Cooper-Standard (CPS) Q3 2026 Earnings Call Transcript

DATE

Thursday, Nov. 5, 2026

CALL PARTICIPANTS

• Director of Investor Relations - Roger S. Hendriksen
• chairman and chief executive officer - Jeffrey S. Edwards
• executive vice president and chief financial officer - Jonathan Banas

TAKEAWAYS

• Sales -- $708.6 million, increasing 1.9% year over year driven by favorable volume, mix, and customer price adjustments despite a 2.3% decline in global production volumes.
• Net Loss -- $20.4 million, compared to a net loss of $7.6 million in the prior year period, primarily due to $19.2 million in restructuring charges.
• Adjusted Net Loss -- $2.1 million, or $0.11 per diluted share, improving from an adjusted net loss of $4.4 million or $0.24 per share in the third quarter of 2025.
• Adjusted EBITDA -- $52.8 million, or 7.5% of sales, reflecting manufacturing efficiencies and lower compensation costs that partially offset higher material inflation.
• Net New Business Awards -- $148.8 million, received during the third quarter, including $28.2 million associated with battery electric or full-hybrid vehicle platforms.
• Year-to-Date Awards -- $395.1 million, nearly reaching the full-year 2026 target of $400 million following accelerated awards over the last two years.
• Sealing Systems Sales -- $350.3 million, representing a slight increase from $348.8 million in the third quarter of 2025.
• Fluid Handling Systems Sales -- $335.1 million, growing from $328.6 million in the prior year period.
• Lean Savings -- $9 million, generated through manufacturing and purchasing initiatives during the third quarter despite increased costs from high launch activity.
• Adjusted EBITDA Bridge (Negative) -- $15 million in higher material costs and $12 million in increased wages and general inflation compared to the third quarter of 2025.
• Adjusted EBITDA Bridge (Positive) -- $13 million in lower compensation related expense and $4 million in lower customs, duties, and tariffs.
• Material Inflation Drivers -- $30 to $40 per barrel in oil prices above the $65 per barrel planning assumption, impacting rubber and plastic feedstock pricing.
• Operating Cash Flow -- $5.2 million, decreasing from $38.6 million in the prior year period due to higher material costs and working capital investments.
• Free Cash Flow -- Outflow of $10.8 million, reflecting increased capital expenditures for automation and new program launches.
• Total Liquidity -- $305.4 million, consisting of $112.3 million in cash and $193.1 million in availability on a recently amended credit facility.
• ABL Facility Amendment -- $200 million capacity, increased from $180 million with a new maturity date extended to September 2031.
• Guidance (Sales) -- $2.75 billion to $2.85 billion, for the full year 2026.
• Guidance (Adjusted EBITDA) -- $235 million to $245 million, reduced from the previous range of $265 million to $295 million due to commodity and inflation headwinds.
• Guidance (CapEx) -- $65 million to $70 million, representing 2% to 3% of sales.
• Production Assumptions -- 15.0 million units in North America and 17.2 million units in Europe for the full year 2026.
• Safety Performance -- 0.27 reportable incidents per 200,000 hours worked, remaining below the world-class benchmark of 0.35.
• Customer Performance -- 99% of quality and service scorecards were green, while 97% of launch scorecards remained green during the quarter.
• Plant Launch Activity -- 100% increase, in total plant launches compared to the third quarter of 2025.
• SG&A Expense -- $4 million reduction, achieved through ongoing fixed-cost optimization efforts.
• Cash Restructuring Guidance -- $30 million to $35 million, expected for the full year 2026.

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RISKS

• Banas stated, "continued elevated commodity prices could further delay the full realization of expected recoveries," noting that the timing depends on price trends and contract lags.
• Edwards noted that the company incurred an increase in launch costs resulting from higher than planned launch activity related to recent conquest business and mid-program transitions.

SUMMARY

Cooper-Standard Holdings Inc. (NYSE:CPS) reported third quarter results impacted by significant commodity cost inflation and general economic headwinds, leading management to lower its full year 2026 adjusted EBITDA guidance by approximately $40 million at the midpoint. Despite these pressures, the company nearly achieved its full-year new business award target of $400 million by the end of the third quarter, driven by strong demand for sealing and fluid handling technologies. Management reported that manufacturing and purchasing lean initiatives generated $9 million in savings during the quarter, while fixed-cost optimization efforts reduced SG&A expenses by $4 million. The company successfully amended its asset-based lending facility to increase liquidity to $305.4 million and extend the maturity to September 2031, providing additional flexibility to support strategic growth and new program launches.

• Management appointed Christopher E. Couch as the chief AI officer to lead the business process orchestration phase of the company's digital transformation.
• Edwards stated, "We believe this process orchestration capability will enable us to scale our top line by more than 1 billion over the next several years without requiring a commensurate increase in headcount and costs."
• The company is actively renegotiating index-based commercial agreements to improve the timing of cost recoveries and refine the indices used to de-risk against future hyperinflation.
• Management expects a significant release of working capital in the fourth quarter, which is traditionally a strong period for free cash flow generation despite upcoming interest payments.
• The company is pushing back on traditional industry practices for financing customer tooling to enhance its ability to generate cash from operations and reduce the burden on the balance sheet.
• Restructuring charges of $19.2 million in the third quarter were primarily associated with the continued downsizing of the Western European workforce to optimize the manufacturing footprint.

INDUSTRY GLOSSARY

• Adjusted EBITDA: A non-GAAP financial measure that excludes interest, taxes, depreciation, amortization, and specific non-core items like restructuring charges.
• ABL Facility: An asset-based revolving credit facility where the maximum borrowing amount is tied to the value of the company's specific assets, such as accounts receivable or inventory.
• TIR: Total Incident Rate, a safety metric representing the number of reportable incidents per 200,000 hours worked.
• Formulink: A proprietary AI-driven technology used by the company to accelerate the development of new material compounds.
• LiveLine: A proprietary automated process control technology that uses AI to improve efficiency and quality in extrusion operations.
• Sealing Systems: Engineered components that provide a barrier against noise, air, and water for vehicle openings such as doors and windows.
• Fluid Handling Systems: Systems designed to transport and control the flow of fuels, brake fluids, and thermal management liquids within a vehicle.
• Net New Business: The estimated future annualized sales from new program awards, adjusted for lost or discontinued business.

Full Conference Call Transcript

Operator: Good morning, ladies and gentlemen, and welcome to the Cooper Standard Third Quarter 26 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Following 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 then the number 1 on your telephone keypad. To withdraw your question, please press star then the number 2. As a reminder, this conference call is being recorded and the webcast will be available on the Cooper Standard website for replay later today. I would now like to turn the call over to Roger S. Hendriksen, Director of Investor Relations. Please go ahead.

Roger S. Hendriksen: Thanks, Mel, 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 Jeffrey S. Edwards, chairman and chief executive officer and Jonathan Banas, 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 3 of this presentation and the company's disclosures 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. With those formalities out of the way, I will turn the call over to Jeffrey S. Edwards,

Jeffrey S. Edwards: Thanks, Roger, and good morning, everyone. We appreciate the opportunity to review our third quarter results and as always provide an update on our business and outlook going forward. So just beginning on slide 5, I would like to highlight some of the third quarter data points that we believe are reflective of our continued outstanding operational performance and our ongoing commitment to our company values. In terms of operations and customer service, we continue to deliver outstanding performance on both fronts. For product quality and service, 99% of our customer scorecards were green in the quarter. For new program launches, we continue to deliver strong performance as well with 97% of those scorecards green.

Even with significantly enhanced launch activity. So, again, a shout out to our plant managers and plant employees as they continue to deliver outstanding performance and value for our customers through their dedication and personal commitment to excellence. I truly appreciate everything they are doing. And as always, the most important operating metric we have is safety performance, and that continues to be excellent. During the third quarter, we had a total incident rate of 0.27 reportable incidents per 200 thousand hours worked. that is well below the world class benchmark of 0.35.

Importantly, 36 of our plants, have maintained a perfect safety record with a total incident rate of 0 for the first 9 months of this year. that is 61% of all of our production facilities achieving a perfect safety score. And demonstrating our ultimate goal of zero safety incidents is certainly achievable. I am proud of our entire global team for their focus and achievement in this important operating measure. In terms of cost optimization, we continue to make progress with our manufacturing and purchasing teams, and they delivered $9 million of savings through lean initiatives and other cost saving programs.

This was despite an increase in launch cost resulting from higher than planned launch activity partially related to the recent conquest business that we have booked and mid program transitions. Total plant launches in the quarter were up more than 100% compared to the third quarter of last year. We also made solid progress in terms of optimizing our fixed cost with an additional $4 million reduction in SG&A during the quarter. Finally, we are continuing to leverage world class service technical capabilities, our award winning innovations to win significant new business. During the third quarter of 26, we in fact received $149 million in net new business awards.

Which are expected to drive profitable new growth as they launch over the next few years. Turning to slide 6, just to put this in context, this brings the total new net business awards for the first 9 months of the year to $395 million essentially already achieving our full year 2026 goal of $400 million. 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 have available capacity to launch much of this new business over the next coming years with minimal incremental capital investment.

We are proud to be the supplier that our customers are increasingly turning to for quality components consistency of delivery, and collaboration on critical design and development of new technologies. With these awards in hand, driving incremental variable contribution margins and a strong commercial pipeline for new business wins ahead, we are increasingly confident that we will be able to execute our plans and achieve our longer term strategic financial targets for growth, margins, and return on capital. Turning to slide 7. In addition to the new business awards, we continue to garner recognition for our accomplishments in quality, culture, and technology innovation.

This slide shows just a few of the awards we have received this year, from customers, respected industry associations, and the media. We believe these awards are a direct reflection of our special culture here at Cooper Standard. I could not be more proud of our team, and I wanna thank our 22 thousand employees worldwide for their continued commitment to our core values and for their continuing achievements. Now, let me turn the call over to John to discuss the financial results for the quarter.

Jonathan Banas: Thanks, Jeffrey, and good morning, everyone. In the next few slides, I will 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. And then provide an update to our 2026 full year outlook. On slide 9 we show a summary of our results for the third quarter and first 9 months of 2026, with comparisons to the same periods last year. Third quarter 26 sales were $701 million an increase of 1.9% compared to the third quarter of 25. The increase was driven primarily by favorable volume and mix and to a lesser extent favorable foreign exchange.

Adjusted EBITDA in the quarter was $52.8 million compared to the $53.3 million we reported in the third quarter of 25. On a U. S. GAAP basis, we reported a net loss of $20.4 million in the third quarter of 26 compared to a net loss of $7.6 million in the third quarter of 25. Adjusting for restructuring expense, net of tax from both periods, adjusted net loss for the third quarter this year was $2.1 million or $0.11 per share compared to an adjusted net loss of $4.4 million or $0.24 per share in the third quarter of 25. Our capital expenditures in the third quarter of this year totaled $16 million or 2.3% of sales.

This was higher than the prior year period due to increased automation and launch related investments. But in line with our expected full year run rate of 2% to 3% of sales. We continue to exercise discipline around our capital investments, consistent with our goal of maximizing returns on invested capital. For the first 9 months of the year, sales were $2.1 billion up 2.3% year over year primarily due to favorable foreign exchange.

Adjusted EBITDA for the first 9 months was $158 million and adjusted net loss was $9.6 million Additional detail on the drivers of the year over year changes for the quarter and the first 9 months are shown in the charts on the next couple of slides. So let's move to slide 10. For third quarter sales, favorable volume and mix net of customer price adjustments and recoveries had a positive impact on sales of approximately $9 million compared to the same period a year ago. Foreign exchange was a tailwind of approximately $4 million in the quarter versus the third quarter of 25.

Our third quarter adjusted EBITDA benefited from an adjustment to compensation related expense, reflecting anticipated incentive compensation payouts now being lower than originally planned. Reduced gross profit, gross tariffs and duties lower SG&A expense, and lean initiatives and purchasing. Positively contributed 13 million 4 million and $9 million respectively, compared to the third quarter of last year. More than offsetting these improvements, however, were $13 million of unfavorable volume and mix, net of customer price adjustments and recoveries, $15 million of higher material costs and $12 million in increased wages and general inflation. The material cost inflation was driven primarily by oil prices, which have remained between $30 to $40 per barrel higher than we planned coming into the year.

Impacting the pricing of our rubber and plastic feedstocks. Aluminum prices were also higher driven by supply chain and transport disruption, and continued uncertainty related to the ongoing conflict in The Middle East. We continue to believe we will recover most of these incremental input costs via the index based contracts and agreements we have in place, as well as through ongoing commercial negotiations. As we said in our last call, the timing of recoveries is still somewhat dependent upon commodity price trends, as well as the time lags inherent in current agreements with our customers. As we have seen in the third quarter, continued elevated commodity prices could further delay the full realization of expected recoveries.

Moving to slide 11. Looking at adjusted EBITDA for the first 9 months of the year, our teams have generated $40 million of savings and increased efficiencies in purchasing supply chain optimization, and lean manufacturing, which continue to benefit our results. Lower than planned compensation related expense versus the same period last year reductions in SG&A expense of $4 million and $5 million in savings from past restructuring initiatives were all positive factors for the first 9 months.

Nonetheless, these positive items were more than offset by $27 million in wage increases and general inflation, $25 million of higher material costs, $21 million of unfavorable volume and mix, net of customer price adjustments and recoveries, and prior year royalty settlements of $10 million that did not repeat. Turning to slide 12. In terms of free cash flow, which is defined as cash provided by operations minus CapEx, was an outflow of $10.8 million in the period.

The year over year change reflects lower cash earnings, and investments in working capital, driven primarily by elevated material costs and general inflation, as well as increased cash taxes cash paid for restructuring initiatives and capital investments supporting new program launches and automation initiatives. We ended the third quarter with a cash balance of $112 million coupled with $193 million of availability on a recently amended ABL facility, which remains undrawn, we had total liquidity in excess of $300 million as of September 30, 2026. We were pleased to successfully complete an amendment to our ABL during the third quarter that enhances our capital structure.

The amendment increases the total facility from $180 million up to $200 million providing additional liquidity and flexibility to support our ongoing operations and strategic priorities. The amendment also extends the stated maturity to September 2031 and improves the financing economics through reduced borrowing spreads and fees. We believe that our current cash and available 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. Turning to Slide 13. I will conclude my prepared comments with a few details on our near term outlook and the revisions to our 2026 guidance.

Following our results for the first 3 quarters, we have reduced our outlook for full year adjusted EBITDA by approximately $40 million at the midpoint. In the bridge on the right side of slide 13, we break out and quantify the key variables that we expect will drive a solid $30 million or 100 basis point year over year increase in adjusted EBITDA despite the incredibly challenging market and industry conditions. Cost savings from manufacturing and supply chain lean initiatives are now expected to be approximately $80 million for the full year, which is about $10 million less than our original plan.

More significant, however, are increased impacts from commodity costs and delays in customer recoveries, as well as continued higher inflation. Combined, these items further reduce our outlook by $30 million for the full year compared to expectations last quarter. While the timing of some of the commodity costs recoveries will now push into 2027, we still expect to recover the majority of the commodity cost increases we will incur in 2026. Jeffrey will provide a bit more color on these efforts in a few minutes. This concludes my prepared section, so I will turn it back over to Jeffrey.

Jeffrey S. Edwards: Thanks, John. In this last portion of our call, I would like to again comment on our high level strategic imperatives and how we believe these are positioning us for continued profitable growth over the next few years. So please turn to Slide 15. The charts on slide 15 provide, we think, a good summary of the progress that we have been. That we have made in restoring the financial strength of the company over the past few years. Gross profit and adjusted EBITDA have increased steadily despite reduced or flat production volumes, in our 2 largest operating regions. Our continued operational excellence and strategic execution have driven the improved results. And we believe there is certainly more to come.

Turning to slide 16, Over the next 3 years, we expect to benefit from the continued optimization of our cost structure higher variable contribution margins on new programs now being launched, incremental sales of value added innovations, future launches, of the record new business awards we have received over the past 2 years and further efficiencies as we continue to leverage the digital transformation of virtually every function across our business. Moving to slide 17, To this point, we were an early adopter of using AI tools to drive operational efficiencies. Beginning with our Formulink technology that launched in 2020 and revolutionized our process for developing new material compounds.

This was followed in 2021 with the launch of our live line, our proprietary automated process control technology, that has reduced scrap improved product quality, and improved the overall efficiency of our extrusion line operations. And over the past few years, we began the rollout of CS AI Star that is essentially a library of the many AI agents that have been developed within our various operations and makes them available for use company wide. But the next phase of our AI journey, the business process, orchestration phase, has the potential to contribute to and streamline functions across our entire value chain. Development of this capability is already well underway, and is being led by Christopher E.

Couch, who we have recently appointed our chief AI officer. In addition to his role as president of the fluid handling business segment and chief technology officer. We are extremely excited about this latest AI initiative and the potential for even further operating efficiencies it is expected to drive as we continue to grow our business over the next several years. We believe this process orchestration capability will enable us to scale our top line by more than $1 billion over the next several years. Without requiring a commensurate increase in headcount and costs. So stay tuned as this initiative rolls out. The financial impact will be very exciting.

Turning to slide 18, Before wrapping up this morning, I want to provide a bit of color on how we are addressing the ongoing inflation crisis. That is impacting our business and, frankly, the industry. Believe me when I tell you we are making every effort to turn this current crisis into future opportunity. And I am confident that we will be a stronger company as a result of what we are doing. Since this was the first time that our index based commercial agreements have been tested in a significant way, we are taking the opportunity to learn from the experience and make meaningful positive adjustments to those agreements.

We are actively engaged in productive discussions with our customers to improve the timing of cost recoveries going forward and to refine the indices used in these agreements. We believe the discussions will lead to a further de-risk our business in future periods of hyperinflation. But it will also enhance our recoveries in the near term. We are also taking the opportunity to push back on traditional practices for things like financing customer tooling. Which unduly burden the balance sheet of Cooper Standard and, frankly, all suppliers. We expect to drive positive changes related to customer tooling that will enhance our ability to generate cash from operations going forward.

We believe we are appropriately managing and improving all aspects of our business that we can control in this dynamic environment. As a result, we expect to be a stronger company and deliver improved results again in 2027. Turning to Slide 19. To summarize and conclude our message this morning, we believe that we remain on track to achieve our longer term strategic financial targets over the next 3 to 5 years that we provided you. In view of recent industry dynamics, we are taking the opportunity to improve and further derisk our business going forward. And we expect to be a stronger company in 2027 and continue the trend of improving our financial performance. As well.

In addition, we expect to continue to deliver exceptional value for our customers and we believe they will continue to support us as a valued supplier. And I certainly wanna thank our customers for their continued trust and support. I remain extremely positive about our opportunities and outlook over the next several years. With our improved cost structure, strong pipeline of upcoming program launches, outstanding customer relationships, a global team I would take over any other in the industry I am confident that we will deliver the long term value our stakeholders expect and certainly deserve. This concludes our prepared remarks, so let's move into Q&A.

Operator: Thank you. To ask a question, please press star then the number 1 on the telephone keypad. Again, star followed by the number 1 on your telephone keypad. If you are using speakerphone, please pick up the handset before entering your request. To withdraw from the queue, press star then the number 2. 1 moment please as we assemble the queue for questions. Our first question comes from Mike Ward with Citigroup. Your line is now open. Please ask your question.

Mike Ward: Thank you very much. Good morning, everyone.

Jonathan Banas: Good morning, Mike. I think to start, if I look at your charts on page 11 and 13, when you are going through the adjusted EBITDA bridge, The general inflation and material economics, are they net of recoveries? No, Mike. that is a good question. Those are shown gross. Any kind of customer recoveries or price adjustments we can glean are included in volume and mix. Obviously, there is a commercial element to that, and we have historically combined any recoveries or price adjustments in that volume and mix category. So what you see as far as the general inflation, material cost inflation, those are gross numbers.

Mike Ward: Okay. So then if I go. If I compare the 9 months to 12 months, so 11 and 13, and I subtract them out, and I kind of look at what it assumes for the fourth quarter, it looks like you have manufacturing is a pretty big delta when you go for the full year compared to the 9 months it is about a $40 million swing and then volume price, and that is where those recoveries are coming. that is a $26 million positive. And then there are offsets, but for additional inflation, it looks like.

But when you look at those numbers and you compare them, it does look like I guess, you get a volume mix in the manufacturing side, you get the benefit, and then you get recoveries. Am I looking at it right? So when I go from what you saw in 9 months and what you expect for the year, that is a big part of the upside you see in Q4.

Jonathan Banas: Yeah, you are absolutely right, Mike. The ongoing run rate, get the full benefit for the most part in Q4 of a lot of those savings initiatives. As the projects are implemented and you get a clean run at them. And keep in mind the performance of both the manufacturing and purchase purchasing organizations Jeffrey described how Q3 launches are up a 100% compared to the prior year. This was a heavy, heavy launch year. And so there is always challenges and changeover activities that go along with that were impacting the first 9 months. Q4 tends to be a lighter launch period, and so we expect to performance to ramp up in Q4.

Also get the full run rate of rebate impacts that the purchasing organization negotiates as you met volume commitments on the supply side. So you will see more of those pulling through in Q4 overall.

Mike Ward: Okay. And then it looks like so that is how you are getting to the upside from a margin standpoint?

Jonathan Banas: Yeah, we are still fighting back general inflation and commodity inflation. You see those in Q4 are continue to be offsets and very challenging for us. Okay.

Mike Ward: Jeffrey, on your chart that you talked about the net new business and that is new awards less anything programs that fell off. Is that correct?

Jeffrey S. Edwards: Yeah. that is correct, Mike. that is the that is the definition now we have used for many years. So nothing's changed there. Nothing's changed.

Mike Ward: And then if I look at it, later in your charts, you talk about a 3-year type rolling process. So if I am looking at 02/2000. You had a big increase in 2025 and 2026, So if I take a base of 2.7 billion in 2024, you are kind of looking at it where it starts to hit in 2027, 2028, where some of these new businesses start to roll in and that is where you are getting up north to the $3.5 billion range. Is that correct?

Jeffrey S. Edwards: that is correct, Mike. So that is that is the roughly $1 billion of net new business that we have been talking about launching. Is 2027, 2028, 2029, and 2030 are. You know, arrive. And that is why we continue to be very confident in that in that outlook and those strategic targets that we have provided. We know what that business is. We know what the margins are. The only thing we do not know as always is volume and mix, but otherwise, terms of the price and the cost associated with selling those products. It. it is already established. So the forecasts are pretty solid. Okay.

And they are all the new commercial agreement you put in a few years ago were all part of those programs, and it is also better programs than higher margin.

Mike Ward: That you focused on. that is correct.

Jeffrey S. Edwards: Everything that. What we have been saying all along is that the hurdle rates that we established you know, to get the, the business projected to go on this, call it, 15% journey by the time we got to 2030. Those programs are here. They are being developed. They are being prepared to launch. And we have consistently been at or above those hurdle rates, which is why we were able to come out with a strategic plan last year talking about really 2025 through 2030. And achieving, 15% EBITDA as a company.

Mike Ward: And, John, any reason why the working capital will not turn positive for the year?

Jonathan Banas: Mike, as you know, our fourth quarter is historically a very, very strong working capital release for us. We do not expect anything different this time around. And as you know as well, we are proactively managing all aspects of that working capital bucket that we can control. Right? So inventory reductions, accounts payable terms, and negotiations and to an. A lesser extent, tooling that Jeffrey talked about in his prepared remarks. However, there are some other things in that bucket this year that are unique. Think government tariff refunds, cannot control the timing of when the government pays us, but those are significant. And we are also actively working on those commodity cost recoveries as well.

So those could tie up working capital between now and the end of the year. But we are continuing to drive it and drive the positive free cash flow in Q4 as best we can, and we will see how things shake out given the continued inflationary impacts we are facing and drag on earnings that is presenting to us.

Mike Ward: Okay. Thank you very much, everybody.

Jeffrey S. Edwards: Thanks, Mike. Thank you.

Operator: Next question comes from the line of Doug Karson from Bank of America. Your line is now open. You may ask your question.

Doug Karson: Great, guys. Hi, Roger, Jeffrey, and John. How are you?

Jeffrey S. Edwards: Great. Good morning. How are you, Doug? Good. Thank you.

Doug Karson: I wanted to talk a little bit more about the bridge. it is kind of a lot riding on Q4 here. To try to get to an EBITDA maybe in the neighborhood of 82 to kinda meet guidance. The visibility in the lean manufacturing that you are hoping to get $40 million out. We have already got a kind of a month of the quarter underneath our belt. Is there more visibility in that than there is in the like, the your tariff rebates? Try and just bridge to my 82, like, I am modeling to 82 million EBITDA. I have kind of have a lot of confidence in that in that lean manufacturing coming through.

Jeffrey S. Edwards: Yeah, Doug. This is Jeffrey. I think if there is anything that we can circle and say we have a high level of confidence both historically and today. it is in our manufacturing teams and their ability to perform and hit these numbers. So that 1 is, that 1 is pretty good to go. The big challenge we have, obviously, is you know, what is the price of oil gonna be next week and the following week and next month and so on and so forth. And the headwind that continues to provide us. We also have significant commercial conversations going on to try to recover as much of that. that is owed to us this year as we can.

So as always in this commercial negotiations are probably those that are most difficult to forecast. So we have we have done our best to come up with what we think is a achievable, commercial recovery plan, and that is what is reflected here. Are we going for more? Of course. But this, I think, is appropriately reflected, and the risk associated with getting everything we want is appropriately reflected.

Doug Karson: Right. that is very helpful. If I could double click on the recovery from you know, the higher commodity cost that your customers essentially owe you If I am thinking about it right, I think Mike you would have dug into it a bit. If I look at slide 11, yeah, I see materials negative 25. And then when I go down the slide, 13, I see the volume and mix kind of inflects positive 5 from negative 21. So it is like a $26 million change in your volume and mix against the production number that is actually down about 2% in North America for Q4.

So am I safe to assume that 20 $26 million change is the hope that you will get some rebates. Is that kind of like the refund number I am circling in my head?

Jonathan Banas: Douglas, I am assuming you meant recovery, not refunds. Right? Yeah. Recover. There certainly is in the volume in mix category an element of those customer recoveries. But the real driver in volume and mix is traditionally production levels and the mix of what we are producing for our customers around the world. So you do have a fourth quarter year over year impact is you have got to look around the world, what we are manufacturing in China, Europe, North America, always heavily into that volume and mix number. So it is not just customer recoveries that we are talking about in that plus 5 for the whole year. Right. Right. Right. There is a production issue there. Okay.

Doug Karson: And then maybe if I just be greedy and ask a question on cash flow. I was kind of feeling a little bit perky when we talked about a working capital release and having a strong Q4 free cash flow. But then I think as the conversation kind of extended a bit, there was some kind of 1-off puts and takes that I maybe was not following. Is free cash flow expected to be positive in Q4?

Jonathan Banas: In the fourth quarter, yes. We expect it to be positive in the fourth quarter. It traditionally is, Doug. Yes. Even with even with the interest coupon that we will pay in mid November here. We expect the significant unwinding of accounts receivable, reductions in inventory, to benefit the free cash flow for the quarter.

Doug Karson: Is the working capital gonna be, like, a source of cash in the $2 million to $3 million kind of neighborhood just if you are able to share some of the blocking and tackling there. That would help us. to kind of model out free cash flow a bit.

Jonathan Banas: If I had that locked in, I would give you the full cash guidance for the year, which obviously we do not. So I will leave it at the at the puts and takes I described.

Doug Karson: that is very fair. And then last question on the liquidity front. I think at the beginning of the call, you said you expanded your capacity by 20 million and also perhaps you may get better terms What was driving that thought process?

Jonathan Banas: Well, we. First and foremost, we wanted to get the maturity extended out. So that was originally set to expire a few years earlier than 2031. So extending that maturity first and foremost. But then along with that, obviously, our lending partners recognize the financial improvements that we have made over the years since the last time we amended that facility, and that is where the economic improvements ultimately came from. So when we said let's look at the whole package, getting the incremental liquidity in terms of 20 million extra, but then also improving the economics for it. It was a no brainer, a double benefit for us along with kicking the maturity down. A couple more years out.

So really, really good results. Or really a good outcome for our treasury team. To continue to work with our banking partners.

Doug Karson: I think that is great. And last thing I will leave on slide 6, I mean, the year to date new business awards are $395 million and that just blows away you know, any year on that screen. Right? it is a 100 million more than a full year 2025. So some point, those are gonna start coming through with, you know, higher revenue numbers. You know, what is the kind of cadence of some of those new business wins? Are they, like, you will see them like a third, a third, a third over a couple years? Or are they, like, a 5 year window?

Kind of as we think about how the revenue top line looks like? what is the duration of some of those wins? Just so as I could think about modeling out I guess you take 2.8 billion which is where we are heading this year, Yeah. And you go out to 2030, 2031, and you put 3.5 to 3.7 billion and then you draw a line. Got you. Perfect. Well, thanks a lot, guys, for answering all those questions. I appreciate it, and I will turn the queue over to somebody else. Thank you so much.

Jeffrey S. Edwards: Thank you.

Operator: Our next question comes from the line of Ben Briggs with Beach Point Capital. Your line is now open. You may ask your question.

Leah: Hey, guys. Thanks for taking the question. Just wanted to ask on the restructuring cost. If you could give a little color on like, big number this quarter, if you could give a little color on what that relates to. And then you know, we are at, I think, 41 million year to date. Compared to the full-year guide of 30 to 35 million. So you could help me bridge that.

Jonathan Banas: Yeah, Ben. This is John. I will start with the P and L for the quarter. The most significant and primarily most of that charge for the quarter was further downsizing of our Western European workforce. So as we continue to do, we continue to optimize the fixed costs and manufacturing footprint around the world. And we were able to successfully reach agreement with certain groups there to further downsize our Western European footprint. Because it is obviously the most costly and the 1 that is been a drag on profitability over the years. So for the most part, that Q3 charge was reaching that agreement and recording all of that P&L charge.

Now cash goes out the door over the next several months into next year. So it was not all cash that left the company. You just booked the accrual. And then it is pay-as-you-go for the most part. Anytime we are we are looking at any of these initiatives, we are looking for cash paybacks certainly quicker than 2 years overall. And we have announced earlier this year a couple of plant closures, 1 in Western Europe, another 1 here in North America. And some of the cash that is been used so far this year has been to start those initiatives, but then also the tail of other restructuring initiatives that we implemented in last year.

So the guide of cash restructuring of $30 million to $35 million is different than what is going to be on the P&L, obviously. So we think there is a few more million that goes out here in Q4 on a net basis. That brings you into that cash number of 30 to $35 million. So hopefully that paints the picture for you.

Leah: Yeah. Super helpful. Thank you. And how do we think about the kind of cadence of that in the next few quarters?

Jonathan Banas: On the P and L, we do not expect much more ahead of us. Everything we have implemented or announced is what we have got on the plate for now. And obviously, the business continues to evolve and we continually assess our fixed costs and our footprint. So there is no guarantee that things will not change in the future, but that is what is on the plate for now.

Leah: Got it. And then just 1 more. Like, I know you guys cannot predict where oil is going, but what oil price was baked into your guide for the year for Q4?

Jonathan Banas: Well, had in my prepared remarks that, you know, the current prices have been anywhere from $30 to $40 a barrel higher than our planning assumptions. So if you take the above a 110 or a 100 mark, that kinda backs you into, our plan assumption was around $65 for the year. But that was not. I mean, for the updated guidance, presumably, you were not still at around $60. Oh, no. No. No, the $100-ish is where the guide, $30 million to $40 million remained higher than that level.

Leah: Okay. Understood. Got it. that is all for me. Thank you.

Jonathan Banas: Alright, Ben. Thanks.

Operator: Thank you. It appears that there are no more questions. I would now like to turn the call back over to Roger S. Hendriksen.

Roger S. Hendriksen: Okay. Thanks, everybody. We appreciate all the questions and the engagement in the call this morning. If further questions come up that were not answered today, please feel free to reach out. Give me a call and we will see to it that we get your answers. Thanks again for joining us. This will conclude our call.

Operator: Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

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