Cooper-Standard Holdings Inc. Q4 FY2024 earnings call

• Safety: In 2024, the safety incident rate was 0.30 per 200,000 hours worked, the best ever; 22 plants had zero reportable incidents, and 22 plants achieved diamond status in the internal plant performance recognition program.
• Cost Savings: $76 million in cost savings from efficiency improvements in plants and supply chain, plus $24 million from job reduction action.
• Financial Results: Operating income improved by 52% despite headwinds from lower production volumes, inflation, and unfavorable foreign exchange; adjusted net loss improved compared to 2023.
• Innovations: Fluids Manifold and FlexiCore Thermoplastic Body Seal recognized for innovation, benefiting customers in areas like lightweighting and assembly.

In the fourth quarter of 2024, sales totaled $660.8 million, a decrease of 1.9% compared to the fourth quarter of 2023. Adjusted EBITDA for the fourth quarter was $54.3 million, or 8.2% of sales, an increase of 96.8% versus the fourth quarter of 2023. For the full year 2024, sales were $2.7 billion, a decrease of 3% versus 2023. Adjusted EBITDA for the full year was $180.7 million, up from $167.1 million in 2023. CapEx in 2024 was $50.5 million, or 1.8% of sales, compared to $80.7 million, or 2.9% of sales in 2023.

• Expect margin expansion in 2025, aiming for double-digit adjusted EBITDA margin by the end of 2025.
• Free cash flow is expected to be positive in 2025.
• Target to reduce net leverage ratio to 2 times or lower by 2027 based on conservative volume assumptions and improved profitability.

• Tariffs: Concern about potential tariffs on products from Mexico, with plans to work with customers to offset any impacts.

Q: On content per vehicle in fluid handling and sealing, A: Jeff explains that the fluid business will grow with hybrids and electric vehicles, and sealing is consistent across powertrains with tech opportunities for noise management in electric vehicles.

Q: On margin and tariffs, A: Jeff says margins increase with new programs, and tariffs will be managed by working with customers to offset impacts.

Q: On PIK interest and FX, A: Jon explains the shift to cash interest payments instead of PIK and expects a FX tailwind in 2025 due to cost currency reverts.

Q: On tooling receivables, CapEx, energy costs, A: Jeff talks about tooling receivables progress, lower CapEx, and energy costs mitigated via quarterly negotiations with customers.

Q: On business mix shift to Chinese domestic, A: Jeff states that the business mix is shifting to 65/35 with Chinese domestic by 2026 and 80/20 by 2027.

Q: On net leverage target, A: Jon and Jeff say the target of 2 times or lower net leverage ratio is expected by 2027 with conservative volume assumptions.

Q: On working capital and EBITDA positivity, A: Jon talks about working capital benefits and EBITDA positivity in all major regions.