV, I think. And so it's probably the answer is probably both. But for us, and what we tried to point out in our presentation, was just the significant increase in content per vehicle that this hybrid electric vehicle approach is going to drive for us. And we've talked about this really over the course of a few years now. It's just that hybrid wasn't being projected as significant volume, and that has changed. And therefore, that's the reason we're trying to do a better job of quantifying what we think that looks like now and into the future. And for Cooper-Standard Holdings Inc. anyway, it's really a good shift. Not that EV wasn't increased content for us either. It was. But not as much as the hybrid, which that also is pretty easy to understand when you have two different systems. That need heating and cooling. And then our technology that's helping to consolidate technology and components within these vehicles to help our customers reduce overall cost, our content goes up. Of course. So it's a big deal. And one that I think we're all looking forward to participating in over the next ten years or so.

Got it. Thank you. And then lastly, with respect to the guidance, you're not withdrawing guidance. You're or are you?

No. We're not. This is Jeff. We're clear there. And, Kirk, I would tell you, it's exactly what we've done. I don't know. Twelve years in a row. We always say we'll look around the corner better. When we get to the end of the second quarter, when we have firmer releases for the third and fourth quarter. Right? And so as I also said in the remarks, the first two the first half of the year, the quarter that we're talking about now and the quarter that we're a third of the way through, we haven't seen significant changes from our original plan related to volume. If anything, mix is probably a little more favorable. So I don't know what the summer is gonna bring as it relates to the way the customers are gonna ultimately stabilize here when the noise is over. I don't know if that's gonna result in higher volume, same volume, or less. But I'll know that I'll have a much better view of it come July, August than I do sitting here today. That's the reason for the approach. But it's pretty consistent with what we've always done, frankly.

Got it. Yes. Yeah. I remember. So with respect to the guidance it is conceivable that you could get to a double-digit EBITDA margin a run rate by year-end. Still.

Of course. Of course.

Yeah. Great. Thank you. I appreciate it.

Thank you. Your next question is from Michael Ward from Study Research. Your line is now open.

Thanks very much. Good morning, everyone.

Hey, Mike.

In the last year or so, one of the things you've talked about pretty consistently, is that it'd be nice to get some volume. And I think there are all these concerns about the impact of the tariffs, but the bottom line is the sales have been stronger. Obviously, some pull forward. Inventory is low. So now you're back into a position where you got an inventory pull. GM yesterday on their call said they would not be cutting back any schedules and talking to the dealers. I think orders are gonna remain robust. What are you hearing from the manufacturers about production over the next thirty, sixty, ninety days?

Yeah. Thanks, Mike. This is Jeff. I'll answer that. So we have seen continued releases that suggest what we saw in the first quarter and as we head into the second quarter, it's exactly what we had planned, if not better mix on trucks and SUVs here. So I think it's consistent with what you just said. It also goes without saying, I guess, and there's clearly some favorable incentive plans being applied by all of our customers here in the US anyway. And I think that's also having a positive impact, right, in these employee pricing programs that are being cascaded across all consumers. We see that having a very positive impact. You mentioned, our customers have talked about that publicly, and you know, we're on the receiving end of that. So it's been really good. We are just trying to make sure we stay focused on what we can control. We have really good systems to help us add up the tariff carnage, if you wanna put it that way, and make sure we get that put in front of, front of the appropriate customers as we need to and as they require it. And as a result of not having to worry about all this from a manual systems point of view, we're not using Excel spreadsheets, you know, like we may have back in the day. We're able to get that done, get it into the customer, and make our appropriate plans. I wanna also say this isn't about just what we're doing in terms of getting paid from the customer. It's also if there's ways that we can adjust what we're doing to avoid having to pay tariffs, then obviously that's our burden to do it. But the way we laid out our supply chain for the most part working with our customers, it's just not that significant for us. It needs to be managed. It needs to be recovered. But it isn't as large as maybe some of the other tier ones.

In Europe, are you more concerned about the volume levels in Europe if there's some pushback from a production standpoint with exporting with a higher cost on the tariff side?

As I mentioned in the call, Mike, I think we're all looking to the summer and the third and fourth quarter to really try to understand what all this is going to mean for volume. I can just tell you, sitting here today, we don't see any significant change in those forecasts. And because of the way sales are going here in the first half of the year, I'm assuming somebody needs to replenish inventory, which means there's gonna be production in the second half of the year. So but how that differs from what we have in the forecast I suppose it could be higher. Right? I mean, could be. I suppose it could be lower. And we just don't have a view of it as we sat here May, but I certainly will in July, August.

So it sounds like the market is discounted the worst-case scenario. You can adapt to the worst-case scenario, but it sounds like the answer is probably gonna be locked better than the market's perception. And you're prepared to handle that if it occurs. From a volume standpoint.

We are. I mean, we flex well. We've been flexing seems like, a decade. Right? And so I think that's an exercise that we're pretty good at. And we also are hoping that we get an opportunity to flex to some volume increases, right, not just volume decreases. So we're maintaining really, really good performance. We have our plants have enough capacity to deal with the volumes if they go up. And we certainly have the ability and the experience to deal with it if it goes down. So I feel as probably as confident as I've felt this time of year in a long time. I mean, you go back over the course of six, seven, eight years, it isn't as if we haven't dealt with you know, a few things. And so I don't feel this is anything that's going to create a long-term issue. Believe that you just have to manage through it. We are company's never been stronger. The quality performance of our plants every way you wanna look, working capital, margins, pointed in the right direction. When we do get volume, which you and I know we will, I think it's going to be really, really good news. So I'll just leave it at that.

Thank you. Jon, two things on the financial side. I know usually first quarter is a working capital drain, but it looks like there was an outside bump up in the receivables. Is that a calendar thing, or is that just timing of collecting the money? Was it you know, the snapshot that changed it and altered it? And when does that come back?

Yeah. Mike, you're absolutely right. Q1 is always a working capital outflow from a seasonality standpoint. Throughout the year. And Q1 here was no exception. When you unpack the receivable side, we did a very good job of driving receivables down in December of last year. So it was down to $311 million, I think, if memory serves. And that grew to about $357 million. Normal seasonality, you also have to unpack month by month. When that revenue is coming back online. So what it kinda tells you is there's a little bit more revenue being produced in, February and March. That you aren't collecting on, that'll get collected in Q2. And roll forward, if you will, through the year. So that's kind of the biggest the biggest explanation when you look at accounts receivable. But, you know, from an overall free cash flow perspective, despite the flat sales, cash earnings themselves and the actual earnings power was up way over year. And then we had a little bit higher of a working capital build to offset that. So almost on par with the prior year when in terms of overall free cash flow.

Okay. So some of that should balance out by the end of the year.

Yeah. Absolutely.

And then on what was the item in the other income? Is that where the royalty true-up was, or was that something else?

That was, Mike. Within that the $7 million bar on that chart, that's where the royalty income was recorded. As I had mentioned in my prepared remarks, this was timing of automotive royalties that were received in the quarter. We earned these in connection with the intellectual property license that we incorporated into a previously divested business. Transaction. So this is really just catching up on that deal. And collecting on those royalty payments that were due to us.

Okay. So then from the on the segment data, on the adjusted EBITDA, it shows up in corporate eliminations and other.

That's correct. Because, I said, that business was divested a while ago. And it didn't really belong in either the ceiling or the fluid business. So we kept it in the corporate and other area.

Okay. Got it. Thank you, Jon. Thank you, Jon. Thanks, Roger.

Alright, Mike. Thanks. Thank you. Once again, ladies and gentlemen, and your next question is from Ben Griggs from Financial. Line is now open.

Good morning, guys. Thanks for holding the call and taking the questions. Most of my most of mine got answered. So thank you for those answers. Just one thing I wanna double-check from your prepared remarks. Did you say that you believe the net leverage ratio can get to around two turns by end of 2027? Did I hear that correctly?

Yeah. This is Jeff. That's exactly right.

Okay. Great. Thank you. Can you walk through a couple of the key assumptions you're using to get there? Because I mean, would there be volume increases? There gonna be further margin increases, some cost-cutting? Just any assumptions that you're using to get there would be helpful.

Yeah, Ben. This is Jon. That first and foremost, that assumes no refinancing activity. That's just our base business plan for the next three years, you know, based on the volume assumptions. That we expect to normalize. Right? We're not talking about the short-term volatility but a more normalized volume production environment. Looking ahead over that time horizon. So it's really what we've been talking about for the last several quarters. The contribution margin benefits that we're seeing on new business coming online over the next couple of years? Taking advantage of the operational leverage that we've created, with our cost reduction initiatives and all the hard work that's been done by the team over the last several years to really bolster the sustainable profitability going forward. But, you know, clearly, to get to that two times that Jeff had in his prepared remarks, it focuses on continued execution, and that those profitable growth certainly remains the most impactful lever to get there overall, to get to improve those net leverage ratios overall. So we feel pretty good about that based on everything that we've been seeing and certainly the type of execution that our global teams are delivering on that we've been talking about a lot today.

Okay. Great. Thank you. And I just wanna follow-up on one of the previous questions. Where they asked about the guidance. And you said you're not pulling guidance. So just to kind of put a pin in that, would you say that your guidance is still full adjusted EBITDA in fiscal 'twenty-five? At the low end of $200 million and at the high end of $235 million?

Yes.

Okay. Great. That is that's it for me. Thank you, guys.

Thanks, Ben.

Thank you. It appears that there are no further questions. I would now like to turn the call back over to Roger Hendriksen for the closing comments.

Okay. Thanks, everybody. We appreciate you joining the call. We appreciate you engaging questions. If there are other questions that come up that we didn't answer this morning, please feel free to reach out. We'd love to continue the conversation in the coming weeks. Thanks again. Talk to you soon.

Thank you. Ladies and gentlemen, that concludes our conference call for today. Thank you all for participating. You may now disconnect your lines.