Commercial Vehicle Group, Inc. Q2 FY2026 earnings call

Consolidated Financial Performance

• Consolidated Q2 2026 revenue was $195.2 million, up from $172 million year-over-year, with growth across all three segments.
• Adjusted gross margin reached 12.9%, up 90 basis points year-over-year and 70 basis points sequentially from Q1 2026, driven by operational efficiency gains and operating leverage from higher production volumes.
• Adjusted EBITDA was $5.4 million (2.8% margin), compared to $5.2 million (3% margin) year-over-year, as higher SG&A and foreign exchange headwinds offset gross margin improvements.
• Net leverage ratio fell to 3.3x at the end of Q2 2026, down from 4.1x at the end of 2025, following $14.6 million in total debt paydown funded by ATM equity program proceeds and a sale-leaseback transaction. The long-term target leverage ratio is 2x.

Strategic and Operational Updates

• CVG continues to reduce concentration risk from cyclical North American Class A truck exposure through geographic and end-market diversification.
• The Zoox robotaxi program progressed to commercial scale production: Zoox secured NHTSA approval to launch commercial robotaxi services in Las Vegas in August 2026, and CVG has added and will continue adding staffing at its Aldama, Mexico facility and investing incremental capital to support the ramp, which is increasing capacity utilization at Aldama and Tangier, Morocco facilities.
• Disciplined cost management is ongoing: discretionary SG&A spending is tightly controlled, and the company is pursuing operational efficiency, price cost recovery for tariffs, freight, fuel and material costs, and leverage from higher facility utilization.

CVG reports three operating segments with the following Q2 2026 performance:

1. Global Seating Segment: Revenue of $80 million, a 7.5% year-over-year increase. This segment contributes 41% of total consolidated revenue. Adjusted operating income was $4 million, a $0.9 million year-over-year increase, driven by higher international demand and footprint consolidation in the Asia-Pacific region.
2. Global Electrical Systems Segment: Revenue of $62 million, a 15.8% year-over-year increase. This segment contributes 31.8% of total consolidated revenue. Adjusted operating income was $1.7 million, a $0.5 million year-over-year increase, driven by volume and product mix improvements from ramping new awarded business, including the Zoox robotaxi program.
3. Trim Systems and Components Segment: Revenue of $53.2 million, a 21.1% year-over-year increase. This segment contributes 27.3% of total consolidated revenue. Adjusted operating profit was $2.2 million, up from $0.3 million in the prior year period, driven by improved volume leverage and favorable product mix despite a 6% year-over-year decline in North American Class 8 production volumes.

• CVG raised its full year 2026 guidance based on strong first-half performance, ongoing new business ramp-up, and improving end-market demand.
• Full-year 2026 revenue guidance is increased to $725-$755 million, representing approximately 14% year-over-year growth at the midpoint, with all three segments contributing to growth.
• Full-year 2026 adjusted EBITDA guidance is increased to $26-$31 million, representing approximately 60% year-over-year growth at the midpoint, with gross margin operating leverage offset by ongoing SG&A expense pressures.
• Positive full-year 2026 free cash flow remains expected, supported by ATM equity program proceeds.
• ACT's 2026 Class 8 heavy truck build forecast continues to imply 9% year-over-year volume growth, with ACT now forecasting 9% further growth in 2027 (up from a prior expectation of a 2% decline) and 13% growth in 2028. North American Class 8 production is projected to accelerate through the second half of 2026.
• The 2026 construction market is expected to see mid-single digit percentage growth, driven by stronger industrial production and fiscal stimulus initiatives.

• Macroeconomic uncertainty, market volatility, and exogenous geopolitical developments create uncertainty for forecasts and could impact results.
• Supply chain constraints (including constrained sea containers requiring expedited shipping) and input cost pressures (tariffs, fuel surcharges, material costs) create cost headwinds, with customer cost recovery lagging by approximately one quarter.
• Growth requires higher near-term working capital investment and capital spending for new program launches, pressuring near-term free cash flow.
• The company faces risks from fluctuations in vehicle production volumes for its customer programs, financial covenant compliance and liquidity, and foreign currency fluctuations when operating in international markets.

Q: Which segment contributed the largest upward revision to the updated revenue guidance, and why is EBITDA growth lower than implied by the revenue increase? / A: Trim Systems and Components had the largest percentage revenue increase year-over-year, with Global Seating and Global Electrical Systems (up 16% YoY) also contributing materially to the upward revision. EBITDA growth is tempered by elevated SG&A, particularly higher mark-to-market expense for cash-based long-term incentive compensation tied to stock price performance, which has risen alongside improved company performance. Management is also being cautious on EBITDA due to ongoing cost headwinds (constrained freight capacity, tariffs, fuel surcharges) and the lag between input cost increases and customer cost recovery.

Q: What is driving the 2026 guidance increase, since the 2026 Class 8 forecast has not changed, and what is the outlook for new business awards? / A: The guidance increase is driven by non-Class 8 growth: stronger-than-expected international growth in Global Seating, stronger growth from new business ramps in Trim Systems, higher-than-expected growth in EMEA for Electrical Systems, and the on-track Zoox program ramp, which management was previously more cautious about. Management remains on track to hit its average annual target of $100 million in new business wins, with growing opportunities for global diversification in seating and new non-Class 8 end markets (power sports) in North America, supporting long-term growth and gross margin expansion through more favorable pricing on new programs.

Q: Is the Zoox program on track with its previously disclosed volume forecast, and are you increasing SG&A investment to support higher projected sales? / A: The Zoox program remains on track to meet its previously disclosed volume targets for 2026, 2027, and 2028, with no material changes to planned volumes. No significant SG&A headcount increases are planned to support the higher sales forecast; only direct and indirect production labor (included in cost of goods sold) is being added. Incremental planned CapEx for new international program ramps that launched faster than the typical 12+ month timeline is the primary incremental investment, not SG&A. The main driver of higher current SG&A is mark-to-market adjustments for performance-based compensation tied to stock price, not new growth investment.