Commercial Vehicle Group, Inc. Stock

Good morning, ladies and gentlemen, and welcome to CVG's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the call over to Michelle Hards, Vice President of Investor Relations. Please go ahead.

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 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 CVG operates, fluctuations in the production volumes of vehicles for which CVG 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.

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 3. As we have highlighted on this slide, CVG delivered year-over-year revenue growth across all 3 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, CVG is hitting its stride as our new business wins are ramping coincidentally with a recovery in our key end markets.

During the quarter, we delivered an adjusted gross margin of 12.9%, 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. We have recently highlighted the growth in our Electrical Systems segment, and that accelerated again with a 15.8% 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. The at-the-market transaction, combined with the sale-leaseback transaction on our Vonore facility provided us with cash that we used to pay down total debt by $14.6 million since the end of 2025, facilitating a net leverage ratio reduction from 4.1x at the end of 2025 to 3.3x at the end of the second quarter. Our goal remains to bring leverage back down to the 2x 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 3 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 3 segments. We are focused on disciplined execution, driving operational efficiency and positioning CVG to drive further shareholder value going forward.

Turning to Slide 4. 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 win ramps 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.

Thank you, James, and good morning, everyone. If you're following along in the presentation, please turn to Slide 5. Consolidated second quarter 2026 revenue was $195.2 million compared to $172 million in the prior year period. The increase in revenues was primarily due to the increased customer demand in international markets and the ramp of previously awarded new business wins across all 3 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.

Adjusted EBITDA was $5.4 million for the second quarter compared to $5.2 million in the prior year period. Adjusted EBITDA margin was 2.8%, down 20 basis points compared to adjusted EBITDA margin of 3% 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.

Interest expense was $2.9 million compared to $2.3 million in the second quarter of 2025, driven by higher interest rates resulting from our refinancing completed in the second quarter of 2025. Net loss from continuing operations in the quarter was $8.7 million or $0.25 per diluted share compared to a net loss of $4.1 million or $0.12 per diluted share in the prior year period. GAAP net loss for the quarter included a $3.4 million pretax warrant liability revaluation expense. Adjusted net loss for the quarter was $4.6 million or a loss of $0.13 per diluted share compared to adjusted net loss of $2.9 million or a loss of $0.09 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.

Free cash flow from continuing operations for the quarter was an outflow of $1.4 million compared to an inflow of $17.3 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. At the end of the second quarter, our net leverage ratio was 3.3x, down from 4.1x at the end of 2025. We calculate net leverage as net debt divided by trailing 12-month adjusted EBITDA from continuing operations, and the improvement demonstrates meaningful progress toward our long-term target of approximately 2x.

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. Sequentially, we have expanded margins the last 2 quarters, resulting in adjusted gross margin of 12.9% 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. As previously mentioned, at the end of the second quarter of 2026, net debt to adjusted EBITDA was 3.3x, down from 4.1x 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. During the quarter, we generated $11.6 million in net proceeds from the ATM program. Combined with our sale-leaseback proceeds, these actions enabled $14.6 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. Our ability to pay down $26.2 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.

Moving to the segment results, starting on Slide 8. Our Global Seating segment achieved revenues of $80 million, an increase of 7.5% 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. Adjusted operating income was $4 million, an increase of $0.9 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.

Turning to Slide 9. Our Global Electrical Systems segment second quarter revenues were $62 million, an increase of 15.8% compared to the prior year period, primarily due to the ramp of previously awarded new business wins in North America and internationally. Adjusted operating income for the second quarter was $1.7 million, an increase of $0.5 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.

Moving to Slide 10. Our Trim Systems and Components revenues in the second quarter increased 21.1% to $53.2 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. Adjusted operating profit for the second quarter was $2.2 million compared to $0.3 million in the prior year period. The increase is primarily attributable to improved volume leverage.

Taken collectively, we've 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 CVG. 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.

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 a 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 million 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 3 business segments.

Our increased adjusted EBITDA guidance range of $26 million 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 2x.

Before I conclude, I'd like to highlight our ongoing efforts to drive additional gross margin expansion, control costs and drive cash flow. We see continued opportunity to drive further operational efficiencies across the business, especially as our new business ramps drive increased facility utilization. We are leveraging price and mix management to drive revenue while recovering costs associated with tariffs, freight costs, fuel surcharges and material costs. We remain focused on tightly managing salaries and discretionary spending. Subsequent to quarter end, we executed a sale-leaseback transaction on our Dublin, Virginia facility, which generated $3.8 million in net proceeds that were applied against our term loan in Q3, further reducing interest expense. Finally, I would like to thank all our CVG employees for their continuous efforts to drive shareholder value every day.

With that, I will now turn the call back to the operator and open up the line for questions. Operator?

[Operator Instructions] The first question comes from the line of John Franzreb with Sidoti & Co.

I'd like to start with the revenue guide. Nice improvement on a year-over-year basis. I'm kind of curious which segments was the largest upward revision?

Well, if you look at our percent versus prior year, Trim Systems and Components had the largest percent increase. Our Global Seating business with the international demand that we saw new programs and other end markets internationally had an appreciable increase year-over-year, too. And then Electrical, 16% up year-over-year, which is really big for that business. So they all contributed a material amount to the year-over-year increase as well as when you look at our guide going forward, all 3 are contributing a similar outlook.

Okay. So you're applying kind of the first half pace of increase to the second half across all 3 segments or maybe the second quarter to the balance of the year. Is that how I'm reading that, James?

This is Angie. Yes, I think we are looking at the first half in terms of expectations for the second half. We do see a little bit of a bigger ramp in Q2, but you'll remember in Q4, that tends to be a little bit of a lighter quarter for us just with less production days.

Okay. Fair enough. And that revenue guide, it's roughly up $60 million, but I guess the incremental EBITDA didn't drop down maybe as much as I thought on that kind of revenue. Is there any particular reason for that?

I think on the EBITDA side, as we mentioned here on the call, we are still seeing some headwinds on the SG&A, in particular, on our incentive compensation expense year-over-year. Our long-term performance awards are directly tied to stock price performance to align our management team and shareholders. So as we continue to see that performance in the second half, we will continue to see that expense be a little bit elevated. And I think probably on the whole of the year, we're looking to be just north of that 11% range, maybe into 11.5% on a full year basis from an SG&A percent of sales perspective.

The other thing I would add too, John, is that we continue to mine opportunities on the gross margin line to offset some of this SG&A increase. And then longer-term target, we are focused on getting to 10% going into subsequent years. So that's our long-term target. With the additional gross margin expansion, we see that fall through coming down to EBITDA.

The other thing I would mention, too, John, is relative to the volatility and the uncertainty on the market recovery as well as exogenous geopolitical things. We're getting somewhat cautious because things are changing very frequently. Everything from constrained sea containers to move freight, which puts you in the expedite also tariffs, also fuel surcharges. So we're being somewhat cautious on that EBITDA line because things move back and forth. And as far as recovery goes, that does lag. So as we have impact to our input costs, those areas I just mentioned, and we go to get recovery from customers, there's a lag effect in that normally by quarter. So we're baking that in that outlook as well.

Understood. And since you brought it up, James, in your closing remarks, you mentioned gross margin improvements and you have a slide dedicated to it also in the presentation. You had -- I think you highlighted 4 key drivers. Which one of those drivers will have the most immediate impact in the near-term?

I would say the operating leverage because of the cost structure, the changes we made over the past several quarters and over the past couple of years. So we expect the thinning of our fixed as we see volume come through. The other item is product mix. Everything -- especially in our trim business, we had a higher mix of larger revenue items and then the launching of new business, the pricing impact of new business launch as well as pricing and product mix for our legacy business in addition to areas where we have a little more price flexibility like in our aftermarket business, where we have more promotional pricing versus our OEM business. So pricing is a big factor.

Product mix is a big factor, the volume leverage and then recovery of the material economics, fuel surcharges, tariffs and those items additionally add more opportunity for gross margin expansion.

Got it. And I hate to ask this last question, Angie, but can you just walk us through what's going on the tax line one more time?

Sure. From a tax perspective, we have been in a full valuation allowance on our U.S. deferred tax assets. And so we don't get to take any benefit for paying foreign taxes. So to the extent we are making money in our international jurisdictions, we pay about a 25% rate on that income. So we just don't get the benefit at the federal level. So that's why we see that expense sort of on the net loss. Sure. I was just going to say it's pretty well in line with our 2025 10-K disclosures around tax.

The next question comes from the line of Joe Gomes with NOBLE Capital.

I kind of want to follow up with John's question on the guide. Last quarter, James, you talked about the Class 8 forecast came in as expected, you'd kind of be at the high end of the previous range, which was $700 million and $30 million of adjusted EBITDA. The forecast for at least '26 hasn't changed at all. And yes, for '27, we've seen the increase for the Class 8 over the previous one. But just maybe you could walk us a little bit more through there as to what you're seeing that would cause you to raise the forecast as high as you did for the rest of '26.

Yes. That's a good point, Joe. And primarily, it's driven by non-Class 8 growth. The international seat business, if you look at the growth year-over-year, the Class 8 truck volume in North America being down is pretty substantial. The trim systems business in Q2 was substantially higher, and that's product mix, new business that we've won that we've launched -- we're launching that is in current ramp-up phase.

And then in our Electrical Systems business, we actually had pretty significant growth in our EMEA business and Zoox is starting to ramp down. They seem to be on their plan for their volume production. We're somewhat cautious in -- with a new customer, new vehicle, new end market in our outlook before. But now we see all of the leading indicators pointing toward them achieving their planned ramp to get to 100 vehicles per week. And we're in constant dialogue with all of our key customers. Our Class 8 customers drive a large portion of our business, and they expect increases starting in Q3 more than they had in Q2, and that's reflected in the ACT outlook, but also in our schedules. And some of our schedules, again, ACT is a guidepost we use for outlook, but some of our customer schedules that are specific to certain models and certain customers could have a higher increase than what ACT is projecting in an aggregate level.

Okay. Great. I appreciate it. And just on the new business, maybe you could talk a little bit about what the environment looks out there now for new awards, not just ramping up awards that you won previously, but what the kind of business cycle looks like award cycle is looking in the second quarter, what you're seeing looking in the third and fourth quarter in terms of new business to go out and get and hopefully get awards and win for awards.

Yes. We target on average about $100 million a year in new business wins. Obviously, the vehicle cycle and sourcing cycles that could go up or down either way. And I would say through the first half of this year, we're on track based on what we've currently booked and what our outlook is from a pending award standpoint, what we've already quoted. And then there's additional opportunity funnels that we manage. And this is becoming more global in nature, Joe. And we have some pretty big opportunities in EMEA, especially in our Seating business. In North America, we're expanding beyond Class 8 and our trim systems business with more wins in powersports and non-Class 8 vehicles. So there's diversification there.

So based on our outlook on the business won and what we have in our funnel, we continue to see further diversification as these programs hit start of production and start to ramp in the coming years. So the outlook right now is a pretty balanced outlook as far as diversification in the business, both regional and from an end market standpoint and across the business segments. So we're really feeling positive about the momentum we're building. Now the key, obviously, is to manage the uncertainties, volatility and variability we're seeing across the markets. With more diversification, you have more elements you have to track. And then the tough part is making the adjustments in your business, not just what you're currently producing, but how you're planning for future business. So investments in working capital, inventory and managing payment terms for receivables, that's soaking up some of our cash generation, but we still expect to be positive this year, and we're managing all of those elements to maximize our positive free cash flow to pay down additional debt to get down to that 2x level.

So that remains a key focus in the business. And the best way to get there is through diversification, new business wins. As you know, pricing elasticity is more advantageous in the first portion of new wins. Some companies manage or measure vitality. And there's a certain part of the business, the revenue stream that they expect with new business because you have more pricing flexibility. So that's another area that we're putting more focus on, which will also help us drive to a target mid-teens gross margin level that we're looking for in the coming years.

Okay. And then one last one for me. I mean you guys do a great job at focused on reducing debt here. And you mentioned how the ATM proceeds came in at the end of the quarter, and you just did pay down another $3.8 million from the most recent sale leaseback. So given all that, kind of what would you say the quarterly run rate for interest expense is now?

Yes. Thanks for that. Yes, we continue to focus on free cash flow generation and paying down that debt. So we were happy to get that done during the quarter. We've been around -- running around $3.5 million to almost $4 million. I think in the second half, we're looking more at $2 million to $2.5 million per quarter on the interest expense. And as you mentioned, we'll be a little bit lower, maybe than $2.5 million just because of that Dublin transaction that we've just done there. So -- and we do, on the free cash flow topic have -- even though we've invested in free cash flow, we continue to see that we're being a little bit more efficient on that front. So despite of the investment, efficiency is favorable year-over-year, where we're at about 18.5% currently versus around 21% last year. So that's giving us some encouragement as well as we head into the second half.

The next question comes from the line of Gary Prestopino with Barrington Research.

A couple of questions. First of all, James, did I hear you say correctly that -- did I hear you say that the Zoox program volumes are running up to expectations? I think you said in 2026, you were going to have about 2,500 going to '27, 5,000 and 10,000 in 2028. Is that -- am I hearing that right?

Yes, that's correct, Gary.

Okay. So there's no change in that. And I want...

I said not an appreciable change based on what we know, obviously, day-to-day and week-to-week, their production -- vehicle production schedules fluctuate. But the intent is the numbers that we have previously disclosed and they have told all their supply base to plan for.

Yes. Okay. And then again, I don't like to talk about guidance, but with the sales increase that you've projected and the flow-through of the EBITDA is just so minimal. And I understand that you're not kicking back stock comp into your EBITDA calculation, but it looks like your stock comp for 6 months was $2.5 million versus $1.7 million. So if that increases, I mean, it just can't explain that low flow-through. So I guess the question I'm asking is in the back half of the year, given the new business wins and what you're doing with Zoox, what kind of -- is there increased investment in growth on the SG&A line to accommodate this increase in sales that you're looking at?

Yes. I would take on the investment portion of it from an SG&A standpoint. We are not forecasting significant headcount increases associated with the new business launching as it relates to SG&A heads. We are adding direct labor, indirect labor heads that are on the gross margin line. But the sales, engineering, commercial, purchasing, IT, all the back-office SG&A costs and SG&A costs in the business, we're not really looking at any significant increase to hit the increased forecast outlook as well as launch new business.

There is CapEx planned that we had in our plan, and there's some incremental to what's in our plan to bring on some of the business in international locations that we've won recently that have more of a near-term impact on our outlook. And that's also what's really increased it last year at this time and earlier this year, some of these programs we won recently and are already starting in production within 12 months, which is pretty quick for our business profile. So that's it from an SG&A and CapEx standpoint from headcount related, and I'll let Angie speak to the other part.

Sure. So the stock-based compensation line, that's right. That's $2.5 million year-to-date. What I was mentioning earlier is actually our -- we have cash-based long-term awards as well that are liability classified that we have to mark-to-market every quarter, which are also tied to stock performance. So that's probably the bigger side, which you don't see on a specific line item here in our financials, but it's driving some meaningful increases year-over-year as well as the annual program because as you might recall, last year, obviously, the performance didn't warrant much in terms of an annual plan result.

There are no further questions at this time. We have reached the end of the Q&A session. I will now turn the call back over to Mr. James Ray for closing remarks.

Thank you all for joining today's call. We continue to execute and deliver. We are back to top line growth across all 3 segments and delivered another quarter of gross margin expansion. Our focus on diversifying our end markets and improving our revenue mix is driving accretive growth. We are well positioned to drive further operating leverage as end markets improve and new business ramps going forward. We look forward to updating you on CVG's progress next quarter. Thank you.

This concludes today's call. Thank you for attending. You may now disconnect.

Good morning, ladies and gentlemen, and welcome to CVG's First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

I will now hand the conference over to Michelle Hards, Vice President of Investor Relations. Please go ahead.

Thank you, operator, and welcome, everyone, to our first 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 first quarter 2026 results, after which we will open the line for questions.

As a reminder, this conference call is being webcast and the Q1 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 CVG operates, fluctuations in the production volumes of vehicles for which CVG 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 on our first quarter performance.

Thank you, Michelle. Good morning, and thanks to all those who joined the call. Before turning to the results, I'm excited to welcome Angie O'Leary, our Interim Chief Financial Officer, to her first earnings call. Angie brings extensive knowledge of CVG to the role and her extensive experience will be critical as we look to sustain our current momentum going forward.

Please turn your attention to the supplemental earnings presentation, starting on Slide 3. As we have highlighted on this slide, CVG delivered year-over-year revenue growth driven by strong results within our Global Electrical Systems and Global Seating segments. This is a testament to our efforts to reduce concentration of cyclical North American Class 8 end markets. Combined with the actions taken in recent quarters to improve operational efficiency, CVG is well positioned to capitalize on the recovery in our end markets that we are beginning to experience.

During the quarter, we delivered adjusted gross margin of 12.2%, up 140 basis points compared to last year and 250 basis points sequentially from the fourth quarter of 2025. The continued year-over-year and sequential improvement in profitability was again driven by our focus on improvements in operational efficiency.

One of our stated objectives over the past year has been to grow our Global Electrical Systems segment. And our success is evidenced by the 14% growth in segment revenues in the quarter. This growth has been driven by the ramp of previously mentioned programs across the North American and international markets. Our Aldama, Mexico and Tangier, Morocco facilities, we have mentioned on previous calls, are serving the growing demand in this segment. Their utilization should increase further as we ramp production under our Zoox contract and other new business wins, which is expected to provide a growth tailwind starting in the second half of this year.

Another highlight in the last quarter was the execution of a sale-leaseback transaction of our Vonore, Tennessee manufacturing facility. This facility is strategic for our Global Seating business, and we expect it to support future growth. The transaction, which we will discuss in more detail later in the call, provided us with cash that we used to pay down debt by $12.8 million since the end of 2025, facilitating a net leverage ratio reduction from 4.1x at the end of 2025 to 3.8x at the end of the first quarter. Our goal remains to bring leverage back down to the 2x level over time.

Looking forward, while there is still plenty of macroeconomic volatility and uncertainty, we are encouraged by the operational efficiency improvements we've made and the early signs of end market improvement with the Class 8 truck production projected to grow 9% in 2026, while we simultaneously benefit from the ramp-up of new business within Global Electrical Systems. Our focus for the balance of the year remains on continued disciplined execution, prudent cost management and putting CVG in a position to drive accretive growth due to improving demand trends.

Turning to Slide 4. I will provide more details on what we're seeing in the Global Electrical Systems segment. I'll get into the drivers momentarily, but we continue to expect our Global Electrical Systems segment sales to increase more than 10% in 2026. Again, this increase is driven by the continued ramp-up of new business wins, which is accelerating the utilization of our recent capacity additions in Mexico and Morocco. The structural improvements to our business model in this segment are helping to drive growth and reduce volatility. The biggest driver of recent performance as well as our expectations for growth in 2026 and beyond is the ramp of new business previously won.

We spoke last quarter about the Zoox robotaxi program, and we are starting to ramp production to support that program. This ramp is expected to solidify CVG as a strategic supplier to the autonomous vehicle sector. As Zoox and other programs ramp up, we are seeing improved utilization at our new production facilities in Aldama, Mexico and Tangier, Morocco, helping drive margin expansion. The low-cost facilities have the capability to meet the unique needs of programs such as Zoox and other new programs. As these ramp-ups continue and other programs contribute, we expect to see continued 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.

Thank you, James, and good morning, everyone. If you're following along in the presentation, please turn to Slide 5.

Consolidated first quarter 2026 revenue was $171.5 million compared to $169.8 million in the prior year period. The increase in revenues was primarily due to higher sales in Global Electrical Systems and Global Seating, partially offset by lower sales in Trim Systems and Components. Adjusted EBITDA was $4.8 million for the first quarter compared to $5.8 million in the prior year period. Adjusted EBITDA margins were 2.8%, down 60 basis points compared to adjusted EBITDA margins of 3.4% in the first quarter of 2025, driven primarily by higher SG&A expenses, partially offset by higher gross margins. Interest expense was $4.1 million compared to $2.5 million in the first quarter of 2025, driven by higher interest rates resulting from our refinancing completed in the second quarter of 2025.

Net income for the quarter was $0.9 million or $0.03 per diluted share compared to a net loss of $3.1 million or a loss of $0.09 per diluted share in the prior year period. GAAP net income for the quarter included multiple items worth noting, including a gain on sale of assets of $14 million, a warrant liability revaluation expense of $5 million and a loss on partial extinguishment of debt of $2 million, all on a pretax basis. The gain on sale and loss on extinguishment of debt related to the sale-leaseback transaction of our Vonore, Tennessee manufacturing facility.

Adjusted net loss for the quarter was $3.4 million or a loss of $0.10 per diluted share compared to adjusted net loss of $2.6 million or a loss of $0.08 per diluted share in the prior year period. Net income and adjusted net loss were impacted by higher sales and improved gross margin performance, offset by higher SG&A and interest expense. Free cash flow from continuing operations for the quarter was $11.7 million compared to $11.2 million in the prior year period, aided by our recently executed sale-leaseback transaction. At the end of the first quarter, our net leverage ratio calculated as our net debt divided by our trailing 12-month adjusted EBITDA from continuing operations was 3.8x, down from 4.1x at the end of 2025.

Turning to Slide 6. I want to highlight the year-over-year and sequential adjusted gross margin improvement we saw in the first quarter. Reflecting back to the strategic portfolio and footprint actions taken in 2024, we've shown continued improvement on the gross margin front. We've driven structural improvement in our operations through both footprint consolidation and operational efficiencies. We continue to optimize our supply chain even in the face of tariff changes and input cost increases. We've seen improvement in plant productivity as well, helping to reduce costs and waste. And finally, our focus on driving product mix improvement and recovering tariff and other cost increases through pricing are supporting margins. Our continued focus in these areas should drive additional operating leverage as volumes recover.

Turning to Slide 7. I'd like to highlight our progress on our deleveraging efforts. As previously stated, net debt to adjusted EBITDA stood at 3.8x at the end of the first quarter of 2026, down from 4.1x at the end of 2025, aided by our recently completed sale-leaseback transaction involving our Vonore, Tennessee manufacturing facility. This transaction generated $16 million in gross proceeds with the net proceeds of $14.6 million used to prepay a portion of our existing term loan facility. We reduced total debt by $12.8 million in the quarter. Under the terms of the agreement, CVG leases back the Vonore property for a 20-year term with an initial annual base rent of approximately $1.4 million for the first year. This transaction demonstrates our commitment to cash generation and deleveraging to better position CVG driving future growth and shareholder value. We remain focused on achieving our targeted goal of 2x net leverage.

Moving to the segment results, starting on Slide 8. Our Global Seating segment achieved revenues of $74.5 million, an increase of 1.5% compared to the year ago quarter, with the increase primarily driven by higher international volumes, offset by decreased customer demand in North America. Adjusted operating income was $3.6 million, an increase of $0.9 million compared to the prior year period as operational efficiencies drove expanded margins on higher sales volumes in the quarter.

Turning to Slide 9. Our Global Electrical Systems segment first quarter revenues were $57.4 million, an increase of 13.9% compared to the year ago quarter, primarily due to the ramp of previously awarded new business wins in North America and internationally. Adjusted operating income for the first quarter was $0.5 million, an increase of $0.3 million compared to the prior year period, primarily attributable to increased sales volumes and operational efficiencies. As production continues to ramp in 2026, boosted by the Zoox robotaxi program, we remain well positioned to drive continued growth and margin expansion in this segment.

Moving to Slide 10. Our Trim Systems and Components revenues in the first quarter decreased 13.9% to $39.5 million compared to the year ago quarter due to lower sales volume from softening customer demand. As a reminder, this segment solely serves the North American market and is most directly impacted by the reduction in Class 8 production volumes, which were down 27% year-over-year in the first quarter based on ACT data. Adjusted operating profit for the first quarter was $0.1 million compared to $1.6 million in the prior year period. The decrease is primarily attributable to lower demand levels. However, we did see sequential improvement from Q4 of 2025 of 620 basis points in gross margin and 430 basis points in adjusted operating margin, indicating that our previous actions to reduce headcount should position the segment with improved operating leverage as North America Class 8 truck production recovers.

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.

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 now imply a 9% increase in year-over-year volumes. ACT is then forecasting a decline of 2% in 2027 before rebounding 25% in 2028. Similar to last quarter, we also think it is helpful to provide a more granular drill down into the quarterly ACT data and outlook. Q1 2026 production came in at 54,000 with expectations for a meaningful uptick in Q2 and further growth in Q3 and Q4. Moving to our construction market outlook. Based on recent commentary and outlooks from our customers and key market players, we expect the construction market to be up in the low single-digit percentage range, primarily driven by lower interest rates and fiscal stimulus initiatives for 2026.

Turning to Slide 12. I will share several thoughts on our outlook for 2026. 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. In spite of continued macroeconomic uncertainty, we are reaffirming our net sales and adjusted EBITDA guidance ranges for 2026. Our net sales guidance range of $660 million to $700 million, which again represents a growth of nearly 5% over 2025 results at the midpoint, remains supported by strong growth in our Global Electrical Systems segment.

Our adjusted EBITDA guidance range of $24 million to $30 million represents growth of approximately 50% over 2025 results at the midpoint of the range, reflecting the operational leverage we expect to see as end markets recover, driving increased capacity utilization. Based on our first quarter performance, the expected program ramps and current customer demand levels, we have maintained these ranges. But if ACT Class 8 forecast play out as projected, we'd expect both metrics to come in toward the high end of the ranges provided and plan to give a further update on our second quarter earnings call.

Finally, we continue to expect to generate positive free cash flow in 2026, supported by the recent sale-leaseback transaction. We expect to prioritize free cash flow for debt paydown, driving net leverage toward our targeted leverage ratio of 2x.

With that, I will now turn the call back to the operator and open up the line for questions. Operator?

[Operator Instructions] Your first question comes from Joe Gomes with NOBLE Capital.

I like the momentum we're seeing. So I just wanted to start out, James, you talked on the Global Electrical Systems about the differentiated solutions and positioning the company to increase content per vehicle. And I was wondering if you could give us a little more color there. I don't want to give exact numbers maybe on percentages. I mean, how much growth could we see in terms of the increased content per vehicle and kind of like what's the timing on that?

Thank you, Joe. That's a good question. And it really varies by the architecture of the vehicle in the end market. So for example, we talked about Zoox autonomous vehicles. Due to the redundant nature from a safety perspective, the electrical content in an autonomous vehicle is almost double because of the redundancy. So that is one indicator that's going to give us a lot of opportunity for growth.

Also, in our legacy end markets with construction agriculture and even in the Class 8 market, as vehicles develop more content for either autonomous operation or feature comfort additions, that increases the content in our legacy end markets as well. And there's not really a number I could put on it, but I would say it's incremental to our current share of wallet per vehicle.

And then in addition to that, some of the new business that we continue to win, we're focused on these higher content applications, which will allow us to continue to further utilize the capacity we have in place and also plan for additional capacity as time goes on and these volumes continue to ramp up. We have enough capacity to support us in electrical for the next year or so. But this time next year, we'll be planning additional -- potential additional capacity if these programs continue to ramp as planned and if the markets continue to recover as planned.

Okay. Great. And then the Class 8 truck market, we're seeing another -- or we've seen since the beginning of the year, really strong order growth. I think the report came out yesterday, April marked the third straight month exceeding 140% year-over-year growth. Just from where you sit, I know you guys look at the ACT numbers, ACT is talking about 9% growth year-over-year. Do you think maybe that number, if we continue to see these types of levels could be low for the year?

Well, as you know, and as you've stated previously, there is volatility in the truck build forecast. And it's not as a result of ACT not fully comprehending what the opportunities are. It's more of a result of external exogenous events that happen, whether it's constraints on supply chain, freight due to geopolitical, whether it's tariffs, whether it's interest rates. So all indications right now based on the inbound orders really over the last 5 months, their forecast, I have a level of confidence in that it will sustain these levels. Now anything can happen, and that's why we're a little cautious on our guidance change right now because we really based our guidance on this customer -- specific customer forecast by end market and by model that we participate on. So we are seeing in our schedules finishing up Q2 and going into Q3, projected build increases from our large Class 8 customers.

Also, in addition to that, now that we're formally in production on the Zoox autonomous robotaxi program, we're seeing more firm schedules as they ramp their factory in California to build vehicles. So we're working collaboratively with both Class 8 end markets and our ConAg end markets as well as the autonomous and electric vehicles we're participating on. And that's really probably the heaviest weighting that we put on our guidance. ACT is a data point as well as we look at the industry reports and earnings reports from our large customers, too, as they have projections.

And the qualifier I'll put out there, too, Joe, is that there are supply chain constraints that OEMs, Tier 1s, Tier 2 suppliers have to deal with. And the turnaround, if you look sequentially from Q1 to Q2 and then Q2 to Q3 from a projected truck build standpoint, there could be some pressure on the supply chain to be able to respond to that type of increase. The trade issues, the fuel prices, those impact those constraints as well, all the way down to Tier 2, Tier 3, Tier 4 suppliers as well as freight carriers. So we're being cautious right now. And I think as we get through Q2 and have better visibility into Q3, we'll have a better understanding of whether or not there is upside to that ACT forecast.

One more and then I'll get back in queue. SG&A was up about $2.5 million year-over-year. Maybe you could just give us a little more color as to what was behind that increase and whether that the first quarter number is a good number going forward? Or do you think that comes back down for the rest of the year on a quarterly basis?

Yes, I can jump in there. The SG&A increase for the quarter is really driven by our incentive compensation coming back over the prior year. And we have different parts of that program. Part of it is related to a long-term performance awards that are tied to our stock price, and those awards get valued quarterly. And I would expect that we'll continue to see SG&A at this level for the balance of the year.

Yes. I'd like to add to that also, Joe, is that as you're aware, we've had a lot of focus really over the past 6 quarters on adjusting SG&A down. And we've eliminated quite a few heads across the globe in response to the market softness, which helped us preserve margin. As we ramp back up as far as like adding shifts to some of our plants, we need more salary people and support people. If those volumes hit that ACT is forecasting in several of our plants, we have to add another shift. We have the floor space. We have the equipment. We're just going to have to bring labor back in, both direct labor and indirect labor as well as salary expense.

So we're starting to see that in some of the plants that we're ramping up in. But our intention is to harvest the entitled operating leverage and really look at the SG&A adds very surgically. The compensation and benefits and those things, that's one piece. But the thing that is really our focus is headcount and expense, discretionary expense as well as expense related to starting up. But we would expect that level to hold throughout the year as a percent of sales, if not have some improvement if sales really go up, we'll get more leverage through there.

Your next question comes from Gary Prestopino with Barrington.

I think you may have answered this question, but when you talked about you have enough capacity through 2026 for what's going on, particularly in the Global Electrical business, you will not have to look for a new facility. You have room in your existing facility to add lines. And I think that you answered that question when you were talking about the last...

That's correct.

Okay. All right. So we're not looking at any big major expenses related to new plants.

Not for another year or so, Gary.

Not for another year?

Yes. We will not be looking at adding additional floor space for at least another year or so. But it depends on how volumes ramp, but we should be good until the end of '27 before we start adding another rooftop for electrical based on floor space and capacity we have.

Well, if you do, that means everything is going real well.

That's a good problem to have.

It sure is. In terms of the Global Electrical, can you maybe break down for us just what percentage of that business is going to -- strictly to the EV market and then further break it down as to the percentage that's going to North America and Europe? Because obviously, the North American market on the EV side is getting hit. But what I'm hearing is that Europe and China are still going full bore at building and selling EVs.

About 10% to 12% of our business goes into the EV market to date. The majority of it is in EMEA. And we have some programs here in North America, but Zoox will become the largest EV end market as it ramps. And that percentage of revenue -- of total revenue for EV will grow pretty substantially as a percent of the total EV as Zoox ramps up in North America. And we still have business that we won in EMEA that has not launched. So as that business ramps, we would expect the EMEA percentage to also increase as a percent of their total sales.

Okay. So you're still launching some business in EMEA as well. All right. I think I may have asked Michelle's question a while back. But in terms of Zoox, how long is that contract for?

Well, we have agreements with Zoox that really take us through the end of the decade here. We have supply agreements and statements of work that carry us over the next few years. Zoox has a number of programs in the future that they will continue to bring new models to market. That's their plan. I can't speak for Zoox or what the timing is or what the configuration of those models are, but we have been in close collaboration with them on both the current model that just started production as well as the next-generation models that they're starting to evaluate.

Okay. And then lastly, just getting back to -- just talking about Global Seating. How does that break out between aftermarket and OEM? Or is it mostly OEM? I'm not -- I just want to get clarification on that.

Yes. Aftermarket sales are approximately $50 million to $60 million. It depends on the volume and the promotional and the seasonality. But in general, it's in that range of the total Seating business. The positive things that we're seeing in that Aftermarket business, as we've talked about in prior earnings calls, we were putting a lot of focus on our field sales rep organization and the management of that as well as bringing out new configurations as shown in the slide deck for the presentation to promote certain aspects of the current market interest. whether it's the 250th anniversary or whether it's a Hunter special that you've seen on the slide. And we're seeing orders to date up about 20% on our Aftermarket orders. Obviously, they're timed at different points for delivery. But one of the things that has enabled us to generate higher orders year-over-year is our capacity alignment and getting fast turnaround on shipments.

So we're really focused on getting seats out within 5 to 7 days of the order, if not sooner. Sometimes it's a little longer depending on the configuration. But we see that as a growth driver, especially with the Class 8 truck production to date has been low. We've been really putting a lot of focus on that. So not only when the production comes back to higher levels, there is an opportunity to continue to drive further aftermarket orders as well.

So we're really excited about that segment. It's had a lot of success, and we're going to continue to invest in it because from an earnings profile, it's very attractive to us from a mix standpoint. We have more promotional opportunity, and we have more margin opportunity as well.

Okay. And just lastly, when we're talking about commercial and off-highway seats, the OEM market, that runs anywhere from Class 8 to things like Volvos or stuff like that?

Yes, that's correct. But it's primarily Class 8. We do have seating products globally, not just in North America, but in EMEA and in APAC outside of heavy-duty truck. And most of our business outside of North America is tied to ConAg and other end markets, office seating, stadium seating, bus seating. There are a number of categories when you look at our footprint outside of North America that we have a lot more traction in outside of heavy-duty truck.

So that also opens up the window for us to put more emphasis on growing heavy-duty truck in some of those areas as well as here in North America, kind of a cross-sell looking at can we get into other end markets in North America. And we do have ConAg seats that we produce in our Vonore, Tennessee plants as well. So with the sale leaseback, that's now a very strategic long-term portion of our footprint. And we're really excited about continuing to invest in that site for future growth in the Seating business.

[Operator Instructions] This concludes the Q&A session. I will now turn the call back to Mr. Ray for closing remarks.

Thank you. Thank you all for joining today's call. I also want to thank the employees of CVG who really helped deliver strong results and are excited about our growth prospects going forward. We continue to execute and deliver on our goals of driving operational efficiency, improving our revenue mix and driving accretive growth. We've made substantial progress operationally, and we are positioned to drive both growth and margin improvement as end markets recover. We look forward to updating CVG's progress next quarter. Thank you.

This concludes today's call. Thank you for attending. You may now disconnect.

Good morning, ladies and gentlemen, and welcome to CVG's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the call over to Michelle Hards, Vice President of Investor Relations. Please go ahead.

Thank you, operator, and welcome, everyone, to our Fourth Quarter 2025 Conference Call. Joining me on the call today are James Ray, President and CEO; and Andy Cheung, Chief Financial Officer.

This morning, we will provide a brief company update as well as commentary regarding our fourth quarter and full year 2025 results, after which we will open the line for questions. As a reminder, this conference call is being webcast and the fourth quarter 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 CVG operates, fluctuations in the production volumes of vehicles for which CVG 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 fourth quarter performance.

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 3. As we have highlighted on this slide, CVG delivered strong year-over-year improvement in profitability despite a challenging demand environment, particularly in North American Class 8 truck market.

During the quarter, we delivered an adjusted gross margin of 10.3%, up 190 basis points compared to last year. The continued year-over-year improvement in profitability was again driven by our focus on operational efficiency and improvement. Another highlight of the quarter is the continued strong performance within our Global Electrical Systems segment.

During the third quarter, we saw segment performance inflect with revenues up 6% compared to the prior year. The fourth quarter saw further acceleration with revenues up 13% year-over-year. We continue to benefit from the ramp-up of 2 key new programs, we highlighted those last quarter. We also announced a new contract with Zoox, autonomous robotaxi in our earnings release last night, which I will give more color on later.

Additionally, we delivered sequential and year-over-year gross margin expansion in this segment. Also highlighted on this slide is our strong free cash generation. For the full year, we generated $33.7 million in free cash, up $21.5 million from last year and ahead of our guidance, driven primarily by improved working capital performance and lower capital expenditures. That free cash flow enabled us to reduce net debt by more than $35 million for the full year, reducing our net leverage to 4.1x.

Andy will expand on our free cash flow and reduced leverage in a minute. But I just want to thank the entire CVG team for efforts in driving this strong cash flow performance in 2025. Free cash flow generation and debt paydown remain a focus for CVG in 2026.

With that, I would like to turn the call over to Andy for a more detailed review of our financial results.

Thank you, James, and good morning, everyone. If you are following along in the presentation, please turn to Slide 4. Consolidated fourth quarter 2025 revenue was $154.8 million, as compared to $163.3 million in the prior year period. The decrease in revenues was due primarily to a softening in customer demand across our Global Seating and Trim Systems and Component segments, particularly in North America.

Adjusted EBITDA was $2.3 million for the fourth quarter, compared to $0.9 million in the prior year. Adjusted EBITDA margins were 1.5%, up 90 basis points, as compared to adjusted EBITDA margins of 0.6% in the fourth quarter of 2024, driven primarily by operational efficiency improvements and reductions in SG&A expenses.

Interest expense was $4.2 million, as compared to $2.2 million in the fourth quarter of 2024, driven by higher interest rates. Net loss for the quarter was $6.4 million, or a loss of $0.19 per diluted share, as compared to a net loss of $35 million or a loss of $1.04 per diluted share in the prior year.

Net loss in the prior year included a noncash tax valuation allowance of $28.8 million. Adjusted net loss for the quarter was $6 million, or a loss of $0.18 per diluted share, as compared to adjusted net loss of $5.1 million, or a loss of $0.15 per diluted share in the prior year. Net loss and adjusted net loss were impacted by softening customer demand in North America as well as high interest offset somewhat by operational efficiency improvements.

Free cash flow from continuing operations for the quarter was $8.7 million compared to $0.8 million in the prior year due to better working capital management and reduced capital expenditures.

Now moving to our full year consolidated results. Consolidated revenue for the full year was $649 million, as compared to $723.4 million in the prior year. The decrease in revenues was primarily driven by a softening in customer demand in Global Seats and Trim Systems and Components segments.

Adjusted EBITDA was $17.8 million for the full year compared to $23.2 million in the prior year. Adjusted EBITDA margins were 2.7%, down 50 basis points, as compared to adjusted EBITDA margins of 3.2% in 2024, driven primarily by lower sales volume, offset somewhat by lower SG&A expenses.

At the end of the year, our net leverage ratio calculated as our net debt divided by our trailing 12 months adjusted EBITDA from continuing operations was 4.1x, down from 4.7x at the end of 2024.

Turning to Slide 5. I want to provide additional color as it relates to free cash flow in 2025. As James mentioned, we exceeded our guidance on this metric, which we have raised from our initial expectations provided in the first quarter of 2025. Operational efficiencies and lower SG&A expenses in 2025 helped limit margin erosion, despite absorbing a $74 million revenue decline.

Working capital was a major focus for us, and we delivered on our expectation of a $10 million reduction in inventory. We also saw improvements across other areas of working capital, including accounts receivable. Another area of focus was controlling capital expenditures, which were down $7 million in 2025. These factors drove $33.4 million in free cash flow, which allowed us to reduce our net debt by $35.8 million, bringing our net leverage ratio down to 4.1x compared to 4.7x at the end of 2024.

Moving to the segment results, starting on Slide 6. Our Global Seating segment achieved revenues of $70.7 million, a decrease of 5.6%, as compared to year ago quarter, with the decrease primarily driven by lower sales volume as a result of reduced customer demand. Adjusted operating income was $1.8 million, an increase of $1.2 million compared to the fourth quarter of 2024.

Despite the revenue decline in this segment, we saw our efforts of driving operating efficiencies and lower SG&A expenses improved profitability.

We continued to see strength in our aftermarket seats with sales up 7% year-over-year as we benefited from the resegmentation completed last year. For the full year, revenues were down 8.7%, again, due to softening customer demand and wind-down of certain programs. Adjusted operating income for the full year was $10.5 million, an increase of $4.9 million, compared to 2024, due primarily to lower SG&A expenses.

We are already seeing operational efficiencies flow through in this segment, and we expect further improvement in operational performance in 2026, as we anticipate recovery in end-market demand.

Turning to Slide 7. Our Global Electrical Systems segment fourth quarter revenues were $49.7 million, an increase of 12.7%, as compared to the year ago quarter, benefiting from the ramp of previously awarded business wins in North America and internationally. Adjusted operating income for the fourth quarter was $0.9 million, an increase of $3.9 million compared to the prior year, primarily attributable to increased sales volumes and operational efficiencies.

We are continuing to see the benefits of the restructuring actions we have taken in this segment, and we remain well positioned to take advantage of higher volumes in 2026, particularly as we ramp the newly aligned Zoox business in the second half of the year.

For the full year, revenues were essentially flat. Adjusted operating income for the full year was $3.8 million, an increase of $4.6 million compared to 2024, primarily due to operational efficiencies achieved. We are starting to see the benefits of the margin improvement initiatives we have implemented in this segment, right as growth is accelerating on the back of new business wins ramping.

Moving to Slide 8. Our Trim Systems and Components revenues in the fourth quarter decreased 22.5% to $34.4 million, compared to the year ago quarter, due to lower sales volume as a result of decreased customer demand.

As a reminder, this segment solely serves the North American market and is most directly impacted by the reduction in Class 8 production volumes. Adjusted operating loss for the fourth quarter was $1.4 million, compared to profit of $0.9 million in the prior year. The decrease is primarily attributable to lower demand levels. In addition to a successful new Wiper program launch, we expect our focus on cost discipline to return to this segment to profitability as Class 8 production improves throughout 2026.

For the full year, revenues were down 22.9% due to the decreased customer demand in North America. Adjusted operating income for the full year was $0.2 million, a decrease of $13.4 million compared to 2024, primarily driven by decreased customer demand and the reduction of backlog in the prior year period.

That concludes my financial overview commentary. I will now turn the call over to James to cover our end market outlook, key strategic actions and our 2026 guidance.

Thank you, Andy. I will start with our key end market outlook on Slide 9. According to ACT's Class 8 heavy truck build forecast, 2026 estimates imply a 4% increase in year-over-year volumes. ACT is then forecasting a decline of 5% in 2027, before rebounding 30% in 2028. We also think it is helpful to provide a more granular drill-down into the quarterly ACT data and outlook today. You can see that the second half of 2025 saw a rapid decline of approximately 28% compared to the first half of the year. On the other hand, the current forecast for 2026 shows a steady ramp throughout the year with the second half up about 18% over the first half.

Moving to our construction market outlook. Based on recent commentary and outlook from our customers and key market players, we expect construction market to be up in the low single-digit percentage range, primarily driven by lower interest rates and fiscal stimulus initiatives.

Turning to Slide 10. I would like to give more details on the recently announced relationship with Zoox. CVG has been selected as a key wire harness supplier for Zoox, an autonomous ridesharing company. This win highlights the global nature of our supply chain and ability to support client needs with high-quality products and available capacity. We are collaborating with Zoox on the design and supply of custom low-voltage harnesses for their all-electric purpose-built robotaxis, supporting our continued diversification into electric and autonomous vehicle markets.

We intend to continue supporting Zoox through their period of scale, further increasing the utilization of our new facility in Aldama, Mexico. Over the life of the program, we expect to reach full utilization of this facility. CVG is focusing on opportunities to expand this relationship. CVG has been supplying harnesses to support their test market vehicle deployment, and we expect volumes to increase in the second half of 2026.

The anticipated ramp is expected to contribute to our target of growing our Global Electrical Systems segment, and more than 10% in 2026 and is accretive to segment operating margins.

Turning to Slide 11. I will share several thoughts on our outlook for 2026. 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.

We expect a year of top line growth with our net sales guidance range of $660 million to $700 million, which represents growth of nearly 5% over 2025 results at the midpoint, supported by strong growth in our Global Electrical Systems segment.

Similarly, we are announcing an adjusted EBITDA guidance range of $24 million to $30 million, which represents growth of approximately 50% over 2025 results at the midpoint of the range, reflecting the operational leverage we expect to see as end markets recover and driving increased capacity utilization.

Finally, we expect to generate positive free cash flow in 2026, supported by further improvements in working capital. We expect to use our free cash flow to continue paying down debt, improving net leverage toward our targeted leverage ratio of 2x.

With that, I will now turn the call back to the operator and open up the line for questions. Operator?

[Operator Instructions] Your first question is from Joe Gomes from NOBLE Capital.

So I want to start out. We talked about those 2 new key programs that started ramping in the third quarter. It looks like the more positive in the fourth quarter. Just wondering if you could give us a little more color on how those programs are unfolding right now.

Yes. Thank you for the question, Joe. They're both going to plan. The one program that was in EMEA is ramping up. We have the capacity. The customer volumes are coming in as planned, in some cases, a little higher. For the Zoox program that we did announce and disclose that customer here in North America, that's going to plan, too.

The new facility in Aldama, Mexico is ramping up, and we see that facility being fully utilized by the Zoox volume. And their forecast is staying pretty true to where it was at business award. We're currently in the last preproduction series supporting them. They're on track to start their volume production towards the latter part of the second quarter, and we're positioned to support them, and we don't foresee any hiccups at this point.

Okay. Great. And I know you guys don't typically talk about the level of new business wins, but, James, maybe give us a little color for '25 outside of these 2 key programs, what you saw kind of on the new business wins? And are there any significant programs in '26 that will be ending?

So for '25, we target approximately $100 million a year to book new business, and that's at the peak annual sales in the programs that are awarded by customers, but as we've discussed previously, the volatility of those quantified numbers that the customers give us and forecast is pretty erratic. It can be delayed program launches, it could be lower volumes, it's all over the map. So that's why we stopped communicating that and really focused on the annual guidance where we have a closer in view of when programs are starting.

The nice thing about the Zoox opportunity, we actually were able to start producing harnesses for them within 12 months of being awarded the business. So that's in more near term. And some of our Seating programs and Trim programs, it's a 2- to 3-year delay from the time you're awarded the business to the time you actually start production.

The other programs in EMEA, we are utilizing our Morocco facility for that, and that's for supporting the Electrical Systems business. So the growth coming through in Electrical Systems is really positive right now. And as we said, we expect that business to grow more than 10% in 2026.

As far as other business that we're pursuing, we booked quite a bit of business each year, but again, it does depend on the timing, and the ramp schedule of the customers and other macroeconomic and geopolitical factors as we know, can happen, like what's going on in the EMEA region now. But there are a number of programs across all businesses. So we have not stopped pursuing new business wins in Seating or Trim Systems and Components. We actually have booked a few wins in each one of those businesses during this first quarter. We won't really disclose the magnitude of it, but we continue to focus on building a funnel of approximately $100 million a year in new business.

Okay. And the aftermarket business seemed to be pretty strong here in the quarter. You talked about it, highlighted. Maybe you could give us a little bit more color on the aftermarket and where you see that going in '26.

Yes. So if you recall, last year, we resegmented our product lines in the company. And an aftermarket business was integrated into our Seating business for the seat products, and the wipers were integrated into our Trim Systems and Components business. One of the benefits is the alignment with our production facilities. We have a separate seating aftermarket plant and a separate OEM seating plant.

Now we look at those sites together. And when we talk about improving operational efficiencies, they're under a single operating unit, and we have much better coordination from a lead time perspective, scheduling perspective. And what really drives aftermarket, especially in seats, is your turnaround time or time to delivery from the time we get an order. And that has reduced substantially from where it was in prior years just based on how we operate the plants together and more seamlessly and much more customer-focused.

The other thing that we started doing with the seat business in a more, I guess, intentional way is driving promotions. And several of our aftermarket seats competitors are more promotional-based. And now that we have the reduced lead time order to delivery, we are fulfilling a lot more promotional actions. So we continue to see that business grow.

Both of the plants, the OEM and the aftermarket plant are running about half capacity. So we have additional capacity to really grow the aftermarket business. We have further engagement with our over 60 field sales reps that represent our product in the aftermarket field.

So a lot more intentional initiatives to really grow that top line and that margin is accretive to the overall Seating business. So we're really excited about it. We're going to continue to focus on that. We've even had opportunities from a cash generation standpoint by using some of our excess inventory to have certain promotions in our aftermarket seat business. So it's really been a multifaceted efficiency improvement across all elements of our financials.

So we're really excited about it. We're looking at new products to introduce into the aftermarket channel in addition to seats, seat covers and other new products. So we're really excited about it. That's going to be a focus area for growth for the global seating business.

In addition to pursuing OEM platforms, the other benefit from aftermarket is near term. So we can get an order and turn around a seat in days or a few weeks compared to booking a new seat OEM program, which takes years to bring to market. So really excited about it.

Your next question is from John Franzreb from Sidoti & Company.

I have to admit, I'm not particularly familiar with the Zoox product line, but my understanding is that the target level there is 10,000 units of production per year. Is that what you're hearing? And what -- when is the time line for them to start to hit that kind of a number?

Yes. So I can't speak for Zoox, but what they have told us is to plan to support 10,000 vehicles per year. They are in a ramp mode. For the first 2 years, we understand their volume to be about 5,000 on an annualized basis. So for us this year, it's about half that, and then for '27, the full 5,000. And then when you get to '28 and '29, they're targeting 10,000 units.

Now their schedule may accelerate depending on the municipality and geofence within those municipality deployments. The more -- the larger their geofence, the more vehicles they can deploy. I had an opportunity to ride in their vehicle at the Consumer Electronics Show. It's a very unique product. It's bidirectional. So it goes both forward and backward, no steering wheel, no brakes -- or it does have brakes, I'm sorry, no steering wheel in the vehicle and the seats are facing, but it's a very highly contented vehicle because of the cameras and the high-speed communication. So the content in that vehicle is more than twice what would be in a vehicle that size that wasn't autonomous. So we're benefiting from that, too, and that's what's allowing us to better utilize and fill our utilization in our Aldama plant in Mexico.

Ray, I was honestly going to ask you if you wrote it, and owing in a follow-up offline, but you answered that.

I've got pictures to prove it, John.

I believe, I really do. I guess I'm actually curious, I think you just answered the question, there's not going to be a capacity problem or capacity addition when you get to that '28 time frame to fill 10,000 units would be fine?

We will scale capacity as needed. But up to that point, we have the capacity in place. As you're aware, we've had headwinds with some of our structural costs in electrical as we built capacity ahead of businesses launching. So the past couple of years, we've been struggling with getting our structural costs aligned with demand. Now we're seeing that come into play, and we're getting much better absorption, and we expect really good operating leverage as that capacity utilization increases over the next couple of years.

Got it.

As a reminder, remember that we have two facilities in Mexico, right? We have flexibility to move programs from one to the other. So as we continue to see the volume and utilization in Aldama, we'll make those decisions. And obviously, when necessary, we'll invest in additional equipment and other capacity. So we have no problem if the customer really want to that level, it will be just good news for us.

Got it. And actually, Andy, this next question might be more for you. You talked about improvement in free cash flow. In 2025, it was largely coming from working capital and the receivables line, best I can tell. And I'm curious what remaining levers because it looks like you're going to pull down CapEx. What are the other levers you still have on operating cash flow that can drive improvement in free cash flow this year?

Yes. So John, we still see opportunities for us to continue to improve our efficiencies in managing our working capital. So we did a lot of work in receivable. We have seen a significant improvement in days and past due. So we saw a lot of process issue. And the next -- as James mentioned, we are seeing the sign of improving inventory efficiencies as well. We're working with customers to make sure that our demand variation is keeping to minimum, allow our plants to be more efficient, and we work on minimum order quantities, lead time with our supply base.

So we actually continue to see we are not done in working capital improvement. So as we're looking for growth now in the next couple of years, so it will require more working capital to fund that growth, but at the same time, our efficiency will allow us to offset that. So we're pretty confident that we'll still have opportunities ahead.

Got it. And maybe one last question, and I'll get back into queue. The last 3 months, we've seen some stunning truck order numbers. I'm curious, a, about your thoughts about that; and maybe b, how long did those orders translate into revenue for you on a normalized basis?

Okay. I'll take that, John, if you guys track ACT, you'll see it's changed substantially since the early part of Q4 last year from the low 200s. And when we guided this, we were basing the truckload on 260,000 units, which came out in February. Just this week, ACT has come out with a revised forecast for 2026, targeting 275,000 vehicles. So the cautionary comment I'll make here is that the volatility in the ACT forecast based on a number of factors, I mean, they have a very robust model on forecasting, but there's so much uncertainty that drives where the OEMs target production levels, and that's really driven by fleet sales and freight rates and economic indicators that relate to GDP growth, et cetera.

So we valve in a very judicious way how we add capacity and inventory, or how we reduce capacity and inventory and headcount to stay flexible. And some of that up and down does create inefficiency. It also -- we see variation in customer schedules. Just in the first quarter, several of our customers had down weeks of production. And if you look at the ACT numbers, the first quarter of '26 actually came in lower than their prior forecast.

So it's a constant adjustment, but we're optimistic that the trend of increased quarterly production is in play. And our customers, we see about a 12- to 13-week EDI schedule from our customers, and then they give us out quarter estimates on where they're going to be. And they're somewhat in line with ACT.

Now we don't supply every OEM that ACT uses in their forecast. So there's a mix element between our customer orders, their production and what the overall ACT production numbers are, which we use as a proxy along with what our customers are telling us.

[Operator Instructions] And your next question is from Gary Prestopino from Barrington Research.

I have quick couple of questions here. Looking at your reduction in debt levels and all that, is the interest expense line in Q4, a good proxy for what it should be on a quarterly basis going forward?

Yes. So thank you, Gary. Well, as I mentioned in my prepared remarks, we continue to focus on using our free cash flow to bring down our debt, right? So as you see that north of $30 million of debt paydown already happened this year, and we are right now at the lowest net debt level for many, many quarters at around $73 million at the end of 2025.

So you also remember about a year ago, we did refinance and the interest rate is higher than what we had in the past. So right now, we see a combination effect of higher interest rates, but we continue to pay down debt. So from what I'm seeing in 2026, you'll continue to see a similar interest rate level, but you'll continue to see a gradual paydown of our debt. We guided that this year, we'll have also positive free cash flow, and we'll use that to pay down more debt as well. It's a little too early for us to talk about the magnitude of the amount of free cash flow and the debt level for 2026 for now, but we will have more line of sight and maybe guide a little bit more in the first quarter call, but overall, you should see that the interest expense will gradually coming down throughout 2026.

Okay. That's helpful. And then James, you mentioned in the Global Electric, you had 2 contracts or 2 programs that were signed up that's starting to drive some growth. Was -- I got confused. Were there 2 programs in addition to Zoox? Or was there 2 programs without Zoox?

There were 2 programs in addition to Zoox.

Okay. And so those 2 programs came on last year, and they're starting to positively impact the numbers.

That's correct.

Last year.

That's correct. And the other thing I'd say, Gary, is that with several of our legacy customers, we have a portion of share of wallet. So to the extent we can provide products to expand our share within those customers, we consider that opportunities for near-term revenue growth, too. And now that we have additional capacity online, a lot of the discussions are centered around share of wallet expansion with some of our legacy customers in addition to pursuing new customers and new end markets. But our legacy construction and agriculture customers and some of those are in power gen end markets now and also the data centers.

So a lot of discussions now are centered around how we can support those customers' growth in power gen for data centers and also the data center architecture itself. So we are looking outside to diversify in other end markets in addition to the construction, agriculture and Class 8, and we're starting to see some good traction and tailwind in winning business and content in those adjacent end markets.

Okay. But the programs that you -- the 2 plus that you announced in Global Electric, those are related to vehicles. It's not related to data centers.

That's correct. That's correct.

Okay. And then just looking at your guidance, pretty big range of adjusted EBITDA there. What -- when you're looking at the low end, what kind of factors are going into that, particularly your Class 8 truck build rate, because the last couple of years, these numbers have started off pretty high, and then gradually as the year goes on, ACT has reduced them, knowing that we've been in a freight recession for years now, and you got to have some replacement units coming on because these are capital equipment and it wears out. So can you kind of help us with what your assumptions are for the high end, low end?

Yes. So let me give you some color there, Gary. So as you see last year, as you mentioned, the last few quarters as we keep lowering the guidance, and you see that that's highly correlated to the Class 8 end-market production. As we're going through into our planning for 2026 and the last couple of months of ACT forecast has been positively revised every time. So I would say that even including yesterday's ACT report is another 5% of positive revision upwards.

So we are actually seeing this time around that the range, yes, is wide, but as you can see, the volatility is high. But the last couple of trend of the ACT report give us more positive confidence that the range is probably giving us the momentum into the top side. So 2024 has been the start of the decline in the end market, but now we see that the bottom as forecasted by ACT is in the horizon.

I will also say that as you look to our cost structure, you can expect that have significant drop-through of the incremental top line that will come through as we have already largely completed our restructuring programs in the last year. The fixed cost has been significantly reduced. So now when we see the additional volume come through, I'm hopeful that the drop-through will be very attractive.

Okay. That's helpful. Well, let me ask it this way then is ACT as we started the year, what's been the -- for the first 2 months of this year, year-over-year, what's been the year-over-year increase in orders?

The ACT Q1 run rate is still around the 50-ish thousand units. So it's a run rate of about 220 or so annualized. If you look at the latest ACT, it's up to 275,000. So that's implying about 65,000 to 70,000 units on a quarter-to-quarter basis. So you will see that the continued improvement in the quarterly volume going into 2026.

There are no further questions at this time. Please proceed with the closing remarks.

Thank you all for joining today's call. I'm encouraged by the progress we have made in driving operational efficiencies and lowering our cost structure. And we are starting to see signs of end-market improvement, which we believe will yield improved financial performance in 2026 and beyond. We look forward to updating CVG's progress next quarter.

Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may now disconnect your lines.

Good morning, ladies and gentlemen, and welcome to the CVG Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the call over to Mr. Andy Cheung, Chief Financial Officer. Please go ahead, sir.

Thank you, operator, and welcome, everyone, to our conference call. Joining me on the call today is James Ray, President and CEO of CVG. This morning, we will provide a brief company update as well as commentary regarding our third quarter 2025 results, after which we will open the call for questions. As a reminder, this conference call is being webcast and the Q3 2025 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-saving 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 CVG operates, fluctuations in the production volumes of vehicles for which CVG 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 third quarter performance.

Thank you, Andy. Good morning, and thanks to all those who joined the call. Please turn your attention to the supplemental earnings presentation, starting on Slide 3. As we have highlighted on this slide, CVG delivered continued improvement in profitability despite a very challenging market environment. During the quarter, we delivered an adjusted gross margin of 12.1%, which is up 10 basis points on a sequential basis and up 50 basis points compared to last year. The continued improvement in profitability was again driven by the operational efficiency improvement initiatives we have spoken to in prior calls. I will expand on this a bit more in a minute. But I just want to give a heartfelt thanks to the entire CVG team for their contributions in driving these operational improvements in these very challenging times.

Another highlight of the quarter is the continued performance improvement within our Global Electrical Systems segment. For the quarter, we saw segment performance inflect with revenues up 6% compared to the prior year despite continuing end market softness. Of note, we benefited from the ramp-up of 2 key new programs in the quarter. The first is with an autonomous vehicle manufacturer in North America, while the other is with a major automotive manufacturer in Europe. Both program ramp-ups are in their early stages, and we expect a continued strong and growing revenue contribution from these programs moving forward. We also delivered sequential and year-over-year margin expansion, driven primarily by the higher revenues as well as the operational efficiency improvements we've made.

Also highlighted on this slide is our strong year-to-date free cash generation. For the first 9 months, we've generated $25 million in free cash, up $14 million from last year, driven by improved working capital performance and lower capital expenditures. I'll speak more about specific guidance later, but we do expect to generate free cash flow in the fourth quarter of 2025. And finally, I just want to highlight that we are not standing still in our efforts to drive further operational efficiencies and reduce costs.

In North America, we continue to rightsize our manufacturing footprint to adjust to the current demand environment. In EMEA and Asia-Pacific, where we are seeing better end market demand, we are proactively optimizing our production capacity to lower costs and create additional capacity to meet future demand growth. We also continue to manage headcount and flex manufacturing operations work schedules across the company to reduce both SG&A expenses and manufacturing overhead costs, respectively.

Turning to Slide 4. I want to provide additional color as it relates to the continued sequential improvement we are seeing at the gross margin line. As we highlighted for the last 2 quarters, the operational efficiency improvements made related to freight, labor and plant level overhead continue to benefit our profitability. We continued that trend this quarter with additional margin expansion of 10 basis points versus the second quarter of 2025, giving us a cumulative improvement of 370 basis points versus the fourth quarter of 2024. What is even more notable is that we were able to expand margins sequentially in the third quarter despite an 11% drop in revenue versus the second quarter of 2025. This clearly demonstrates the operational efficiency improvements we've made to address our cost structure.

As a quick reminder, the bulk of these improvements have come from a reduced reliance on expedited freight, optimized terms with our suppliers and our improved lead times and order quantities. We have also flexed our direct labor to better align with customer volume changes and our new segment alignment has provided a more optimal overhead structure. Our focus is on driving operational efficiency, which has supported our financial performance in a lower demand environment. While we acknowledge the broader market and macroeconomic uncertainty, we are committed to taking the necessary proactive actions to drive improved financial performance. As we look ahead to the eventual end market recovery, we believe we are well-positioned to enhance shareholder value through continuing to win new business, driving accretive growth, accelerating margin expansion and increasing our capital efficiency.

With that, I'd like to turn the call back to Andy for a more detailed review of our financial results.

Thank you, James, and good morning, everyone. If you are following along in the presentation, please turn to Slide 5. Consolidated third quarter 2025 revenue was $152.5 million as compared to $171.8 million in the prior year period. The decrease in revenues is due primarily to a softening in customer demand across our Global Seating and Trim Systems and Components segments, primarily in North America. Adjusted EBITDA was $4.6 million for the third quarter compared to $4.3 million in the prior year. Adjusted EBITDA margins were 3.0%, up 50 basis points as compared to adjusted EBITDA margins of 2.5% in the third quarter of 2024, driven primarily by operational efficiency improvements and reductions in SG&A expenses.

Interest expense was $4.1 million as compared to $2.4 million in the third quarter of 2024, driven by higher interest rates following our June 2025 debt refinancing. Net loss for the quarter was $6.8 million or a loss of $0.20 per diluted share as compared to a net loss of $0.9 million or a loss of $0.03 per diluted share in the prior year. Adjusted net loss for the quarter was $4.6 million or a loss of $0.14 per diluted share as compared to adjusted net loss of $0.4 million or a loss of $0.01 per diluted share in the prior year. Net loss and adjusted net loss were impacted by softened customer demand in North America as well as higher interest and taxes, offset somewhat by operational efficiency improvements.

Free cash flow from continuing operations for the quarter was negative $3.4 million compared to positive $17.1 million in the prior year as softer demand and the facility move in China led to an increase in inventory in the third quarter. The China facility move positions us for lower labor cost and a more optimal manufacturing footprint moving forward. Just a reminder that last year's third quarter included the proceeds from the sale of our cap structures business as well as another facility, totaling $27.4 million. James will share more color on our free cash flow outlook momentarily. At the end of the first quarter, our net leverage ratio calculated as our net debt divided by our trailing 12 months adjusted EBITDA from continuing operations was 4.9x, up slightly from 4.8x at the end of the second quarter.

Moving to the segment results, starting on Slide 6. Our Global Seating segment achieved revenues of $68.7 million, a decrease of 10% as compared to the year ago quarter, with the decrease primarily driven by lower North American sales volume as a result of reduced customer demand. Adjusted operating income was $2.9 million, an increase of $3.7 million compared to the third quarter of 2024. Despite the revenue decline in this segment, we saw an improvement in adjusted operating income margin, primarily attributable to the proactive actions taken to drive operational efficiency improvements as well as lower SG&A expenses.

Turning to Slide 7. Our Global Electrical Systems segment third quarter revenues was $49.5 million, an increase of 6% as compared to the year ago quarter as the ramp-up of new business wins more than offset weaker Construction and Agriculture demand. Adjusted operating income for the third quarter was $1.4 million, an increase of $1.6 million compared to the prior year, primarily attributable to increased revenues and operational efficiencies. We are continuing to see the benefits of the restructuring actions we have taken in this segment, and we are encouraged by the return to growth we saw in this third quarter. As we have said before, we continue to win new business here at attractive margins and Global Electrical Systems remains a key area of focus for growth and cash generation moving forward.

Moving to Slide 8. Our Trim Systems and Components revenues in the third quarter decreased 29% to $34.3 million compared to the year ago quarter due to lower sales volume as a result of decreased customer demand. As a reminder, this segment solely serves the North American market and is most directly impacted by the reduction in Class 8 production volumes. According to ACT Research, Class 8 fields were down 39% year-over-year in the third quarter.

Adjusted operating loss for the third quarter was $0.3 million compared to a profit of $4.1 million in the prior year. The decrease is primarily attributable to lower sales volumes. While it was encouraging that segment revenues declined less than the market in the quarter, we are implementing further actions to rightsize this business to adjust to the lower demand environment. We are in the process of implementing further operational improvements, including spending cuts, collaboration with suppliers to reduce costs and launching new programs such as a new wiper program in Q3, all with a goal of returning this segment to profitability as quickly as possible. That concludes my financial overview commentary.

I will now turn the call over to James to cover our market outlook, key strategic actions being taken and our updated guidance.

Thank you, Andy. I will start with our key end market outlooks on Slide 9. According to ACT's Class 8 heavy truck build forecast, 2025 estimates imply a 28% decline in year-over-year volumes. ACT is forecasting a further decline of 14% in 2026 before rebounding 34% in 2027. Just a reminder that we quote ACT's North American Class 8 production outlook as a point of reference, but our revenue here is driven by our actual end market and geographical mix as well as our customers' demand and production schedules. Furthermore, ACT's outlooks have been subject to large variations as seen by the revisions they've made since we reported Q2 results.

Based on published reports, the U.S. has been in a freight recession over the last 2 years as capacity exceeds demand following a surge of additions to meet supply challenges during and coming out of COVID. ACT is currently factoring lingering tariff impacts into their 2026 forecast, but acknowledges a more positive tariff environment provides upside to their 2026 outlook. We have also seen North America truck OEMs give more optimistic 2026 North American Class 8 forecast than ACT, giving some indication that the current production levels are running below expected market replacement needs. As a result, despite adjusting our footprint to current demand levels, we are preserving optionality for when markets eventually improve to drive operating leverage as volumes recover.

Moving to our Construction and Agriculture market outlook. Based on recent commentary and outlooks from our customers and key market players, we expect the construction market to be down 5% to 10% and agriculture markets to be down in the 5% to 15% range as construction is faring a bit better than agriculture this year. The drivers in both markets remain higher interest rates, weaker housing starts, slower commercial real estate activity and lower commodity prices continuing to weigh on demand. We remain optimistic about these end markets, which most directly impact our Global Electrical Systems business as we see ongoing replacement needs and underlying secular trends driving a recovery in these markets in 2026 and beyond.

Turning to Slide 10. I'd like to give more details on the outlook for our Global Electrical Systems segment. I'll get into the drivers momentarily, but we expect our Global Electrical Systems segment sales to increase in the high single-digit to low double-digit percentage range in 2026, even in the face of these weaker end markets I just discussed. This increase is driven by the continued ramp-up of new business wins, which is accelerating the utilization of our recent capacity additions.

Furthermore, we have made structural improvements to our business model in this segment, which we expect to drive growth and reduce volatility. We are focused on our core market and customers where we can drive growth in wallet share through a continued focus on quality, customer satisfaction as well as upselling. We also are accelerating our expansion in adjacent markets with strong secular growth drivers such as autonomous EVs and infrastructure markets. And finally, we are extending our differentiated solutions, including high-voltage wire harness and power distribution boxes to drive increased content per vehicle.

The biggest driver of Q3 performance as well as our expectations for growth in 2026 is the ramp of new business previously won. We recently launched a program where we provide low-voltage wire harnesses for an autonomous vehicle customer in North America. Autonomous vehicles have been a key focus area for the company, and we are currently working with our partners to establish a leading market position here for CVG. We have also launched programs providing wire harness solutions for multiple European OEMs across various geographies.

After seeing delays and push out of our new business win program launches during 2024, we're encouraged to see these programs ramping up and driving top line growth. As these programs ramp up, we are seeing improved utilization at our new production facilities in Aldama, Mexico and Tangier Morocco, helping drive margin expansion. As the ramp-up of these programs continues and other new programs contribute, we expect to see continued margin improvement into 2026 and beyond for the Global Electrical Systems segment.

Turning to Slide 11. I'd like to provide some updates on key actions we have underway to drive free cash flow improvement as well as mitigate the impact of tariffs and broader macroeconomic headwinds.

First, we remain focused on driving improved cash generation and aligning our SG&A structure with our current revenue base this year. As Andy mentioned, we did see a small inventory build in the third quarter, and we expect working capital to return to being a source of cash for us in the fourth quarter. We continue to expect $30 million in working capital reduction for the year, focused primarily on inventory and accounts receivable as well as a 50% reduction in planned capital expenditures this year. We also continue to expect $15 million to $20 million in cost savings this year with a focus on SG&A, which should drive incremental margin expansion as our top line returns to growth in the future.

Second, we are seeing tangible benefits of strategic portfolio actions taken in 2024 to lower our cost structure as we experienced lower decremental margins, positioning us well to grow our earnings power as end market demand recovers. As demonstrated this quarter, despite demand headwinds leading to a revenue decline of $19 million year-over-year, adjusted EBITDA increased by $300,000 versus the prior year.

Third, we've remained in constant communication with our customers, improving our line of sight to production schedule changes, particularly in the light of current market conditions, which allows us to implement necessary cost action in the event of future changes. In addition, our teams took immediate action in response to tariffs to mitigate potential impacts, and we've made substantial progress in negotiations on price recovery terms with our customers.

Turning to Slide 12. I'll share several thoughts on our updated outlook for 2025, which reflects the current estimated impact of tariffs, trade policy and economic uncertainty as well as our proactive efforts to manage this current uncertain environment. Most importantly, we are maintaining our free cash flow guidance to reflect our progress year-to-date as well as our ongoing focus on cash generation. We expect to build on our year-to-date free cash flow progress in the fourth quarter, generating at least $30 million of free cash flow for the full year, which we expect to use to pay down debt. Our continued focus on reducing working capital and lowering capital expenditures underpin this outlook.

Net leverage is expected to decline through 2026 as we work toward returning to our targeted 2x level. Based on current macroeconomic trends, prevailing truck build forecast and ongoing softness in Construction and Agriculture markets, we are lowering our quantitative annual guidance for revenue and adjusted EBITDA and tightening the range on both. Given current demand outlooks, we are adjusting our full year 2025 revenue guidance range to $640 million to $650 million, which is down from $650 million to $670 million from our prior guidance. We are also revising our adjusted EBITDA guidance expectations to the range of $17 million to $19 million for 2025, down from $21 million to $25 million from our prior guidance.

With regard to the current demand outlook, I mentioned a few minutes ago that ACT Research's 2025 North American Class 8 production forecast is down 28% year-over-year. If you look more closely, you'll see that they are forecasting second half 2025 volumes down 37% sequentially versus the first half of 2025. While there is typically some seasonality to our North American Class 8 related business, you can imagine the challenges this type of sequential decline creates. Consequently, we remain laser-focused on operational efficiency improvements and reducing SG&A to protect margins in the face of lower demand and position us for strong operating leverage when the eventual market recovery happens.

With that, I will now turn the call back to the operator and open up the line for questions. Operator?

[Operator Instructions] Your first question comes from Joe Gomes with NOBLE Capital.

I wanted to start out on some of the efficiency improvements, the headcount reductions, the reduced CapEx. Obviously, I understand why that's going on, but how much more can we wring out of those before you have to start spending more money on CapEx? Are you starting to cut into muscle, so to speak, with some of these headcount reductions? I'm just trying to get a little handle on what more is possible there.

Joe, this is James. Yes, we continue to prioritize our reduction areas so that we take advantage of the higher growth and also cut, restructure, reorganize where we're seeing much slower growth. So from a headcount standpoint, it's not just SG&A, but it's also the manufacturing overhead headcount. As we look at our facilities and our footprint, there are opportunities to create synergies between sites to minimize the manufacturing overhead. We continue to focus on execution items and quality scrap, premium freight, those things that we made headwind in. We still are entitled to additional operational efficiency improvements. So we're not done yet. And as you know, as volumes change and as mix changes, that creates other opportunities.

The one thing that we did in Q3, and we started in Q2 was really engaging with our supply chain partners and our supply base to look for additional opportunities as suggested by them that are mutually beneficial to both the supplier and to us. And we've really generated a good funnel of incremental opportunities to go after. We obviously continue to work with our customers to make sure we're aligned with their schedule changes as well as their approvals for mitigating tariffs as well as approvals for making changes to designs and other cost savings initiatives.

So there's still opportunity to reduce more the bottom line to your question, without significantly impacting our ability to respond to market changes. We have seen fluctuations both up and down. So we're very careful and very surgical in how we flex those so we don't leave opportunity on the table by not being able to respond to demand. And that's on a global basis. So that's pretty much where we are right now. We're not finished. And as the market continues to fluctuate and we deal with the volatility, we have a playbook that we're going after to make sure our costs are aligned and we don't sacrifice the future for recovery.

Joe, if I may add on the CapEx side for your question. So mostly this year, we are holding on to our maintenance CapEx. And as you asked when will CapEx come back up, it really depends on the business program launches that we are seeing in the next year. As you know, we already invested a lot in our electrical system capacity in the last couple of years. So major fixed costs are there. So when the new business and revenues come in, we may need to add some equipment. So that's when we see CapEx coming up a little bit, maybe sometime later next year.

Okay. And a question on the updated guidance. You took revenue down as you stated, but it looks like it's a bigger reduction in adjusted EBITDA based on the numbers that you provided. Just wondering why the bigger reduction in adjusted EBITDA there? Is that just deleveraging or is there anything else behind that?

Yes, Joe, I would say that the majority of that is the deleveraging. And part of the changes will you have to consider the mix of the reduction. As James mentioned, right now, what we are facing the most sharp reduction is in our North America Class 8 business, which is really affecting our Trim and Component business, and that is a very fixed cost-driven business. As you can imagine, our business product lines thermoforming, a lot of the equipment is already put in place. So there's a higher contribution margin in that business. So that 30-some, 40% reduction is really helping our margin from a mix standpoint.

Okay. And one more for me, if I may. So I understand the ACT numbers are not the be all end all, but let's assume their forecast is somewhat accurate here, and you're looking at that 14% reduction in '26 in Class 8, can the expectation of the electrical system and new products generating more revenue there offset a continued decline in the Class 8 business for 2026? Is that possible?

Yes, Joe, that's our expectation. As we look into our customer schedules for Q1 and also Q2, where some of the other programs are starting to ramp up at a more significant rate in the back half, we feel and we expect to offset the forecasted downturn. And when you look at it sequentially, the Q1 to Q4 build rate isn't substantially different. It's somewhat flattish going into Q1 and then lingering into Q2 and then the back half, when you look at ACT's numbers, it starts to ramp back up. So the key is getting through the next quarter or 2 with our cost structure changes we made and with our improved operational efficiency, we expect to have better operating leverage as the quarters roll in with higher production numbers. So margin expansion is a focus, cash generation is a focus and paying down debt as a result of additional cash and margin expansion is our priority.

And Joe, it's a little too early for us to guide '26, but we already mentioned a little bit about our expectation for our electrical business top line next year, somewhere close to a double-digit improvement. So we believe that next year, overall, with the Class 8 reduction, we likely see a flattish revenues for the enterprise, but we'll know more in a couple of months when we go out for guidance in our Q4 earnings call.

Your next question comes from John Franzreb with Sidoti Company.

I'm going to start where you just left off, Andy. When you're thinking about the new program wins in electrical, when does that ramp become the full annualized rate? Is that a 2026 event? Is that a 2027 event? How should we be thinking about that?

When we look at the schedules from our customers, John, a lot of the ramp at volume starts in the second half of '26. We're already producing some pre-series builds and prototype builds, and we have very significant customer engagement that is validating our capacity to ramp at the rate that they expect to. But in normal course, we make sure we manage the risk of delays as well as the opportunity that ramps may occur faster. So we've built in some flexibility to go either way to make sure we stay focused on margin preservation as well as cash generation.

Yes. Short answer, John, will be late '27, '28 is what we're expecting. As James mentioned, typically, our customer will require somewhere around a year or so to ramp their production. So second half '26 is what we're starting to see, and then it will likely take another year. But again, it's a little bit difficult for us to speculate our customer production schedule, sometimes can be lumpy, but this is what we've been told around this time.

That's exactly what I'm kind of looking for. I appreciate that, both of you. And when you think about the cost savings takeout of $20 million to $25 million, are you fully done those cost-outs or how much remains in the fourth quarter?

The cost-out process we [ formally ] have, John, is ongoing. We do have opportunity this quarter to continue. The part of the challenge is when we dimension and quantify potential projects that roll in, as volumes change from our customers and delays or reduced volume, that does impact the amount of cost-out. So we have to offset that with additional measures, so we continue to maintain the projection that we're forecasting. The engagement of the supply base as well as the customers also help us have a better SIOP, or sales inventory operations planning, process so that we make sure that we valve cost to achieve in the cost savings that we plan to harvest.

So we're trying to have better alignment with the cost to achieve and the cost that we're going to harness based on volume outlook and based on schedule fluctuations and new project launches. But I feel like we're much better positioned going into -- finishing out the fourth quarter going into '26 than we've been from the standpoint of mitigating some of the inefficiencies and unplanned leakage that we had in prior periods.

Okay, James. And I guess I'm kind of curious where you stand on tariffs, not only in negotiations with your customers, but also with the suppliers. And if I missed that in your prepared remarks, I apologize.

Yes, no problem. Tariffs, obviously, is a moving pin, right? Every month, there's a different dynamic. But what I will say is that we engaged immediately with customers, and there are 2 paths here. One is the discussions around the data required to prove that we had impact from tariffs. And our customers are very fact-based, and we provide data that shows what our impact is, so that can translate into potential price adjustments or term changes. The other area is mitigation. And this can be almost as significant, and this is reshoring, onshoring, changing suppliers, coming up with onshore distribution warehouses where we don't incur the tariff that the supplier does and then we negotiate with the suppliers.

But we feel that both of those work streams have yielded pretty good progress through the year. It took us a quarter or 2 to really get traction on it. But now we've got agreements in place. We also have a road map of mitigation actions, whether it's technology product changes or whether it's the -- as I mentioned, the reshoring and the supply chain changes that will mitigate some of the country reciprocal tariffs as well as the 232 steel tariffs. But again, that's a changing roadmap from our trade policy, and we stay pretty close to that as well with our customers. So we have much, much better alignment right now going into this quarter and going into next year.

Okay. Got it. And one last question, if I can just sneak it in. I'm just curious about the revenue sensitivity in the Trim segment. Is that a short lead time business? I mean, should we look for that to be the canary in the coal mine when things start to improve in Class 8? I'm just curious, it's been down 2x compared to Global Seating all year long and maybe just some thoughts about that.

Yes. Well, yes, as a reminder, the Trim Systems and Components business is a North American business with the majority of that business focused into the Class 8 end market. We have adjusted our shift patterns and our plant utilization. There is more work to do there but one of the bright spots in that business is that we have good capacity available in dealing with our customers and dealing with other interested parties, we can onshore and nearshore some of what they're importing into our capacity. So the focus right now is really looking at opportunities for onshoring and helping our customers mitigate tariffs where they're importing product. But the leverage when that business -- the end market does come back, that's going to provide pretty substantial operating leverage as compared to some of the other businesses because we already have the investments in place.

And if you look back in prior periods, prior years, the trim portion of the business, the wipers and plastics and trim products have very attractive margins compared to some of our other segments. So we expect to see that inflection as that volume increases, but also we're not waiting for it either. So we have field sales rep organizations that we use to market our capacity that we have in flight. We have a very significant funnel of opportunities that we're going after, not just in Class 8, but other end market -- adjacent markets. So it is a very key focus for us to fill some of that capacity and absorb some of this excess cost as well as look at additional restructuring and realignment of those plants.

Your next question comes from Gary Prestopino with Barrington Research. Questions here.

Andy, first of all, interest expense year-over-year was up. And I'm just wondering if there were some one-timers in that number since you refinanced -- I think you did something in your credit facility.

Yes, Gary, you're right. You remember, we completed our refinancing at the end of June. So Q3 is actually a full year that reflected the new interest rate for us. And as we communicated after the refinancing, the interest -- effective interest rate has actually gone up from our prior financing structure. So every quarter, we're adding about $1 million to $1.5 million based on the current borrowing that we have. So that's why you see the year-over-year increase in interest expense.

So that's a good quarterly run rate is what you're saying. There isn't anything in there in terms of that you backed in that were onetime related to the refinancing?

No, there's no onetime there. But as you can see, as we guided as well, that we continue to use our free cash flow to pay down debt. So we continue to see the next few quarters that the debt level will come down. So that will help us bring down the overall interest expense.

Okay. And then just to be clear, it looks like you're -- obviously, you're seeing the work of your driving efficiencies in your adjusted gross margin. It looks like your SG&A this quarter was flat for the 9-month period, it looks like it was down $3 million, but there was also a $3.5 million gain on the sale of the business unit or a factory or something in last year that was added in SG&A. So the real level of SG&A would have been about $58 million. Is that correct?

That's about right. If you think about it last year, we are running at around $20 million a quarter is our SG&A as enterprise. And now you can see $17-ish million is our run rate. So you can see a 15% reduction year-over-year. If you look at quarter-to-quarter, sometimes there's some timing of expenses, but between the $20 million to the $17 million is where we bring down our SG&A run rate.

Okay. So when you talk about headcount reductions that you put in place and all that, that's going to -- that's really more at the factory level. So it's going to be more of an impact on gross margin versus your SG&A run rate. Is that correct?

No, it's actually both. We did also work in the SG&A headcount as well. So when I say 15% reduction in SG&A, if you look at our SG&A headcount, it's actually reduced by a similar amount in terms of head percentage. So what James mentioned about our productivity programs, we actually work on both on the factory side and gross margin as well as in the SG&A side.

Gary, so the focus on the re-segmentation and the organizational design efficiency we continue to see benefit from that as we've navigated through the year. And again, there's additional opportunity as we look at where we need to rightsize with the end market. So we're not standing still. Again, it's -- you all say more parts per person per day and SG&A is more services per person per day. So looking at how we just get more out of what we have and looking at our processes as well as the people expense. So some of the outside services that we used previously, we've really ramped that down quite a bit and not so dependent on it and just improving the capability of our organization to do more on our own and harvest that opportunity into margin and cash flow and paying down debt.

And then in terms of the Global Electrical, the new business that's coming on stream in 2026, could you just reiterate those programs again for me? I wasn't able to write them down as quickly.

There are a number of programs, Gary. Two of the major ones, though, that are having -- we're starting to see a benefit in Q4, but more significant benefit as we navigate through '26 and then the back half, and as Andy mentioned, ramping up to full volume in '27, '28. One of those is with an autonomous vehicle OEM where we have a portion of the wiring system. There is opportunity to expand wallet share, not just with the new customers, but also our existing customers. And we've gotten good indication from our core markets in ConAg, where we have opportunity to expand share in those end markets plus the launching of the new program. The second program is a European OEM, where we're utilizing our Morocco facility as well as our existing Eastern European facilities. to launch that business, and that's coming on toward mid- to late next year.

And that's a European OEM for EVs?

That's correct -- no, it's ICE internal combustion engine. But we do have EV opportunities in Europe, but the driver is ICE, internal combustion engine vehicles.

And the autonomous vehicle OEM, is that a North American-centric?

Yes. That's correct. And we're utilizing our Aldama, Mexico facility to ramp that up. So in prior quarters and prior periods, we've talked about the lag between getting the capacity online and the ramp starting. So -- in a couple of cases, ramps have been delayed or have been slower to ramp, but they're starting to hit now. And we're seeing key leading indicators from our customers where their factories are in place to build the vehicles and their launch planning is very meticulous to make sure we're aligned from a capacity standpoint. So we've got some good leading indicators that if the ramp is starting and it will come.

[Operator Instructions] There are no further questions at this time. I will now turn the call over to James for closing remarks. I'd like to thank you all for joining today's call.

We continue to take necessary proactive steps to support our customers in this very dynamic environment, also driving operational efficiency improvements as well as ultimately delivering better results financially as well as for our customers. More importantly, we are managing the elements under our control to set CVG up for the future, and we look forward to updating CVG's progress in the next quarter. Thank you all. Have a great day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.