Cooper-Standard Holdings Inc. Stock

So for the next presentation, we've got Cooper-Standard with us. And we're pleased to have the CEO and CFO, right? We have Jeffrey Edwards and Jonathan Banas.

Thank you. Good to be here.

Thank you so much for taking the time.

Good to see everybody.

Maybe just diving right into it, we'll just like recap second quarter results for the investors. You guys reported last week, a solid set of results on the top line, and we saw like some compression on the EBITDA margin. Just wanted to recap just some highlights of what were some of the onetime items you guys saw in the second quarter? And how was like overall production tracking? And how should we think about just the drivers of the results?

Yes. I think as we looked at the second quarter results, clearly impacted for us was basically an inflation quarter. We actually suggested it would be at the end of the first quarter because oil prices impact our company in a big way. Every dollar, a barrel of oil up is $450,000 of EBITDA up or down. Our business plan for the year was at $65 and the average price of oil in the second quarter was over $90.

So obviously, a big impact. If you just -- keeping it real simple, if you look at the impact that the commodities had in addition to a little bit of tariff, it was around an $18 million hit to the quarter. So if you add the $18 million on to the $53 million that we reported, we're probably ahead of everything that people said, but there's not much we can do about that.

The good news is we have index contracts with our customers. So effective July 1, the price increases for oil went from $65 to call it, low 90s, and we began to recover the monies in the third quarter that we gave away in the second. So assuming the conflict is over at some point in time here in the quarter, in the third quarter, we would recover most of what we inherited by the end of the year, probably a little bit would spill over into the first quarter of next year as well. But I'm done predicting the end to the Middle East conflict. So I'll just leave it at that.

No, makes sense. And I think just like stitching it from there, the second half walk because you guys are looking at the guidance, you tightened a little bit of the range, but largely like unchanged. And it implies like a steep ramp-up in like the margin level from here. Is that like more along the confidence of how much you've taken in net recovery still now in the month of July or maybe some new underlying assumptions that you've taken for oil prices? Just some of the puts and takes there and like how much conservatism, if any, is baked into it to go to the lower high end of the range?

Yes. I think start with the good news. I think our top line is basically what we've expected it would be for the first half of the year and is tracking as well. There's always puts and takes with volume and mix in our industry. There was a little bit of put and take in the first half. There'll probably be some of that in the second half. But I would use the word stable when I talk about the business, really in all the regions. So that's the good news.

The intent with the second half guidance that we put out there is, in essence, we would recover virtually all of the inflation that hit us in the second quarter. We would recover all that in the third and then some into the fourth, and that's the reason for the increase. If you go back and look at the business over the last 3 years and you look at the -- we ended last year just under our margins anyway have expanded every year. We're at just under 12% in '25. We're tracking above that this year. Our 2030 projections are 15%. So if you draw a line from [ '23 ] to [ 30% ], we're still right on that line.

Obviously, you have virtually no volume uptick in those numbers, right? It's basically a flat 90 million units between now and 2030 is what the forecasting folks are saying. So that's what's in our numbers. If there's volume upside, then the numbers get better. In addition to that, we'll triple our return on invested capital over the course of the next 3 years. We were 7% last year. So you can do the math by the time we get to '28, but we feel very positive about the health and the trajectory of the company.

And in fact, by 2030, we expect it to be about $3.8 billion on the top line. So up $1 billion from $25 billion to $30 billion, all organic growth. So a lot of positives going on. And we feel very good about the cost base, the pricing that's been established in the world and the indexing agreements that we have that allow us to really defend ourselves through times like this, right?

Historically, that hasn't been the case with these new contracts. And for the first time, we put those in effect July 1, and it's working. It just doesn't feel like that when you look at the quarterly result, but the overall health of the business is very good.

Makes sense. And just double tapping on the raw mats piece, right? Given just like the correlation over there, how much of this is like a direct headwind that you guys face in terms of the raw mats that you procure material costs? And how much would be like an indirect effect of just like freight or any reimbursements you have to give to like Tier 2s or 3s.

Can you size us like -- you gave some numbers on the correlation, right, like for every barrel oil. And how much is like the -- what's the assumption that you guys have taken in the latest guidance on an oil price range? Because we've had like other companies like rubber companies, companies and all also going through like a similar dynamic there with a lot of swing. So just walk us through those pieces.

Yes. Our assumption in the guidance is basically we're going to recover what we -- what it cost us in the second quarter. We'll recover that in the third and the fourth. If there's continued inflation headwinds in the third, then you obviously recover that with that same quarter lag. But assuming that the price of oil remains below our current $92, then we should be fine. But there's fluctuations, as you know, in the past 30 days that I think it's been -- the range is something like $77 to $97. So there's still a lot of volatility there. And the way the indexes work, you just take an average for the quarter, and that becomes your new price point. So let's see how it plays out.

Do you want to talk about the rest, Jon, other inflation and some of those costs that were embedded in the total gap for the quarter?

Yes. It's not just an oil story for us. About 70% of what we incurred in Q2 was oil-based inflationary pressures. But in our fluid business, we also procure metals, namely stainless steel and aluminum inputs, which there was about $3 million worth or about 30% of our commodity inflation in the quarter as well.

Good news there is we also have index contracts with our customers to recover most of that. Similar quarterly lag, and we'll get that -- most of that back by the end of this year, we expect. But the whole geopolitical environment is making all costs high. So you think transportation costs, utility bills are rising as well. Those aren't necessarily directly indexable. If there are shocks in the system, we can approach the customers to go back and recover some of that. But normally, we offset that with our own purchasing and manufacturing lean initiatives from a cost savings standpoint to cover off any of the "normal inflationary pressures.

Right. Just moving on to just the customer profile concentration and the kind of OEMs that you guys have partnered with. More than half of your business like comes from the Detroit 3. You've got like a couple of more OEMs like top 5 would go up to like 65%, 70%. How do you think that mix has changed over time? And is there room for that to change going ahead, just given that having these outsized exposures would mean that you guys would see some cadence swings when it comes to like a Novelis kind of a situation or like a truck platform change for GM in the fourth quarter. So just wanted to get your thoughts there of how you're thinking about that.

Yes. I'll just back up to -- I mean, the industry is 90 million units globally and kind of projected to hang around that number for the next 4 or 5 years. So how I think about that is 10 years ago, 75% of the revenue for the company was the North American manufacturers. And today, it's closer to 50%. I think going forward, as the China auto industry continues to grow.

I mean, today, it's roughly 30% of the global market. So that clearly means that if you're not diversifying with the China market, then I think you probably are going to end up with an extreme amount of business, call it, your entire market is tied up in 70% if you're not with the China customers. And so in our case, we're very pleased that it's our fastest-growing region, our fastest-growing customer base. And not just for the China domestic, but as they grow share globally, we're very excited to be part of their export supply base.

And so today, as an example, let's just say they're right around 28 million units of production in China and about 40% of that is being exported this year. I'm sure that will vary in years to come. But the other thing that's happening is we're also part of their plans as they build factories in Europe and other places in Southeast Asia, we are going to be supplying them the product that we supply everybody. So I tend to think about it going forward, every vehicle that's produced. So those 90 million units require every part we make.

So we ought to be able to figure out how to thrive in an environment where there's 90 million units produced and we produce everything that those 90 million units need. So I think we'll carve out our fair share. We'll continue to balance appropriately in all regions of the world. The other thing that's changed over the past 10 years, as we sit here today, we are profitable in every single region in the world. We have very clear hurdle rates for our prices with every customer along every product line or we don't take the business. And so that's the reason we have returned to a level of profitability and why our projections over the next 5 years continue to show significant organic growth.

And the final point I would make there is with our business, this year, we'll book $400-plus million of net new business. All of that will launch over the next few years. And so about every 6 years, we're building out programs and new ones are replacing them. And for 3 straight years, our net new business margins exceed the products that they're replacing. So when we put together a 5-year outlook like we have through 2030, you can go out to 2029. By the end of this year, we'll have 80-plus percent of our 29 revenue already booked. So we feel pretty solid about the forecast. We don't control volume and mix. We don't control conflicts from a geopolitical point of view. But what we can control, we're managing pretty well.

Makes sense. While we're on the China piece, right, like on both the front, I think you guys have disclosed -- have you sized how much is coming in from China? And within that, any mix of like foreign versus domestic OEMs? And also like 20% of the market is exports. I think this earnings season, almost all the suppliers were talking about how exposed they are to some of these export platforms. So any granularity there on how you're thinking about it? And also on the new business bookings number of $400 million, how much of that is with Chinese OEMs, maybe domestics? And when would that materially weave into the numbers in the later half of the decade?

Yes, I'll start with the last part first. So of the $400-plus million that we'll book this year, I think we're suggesting externally that 20% of that is tied to the China manufacturers to answer your question. And if you look at our fluid business and our sealing business, I think this year, that number is kind of split in half. Half of it is new business for sealing, half of it is new business for fluid. The dynamic that's really important for our fluid business is this shift that's taking place from the ICE powertrains to battery and to hybrid. And if you compare just as a simple baseline, if you look at -- let's just assume 90 million units today were all ICE, they're not, but it helps my story.

90 million units were ICE. If 15% become electric vehicles, then our fluid business content per vehicle goes up 20%. Let's say, 50% of the market by 2035 will be electric or hybrid. Same 90 million units, but half of the market will generate somewhere between a 20% and a 50% content per vehicle upside for our Cooper fluid business. So it's a really interesting dynamic that's taking place across the world as they shift to, call it, a balanced portfolio of hybrid and electric vehicles. And if we don't book one more vehicle, our content still goes up 20% to 50% with the fluid business.

So I think that's also a way that we are "insulating" or in some way, creating a business model that will stand the test of time within the portfolio. It doesn't matter what powertrain goes in it. Every vehicle still needs every part that we're producing, of course, a fuel line and an electric vehicle that goes away. But the content that I gave you of 20% up is net of fuel lines coming out. So it's a really good story for us. It's a great growth story.

The other thing I will say to all of you because most of us own vehicles, I would think. And if you think about the critical nature of what we produce, if you have a sealing system and you take your car through the car wash and you get wet, you're probably never buying another one of those vehicles. If you park one in your garage or in your driveway at night and you end up with something on the ground that's not supposed to be there, you're probably never buying one of those vehicles. That's why we get all the business. Because especially in the case of the Chinese domestics that are trying to build a quality brand globally, they don't want to take a chance that either one of those events is going to create a customer dissatisfier that will be very, very difficult to overcome with new brands.

So again, I think that's one of the reasons why we're being chosen and trusted with our innovation, with our quality, with our engineering, with our global footprint, the ability to deliver products that are critical to customer satisfaction is very high. And so we're proud of that history, and we're certainly proud of the existing relationships we've had for 60 years, but looking forward to the next 60 and building additional relationships with the new automakers.

And just then on Europe, right, like 1/4 of the business, I think, comes from Europe for you guys. A continued theme that we've heard from suppliers more so now is just the -- the imports that they're facing from just these Chinese domestics and not all of it is EVs, right? Like half of the exports that China is still doing is on ICE platforms. Are you seeing any pressures over there from these legacy relationships, German luxury, VW, like all of these brands in Europe? And how are you thinking about like balancing the portfolio to be more levered to these Chinese who are gaining more share in that region?

Again, we're talking about the same 90 million units just with some variation associated with it. And so obviously, as market share shifts, which is what you're referring to, it's still 90 million units. And so our job is to work with each of our customers to make sure that we are providing the innovation, the competitive cost, the high level of execution. So whether they're making 100,000 units or whether they're making 500,000 units, it has to work.

And so we clearly recognize that there's probably going to be some consolidation across the customer base. There, without a doubt, will be sharing of engineering or design specifications, I think, to help even further simplify what's going on today with the specifications that are required in Europe versus Asia versus North America and other places around the world. So again, I think the customers that we've been doing business with trust us that we can deliver high-quality product, help them with their overall efficiencies, help them with their overall cost targets.

And I'm convinced that there is a way to grow and grow profitably regardless of what that consolidation looks like because, again, we're talking about 90 million to 100 million units. Stay focused there is how we think about it. And the number of OEMs are going to shrink, the number of suppliers, I think, will shrink over that same period of time. So that consolidation, I think, will actually help those that are coming at it from a position of strength, and we think we are.

Yes, I'll just open it up to the audience as well in the middle. If anyone has a question, you can raise your hand. While they think of their question, we'll just continue on the next one.

Just on BEV platforms, right, the three biggest customers that you have exposure to, they've obviously announced very publicly their plans to -- for ICE to be here for longer. A lot of the new platforms, which you guys delivered to as well are going to be there for longer, the pickup trucks, V8s coming back, new model year launches.

Just how are you thinking about this next leg of electrification investments, if any, that you guys have to make, like the majority of your products are agnostic as it is. But is there any change in planning processes when you're bidding for like EV platforms versus ICE? And how would you like think about that going ahead, just given the headwind that we had just taken in the last couple of years?

Again, I think it's important to talk about what is changing and what isn't changing. So Europe is still going on the same track to EV and hybrid, China, the same. So what you're talking about is what's happening in the North American market. So that's 16 million units of the 90 million. So that's the proper perspective. And what we see happening in North America, while EV is not going to develop as fast as originally planned, hybrid is probably going to develop even faster.

And for our sealing business, same. For our fluid business, that means our content per vehicle for every hybrid goes up around 50%. So at least for those, let's just say there's 30% by 2035 of a combination of hybrid and EVs in that 16 million unit market. I would hope it was higher, but in that 16 million unit market, sealing, nothing changes, fluid, the content goes up 50%. So I think it's still a very good story.

Of course, we invested like a lot in some EV programs that were canceled. But I think because of the relationships we have with our customers and clearly, the North American customers have been very fair, in my opinion, of how they have paid for some costs on programs that were canceled. And now we're all moving on to the hybrid technologies and looking forward -- I know I'm looking forward to that. I think as consumers, we're probably all looking forward to that.

Makes sense. Just on the cost outs and just the initiatives that you guys have taken over there. It's been a great story of like almost $100 million of costs coming out every year in the last 5 or 6 years. I wanted to understand just how much room there is going ahead on that initiative? How much is coming in from these new AI initiatives that you guys are launching and also like across which divisions, maybe someone like procurement, sourcing, SG&A, back office, all of those kinds of buckets.

Sure. So there's -- I'll talk about those in two different buckets. So the first bucket would be what we would all refer to as VA/VE, which as new vehicles launch and new systems from the supply base go into those vehicles, and they last for 5 or 6 years in production. There's always opportunity to continue to improve upon what was launched. We learn more scale changes over time, and there's an opportunity to do -- to always take cost out. So I think that as part of a process improvement going forward will look kind of like it's always looked.

But what I think will change, and you mentioned, we went from 12.5% SGA&E 4 years ago, and we're operating at a 7% SGA&E today on a larger company. Now if we fast forward to 2030 and those strategic objectives that I talked about last year for 2030, our revenue is $3.8 billion. So up $1 billion between today and 2030, all organic. If you think about a 7% SGA&E company today on 2.8, the way life usually works is the accountants go onto the spreadsheet and they'd say, okay, now it's 7% of $3.8 billion in 2030. I don't think so.

I think the opportunity for companies like ours to find ways to grow and do it at today's cost base and not continue to stack the type of costs into an organization that have traditionally come with -- be it engineering costs, be it program management, be it any function you want to talk about, we have amazing systems, amazing manual systems today operated by the best people in the world. I would like to think that we can use AI with that same group of people doing the same thing a lot faster and a lot better 4, 5 years from now.

And so imagine if you could hold your cost base today where they are and have $1 billion in additional revenue with the same people doing the same type of processes only utilizing AI. That's how I think about it. We just launched a major initiative. And we like most. I mean we -- I think we're up to 1,000 agents today, helping people do their jobs. But I'm excited because we spent $1 billion in our IT systems in the last 10 years. And so we have a wall-to-wall ERP that's second to none, and it provides us all kinds of data to measure what we do and how we do it.

Now all of a sudden, we have the opportunity to build an AI operating system of our own, maybe and get after the cost of how we are operating the company and the people that are doing it today will be able to use those tools to do it better tomorrow. And so I'm excited about that. I think it will become the largest cost reduction opportunity in our company's history, probably in most companies' history.

And I'm excited how we're going to do that. We're going to do it the right way. If our customers can't feel it in our income statement and balance sheet can't see it, then we're probably going to do something else. So that's our focus, is to drive AI tools that are going to help the stakeholders of the company, understand how much better we are than we used to be. Faster, better quality, speed to market, doing things that our customers want us to do only a lot faster and a lot better.

Maybe this one is for Jon, you take a break. Maybe just on like deleveraging and capital allocation as a topic. How are you thinking about a target range that you guys want to get to in terms of net debt to EBITDA? I think net leverage is just shy of like 5x on adjusted EBITDA. And just like when should we see like any potential of like just capital returns for shareholders and any other like opportunities that you guys are seeing inorganic, organic, anything?

Sure. Earlier, Jeff touched on our ROIC trajectory and where we think we're going to triple the return on invested capital in the next 3 years. Incredibly confident about the trajectory. But going into that calculation is obviously disciplined spend on capital. Our first and foremost area of spend from a capital allocation standpoint is winning and launching new business on behalf of our customers.

So I think customer own tools that we manufacture on our behalf and their own capital, specialty finishing or other equipment to launch that business. That won't change. And in fact, we were very disciplined over the last couple of years below 2% of sales. We see that growing to about 2% to 3% of sales for the next several years as we've got this pipeline of over $700 million of net new business we've won in the last couple of years. So that's first and foremost.

But to get back to that ROIC journey, clearly, there's going to be a significant increase in profitability that will help the net leverage ratio back to your question, but also free cash flow generation. That disciplined spend and approach, not only on capital, but on working capital, in other areas of the business that we think there's further opportunity for us to improve will help both the numerator and the denominator when you're thinking about the net leverage calculation.

We've already been talking publicly about our trajectory to get down below 2x net leverage by the end of 2027. We left last year at 4.5x. So significant improvement, both in profitability, but also in building cash on the balance sheet. So after that amount of time, our senior notes have a non-call 2 provision, which we're still 18 months away from. So whether we're building that cash or eventually utilizing it to ultimately delever, then that's the trajectory we're on. And over the next 3 to 4 years, it just improves that much more from there on out.

The next question we can probably go to is nonautomotive adjacencies. I think that's an interesting area, key theme again, like this earnings season and in the last. I think the great majority of your business is still like light vehicles, like 96%, 97%. Are there some opportunities that you guys are trying to capitalize on? Any early conversations with certain customers on just like utilizing the same capacity and existing products into like just other adjacent end markets?

Yes. We have 3 business divisions, if you will, our sealing business, our fluid business and what we call our Industrial and Specialty Product Group. That is the nonautomotive arm, if you will. It's a small business, $100 million or so top line. We would like to see that business double over the course of the next 5 years as well. And that would come from nonautomotive opportunities.

So without boring you, it's the same things that most people have probably talked to you about, right? If there's an opportunity with data centers, if there's an opportunity because they all get seals, they all have a lot of fluid management going on within those. We are looking at that. We have opportunities to build some prototypes and do some tests with the end users there.

I don't know if that will result in what you just said, but like most, we're looking at that. And we have a platform to actually do it within our Industrial and Specialty Product group. So time will tell. Otherwise, it will be a $3.8 billion company when I'm sitting here and talking to you in 2030. And so there's plenty of work to be done over the course of the next several years and executing that because most of it is already booked or will be booked by the end of this year. So it's plenty to keep us busy, and I think it will continue to drive the type of value that our shareholders and me personally are looking forward to.

Right. Now with that, we're up on time. And please thank me in joining Jeffrey and Jonathan for the time today.

Thanks very much.

Thank you.

Thanks all.

Good morning, ladies and gentlemen, and welcome to the Cooper-Standard Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded, and the webcast will be available on the Cooper-Standard website for replay later today. I would now like to turn the call over to Roger Hendriksen, Director of Investor Relations. Please go ahead.

Joining our call this morning. The members of our leadership team who will be speaking with you on the call this morning are Jeff Edwards, Chairman and Chief Executive Officer; and Jon Banas, Executive Vice President and Chief Financial Officer. Before we begin, I need to remind you that this presentation contains forward-looking statements. While they are made based on current factual information and certain assumptions and plans that management currently believes to be reasonable, these statements do involve risks and uncertainties. For more information on forward-looking statements, we ask that you refer to Slide 3 of this presentation and the company's statements included in periodic filings with the Securities and Exchange Commission.

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

Thanks, Roger, and good morning, everyone. Thank you for joining the call this morning. To begin on Slide 5, I'd like to highlight some key second quarter data points that we believe are reflective of our continued outstanding operational performance and our ongoing commitment to our core company values. In terms of operations and customer service, we continue to deliver excellent performance. For product quality and service, 99% of our customer scorecards were green in the quarter. For new program launches, we also continue to deliver strong performance with 97% of the customer scorecards being green. And for the most important operating metric, safety performance continues to be excellent.

A shout out there to our plant employees. Thank you all. Just further on safety, listen to these stats, pretty impressive. During the second quarter, we had a total incident rate of 0.17 reportable incidents per 200,000 hours worked. That's well below the world-class benchmark of 0.35. Importantly, 44 of our plants have maintained a perfect safety record with a total incident rate of 0 for the first 6 months of the year. That's 75% of all of our production facilities achieving a perfect safety score and demonstrating that our ultimate goal of 0 safety incidents is achievable. We're proud of our entire global team for their focus and achievement in this most important operating measure. In terms of cost optimization, we had another solid quarter with our manufacturing and purchasing teams delivering $15 million of savings through lean initiatives and other cost-saving programs.

These cost reductions and operating efficiencies are always important, but I would call them critical in periods of hyperinflation such as we just experienced this quarter. So I want to give a special shout out to our purchasing team and our manufacturing and engineering teams for their continued excellent work and achievements. We appreciate all you're doing. In addition, we did a nice job managing working capital and spending in order to optimize cash flow. During the quarter, we were pleased to deliver a solid $16 million in free cash flow, $40 million improvement over the second quarter of last year. Finally, we're continuing to leverage our world-class service, technical capabilities and our award-winning innovations to win significant new business. In fact, during the second quarter of 2026, we received $118 million in net new business awards, which will drive additional profitable growth as they launch over the next few years.

Turning to Slide 6. Putting the strong commercial performance in context, this brings the total net new business awards for the first half of the year to $246 million. This remains ahead of our plans for the year so far, which we believe puts us in a strong position to achieve the full year goal of over $400 million in 2026 and topping $700 million when combined with last year's award. As you can see in the chart, our new business awards have been accelerating over the past few years as the financial strength of the company has been improving. And the good news is that we will have available capacity to launch much of this new business over the coming years with minimal capital investment. We're certainly proud to be the supplier that our customers are increasingly turning to for quality components, consistency of delivery and collaboration of critical design and development of new technologies.

With these awards in hand, driving incremental variable contribution margins and a strong outlook for new business wins ahead, we're increasingly confident that we'll be able to execute our plans and achieve our longer-term strategic financial targets for growth, margins and return on capital. Now let me turn the call over to John to discuss the financial results for the quarter.

Thanks, Jeff, and good morning, everyone. In the next few slides, I'll provide some details on our financial results for the quarter and discuss our cash flows, liquidity and aspects of our balance sheet and capital structure. On Slide 8, we show a summary of our results for the second quarter and first half of 2026 with comparisons to the same periods last year. Second quarter 2026 sales were $721.3 million, an increase of 2.2% compared to the second quarter of 2025. The increase was driven primarily by favorable foreign exchange and to a lesser extent, favorable volume, mix and customer price adjustments and recoveries. Adjusted EBITDA in the quarter was $53.9 million compared to $62.8 million we reported in the second quarter of 2025.

The year-over-year change was primarily due to higher costs for materials, duties and tariffs and other general inflationary pressures. On a U.S. GAAP basis, we reported a net loss of $18.8 million in the second quarter of this year compared to a net loss of $1.4 million in the second quarter of 2025. Adjusting for restructuring expense net of tax from both periods, adjusted net loss for the second quarter was $2.3 million or $0.13 per share compared to adjusted net income of $1 million or $0.06 per share in the second quarter of 2025. Our capital expenditures in the second quarter of 2026 totaled $13.8 million or 1.9% of sales. This was higher than the prior year period due to increased launch-related investments in automation, but in line with our full expected run rate of 2% to 3% of sales.

We continue to exercise discipline around our capital investments, consistent with our goals of maximizing returns on invested capital. For the first half of the year, sales were $1.4 billion, up year-over-year, primarily due to favorable foreign exchange. And adjusted EBITDA for the first 6 months was $104.9 million and adjusted net loss was $7.6 million. I'll provide some additional detail on the drivers of the year-over-year changes for the quarter and the first half in the charts in the next couple of slides. But moving to Slide 9. For second quarter sales, favorable foreign exchange was a tailwind of approximately $10 million in the quarter versus the second quarter of 2025.

Favorable volume and mix, net of customer price adjustments and recoveries had a positive impact on sales of approximately $5 million compared to the same period a year ago. For second quarter adjusted EBITDA, lean initiatives in purchasing and manufacturing positively contributed $15 million year-over-year, demonstrating continued strong performance from our global teams. In addition, favorable foreign exchange added $2 million compared to the second quarter of last year. More than offsetting these improvements were $10 million of higher material costs around rubber, metals and resins as well as $8 million in increased wages and general inflation and $8 million in higher duties, tariffs and other costs. Most of the commodity inflation was driven by higher oil prices, which averaged about $30 per barrel higher in the second quarter than before the Middle East conflict began.

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

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

As mentioned, despite ongoing cost pressures from materials and tariffs, we remain confident in our ability to recover or mitigate the vast majority of these impacts through commercial recoveries and operational actions. Accordingly, we expect only a modest net effect on full year results, and we'll continue to proactively manage changing commodity conditions and recovery timing throughout the remainder of the year. Turning to Slide 11. As Jeff mentioned earlier, we had a strong quarterly performance in terms of cash flow. Free cash flow, defined as cash provided by operations minus CapEx was $16.3 million in the period. This was an improvement of $39.7 million compared to the second quarter of last year, driven primarily by our successful refinancing in the first quarter and our continued focus on optimizing working capital.

Year-to-date cash usage was higher than the prior year period, reflecting lower first half earnings driven by elevated material and tariff costs, volume and mix dynamics as well as increased capital investments supporting new program launches and automation initiatives. As material cost recoveries take effect and operational efficiencies ramp up further, we continue to expect positive free cash flow generation for the full year. We ended the second quarter with a cash balance of $126.6 million. Coupled with $167.6 million of availability on our ABL facility, which remains untapped, we had total liquidity of nearly $300 million as of June 30, 2026.

We believe that this current level of liquidity, combined with expected future cash generation provides us with sufficient resources to support the continuing execution of our strategic plans to deliver profitable growth, lower our net leverage and maximize returns on our invested capital. This concludes my prepared remarks. So let me turn it back over to Jeff.

Thanks, Jon. And in this last portion of our call, I'll comment on our high-level strategic imperatives and how we believe these are positioning us for continuing profitable growth over the next several years. Then I'll wrap up with a few comments on our outlook for the business and our industry in general in 2026. So if we can turn to Slide 13. Our strategies and operating plans are built around the 4 key strategic imperatives that you see outlined on Slide 13. By aligning the company around these common objectives, we continue to drive significant improvements in virtually every aspect of our business. And by the continuing execution of our plans and strategies, we're positioning the company to deliver continued profitable growth, further improvements in margin and significantly improved returns on invested capital.

Slide 14. The charts on Slide 14 provide concise summary of the progress we've made in restoring the financial health of the company. Through our successful strategic execution, we've been able to increase our gross profit margins by 160 basis points over the past 2 years despite reduced or flat production volumes in our 2 largest operating regions. This includes the impact from the significant decline in production on one of our key programs here in North America that resulted from a customer supply chain disruption beginning in the fourth quarter of last year and carrying into the first half of this year.

Because of our success in driving sustainable efficiencies and fixed cost reductions, we believe we will continue the trend of expanding margins in 2026 and beyond, even if production volumes remain flat. And we would expect to leverage any increases in production volume to drive further profitability and returns. In addition to our cost optimizations, we're benefiting from continuing launches of new programs and products with enhanced variable contribution margins. As the new programs ramp up, they're replacing older programs that have lower margins on average. Our book business, launch cadence and the timing of runout business give us a high degree of confidence in our expanding margin outlook. In addition, our enhanced commercial agreements with top customers allow us to recover most material and tariff cost increases such as those we experienced this quarter.

This significantly reduces the risk for turbulent market conditions that might otherwise disrupt our strategic execution. Turning to Slide 15. Both of our business segments are continuing to execute their sound strategies to drive profitable growth and improve returns on invested capital. Specifically in our Sealing segment, where we're already a global leader in the industry, we're leveraging our leading technologies, expertise and innovation to capture additional share and profitability. We've also deployed sophisticated digital tools, and we're in the process of implementing several automation initiatives within our manufacturing facilities to drive further efficiencies and improved asset utilization. Finally, as we continue to deliver exciting innovations that provide incremental value to our customers, we're winning more than our share of new business.

Turning to Slide 16. We provide a few examples of the sealing innovations we've introduced into the market that are beginning to gain traction and drive sales. Our FlushSeal system has been very popular and is already in production on more than 20 vehicle programs. A more recent innovation, FlexiCore body seals is an award-winning technology that we expect will be in production on 2 vehicle programs later this year. In addition, we're advancing development projects for FlexiFit glass and FlexiFit hidden outer waste belt technologies with several customers and expect to add these innovations to our list of new business awards very soon.

Turning to Slide 17. In our Fluid Handling Systems segment, we believe we've unmatched portfolio of products and innovations that position us well to take advantage of increases in ICE and hybrid powertrains in the U.S., the continuing adoption of EVs in China and the evolving mix of hybrids and EVs in Europe. This flexibility around powertrains, combined with our ability to design and deliver engineered solutions to optimize vehicle efficiency is creating opportunities for increasing content per vehicle and profitable new growth. Additionally, the current challenges in our market are creating difficulties for some of our competition, resulting in opportunities for us. Recently, we received a call from an OEM with whom we had traditionally stable business, but frankly, a lower level of revenue.

They shared that they had a problem with a direct fluids competitor and asked if we'd be interested and willing to invest in growing our relationship with them, beginning immediately. Together, we moved fast to make modest capital investments and preparations in our plant, and this customer moved business that was already in production and awarded it to our Fluids group. And this was not a onetime event. Over the past 10 months, our Fluids group have been awarded mid-production conquest business nearly 10x with the awards totaling nearly $40 million in annual sales and that's effective this year. So our continued commitment to providing world-class quality, service and overall value to our customers is certainly being recognized, making us the clear supplier of choice for vehicle fluid handling systems.

As we've said in the past, our longer-term strategic target, make no mistake, is to double the fluid handling business within the next 5 to 7 years. With recent new business wins and a long list of target business opportunities coming up, we believe we're on track to achieve this goal. Turning to Slide 18. To conclude our prepared remarks this morning, I'll shift focus to the near term and our outlook for the rest of 2026. As we look forward to the remaining 5 months of the year, we're optimistic that certain headwinds we've faced over the past few quarters will be resolved or mitigated in the back half of the year. We are seeing a more normalized production volume on certain key platforms, and we expect that to continue.

Additionally, while our cost for materials remain elevated due to oil prices and disruptions in the Middle East, we've begun recovering these incremental costs for the terms of our commercial agreements and through further commercial negotiations. It's important to note with the enhanced commercial agreements and index-based contracts that we put in place over the past few years, we've structurally improved the business to limit the potential risks in precisely these types of hyperinflationary markets. Meanwhile, we're focusing on delivering high value for our customers, optimizing our operations around the world and successfully executing our strategic plans to drive profitable growth further expand our margins and once again maximize return on invested capital.

Turning to Slide 19. So despite the higher material costs that we've discussed and the timing of commercial recoveries that impacted our results here in the second quarter, we believe we remain on track to achieve our full year plan for sales and profitability. In terms of adjusted EBITDA, this was reflected in the midpoint of our guidance range, which we've kept unchanged, even though we tightened the upper and lower ends of the range to reflect better visibility midyear, which is traditionally how we've done it. We did make a few minor adjustments to other elements of our guidance, including a small increase in capital spending, reflecting incremental investments for the unplanned new business launches that I described earlier.

An increase in restructuring expense as we accelerate initiatives to optimize fixed costs and our overall operating footprint and a decrease in expected net interest expense to reflect the terms of our successful refinancing. So in summary, we're confident and believe that we will deliver strong full year results in 2026. And importantly, we believe we are solidly on track to achieve our longer-term strategic financial targets that we reviewed with you for adjusted EBITDA and return on invested capital as we continue to grow and improve the business over the next 4 to 5 years. As we wrap up, I certainly want to thank our customers, our suppliers and all of our stakeholders for your continued confidence and support. We also want to thank all of our employees for their continued hard work, dedication and their commitment to driving sustainable, long-term value. This concludes our prepared remarks. So let's move into Q&A.

[Operator Instructions] Your first question comes from Michael Ward of Citibank.

When you talk about these conquest awards, is that unique to the fluids business where you can pick up that quickly? We normally hear about conquest wins in the 1, 2, 3 years down the road. But it sounds like it's impacting business today.

Yes, that's right, Mike. As I said, it is unique. We are well positioned with technology and with our ability to execute. And as we've talked many times, the fluid business is critical components, right? I mean if it leaks, it shows up in your driveway or your garage and there's a big problem. So I think customers are really taking a look at the innovation we have, the technology we have, how well we're executing in that business. And so when they have issues, they're addressing them quickly. So I thought it was important this morning to share that because it is different. It is unique. That's happened actually to our sealing teams a couple of times as well here in the past 12 months. But we're proud of the fact that we have those relationships. Our footprint allows us to be nimble and quick and flexible.

Obviously, moving sealing programs is more challenging than some of the fluid businesses, Mike. So I think both of those things play a role, but really hats off to our manufacturing and engineering teams and obviously, the commercial folks that are on the front end there making that happen, but we're pretty proud of that. And look, I said we're going to double the business in 5 to 7 years, and we said that 2 years ago. So we're on track to achieve that as well. So our fluid team and our sealing team are performing at a very high level. We're proud of them.

So a combination of the product innovation as well as it sounds like some weakness on the competitive front [indiscernible].

Yes, or decisions that they made. I'm not sure which it is. Maybe it's a combination of both, you know what I mean?

Right. John, I just want to make sure I confirm your second half outlook based on your guidance and what it suggests. If I'm doing my math right, you're talking about adjusted EBITDA margins in the second half at the midpoint of the range at 12% plus. And when I look at the cash flow numbers, $100 million in surplus cash or free cash flow, is that -- am I looking at it in the right way?

You are. Your math triangulates, Mike. That's the expectation. Certainly, when you think about these recoveries coming online, that will benefit EBITDA and then fall through to cash flow both. So both of those metrics will benefit in the second half. And all the focus that we put on the call today earlier about the purchasing performance and the manufacturing team's performance, they had a strong first half, but they're looking forward to even better half. As you look at the overall bridge going across the page, they're in line with another $50-plus million in the second half of incremental savings year-over-year. So that will go a long way towards completing the walk in the second half.

Okay. And that's not going to be the run rate for next year, but it's certainly the next 6 months or so, you have a pretty positive outlook. So that's good news.

Your next question comes from Doug Karson of Bank of America.

Great job on the business wins. It's impressive year-to-date. It's a big number. I just wanted to maybe double-click on the guidance. As we look at the $105 million you've done in the first half, that would suggest an $80-plus million EBITDA each quarter on the low end of the guidance and around $95 million a quarter to reach the high end. So when we try to get that goal, I'm looking at the recoveries as a big part of that. Help me think about that a bit of what type of recoveries would we be looking at? Because I look at -- on Slide 10, the kind of year-to-date bridge, like where are we getting the recoveries, the duties and tariffs, the general inflation because that number has got to be kind of quite big to get to your guidance given the kind of unit volume and mix has been kind of negative year-to-date, negative 8%.

Yes, Doug, I'll take it. This is Jeff. So clearly, the $30 in some cases, higher variance that we had in oil that John spoke of in his prepared remarks. In essence, we said this in the last quarter call that there's a quarter or so lag, in some cases, a little bit longer. So effective July 1, I mean, we had a significant price increase from our customers that went in for all purchase orders to begin collecting the difference between what we had in the plan with them, which was, I think, around $65 to a price increase of over $90. So that's kind of how it works, and now we're collecting that back. Obviously, the price of oil is below that number today, but the way this works is each quarter, that average gets adjusted into the price.

So -- we've been very clear about that really for a couple of years now. And as I mentioned and Jon mentioned, it's really the first time we've had to put it into action. It's working. It's working well. Our customers have lived up to every single deal they made with us. And the rest is what we call the normal negotiation. I mean any time you have energy costs spike like they have for everyone. There's negotiations that go on every single day, either to offset those or get help in other ways to offset those. And that's what we refer to as other commercial negotiations. And then most importantly, it isn't just all about that. We have to continue to execute on the cost side.

And as we talked about in the beginning of the year, we had significant plans. We had 95% of our cost initiatives for the year already identified before we started January of '26. So the teams are executing. That's what you heard us talk about in the first quarter. That's what we quantified here in the second quarter. So we're well positioned to continue to deliver. Most of those things have already been implemented, and we're reaping the benefits of those cost initiatives that were started last year, implemented beginning of this year and paying bills as we go forward. So that helps offset some of the wage inflation that Jon spoke of, and it does every year. So that's not unusual.

And then finally, the supply base. I mean, we're very engaged. This is just a really challenging time for any material science company, right? And so we're engaged with all of them doing our best from a purchasing point of view to leverage supply and demand and scale, and we have choices, too. And so that's been going on here the last couple of months, and we expect that to pay dividends for us in the second half to help recoup what we funded for everybody in the second quarter. So I know that's a long explanation, but hopefully, you get the context of if there's 2 things that go on. We drive cost out, and we have to receive compensation back. Both of those things are happening.

That's a very good summary. So if I summarize for myself, driving the cost is the lean manufacturing improvement that we see in that big bar and then capturing refunds and also the pricing coming through and oil a lot different than it was at the beginning of the year and there's a lag. So we should expect not to get in front of it, but a Q3 that's going to look a lot different than Q2 as far as EBITDA.

That's correct. And again, that's what we sort of highlighted to you last quarter, Doug, that we expected these headwinds in Q2 and that we expect it to recover in Q3 and Q4, and that's exactly the way it's playing out. So I don't have any magic beyond that. I mean that's just what's happening.

No, that's perfect. And you did say that, and it's helpful to kind of review it and I appreciate the data and the slide deck.

Your next question comes from Nathan Jones of Stifel Financial.

This is Andres on for Nathan Jones.

Just a quick question on $37 million in net new business coming from hybrids and EVs. Obviously, that presents a better opportunity from a higher content perspective. Can you kind of break out the net new awards between how much traction you're getting on EVs, hybrids? And you've mentioned in the past kind of OEMs and consumers favoring hybrids. Is that still the case when you're looking at future net new business awards and how the market is trending?

Yes, Andres, thanks for the question. This is John. The -- think of the $30-some million in the combined bucket, essentially 50-50. But I'll remind you going back to when we talked to you about these new business awards, the content per vehicle increase is on both of those, right? So you do see a benefit compared to traditional ICE engines when you're talking full battery electric, but then even a greater extent on hybrids. So we continue to see that market development. In fact, some of our major OEM customers are throttling back EV investments and new models there and going all in on hybrids. A lot of that is certainly driven by consumer preferences globally.

It's not just the North American story, but Europe as well. And in China, it's a combination of both EV and hybrid story overall. So we continue to see that growing over time and getting more share of the overall market compared to the ICE engine variant. A lot slower than, of course, anybody thought a couple of years ago, but certainly still a positive development for Cooper-Standard when you think about the increased content per vehicle that we would expect to see on those programs.

That is very helpful. And then maybe just on the F-150 kind of an update there. When you guys think about the back half of the year, we heard the OEM obviously talk pretty positively about the ramp. What are you seeing on your end? And how do you think about kind of revenue in the back half with respect to that?

Yes, this is Jeff. I think started off July strong, obviously, with additional production during what was intended to be a shutdown period. So that was positive for the quarter. As it relates to releases for the fourth quarter, we haven't really seen an uptick. So we didn't include that in the forecast. So if there's any additional volume up year-over-year, then that would be a positive for the second half. We were hoping there would be about a 20% uplift second half versus first half, but we haven't seen that in the release yet. And so we didn't want to assume anything. But like you, we've heard all the positive statements, but if it doesn't show up in the release, we don't put it in the forecast.

Your next question comes from Wolf Joffe of EVR Research.

I just wanted to comment on the continued really impressive performance. The safety metrics that you guys continue to publish are just kind of astonishing. So congrats on all of that.

Appreciate it. We've done a really nice job with respect to net new business awards over the last several years, call it, $250 million in '22, $180 million each year in '23 and 2024 roughly. If global auto production is forecasted to be flat in 2027, how much could our production grow given past net new awards?

Well, I think if it's flat, the growth would obviously tend to trend in year-over-year depending on the launch schedule of each of the awards. I think what we have to consider is what was the projected growth outlook when we won the awards because that's really what those award totals are based on. So we see it as positive. We see it lining up well, as we've said, to achieving our longer-term targets, and all of those awards play into that.

Wolf, this is Jeff. I would say even a little more specific than Roger just gave you, as we look forward to building the '27 plan, which isn't built yet, keep that in mind. Our forecast on flat sales, I mentioned earlier in my prepared remarks that we would still be on target to hit the increased margin expectation that we put out there in our strategic outlook last year for you. So that's point one. Point two, I would tell you that we would expect our revenue to just be under $3 million, assuming flat volume and the same mix. rough numbers, of course. But hopefully, that gives you some idea. There's no question that the net new business that we booked the last few years, we're launching it as we speak.

We'll launch more as the year goes on. And then as we've also said, as hybrid comes on and as EVs come on, that helps drive our fluid revenue even further, much of which is not included in that original outlook because we obviously didn't have all of the North American manufacturing ins and outs related to what EVs were going out and what hybrids were coming in when we built that plan last year. So we have a lot better idea of what that is as we sit here today. We'll be building our business plans for '27, '28 and '29 over the next few months. And then that will dictate what I just said. I expect it to look very good. I expect it to be on those strategic targets that we provided last year. Hopefully, that helps.

Yes. As you mentioned, if revenue and production is sort of flattish, you guys should still show margin expansion. Is there -- can you provide any granularity around how much your margins should go up each year in a flat environment? Is it 20 bps, 40 bps, 5 bps?

Well, we're up 160 basis points the last 2 years, I think I said in my prepared remarks. So I'll just use that to tell you that we know how to do it, and we're not going to forget over the course of the next couple of years. So VCM is up on all business that we're booking across the board on average. So we didn't just guess when we put together the forecast for the next several years that we've been talking to you guys about. As you know, we're booking business a couple of years, in some cases, 3 years before we even launch it. So we know our costs, we know our prices. We know the available capital and the capacity that we have in the company. And when we say that we don't need a whole lot of capital to do what we've already booked, that's the case.

And we know what the margins are because we know what our costs are. So the only thing I don't know is volume and mix, but beyond that, what we can control, we're controlling.

Okay. And you discussed the competitive benefits in the Fluids segment. I'm wondering if those benefits are enough to signal that we should be toward the high end of the full year guidance or maybe it's not enough to move the needle?

Yes. If somebody can tell me what's going to happen in the Middle East, then I'll answer that question. Otherwise, I got no idea.

I know a guy. I know a guy. He has the answers. I'll put you in touch with them. Congrats on just the continued operational performance. And I imagine we're just really, really enjoying the new contracts. They're just great.

It appears that there are no more questions. I would now like to turn the call over back to Roger Hendriksen for closing comments. Please go ahead.

Okay.

Thanks, everybody. Again, we appreciate you taking the time to join us this morning. We appreciate the engaging questions. If there are any topics or issues that weren't addressed this morning, please feel free to reach out to me directly, and we'll make sure that we get your questions answered. Thanks again for joining our call.

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

Good morning, ladies and gentlemen, and welcome to the Cooper Standard First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded, and the webcast will be available on the Cooper-Standard website for replay later today. I would now like to turn the call over to Roger Hendriksen, Director of Investor Relations.

Thank you, Sergio, and good morning, everyone. We appreciate you spending some time with us today. The members of our leadership team who will be speaking with you on the call this morning are Jeff Edwards, Chairman and Chief Executive Officer; and John Banas, Executive Vice President and Chief Financial Officer.

Before we begin, I need to remind you that this presentation contains forward-looking statements. While they are made based on current factual information and certain assumptions and plans that management currently believes to be reasonable, these statements do involve risks and uncertainties. For more information on forward-looking statements, we ask that you refer to Slide 3 of this presentation and the company's statements included in periodic filings with the Securities and Exchange Commission. This presentation also contains non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to their most directly comparable GAAP measures are included in the appendix to the presentation. With those formalities out of the way, I'll turn the call over to Jeff Edwards.

Thanks, Roger. Good morning, everyone. We appreciate the opportunity to review our first quarter results and provide an update on our business and the outlook going forward.

So to begin on Slide 5, I'd like to highlight some of the key first quarter data points that we believe are reflective of our continuing outstanding operational performance and our ongoing commitment to our core company values. In terms of operations and customer service, we started 2026 with the same strong level of performance that we had in 2025, ending the first quarter with 99% green customer scorecards for quality and service.

For new program launches, we also continue to deliver strong performance with 97% of our customer scorecards being green. Our plant managers and our plant employees continue to deliver outstanding performance and value for our customers through their dedication and commitment to excellence. And as always, our most important operating metric, safety performance continues to be excellent.

In fact, during the first quarter, we had a total incident rate of just 0.18 reportable incidents per 200,000 hours worked, well below the world-class benchmark of 0.35. Importantly, 48 of our plants maintained a perfect safety record with a total incident rate of 0 for the first 3 months of the year. That's 84% of all of our production facilities achieving a perfect safety score and demonstrating that our ultimate goal of 0 safety incidents is achievable. We're certainly proud of our entire global team for their focus and achievement in this important operating measure.

In terms of cost optimization, we had another solid quarter with our manufacturing and purchasing teams delivering $17 million of savings through lean initiatives and other cost-saving programs. These cost reductions and operating efficiencies, combined with revenue growth in the quarter, allowed us to achieve a solid 40 basis point improvement in gross margin versus the first quarter of last year. As a result, despite of some of the market headwinds we've been seeing, we continue to drive profitable growth and margin expansion through the execution of our plans and strategies.

Finally, we're continuing to leverage world-class service technical capabilities and our award-winning innovations to win significant new business. During the first quarter of 2026, we received $128 million in net new business awards, which are expected to drive profitable growth as they launch over the next few years. I'll talk more about the significance of our new business awards in a few minutes.

Turning to Slide 6. As we've made terrific improvements in our operating metrics and profitability over the past few years, we certainly haven't lost sight of the importance of being a good corporate citizen. We continue to work on developing and delivering and material solutions, delivering product and material solutions for our customers that help them achieve their environmental goals. And of course, we've set and are working to achieve aggressive internal goals for reducing energy consumption, emissions and scrap. Our achievements in corporate responsibility continue to garner recognition from numerous entities as well as our customers.

One of our recent innovations, our FlexiCore thermoplastic body seal technology was recently recognized as a winner in the 2026 Environment + Energy Leaders Award. This new technology replaces the metal carrier that is used in a traditional dynamic body seal with a patented thermoplastic carrier. The result is a lightweight body seal that maintains the same high-quality performance of traditional materials but is 100% recyclable. -- increasing vehicle efficiency and reducing materials that end up in landfills. Recently, a Flexicore front and rear closure seal application was successfully launched into production with a global automaker, further demonstrating the real-world impact of this technology.

We're also pleased to have recently been included among USA -- today's list of America's Climate Leaders for the third consecutive year in recognition of our continuing advancements in environmental stewardship. Corporate responsibility is and will continue to be an area of focus for our entire organization from the production floor to the boardroom because it's the right thing to do. You can learn more about our goals and our progress in sustainability in our 2025 corporate responsibility report, which will be published within the next few days. We encourage everyone to take a few minutes to look through it when it posts on our website. Now let me turn the call over to John to discuss the financial results for the quarter.

Thanks, Jeff, and good morning, everyone. In the next few slides, I'll provide some details on our financial results for the quarter and discuss our cash flows, liquidity and aspects of our balance sheet and capital structure.

On Slide 8, we show a summary of our results for the first quarter of 2026 with comparisons to the same period last year. First quarter 2026 sales were $686.4 million, an increase of 2.9% compared to the first quarter of 2025. The increase was driven primarily by favorable foreign exchange and partially offset by unfavorable volume and mix, net of customer recoveries. As Jeff mentioned, our first quarter 2026 gross margin improved 40 basis points compared to the prior year, up to 12.0% of sales. This is a strong result in view of the production volume headwinds we continue to face on certain key platforms in North America during the quarter.

Adjusted EBITDA in the quarter was $51 million compared to the $58.7 million we reported in the first quarter of 2025. The year-over-year change was primarily due to the nonrecurrence of approximately $10 million of royalty payments that we received in the first quarter of 2025. Otherwise, adjusted EBITDA and margin would have improved over last year. On a U.S. GAAP basis, we reported a net loss of $33.3 million in the first quarter of 2026 compared to net income of $1.6 million in the first quarter of 2025.

Adjusting for the loss incurred on the successful refinancing of our debt in the first quarter this year, restructuring and other items from both periods as well as the related tax impacts, adjusted net loss for the first quarter of 2026 was $5.2 million or $0.29 per share compared to adjusted net income of $3.5 million or $0.19 per share in the first quarter of 2025. Our capital expenditures in the first quarter of 2026 totaled $24 million or 3.5% of sales. slightly higher than the prior year period due to increased launch-related investments. We continue to exercise discipline around capital investments as we focus on maximizing our returns on invested capital.

Moving to Slide 9. The charts on Slide 9 provide additional insights and quantifications of key factors impacting our results for the first quarter. For sales, favorable foreign exchange was a tailwind of approximately $24 million in the quarter versus the first quarter of 2025. Unfavorable volume and mix, net of customer price adjustments had a negative impact on sales of approximately $5 million compared to the same period a year ago. For adjusted EBITDA, lean initiatives in purchasing and manufacturing positively contributed $17 million year-over-year, delivered by continued strong performance from our global teams.

In addition, we continue to realize benefits from our restructuring initiatives implemented in prior periods, amounting to $2 million in incremental savings as well as lower SGA&E of $1 million in the first quarter compared to last year. Offsetting these improvements were $7 million of unfavorable volume and mix, including customer price adjustments and the impact of certain short-term production disruptions. $7 million in increased costs in the form of higher wages and general inflation, $2 million from unfavorable foreign exchange and $12 million of other unfavorable items, primarily the nonrecurrence of certain royalty payments we received in the first quarter of last year.

Moving to Slide 10. We ended the first quarter with a cash balance of approximately $118 million, owing primarily to typical seasonal changes in working capital, which we expect will unwind over the next couple of quarters as well as $24 million of out-of-period accrued interest that we paid in conjunction with our refinancing. Cash on hand, coupled with $167 million of availability on our ABL facility, which remains unutilized, we had total liquidity of approximately $286 million as of March 31, 2026. We believe that this provides us with more than sufficient liquidity to support the continuing execution of our business plans and profitable growth objectives in today's economic and industry environment.

The successful refinancing that we completed on March 4 of this year gives us an overall lower interest rate and reduces expected annual cash interest by approximately $6 million. In addition to the lower interest rate, the refinancing also provides us with increased financial flexibility through more favorable terms and significantly extends the maturity on the newly issued notes out to 2031. We believe this enhanced capital structure positions us extremely well to continue to execute on our strategic plans to deliver profitable growth, lower our net leverage and maximize our returns on invested capital. This concludes my prepared comments. I'll turn it back over to Jeff.

Thanks, John. And in the last portion of our call, I'd like to again comment on our high-level strategic imperatives and how these are positioning us for continuing profitable growth over the next several years. And I'll wrap up with a few comments on our outlook for our business and our industry in general in '26.

Please turn to Slide 12. Our strategies and operating plans, as you know, are built around the 4 key strategic imperatives that you see outlined on Slide 12. By aligning the company around these common objectives, we continue to drive significant improvements in virtually every aspect of our business. And by the continuing execution of our plans and strategies, we are positioning the company to deliver continued profitable growth further improvements in margins and significantly improved returns on invested capital as we discussed in last quarter's call.

Moving to Slide 13. The charts on Slide 13 provide a concise summary of the progress we've made in restoring the financial strength of the company. Through our successful strategic execution, we've been able to increase our gross profit margins by 160 basis points over the past 2 years despite reduced or flat production volumes in our 2 largest operating regions. This includes the impact from the significant decline in production on one of our key platforms in North America that resulted from a customer supply chain disruption beginning in the fourth quarter of last year.

Because of our success in driving sustainable efficiencies and fixed cost reductions, we believe we will continue this trend of expanding margins in 2026 and beyond, even if production volumes remain flat, and we would expect to leverage any increase in production volume to drive further profitability and returns. In addition, our cost optimizations were benefiting from continuing launches of new programs and products with enhanced variable contribution margins. So as these new programs ramp up, they're replacing older programs that have lower margins on average. our book business, launch cadence and the delivery of runout business gives us a high degree of confidence in our expanding margin outlook.

Turning to Slide 14. Both of our business segments are executing sound strategies to drive profitable growth and improved returns on invested capital. In our Sealing segment, where we're already the global leader in the industry, we're leveraging our leading technologies, expertise and innovation to capture additional share and profitability. We've also deployed sophisticated digital tools within our manufacturing facilities to drive further efficiencies and improved asset utilization. Finally, as we continue to deliver exciting innovations that provide incremental value to our customers, we're winning more than our fair share of new business.

Turning to Slide 15. In our Fluid Handling segment, we've unmatched portfolio of products and innovations that position us well to take advantage of increase in ICE and hybrid powertrains in the U.S., the continuing adoption of EVs in China and the evolving mix of hybrids and EVs in Europe. This flexibility around powertrains, combined with our ability to design and deliver engineered solutions to optimize vehicle efficiency is creating opportunities for increased content per vehicle and profitable new growth. As we've said in the past, our longer-term strategic target is to double the Fluids business within the next 5 to 7 years. With recent new business wins and a long list of target business opportunities coming up, we believe we're on track to achieve this goal.

Turning to Slide 16. In terms of winning new business, I mentioned at the beginning of the call, we've received $128 million in net awards in the first 3 months of the year. This was ahead of our plans for the quarter, putting us in a strong position to achieve the full year goal of over $400 million in net new business awards. As you can see in the chart, as our overall operating performance and financial strength continue to improve, the new business awards are accelerating. And the good news is that we have available capacity to launch much of this new business over the coming years with minimal incremental capital investment.

We are proud to be the supplier that our customers are increasingly turning to for quality components, consistency of delivery and collaboration on critical design and development of new technologies. With these awards in hand for Q1 and a bright outlook for the new business wins ahead, we are increasingly confident that we will be able to execute our plans to achieve our longer-term strategic financial targets for growth, margins and return on capital.

Turning to Slide 17. To conclude our prepared remarks this morning, let me shift focus to the near term and our outlook for the rest of 2026. I think the key takeaway this morning is that despite continued disruptions within our industry and ongoing uncertainty in the global economy, we were able to deliver results that exceeded our original operating plan. We are optimistic that certain headwinds we have faced for the past 2 quarters could turn into tailwinds in the back half of the year. And if we could get some resolution to the military actions going on in the Middle East, we would expect a strong positive effect on consumer sentiment and consumer demand globally. Meanwhile, we're maintaining our focus on delivering value for our customers, optimizing our operations around the world and successfully executing our strategic plans to drive profitable growth, further expand our margins and maximize return on invested capital.

We believe we're on track to achieve or exceed the full year targets that we set out for you back in February. We expect to provide a more formal update on guidance as we typically do in conjunction with our second quarter results. We also believe we are solidly on track to achieve our longer-term strategic financial targets for adjusted EBITDA margins and return on invested capital. So with that, we'd like to thank our customers, our suppliers, all of our stakeholders for your continued confidence and support. We also want to thank all of our employees for their continued hard work, dedication and their commitment to driving sustainable long-term value. This concludes our prepared remarks. Let's move on to Q&A.

[Operator Instructions] The first question comes from Nathan Jones from Stifel.

This is Andres Roma on for Nathan Jones. So nice step-up in new business from $181 million in 2024 to $298 million in 2025, now $128 million in 1Q. I think you released that about $32 million of net new bids coming from battery electric and full hybrid. Can you maybe give us a split between how much of that is within ceiling or fluid and for 2025 as well, just so we have an indication, obviously, more content on the fluid business on those powertrains. So curious to hear about that.

Yes, sure. This is Jeff. The $128 million that we've booked so far in Q1, about 60% of that is fluid, 40% is ceiling. So not a surprise. Around 50% of it is North America-based and a large percentage is China-based, again, not a surprise. I think as we go forward and there are continued hybrid products introduced into the market, you'll continue to see the content per vehicle for fluid continuing to rise. Last year, to your point, about the nearly $300 million of net new business, I think Sealing actually had more of that than fluid. So it doesn't surprise me this year that fluid is outpacing the ceiling net new business. It tends to fluctuate like that.

But I do think Fluid going forward is going to benefit significantly from the additional hybrid coming into the market. And as we've said in the past, that can result in more than double content per vehicle than what we've seen from the ICE traditional ICE programs that were booked within our Fluid business. So really a positive story. We're on our way to exceeding the $400-plus million of net new business for 2026.

Awesome. And then just one more, switching gears a little bit to margins. Can you discuss sort of the impact higher input costs are expected to have on margins this year? How should we think about that? And maybe the escalators and de-escalators Cooper has in place?

Andres, thanks for the question. When you think about the significant oil price increases that the industry is bearing as well as higher aluminum prices for some discrete reasons that the suppliers are raising globally. We are fairly well protected. As we've talked in the past, we're in excess of about 70% covered on contractual indexes with our customers or otherwise. negotiate on a regular basis, call it, every quarter, every 6 months with customers to claw that back. So we think any increases will be adequately addressed with those historical mechanisms that we've got in place with our customers overall.

There is a lag when you think about our spend versus the timing of recovery. The indexes will traditionally reset every quarter, and therefore, then you can go back in and recover the previous quarter's inflationary impact or in a good news situation, you would give some of that back. So that's the typical cadence in Q1, just given the timing of oil price ramp-up, there wasn't a significant impact in inflationary pressures in Q1, but we certainly expect to see that headwind come in Q2, but then the recoveries would come online in that sequential recovery cadence.

Your next question comes from Kirk Ludtke from Imperial Capital.

On Slide 16, another impressive quarter for new business. And it's one of these bullets says 74% related to innovation products. And if I remember correctly, those are materially higher margin than your existing average margins. I'm just curious if you'd be willing to quantify how much more profitable they are.

Yes, Kurt, this is Jeff. I think as we have said going forward as the -- whether it's innovative net new business or whether it is the traditional products that we have historically been marketing and selling to our customers, we have been very consistent with targeting hurdle rates and achieving those hurdle rates as we book net new business. It's why we're able to put out the type of strategic targets we have related to the VCM increase, overall margins and the overall significant increase of return on invested capital that's forecast over the next several years. So that's actually happening. You can see the 160 basis point increase over the last 2 years. You can see the VCM well over 30% this particular quarter. So as all this business launches from -- that we booked in '24, '25 and then we're booking here in '26, those numbers will continue to go up.

And we expect, as I've said on this call as well, we expect our return on invested capital to be well over 20% at the end of our 28 business year. So tracking to the same strategic targets that we put out last June. Your point is well taken related to the innovation. We are seeing further expansion as we launch a product that is innovative and that provides customers with cost-down opportunities, lightweighting opportunities, recycling opportunities. So I would expect those numbers to even be better as we present our 5-year plan. We actually have a meeting coming up with our Board in June where we'll roll out the next 5 years. And so I would expect to see continued margin expansion beyond what we've even said.

Got it. I appreciate it. And then maybe a follow-up on the higher gasoline prices. Have you seen any change in schedule since prices went up?

Maybe... No we have not. Yes, the volumes that we have in our business plan, we had some pluses and minuses as we usually do each quarter. As we start in the second quarter, we're seeing the volumes basically on our plan. So as I said on the call, I think that as long as the Middle East conflict gets resolved here in short order, I expect it to frankly end up being a tailwind in the second half. Now if that doesn't happen, then your guess is as good as mine. But so far, I think we're well positioned for the first half of the year. We'll manage through the increase in oil prices that existed versus our plan for the second quarter. and then hopefully be well positioned for the second half of the year to be stronger than planned. That's what I'm hoping for.

[Operator Instructions] Your next question comes from Doug Karson from Bank of America.

As I look at the bridge from '25 to '26, I know you'll be out with more detail in 2Q. So I don't want to get ahead of it. But that was a goal that was set. I think investors thought it was an optimistic goal, but it looks like you're going to hit it or potentially exceed it. A large part of that bridge was lean manufacturing, improvements in purchasing. And in this tough market to be able to beat that number, we just get a little bit of a sense if you feel this is going to be coming more from business wins? Or do you feel like the lean could get even higher? -- or maybe more pricing because you know volume is going to be challenging. So just give us a little sneak peek on what to be thinking about as far as that guidance. And then maybe separately, during the deal, we talked about 51% of your awards were coming from high-growth Chinese OEMs. And just wondering kind of how that cadence has been with the Chinese.

Doug, this is Jeff. Thanks for the question. So related to how we continue to expand margins, it's sort of all the things that you talked about, right? So we have teams both in our sealing and our fluid business. They come to work in 20 countries plus. And each month, each quarter, they have detailed plans that they're executing. They just don't start that at the beginning of the year, right? So they're working on those plans well in advance of a particular business year. So as John and I said in the last call, we had a high level of confidence that the execution of the cost reductions to help offset inflation was well on its way to being a record performance. In fact, we didn't -- we hadn't seen a year where they had come in with 90-plus percent of these ideas already identified and being worked on before we even started 2026. So that's why you see the execution and the ability to deliver on what we told you we would.

I would expect that to continue for the rest of this year and next year. I mean it's been an approach here for well over a decade. So the process is the process, the team is the team, the trust is the trust, and they continue to exceed expectations. Related to the net new business, as you also know, when we talk about 2027, 2028, I mean we've got 85% to 95% of that is already booked. So we know what those prices are. We know what our costs are. That's why we're able to predict the margin expansion -- we also know what the investment is going to be to launch it all. Hence, the confidence we have in more than doubling our return on invested capital over the next couple of years. So it's a business that while you book something that launches 2 or 3 years later, seems like a tall task, but the fact that we're able to understand what our prices are, costs, investments are, it really gives credence to the ability for us to forecast.

Now the only thing I can't forecast is volume and mix, which you point out. And despite that being a challenge for the last -- I've lost track, doesn't matter, last number of years, we continue to expand the profitability and the returns because of how we're running the business, the decisions that we're making. And most importantly, the type of people we have in our plants that are executing the heck out of the business. So we'll see what the second quarter brings. As John mentioned, the oil prices have shot up here in terms of what we had in the business plan. But contractually, we're pretty much covered there for recovery. There will be some timing issues associated with it maybe in the second quarter. But for the full year, I'm still bullish because I believe that the overall macroeconomic environment is positive. I think the geopolitical environment has to become more positive. How could it be worse? And so that's the reason I believe the second half is -- potentially has some tailwinds to it. So we'll talk to you about that in August.

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

Okay. Thanks, everybody. We appreciate your continued engagement with our calls. And if you have questions that didn't come to mind and you'd like to get in touch with us, we'd certainly be open to further conversations. Just feel free to reach out to me directly. Again, we appreciate your participation this morning, and thanks for your continued trust and confidence. This will conclude our call. Thank you.

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

Good morning, ladies and gentlemen, and welcome to the Cooper-Standard Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded, and the webcast will be available for replay later today.

I would now like to turn the conference call over to Roger Hendriksen, Director of Investor Relations.

Thank you, Jenny, and good morning, everyone. We appreciate your continued interest in Cooper-Standard, and we thank you for taking the time to join our call today. The members of our leadership team who will be speaking with you on the call this morning are Jeff Edwards, Chairman and Chief Executive Officer; and Jon Banas, Executive Vice President and Chief Financial Officer.

Before we begin, I need to remind you that this presentation contains forward-looking statements. While these statements are made based on current factual information and certain assumptions and plans that management currently believes to be reasonable, these statements do involve risks and uncertainties. For more information on forward-looking statements, we ask that you refer to Slide 3 of this presentation and the company's statements included in periodic filings with the Securities and Exchange Commission. This presentation also contains non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to their most directly comparable GAAP measures are included in the appendix to the presentation.

So with all of that out of the way, let me turn it over to Jeff Edwards.

Thanks, Roger, and good morning, everyone. We certainly appreciate the opportunity to review our fourth quarter and full year 2025 results and provide an update on the outlook for 2026.

So let's begin on Slide 5, and I'd like to highlight some key data points that are reflective of our continued strong commitment to operational excellence and driving increasing value for our shareholders. In 2025, we continued to deliver world-class results in terms of product quality, program management and service for our customers. This is reflected by our 99% green product quality scorecards and 98% green program launch scorecards.

Even more importantly, we had our best year ever in terms of employee safety. For the full year 2025, our safety incident rate was just 0.24 per 200,000 hours worked, surpassing our previous best from 2024 and well below the world-class benchmark of 0.47. We're especially proud of our 31 plants that completed the year with a perfect safety record of 0 reportable incidents. The dedicated teams in these plants continue to affirm that our long-term goal of 0 safety incidents is achievable.

And as we usually do, a shout out to our plant managers here. Well done, and we really appreciate their personal commitment to our total safety culture. And for those of you that don't realize, about 85% of our 21,000 employees report into those plant managers. So amazing leadership, and keep up the great work guys.

Next, some more information regarding ops, the combined efficiency improvements in our plants and lean initiatives in our supply chain generated $64 million in cost savings during the year. In addition, we realized $18 million in year-over-year savings primarily related to the salary reduction action we implemented in the second quarter of 2024.

As a result of the increases in operating efficiency and cost savings, we achieved a solid 24% improvement in operating income for the year. We're proud of the way our team was able to respond to and overcome the continued inflationary headwinds we experienced throughout the year and the fourth quarter impact from a customer supply chain disruption that significantly reduced production volumes on 1 of our top platforms.

In addition, we continue to deliver industry-leading world-class service and quality products to our customers. They're definitely rewarding us with additional business. In 2025, we received a total of $298 million in net new business awards, which we expect will support a solid trajectory of profitable growth in future years.

So in summary, by many measures, 2025 was our best operational performance in company history. We were pleased to deliver full year results above our original operating plan and at the high end of the updated guidance range we gave you at the end of October despite the significant production disruption experienced by our top customer on our top vehicle program during the fourth quarter. We expect to continue to build on the successes of 2025 to drive further margin expansion and increasing value for all of our stakeholders in 2026 and beyond.

So let's turn to Page 6. None of the achievements I just mentioned would be possible without a world-class culture and commitment to doing business the right way. With an uncompromised honesty, transparency and integrity, we were pleased in 2025 to again receive numerous awards for excellence in product quality and customer service, as well as broad recognition for our continued achievements in culture and sustainability. I couldn't be more proud of our global workforce and their joint commitment to a culture of achievement, excellence and integrity. And I'd like to thank all of our employees, our Board of Directors for their continued hard work, accomplishments and support in 2025 and for setting the stage for an even more successful 2026.

Now let me turn the call over to Jon to review the details of our fourth quarter and full year financial results.

Thanks, Jeff, and good morning, everyone. In the next few slides, I'll cover the details of our quarterly and full year financial results, put some context around some of the key items that impacted our earnings and then provide some color on our cash flow, liquidity and balance sheet.

So let's turn to Slide 8. On Slide 8, we show a summary of our results for the fourth quarter and full year 2025 with comparisons to the prior year periods. Fourth quarter 2025 sales totaled $672 million, an increase of 1.8% versus the fourth quarter of 2024. The improvement was despite the negative impact from a customer supply chain disruption that significantly reduced production volumes on 1 of our top platforms. The volume and mix, which is net of customer price adjustments and recoveries, was more than offset by favorable foreign exchange, mainly from the euro.

Adjusted EBITDA for the fourth quarter 2025 was $34.9 million or 5.2% of sales. This compares to $54.3 million or 8.2% of sales in the fourth quarter of 2024. The decrease was primarily driven by the short-term industry disruptions impacting volume and mix and efficiencies, as well as inflationary and compensation-related costs year-over-year.

On a U.S. GAAP basis, we generated net income of $3.3 million in the fourth quarter. This included a $45 million deferred tax asset valuation allowance release and $11.5 million in restructuring charges. Excluding these and other smaller noncash items, we recorded an adjusted net loss of $31 million or $1.73 per diluted share for the fourth quarter of 2025 compared to an adjusted net loss of $2.9 million in the fourth quarter of 2024.

For the full year 2025, our sales totaled $2.74 billion, an increase of 0.4% versus 2024. The modest improvement was primarily due to favorable foreign exchange and net customer pricing and recoveries, which served to offset the lost sales related to customer production disruptions and other favorable -- unfavorable volume and mix that occurred during the year.

Adjusted EBITDA for the full year 2025 came in at $209.7 million compared to $180.7 million for the full year 2024. This result for 2025 was at the high end of our most recent guidance range and in line with the estimates of the analysts who follow us most closely. Improved manufacturing and supply chain efficiencies, especially in the first 3 quarters of the year, savings from restructuring initiatives and favorable foreign exchange more than offset the overall impact of weak volume and unfavorable customer price adjustments.

On a U.S. GAAP basis, full year net loss significantly improved to $4.2 million from a net loss of $78.7 million in 2024. After adjusting for special items and the related tax impacts, we incurred an adjusted net loss for the year of $30.9 million or $1.73 per diluted share. This is also a significant improvement when compared to the adjusted net loss of $56.7 million or $3.23 per diluted share recorded in 2024.

From a capital expenditure perspective, we spent $48 million during 2025 or 1.8% of sales, similar to our capital investment level in 2024. We continue to optimize asset utilization throughout the company and focus our spend on customer launch readiness and new business growth.

Moving to Slide 9. The charts on Slide 9 and 10 quantify the significant drivers of the year-over-year changes in our sales and adjusted EBITDA for the fourth quarter and full year, respectively. For sales in the fourth quarter, favorable foreign exchange increased sales by $14 million. This was partially offset by unfavorable volume and mix of $3 million. As mentioned, this category includes the impact of customer production disruptions as well as net customer price adjustments and recoveries.

In terms of adjusted EBITDA, volume and mix was a net benefit of $4 million in the quarter as the overall mix of production and net pricing and recoveries in the quarter helped offset the negative impact of customer production disruptions. Manufacturing and purchasing efficiencies drove just $1 million in savings during the quarter as efficiency was negatively impacted by trapped costs and reduced fixed cost absorption levels caused by those customer production disruptions, as well as higher-than-expected launch volumes and a couple of new programs.

Savings from restructuring initiatives resulted in an additional $1 million of cost improvement, and a slight tailwind on raw materials amounted to $1 million in the period. These improvements were more than offset by $6 million of general inflation, such as wage and energy cost increases, while the nonrecurrence of some one-off positive items from the prior year and higher incentive compensation expenses year-over-year combined for the rest of the walk.

Moving to Slide 10. For the full year, favorable foreign exchange increased sales by $12 million, while unfavorable volume and mix, net of customer price adjustments and recoveries, reduced sales by $2 million. For full year adjusted EBITDA, $64 million of improved manufacturing and purchasing efficiencies, $18 million of restructuring savings, $10 million of favorable foreign exchange and $2 million of lower material costs were all positive factors. Offsetting these positive items were $25 million in higher wages and other general inflation and $17 million in unfavorable volume, mix and net customer price adjustments. Other includes a minor amount of tariffs yet to be recovered just due to timing, higher incentive compensation year-over-year, increased SGA&E primarily due to share price appreciation and a collection of other smaller items.

Moving to Slide 11 and an update on our liquidity and our balance sheet. We were very pleased to end the year with strong free cash flow of $44.6 million in the fourth quarter, and importantly, positive free cash flow for the full year, as we indicated we would, of $16.3 million. Net cash provided by operating activities in the fourth quarter was $56 million, a decrease of $18.5 million compared to the same period last year due to the lower cash earnings in the quarter. Capital expenditures were $11.7 million for the quarter as we continue our intense focus on cash preservation and optimizing asset utilization.

We ended the year with total liquidity of over $352 million. As of December 31, 2025, we had cash on hand of $191.7 million and an additional $160.9 million of availability on our revolving credit facility, which remained undrawn. Based on our current outlook for production volumes and expectations for continued operational efficiencies and margin expansion, we expect that free cash flow in 2026 will again be positive. We believe our current cash on hand, expected future cash generation and access to flexible credit facilities will provide ample resources to support our ongoing operations, make required interest payments and execute planned strategic initiatives.

Before we wrap up, I wanted to offer some thoughts on managing our debt maturities and how we are looking at our financing options going forward. We have continued to monitor the debt markets and consult with our advisers in anticipation of a potential refinancing of certain of our outstanding debt. We have made significant progress on evaluating potential paths forward. While the timing for the initiation of any refinancing action will be market dependent, we continue to target a refinancing transaction in the near future.

That concludes my prepared comments. So let me hand it back over to Jeff.

Thanks, Jon. And to wrap up our discussion this morning, I want to share a few thoughts regarding our outlook for 2026 and why I remain extremely optimistic about our opportunities this year and beyond.

If we could move to Slide 13. The first reason for optimism is our continued success in executing our strategic plans. And based on the 4 key strategic imperatives you see on this slide, since we first defined these imperatives a couple of years ago, the alignment and the focus of our teams has enabled us to drive significant improvements in virtually every aspect of our business. And importantly, our operational improvements in our manufacturing facilities and investments in innovation are translating to improved financial results.

Turning to Slide 14. The charts on this slide clearly illustrate strong trends in margin expansion and improved cash flow despite revenue declining due to lower industry production volumes over the past 3 years. As we've significantly reduced our fixed cost and continue to optimize manufacturing and purchasing efficiencies, we believe we can further accelerate margin expansion as our top line begins to grow. And we believe that both of our product segments are well positioned to grow significantly over the next few years.

Turning to Slide 15. The strategy for our Fluid Handling Systems segment looks to unlock the full potential of the organization by expanding geographically in association with key fast-growing customers, leveraging the growth trends in hybrid vehicles to expand the content per vehicle and launching new innovative products and technologies, including thermal management solutions and our award-winning eCoFlow family of integrated coolant control products.

Please turn to Slide 16. As the global leader, our Sealing Systems strategy is focused on sustaining the operational excellence that has reestablished the financial strength of the business and leveraging global expertise in engineering, design, and manufacturing to drive profitable growth in both our existing and new markets. We're using digital tools and world-class engineering capabilities to make the design and validation process for new products faster and more efficient, supporting our customers in developing markets that tend to have a shorter product development cycle. Paying close attention to the voice of the customer, the Sealing team is quickly bringing additional innovative products and technologies to market that we expect will add value for our customers and enable the company to expand content per vehicle and drive market share gains going forward.

Turning to Slide 17. For both of our segments, China represents a key part of our profitable growth strategy. And as you know, Chinese OEMs are expanding aggressively into many global markets and are expected to gain significant market share by 2030. As a key part of our strategy, CPS expects to grow and gain share alongside Chinese OEMs, leveraging our world-class technology and service and the relationships that we've established over 20 years of operating in China, as well as our outstanding locally led team.

Currently, Chinese OEMs represent approximately 36% of our revenue in China, while Western OEMs and their joint venture partners represent approximately 60%. Based on recent new business awards already in hand and developing target business, we expect to grow our business with Chinese OEMs to more than 60% of our revenue by 2030. In addition, given our existing available production capacity, we believe we'll be able to scale our business with Chinese OEMs with minimal incremental investment, resulting in very favorable returns on invested capital.

In the near term, we expect our total revenue attributable to China will grow at a CAGR north of 15% between 2025 and 2028. Further, we currently expect to triple our total sales to Chinese OEMs globally over the next 5 years as we support them in their growth within China as well as their expansion into other key markets around the world.

Turning to Slide 18. Our positive outlook for sales growth that exceeds the market is supported by continuing new business awards. I mentioned at the beginning of the call, we received nearly $300 million in net new business awards in 2025. Of the total awards, 74% of the new awards were related to the value-add innovation that we have introduced into the market. Products like FlexiCore and FlushSeal in our Sealing segment and our portfolio of low permutation tubes and [ quick connects ] in the Fluid segment are delivering value for our customers and driving new business wins. Similarly, 74% of the new awards were related to battery electric or hybrid vehicle platforms, which is an indication of how closely our product offerings and innovations are strategically aligned with the fastest-growing segments of the market.

Finally, consistent with our China strategy, we just discussed, 51% of the net new business awards were with Chinese OEMs. We're certainly proud to be the supplier that our customers turn to for quality components, consistency of delivery and collaboration on critical design and development of new technologies. And now we're also the supplier they're continuing to support for their global expansion goals. Further, we expect some of our latest innovations, such as our eCoFlow Switch Pump and our Integrated Coolant Flow Manifold, which we are currently marketing to our customers in China, will drive even more business wins in 2026. So far, we're off to a strong start of the year with several new awards already in hand, and we expect to keep the momentum going throughout this year.

Turning to Slide 19. Our world-class service, technology and innovations, continuous -- continue to allow us to partner with customers on some of their most important high-profile vehicle platforms. On this slide, we show our top 10 platforms for 2026 based on expected revenue. These 10 programs represent approximately 45% of our planned revenue for the year based on current production volume estimates and an expected average content per vehicle of approximately $190. Importantly, 7 of these 10 platforms offer multiple powertrain options, which allows for flexibility and reduces risks related to fluctuations in production volumes driven by trends in consumer preference or changing regulatory environment.

Let's go to Slide 20. To conclude this morning, let me provide a little color on the guidance we published in our press release yesterday afternoon and also provide a few comments on our longer-term financial outlook. Our expectations for 2026 are for increased profitability and for further margin expansion, leveraging an increase in sales of around 3% based on the most recent industry production outlook. We expect continuing launches of new higher-margin business will be a positive driver again during the year. We are confident that the combination of increasing operating efficiencies and the ramp-up of higher-margin business will enable us to hit our near-term strategic target of double-digit EBITDA margin for the full year in 2026, with the first quarter likely to be the weakest in terms of margins and cash flow, but building steadily throughout the remaining 3 quarters of the year.

Over the longer term, we continue to believe we're only at the beginning of an exciting period of growth and prosperity for Cooper-Standard. The actions we've taken and the successes we've achieved over the past 4 years have clearly made us better and stronger. We believe we're better positioned than ever before to leverage future increases in production volume, although we believe we can continue to expand margins even in a flat or stable production environment. We're also better positioned to expand into high-growth markets and partner with new dynamic customers who have aggressive growth plans around the world, and we're already doing that. We believe the benefits of these new and expanded relationships will become more evident in the coming years as those new programs launch.

Based on current estimates for the global production volumes for 2026 to 2028, we believe the implied growth in our expanding margins will enable us to reduce our net leverage ratio to something in the range of 2x or lower over that time frame. Additionally, we believe and are confident that we will triple the return on invested capital of our business by 2028. So you can see why we're excited about the opportunities and outlook in 2026 and for the next several years beyond that.

I want to again thank our employees for their hard work and commitment to helping make Cooper-Standard a premier automotive supplier and the first choice of all of our stakeholders. I also want to thank our customers around the world for their continued trust and partnership. This concludes our prepared comments.

Jenny, can we open it up for Q&A, please?

[Operator Instructions] Your first question is from Kirk Ludtke from Imperial Capital.

On Slide 20, the guide -- the bridge to the $280 million of adjusted EBITDA. Is there -- and lean is the big contributor there. Are there any significant initiatives worth mentioning that's included in that $90 million? Or is it more or less business as usual?

More of the latter, Kirk. This is Jon. It's business as usual for the team. They do this very, very well. As Jeff positioned in the beginning of this call as far as continuous improvement, whether it's in the manufacturing side of the business or the purchasing supply chain side. And as you can see from this bridge, they're signed up for considerable commitment again this year. But nothing in and of itself is unusual within that $90 million.

Okay. And then volume, mix and price. Are the new products, eCoFlow, et cetera, are they included in that $10 million?

This is Jeff, Kirk. Yes, everything that I talked about on the call today related to the net new business number that we've just booked last year in '25 and obviously, what we did in '23 and '24 that's in launch or already launched, it would be all inclusive.

And the follow-up to your comment about the teams and lean, just to give you an idea of our confidence in that $90 million. As we head into '26, we've already identified well above 90% of all of that. And it's the -- that's the highest number in a decade in terms of already identified and being worked on. So the confidence level of the team executing that is very high. A lot of work gets done months in advance each year. And that list is very good and certainly is being managed on a daily basis by the 2 presidents of those businesses.

That's very helpful. And then on the volume mix bar, that includes the new products. It includes the shift to hybrids, all of those trends you've talked about?

It does. And obviously, as we put together our 3-year business plan, as you know, '26, '27 and '28, we've just completed it. So all of the business, the new business for '26 is already being produced in our factories. For '27 and '28, the book business there exceeds 95% already. So it makes it pretty easy for us to forecast what's coming out and what's going in and what those margins are. And that really drives the level of clarity, transparency around our 3-year plan for our business. So it's clear what we're going to do in '26, '27 and '28. Of course, the issue that always is, is what's the volume and mix going to be. Otherwise, we're pretty predictable in terms of what we're going to deliver.

Got it. Okay. I appreciate it. And then with respect to -- I know you're probably limited as to what you can say about this, but with respect to the F-Series, is that back to normal as far as you're concerned?

Kirk, it's Jon again. We're reading the kind of the same news you are, and based on the releases, some volumes are coming back online. You're right, we won't get into too much details or speak on behalf of our major customer, but we're seeing production continue to ramp up, and the releases are holding there.

Okay. So that could continue to be a drag in the first part of the year?

This is Jeff, Kirk. I don't know if this is going to be a drag. I think it's moving in the direction that we've predicted and I think the customer has predicted. So I'll just leave it at that.

Your next question is from Mike Ward from Citigroup.

And I guess, maybe another way around the F-Series discussion. What are you seeing with your schedules from the manufacturers, does that differ from what we're seeing like with IHS? It sounds like the first quarter is part of what you're looking at with your cadence of earnings is relatively soft production, but I think most manufacturers are talking about acceleration in the second half. And is that what you're seeing in particularly at some of those key models?

Yes. I saw the transcript like you did in terms of what the customer was predicting for '26 in terms of F-Series production, the 150,000 units over and above '25 that was just discussed publicly. I will tell you that, that would represent probably 60,000 units above what we have in our plan, Mike.

Now the question becomes when those are going to be built, produced. There's additional shift that was talked about. There was a line speed that was talked about. So I don't have any insight into that. As our releases get adjusted accordingly, then that will reflect. But I can tell you that there's a potential increase of 60,000 units if those 150,000 increase year-over-year happen. It's not a secret. Our content per vehicle is $450 on those vehicles. So you can do the math.

Yes, it's a big number. It's -- yes, I think Ford is in the same boat you are. I think they're just -- in all fairness to Ford and to you, I think they managed the situation better than expected in 4Q. And I think that they're still trying to figure out on the supply side and the cost benefit and everything else. But inventory is in great shape, right? So right now, schedules are sticking, from what you've seen. Is that correct?

That's what we've seen. Yes. That's what we're seeing. We're cautiously optimistic, how about that.

Yes. The -- [ Magna ] this morning reported that it got a pretty good lump sum of cash for some of the BEV stuff. How do you expect to see it, lump sum, piece price, all of the above? Have you seen any big cash contribution yet or lump sum cash inflow yet? Or do you expect one in '26?

Yes and yes. So we finished some negotiations in '25. And those are behind us, and we've got others that we're expecting to go through in '26. And it seems that most are talking lump sums, Mike. That's my...

Interesting.

That's my view as I sit here today anyway. Yes.

That's good news. That's a difference than in the past. Jon, is there any sense of urgency to get the refi done before the end of March when you become current?

Mike, what I've talked about in the past is we certainly would prefer to get something done prior to the first lien and third lien notes coming current. Those milestones are middle of May and middle of March, respectively. So if you think about it in that kind of time frame, certainly, we don't want to have that added pressure of the notes coming current.

Your next question is from Nathan Jones from Stifel.

I guess I'll start with some questions around the net new business wins. Obviously, very strong in '25 again on the back of some good new business wins in '23 and '24. Can you talk about kind of what's in the '26 guide from net new business wins in '23 and '24? And how we should think about those layering in over the next few years?

Yes, Nathan, this is Jeff. So I can tell you that the $300 million that we booked in '25 that we just discussed this morning, those typically take a couple of years, call it between 2 and 3 years on average to roll into the portfolio. The $400-plus million that we expect to book in '26 will be similar.

Now keep in mind that 51% of that net new business was China, and it's a lot faster to the market than is traditionally seen by our other customers. So I would just temper it by saying that. It could be faster -- it will be faster related to the China portion than the rest. So we're very positive about what's happened in '23, '24 and '25. Obviously, the margin expansion, our ability to execute those launches, it's really showing up in our financials, right? And I expect, based on all the new business that we just booked in '25 and our targeted business for '26 across both Fluids and Sealing will continue to drive the type of margin expansion that we've talked about in our longer-term strategy numbers for 2030.

I guess given the net new business wins kind of from '23 and '24, depending on how long they take to start reading through into revenue, maybe potential for Ford to catch up some production this year. The revenue guidance looks maybe a little bit lower than we were expecting, and I think some of the other folks that cover you were expecting for '26. Can you talk about what the -- some of the offsets maybe are for that? You should have some tailwinds from FX. Is the bottom end of that range really a bit conservative? Just any further color you could give us on that?

Well, we stick with the S&P numbers for the market, Nathan. So I'll read you what the slide says: North America, we were at 15.3 in '25, we're going to 15 in '26; Europe at 17 in '25, we're going to 16.9 in '26. China is up -- is down from 33 to 32. South America is up from 3 to 3.2. So the fact that we're generating the additional revenue year-over-year that we are with the down volume that's being predicted by the people that predict, it's actually a pretty amazing story from a margin expansion, and that's what we tried to show you on the slides that we walked through today.

And if you look at the midpoint, $2.8 billion on top line, up significantly over what we just finished '25 on a down market, EBITDA from $210 million to $280 million on a down market, sounds pretty good to me. But obviously, if we get more volume than what is being predicted by S&P towards the end of last year, then these numbers are going to be a lot better. So anyway, I guess time will tell.

Yes, the EBITDA growth is great. Maybe just a last one on free cash flow. It comes down a little bit in -- from '23, '24 and '24 to '25. I know you said you expect it to be positive again in '26. Any more color you can give us on an expectation of around where you expect free cash flow to come in or what kind of conversion of EBITDA or something like that we should think about as we're thinking about free cash flow?

Yes, Nathan, thank you. It's Jon again. We give you a lot of the main components of our free cash flow build on the guidance table. So you can see from last year to this year, we're going to invest more in capital expenditures certainly, about $15 million or so at the midpoint. We do expect cash taxes to go up based on increasing profitability around the world. So that will be a drain on free cash flow as well.

But then with the new business that we've just been discussing, there is an element of getting ready to launch new programs. So we see investments in tooling to support net new business wins. With the global perspective on this, some of those get recovered right around the time the tools are approved for production. Others are amortized over the life of the program. So we're seeing some balance sheet tie-up of working capital for some of those amortized programs when you think about tooling.

And then with the typical build in revenue, you do have an increase in working capital as well. If sales are up $60 million to $100 million or so, you'll see more accounts receivable building by the end of the year than you've got today. You typically need to have a little bit more inventory throughout the cycle. We do a good job of bringing it down at year-end, but with a higher revenue base, you expect some working capital tie up overall. So that's why you'll see the year-over-year comp on cash flow being generally what it is on the page.

[Operator Instructions] And your next question is from Brian DiRubbio from Baird.

Just a couple of cleanup questions. Just -- Jeff, I want to make sure I heard this right. You said today, 36% of your revenues are from Chinese OEMs, and you want to get that to 60% of total revenues in the next 5 years?

What we were talking about was the shift from Western OEM business to the Chinese OEM business. And so our focus over the course of the next 3 years will be to increase the percentage of our Chinese OEM business in China to that number. That's what we're talking about.

Okay. So it's not a total revenue number, it's just what you're -- within Asia Pacific revenues, that's going to move from 36% to about 60%?

That's correct, Brian. Obviously, the Western OEMs have all announced significant volume reductions. The Chinese OEMs have announced significant volume increases. As that portfolio shifts, that's what we're booking. And so that's why -- and I wanted to make sure you understood, the 51% of our net new business that we just booked in '25 was exactly that. So to add to the credibility of that transformation.

I mean back 5 years ago, Brian, I think we had 90% Western OEM business and 10% Chinese OEM business. And we have transitioned all of that to what I just said. So it's really been a tremendous effort by the teams there to adjust to the market and to win new business profitably and to get our innovation into that market in a way that's being valued not only for the locally produced vehicles, but also those vehicles that are being exported around the world, especially to Europe, has our parts on it.

So we're very excited about that. We still have some open capacity in China that will fill up over the course of the next couple of years. So that's why I also mentioned that the return on invested capital kicker that we get from launching all that new China business with very little investment also is helping to put the numbers in front of you that we have for '26 through '30 in other conversations.

Got it. So I think just your total mix between Chinese OEs and U.S. And again, just trying to get a sense of the mix shift of your business over the last couple of years is really just looking at 36% of just that general Asia Pac bucket is China and the rest would be Western OEMs. Fair?

Correct.

Okay. Great. And just want to stick on China just for one more question. What contract protections do you have with those Chinese customers in terms of your products staying on that platform for a number of years, both either just for production perspective? And obviously, what IP protections do you guys have in China?

Yes. We've been at this for a couple of decades now. And so I think we have built the type of relationships that make us believe that we can make decisions with those particular partners. And I don't mean all 130, but the ones that we've chosen to do business with, we trust and they trust us. We have promised that we would put innovation into the product in China. We have. We've had 0 incidents of any issues with intellectual property. And we'll continue to, like everybody, trust that if we find an issue, we'll work it out, but it hasn't been a problem to date.

And as I said, our product is really critical to the overall consumer satisfaction level, Brian. I mean our Sealing business, you drive your car through the car wash, you better not get wet. Our Fluid business, you park it in your garage or in your driveway, there better not be a spot underneath there. So it's really a big deal to the Chinese OEMs that, that level of performance is there, day 1. They're not willing to take risks as they export and build brand loyalty around the world. They want those products to be world-class quality and of the highest level that we can engineer them.

So that's the bond, that's the relationship. That's why our products are working, and that's why the relationship has never been stronger and why we're convinced between now and 2030, that will continue to grow at a very high rate with fantastic margins. We've earned that, and we're delivering that, and the customers trust us.

Got it. And just a final question for me as we think about the guidance for '26. What of the various variables you can think about, raw materials, production schedules, so on and so forth would be -- sort of have the biggest impact positive or negative on your guide?

Yes. I guess -- this is Jeff. I would tell you that volume and mix is always the number 1 answer to that question. We have done a very good job with our contracts and the ability to index if there are raw material fluctuations. So those days are behind us in terms of having volatility really associated with raw material fluctuations. So that, for Cooper-Standard, is not such a big deal.

I would say this year, like last year, there's still some question around tariffs. That's more for our Fluid business than it is for our Sealing business, Brian, but that's probably there on the list is something we'll have to work our way through. It sounds like midyear again, but who really knows. That's how I'd answer the question.

Yes. It appears that there are no more questions. I would now like to turn the call back over to Roger Hendriksen.

Thanks, Jenny, and thanks to all who participated this morning. We appreciate your time and your continued interest. If there were questions that didn't get asked or you want to have some follow-up conversations, please feel free to reach out to me directly, and we'll make sure that, that can happen. This concludes our call. Thank you very much.

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

Good morning, ladies and gentlemen, and welcome to the Cooper-Standard Third Quarter 2025 Earnings Conference Call. As a reminder, this conference call is being recorded, and the webcast will be available on the Cooper-Standard website for replay later today.

I would now like to turn the call over to Roger Hendriksen, Director of Investor Relations.

Thanks, Danny, and good morning, everyone. We appreciate you spending some time with us this morning. The members of our leadership team who will be speaking with you on the call this morning are Jeff Edwards, Chairman and Chief Executive Officer; and Jon Banas, Executive Vice President and Chief Financial Officer.

Before we begin, I need to remind you that this presentation contains forward-looking statements. While they are made based on current factual information and certain assumptions and plans that management currently believes to be reasonable, these statements do involve risks and uncertainties. For more information on forward-looking statements, we ask that you refer to Slide 3 of this presentation and the company's statements included in periodic filings with the Securities and Exchange Commission. This presentation also contains non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to their most directly comparable GAAP measures are included in the appendix to the presentation.

With those formalities out of the way, I'll turn the call over to Jeff Edwards.

Thanks, Roger, and good morning, everyone. We certainly appreciate the opportunity to review our third quarter results and provide an update on our business and the outlook going forward.

To begin on Slide 5, I'll highlight some of the key third quarter data points that we believe are reflective of our continuing outstanding operational performance and our ongoing commitment to our core company values. In terms of operations and customer service, we're on track to have possibly one of the best years in our company's 65-year history. We ended the third quarter with 99% of our customer scorecards for quality and service being green.

For new program launches, we also continue to deliver strong performance with 97% of those scorecards green. Our plant managers and our plant employees continue to deliver outstanding performance and value for our customers through their dedication and commitment to excellence. We're extremely proud of that. Also in our plant operations, safety performance continues to be excellent.

In fact, during the third quarter, we had a total incident rate of just 0.28 recordable incidents per 200,000 hours worked. That's well below the world-class benchmark of 0.47. Importantly, 36 of our plants have maintained a perfect safety record with a total incident rate of 0 for the first 3 quarters of the year. That's 60% of all of our production facilities achieving a perfect safety score and demonstrating that our ultimate goal of 0 safety incidents is achievable. We're proud of our entire global team for their focus and achievement in this most important operating measure.

In terms of cost optimization, we had another solid quarter with our manufacturing and purchasing teams delivering $18 million of savings through lean initiatives and other cost-saving programs. These cost reductions and operating efficiencies, combined with revenue growth in the quarter, allowed us to achieve a solid 140 basis point improvement in gross margin versus the third quarter of last year. Despite some of the market headwinds that we've been seeing, we continue to drive profitable growth and margin expansion through the execution of our plans and strategies.

Finally, we're continuing to leverage world-class service, technical capabilities and our award-winning innovations to win new business. During the third quarter of 2025, we received $96 million in net new business awards, which are expected to drive profitable growth as they launch over the next few years. That brings our total net new business awards for the first 9 months to nearly $229 million. I will provide some additional detail on this in a few minutes.

First, let me turn the call over to John to discuss the financial details of the quarter.

Thanks, Jeff, and good morning, everyone. In the next few slides, I'll provide some details on our financial results for the quarter and discuss our cash flows, liquidity and aspects of our balance sheet and capital structure.

On Slide 7, we show a summary of our results for the third quarter and first 9 months of 2025 with comparisons to the same period last year. Third quarter 2025 sales were $695.5 million, an increase of 1.5% compared to the third quarter of 2024. The slight increase was driven primarily by positive foreign exchange and favorable volume and mix, partially offset by certain customer price adjustments. As Jeff mentioned, our third quarter 2025 gross margin improved 140 basis points compared to the prior year to 12.5% of sales.

Adjusted EBITDA in the quarter was $53.3 million, an increase of more than 15.6% when compared to the $46 million we reported in the third quarter of last year. Importantly, we were able to drive further margin expansion of 100 basis points versus the same period a year ago despite the modest revenue growth and market headwinds. On a U.S. GAAP basis, we reported a net loss of $7.6 million in the third quarter compared to a net loss of $11.1 million in the third quarter of 2024.

Adjusting for restructuring and other items from both periods as well as the related tax impacts, adjusted net loss for the third quarter of 2025 was $4.4 million or $0.24 per share compared to an adjusted net loss of $12 million or $0.68 per share in the third quarter of 2024. Our capital expenditures in the third quarter of 2025 totaled $11.2 million or 1.6% of sales, similar to the prior year period. We continue to exercise discipline around capital investments, which are primarily focused on program launch readiness in order to maximize our returns on invested capital.

Moving on to the 9 months. For the first 9 months of 2025, our sales were essentially flat compared to the first 9 months of 2024. Significantly, and despite flat revenue over the first 3 quarters, our gross profit margin increased by 170 basis points and our adjusted EBITDA margin improved by 230 basis points compared to the first 9 months of last year.

Moving to Slide 8. The charts on Slide 8 provide additional insights and quantification of the key factors impacting our results for the third quarter. For sales, favorable volume and mix, net of customer price adjustments, increased sales by approximately $2 million compared to the third quarter of 2024. The impact of favorable foreign exchange was approximately $8 million.

For adjusted EBITDA, lean initiatives in purchasing and manufacturing positively contributed $18 million year-over-year. In addition, we continue to realize benefits from our restructuring initiatives implemented in prior periods, amounting to $5 million in incremental savings in the third quarter compared to last year.

Favorable foreign exchange was a tailwind of approximately $4 million in the quarter. Partially offsetting these improvements were $5 million of unfavorable volume and mix, including customer price adjustments and the impact of certain short-term production disruptions, $6 million in increased costs and wages and general inflation and $6 million in higher SGA&E expense.

The increase in SGA&E expense was primarily related to stock price appreciation adjustments for certain equity-based incentive awards as our share price increased by approximately 72% during the third quarter. With most of the price gain occurring later in the quarter, this increase and the related incremental expense were not contemplated in early August when we last reported earnings and updated our guidance.

Moving to Slide 9. On Slide 9, we present the same type of year-over-year bridge analysis for the first 9 months of the year. As mentioned, sales were essentially flat for the first 9 months with slight positive volume and mix being offset by unfavorable foreign exchange. Adjusted EBITDA in the first 9 months increased by more than $48 million or more than 38% compared to the first 9 months of 2024.

The improvement was driven primarily by $63 million of manufacturing and purchasing efficiencies, $17 million of restructuring savings and $9 million of favorable foreign exchange. These positive drivers were partially offset by $20 million of unfavorable volume, mix and price adjustments, approximately $19 million of higher wages and general inflation and $5 million in higher SGA&E expense, again, mainly due to the stock price appreciation discussed earlier. Overall, our SGA&E continues to benefit from previous restructuring and cost reduction initiatives and a disciplined management focus on controlling costs.

We are pleased with our improving results in the first 3 quarters of 2025 as our focus on controlling costs, delivering exceptional operational performance and launch of new, more profitable programs are having the positive impacts we had planned despite some of the market headwinds we began to see late in the third quarter.

Moving to Slide 10. Looking at cash flow and liquidity. Net cash provided by operating activities was approximately $39 million in the third quarter of 2025 compared to $28 million in the third quarter of 2024. Capital spending, as mentioned earlier, was approximately $11 million in the third quarter of 2025, resulting in net free cash flow of approximately $27 million for the quarter, more than $11 million higher than the same period last year.

We ended the third quarter with a cash balance of approximately $148 million. Coupled with $166 million of availability on our ABL facility, which remained undrawn, we had solid total liquidity of approximately $314 million as of September 30. We believe that is more than sufficient to support the continuing execution of our business plans and profitable growth objectives in today's environment. Following the solid results of the first 3 quarters and even considering our revised outlook for production volume headwinds in the fourth quarter, we believe we remain on track to achieve positive free cash flow for the full-year this year.

With respect to our capital structure, we are continuing to evaluate various options to strengthen our balance sheet and further improve our cash flow and are carefully monitoring market conditions and developments in the credit markets. We are optimistic that as we continue to deliver improving results, we will be able to favorably refinance our first and third lien notes in the next several months.

With that, let me turn it back over to Jeff.

Okay. Thanks, Jon. And this last portion of our call, I'd like to again comment on our high-level strategic imperatives and how these are positioning us for continuing profitable growth over the next several years. Then I'll wrap up with a few comments on our near-term outlook and our revised guidance for 2025, so please turn to Slide 12.

Our strategies and operating plans are built around the 4 key strategic imperatives that you see outlined on Slide 12. By aligning the company around these common objectives, we've been able to drive significant improvements in virtually every aspect of our business. By the continuing execution of our plans and strategies, we're positioning the company to deliver continued profitable growth, further improvements in margins and significantly improved returns on invested capital as we discussed in last quarter's call.

Moving to Slide 13, as I name it, my favorite slide in today's presentation. One of the key improvements in our business has been the increase in our profit margins all financial strength and overall financial strength of the business. Through our successful strategic execution, we've been able to increase our gross profit margins by more than 100 basis points each year over the past 3 years, and that's despite reduced or flat production volumes in our 2 largest operating regions.

Because of our focus on sustainable efficiency and fixed cost reductions, we will continue this trend of expanding margins into the future even if production volumes remain flat. We would obviously expect to leverage any increase in production volume to drive further profitability and returns. In addition to our cost optimizations, we're benefiting from continuing launches of new programs and products with enhanced variable contribution margins. As the new programs ramp up, they'll be replacing the older programs that have lower margins on average. Our book business, launch cadence and the timing of runout business give us a high degree of confidence in our expanding margin outlook.

Turning to Slide 14. Our strategic execution is also enabling business wins that we believe will drive further profitable growth in coming years. I mentioned at the beginning of the call that in the first 9 months of the year, we've received nearly $229 million in net new business awards. Of the total awards, 87% were related to the value-add innovations in product and technology that we've introduced into the market.

We continue to believe that our strategy and capabilities around technology and innovation are a clear source of competitive advantage for us. Similarly, 83% of the new awards were related to battery electric or hybrid vehicle platforms, which is an indication of how closely our product offerings and innovations are strategically aligned with the fastest-growing segments of the market.

Finally, as we shared last quarter, our growth strategy includes expanding our relationships with the fast-growing Chinese OEMs that are beginning to expand their business globally. This opens up significant opportunity for us to expand both in terms of our customer base as well as geographically where we believe the greatest growth will be occurring over the next several years.

We are proud to be the supplier that our customers turn to for quality components, consistency of delivery and collaboration on critical design and development of new technologies. Now, we're also the supplier they're returning to, to support their global expansion needs. With these awards in hand and bright outlook for new business wins ahead, we are increasingly confident that we will be able to execute our plans and achieve our longer-term strategic financial targets for growth, margins and return on capital.

Turning to Slide 15. To conclude our prepared remarks this morning, let me focus in the nearer term and our outlook for the rest of 2025. Following a somewhat choppy third quarter in which certain of our customers around the world experienced short-term production disruptions from things like cyber attacks, lightning strikes, labor disruptions, just to name a few, we're now expecting a much more significant impact, unfortunately, in the fourth quarter due to the aluminum supply chain disruption that has hit our largest customer. While we're encouraged by public commentary about plans to make up the lost production in future periods, there is no way we can mitigate the impact this will have on our fourth quarter.

From a more positive perspective, the statements about making up lost production early next year support our view that the underlying demand for new light vehicles remains strong, it's consistent with our plans for strong profitable growth over time as markets normalize. We expect any reduction in production volumes related to this latest supply disruption to be temporary and will not have any lasting impact on our opportunities to achieve our longer-term strategic targets.

As a company, we're maintaining our relentless focus on the aspects of our business that we can control, operational excellence, delivering world-class quality, service and innovation to our customers and continued near flawless launches of new programs with enhanced contribution margins. As we do this, we're confident that we will position the company to achieve our strategic financial targets going forward as production volumes normalize.

Turning to Slide 16. Despite our strong results in the first 3 quarters of the year, which exceeded our original plans, we are reducing our full-year guidance ranges for sales and adjusted EBITDA to reflect the expected impact of various temporary reductions in customer production volume, including on some of our most important platforms.

The waterfall chart on the right breaks out the various drivers of our revised outlook for 2025 full-year adjusted EBITDA versus 2024 actuals. Our success in delivering manufacturing efficiencies and other cost savings are still the biggest drivers to the positive, but unfavorable volume and mix is now a significantly greater factor to the downside. Importantly, even with challenging overall outlook in the fourth quarter, we still expect to deliver significantly higher adjusted EBITDA and positive free cash flow for the full-year on sales that are flat to slightly lower than they were in 2024.

We want to thank our customers, our suppliers and all of our stakeholders for your continued confidence and support. We remain committed to working together and finishing the year as strongly as possible.

This concludes our prepared remarks, so let's move into Q&A.

[Operator Instructions]. Your first question comes from Mike Ward of Citigroup.

Jeff, if we look out in 4Q, it's unfortunate the fourth thing happened, but it sounds like they're trying to get it accelerated as fast as they can. Then it sounds like they're going to try to make it up pretty early in the first half. It also sounds like they're going to add a third shift to Dearborn and LineSpeed, so when you kind of balance it out, it's really just postponing it into first half '26. Is that how you're looking at it? Can we look at first half of '26 where some of the things actually start to accelerate for you? Is that the way you're thinking about it?

That's exactly how I'm thinking about it. I think while the end of '25 isn't quite what we had forecasted because of the event, we're preparing our business plans for '26, '27 and '28. Certainly, there's an impact positively to what's going on in '26. Yes, it's a short-term issue, as I said in my prepared remarks, and I have no doubt that the first half of '26 will reflect improved results beyond what we originally had planned.

When we look across the different vehicles you supply components to, if you had to pick one where they're increasing the line rate, would the F-150 be the one that your highest content vehicle?

Yes. My short answer would be yes.

Jon, I wonder if you can walk through the gives and takes on the cash flow because that's a pretty strong cash flow statement you made for 4Q. You have to pay the interest, right, that was accrued in 3Q, so you have the 6-month interest payment. Is that correct?

That's correct. Mid-December is the next coupon due on the first and third lien notes.

That's about $30 million?

Actually, closer to $55 million. $55 million combined.

Then you have working capital. It sounds like working capital should be a strong positive.

It needs to be Mike.

Right. To get to positive, we need to generate about $30 million-plus of free cash flow in Q4. You're right, the big benefit that we see as we do every Q4 is improvements in working capital, unwinding that from an accounts receivable perspective and reducing inventory levels as production winds down towards the end of the year. Both of those obviously have a positive cash benefit. We're spending less, obviously, in the lighter months of November and into December as well. That preserves some cash on the balance sheet as well. All that combined will benefit and more than outweigh the $55 million in coupon payment that's due in mid-December.

The F-150 delays doesn't disrupt the working capital that much?

The timing will matter about when the production comes out because if you think about the timing of average days receivable, things that don't get produced in October would impact the total quarterly cash flows. If it's later in November, December, that's not being produced, then that impacts the subsequent quarter's cash flow timing.

Your next question comes from Nathan Jones of Stifel.

I guess I'll start with some of the net new business wins and probably as, I guess, the year-to-date ones more than just focusing on the 3Q ones and how that impacts the path to the 2030 targets that you laid out last quarter? What I'm looking for is some more commentary on the linearity of the path from 2025 to 2030, should we expect the growth and margin expansion to be fairly linear between 2025 and 2030? Is it more backloaded? I mean, I think some of these Chinese OEM contracts will ramp up faster than maybe some of the Western ones. Just any commentary you can give us on the linearity you're looking at for that, please?

Yes, Nathan, this is Jeff. I will tell you that we've been at this booking new business at these higher margins now for a couple of years plus probably. Yes, if you're going to take the line from today to 2030, I think it's pretty linear. Certainly, you're also correct that the Chinese launches are coming to market faster than most. Even with that taken into consideration, I would tell you we're very happy with what we're seeing in margin growth. We showed you a little bit of that today, the historical trend line there and even a glimpse into what we already know with 2026. If you drew the line from '26 to '30, you keep going on a similar trajectory.

I guess to follow-up to that, obviously, these platforms don't ramp up -- start ramping up out in 2030. There are net new business wins that you need to get over the next couple of years at least to get to those 2030 targets. What kind of net new business wins should we be looking for, say, in '26, '27 and '28 to check that the company is still on target to get to those 2030 goals?

I think similar to what we track this year. That's kind of how we have to do it, right? You got to replace what's building out and you got to win the new stuff that's coming. Then if there's new programs or conquest opportunities on top of that. Historically, it's been in that same range that you see happening this year. We've had some years that were a little better, some years maybe a little bit under it, but I think that's a pretty good number going forward as well.

Then maybe a follow-up on the balance sheet. You're still at about 4.2, a little over 4 turns of leverage today. I think you guys have targeted getting that down closer to 2x by the end of 2027. Do you think you're still on target to get to there? Does any of this disruption change that at all? Or I still think that you're on target to get to that kind of leverage by then?

This is Jeff. We're still on target to get there. As we just talked, I think '26 is actually going to be better than we originally had planned, not only because of what we discussed a few minutes ago with the volumes being made up from some of the fourth quarter disruption. I also tend to believe that we're going to see increases in overall volumes in some of our key regions. We don't have that yet in our forecast, but based on the leading indicators and certainly based on the amount of new models that are being invested in and coming through the system related to hybrid and electric vehicles, we're pretty excited about the businesses that we've been winning and the overall impact we think that will have on the next several years related to volume.

The next question comes from Kirk Ludtke of Imperial Capital.

On Slide 15, did any of these items impact the third quarter?

Kirk, it's Jon. When you think about some of the non-aluminum issues, the answer would be yes. Obviously, the thing is about the cybersecurity incident at one of our customers as well as some of the natural disaster weather-induced things, they did impact September and did put a little bit of a drain otherwise on Q3.

Was it meaningful? Can you quantify it? Or kind of?

You see it impacted in the lower volume and mix that we would have had otherwise. Certainly not anywhere near as significant as the Q4 impact of the $25 million that you see on the bridge slide. We were able to essentially manage through that, but you think of the lost revenue, it's a big portion of the lower contribution at $53 million of EBITDA. Otherwise, we would have been a couple of million higher than that.

I know we've talked about #1, but are #2 and 3, do you expect the production lost from #2 and #3 to be recovered in the first half of '26?

We haven't heard directly on that from those #1 and #2 -- or sorry, #2 and #3 customers, but if it's any indication, I think that they'll be competing for share and should do well as far as their production ramps.

Then on Slide 14, the net new business slide, that's very helpful to break that out. Can you apportion that 83% between just battery and hybrid?

We do have that breakdown, Kirk. I'm going to have to get back to you on what that -- the current business wins are. broken out by hybrid and the true battery electric, but as we indicated, the majority of the total is, in fact, electrified, one of those platforms or another compared to the ICE platforms, but we'll get you that in short order.

[Operator Instructions]. It appears there are no more questions. I would now like to turn the call back over to Roger Hendriksen.

Okay. Everybody, thanks for your engagement this morning. We appreciate your questions. If you do have additional questions that weren't addressed on the call this morning, please feel free to reach out to me, and if necessary, we can arrange for future discussions with the management team. Thanks again for joining the call. This will conclude today's session. Thank you.

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