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CV

Commercial Vehicle Group, Inc. (CVGI)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 was resilient operationally but softer on volume: revenue fell 11% YoY to $152.5M amid North American demand softness, while adjusted gross margin expanded to 12.1% and adjusted EBITDA rose 7% YoY to $4.6M as efficiency programs offset volume deleverage .
  • Relative to S&P Global consensus, CVG modestly missed revenue ($152.5M vs $156.3M*) and adjusted EPS (-$0.14 vs -$0.12*), while adjusted EBITDA was roughly in line ($4.6M vs $4.8M*) as cost actions mitigated end-market weakness (Electrical Systems growth offsetting Class 8/Trim declines) .
  • FY25 guidance was lowered on revenue and adjusted EBITDA (Net Sales to $640–$650M from $650–$670M; Adjusted EBITDA to $17–$19M from $21–$25M), while free cash flow (FCF) guidance was maintained at “> $30M,” signaling continued cash prioritization despite macro pressure .
  • Management highlighted sequential adjusted gross margin expansion (+10 bps vs Q2) despite an ~11% sequential revenue decline, underscoring structural efficiency gains; however, higher interest expense post-refinancing and Class 8 demand declines pressured EPS and cash conversion in Q3 .
  • Key catalysts: (1) sustained margin execution and SG&A reductions, (2) program ramps in Global Electrical Systems (autonomous and European OEM wins), and (3) tariff mitigation progress; offsets include Class 8 cyclical pressure and higher interest expense until leverage declines .

What Went Well and What Went Wrong

  • What Went Well

    • Sequential/YoY margin progress: adjusted gross margin reached 12.1% (+10 bps QoQ; +50 bps YoY) on freight, labor and overhead efficiencies; adjusted EBITDA margin improved to 3.0% (+50 bps YoY) .
    • Global Electrical Systems returned to YoY revenue growth (+5.9%) with margin expansion, driven by new program ramps (autonomous vehicle OEM in North America; major European OEM) .
    • Strategic cost discipline: SG&A run-rate reduced (~15% YoY), headcount reductions across SG&A and manufacturing, and continued restructuring underpinning lower decrementals and future operating leverage .

  • What Went Wrong

    • Volume headwinds: revenue down 11.2% YoY (North America softness in Class 8, Construction & Agriculture) with pronounced declines in Trim Systems & Components (-29.2% YoY) .
    • EPS pressure from interest/taxes: GAAP diluted EPS from continuing ops (-$0.20) vs -$0.03 LY; interest expense rose to $4.1M (higher rates post-June refinancing) .
    • Cash conversion dip in quarter: FCF (continuing ops) -$3.446M vs +$17.148M LY, driven by softer orders and a China facility move (inventory build), though management expects working capital release in Q4 .

Financial Results

Headline P&L vs prior year and prior quarter

MetricQ3 2024Q2 2025Q3 2025
Revenue ($M)$171.8 $172.0 $152.5
GAAP Diluted EPS (Cont. Ops)-$0.03 -$0.12 -$0.20
Adjusted Diluted EPS-$0.01 -$0.09 -$0.14
Gross Margin (%)9.5% 11.3% 10.5%
Adjusted Gross Margin (%)11.6% 12.0% 12.1%
Adjusted EBITDA ($M)$4.348 $5.166 $4.642
Adjusted EBITDA Margin (%)2.5% 3.0% 3.0%

Q3 2025 vs S&P Global consensus

Metric (Q3 2025)ConsensusActualBeat/Miss
Revenue ($M)$156.3*$152.5 Miss
Adjusted EPS-$0.12*-$0.14 Miss
Adjusted EBITDA ($M)$4.8*$4.642 Slight Miss

Values with asterisk (*) are retrieved from S&P Global.

Segment Breakdown (Q3 2025 vs Q3 2024)

SegmentRevenue Q3’24 ($M)Revenue Q3’25 ($M)YoY %Adj. Op Inc Q3’24 ($M)Adj. Op Inc Q3’25 ($M)
Global Seating$76.6 $68.7 -10.4% -$0.8 $2.9
Global Electrical Systems$46.7 $49.5 +5.9% -$0.2 $1.4
Trim Systems & Components$48.4 $34.3 -29.2% $4.1 -$0.3

KPIs and Balance Sheet/Cash

KPIQ1 2025Q2 2025Q3 2025
FCF – Continuing Ops ($M)$11.209 $28.464 (6M) / $17.255 (Q2) -$3.446
Cash ($M)$20.213 $45.290 $31.326
Total Liquidity ($M)$122.7 $135.9 $127.8
Net Leverage (x)5.0x 4.8x 4.9x
Interest Expense ($M, quarterly)$2.503 $2.291 $4.068

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($M)FY 2025$650–$670 $640–$650 Lowered
Adjusted EBITDA ($M)FY 2025$21–$25 $17–$19 Lowered
Free Cash Flow ($M)FY 2025> $30 > $30 Maintained

Management context: ACT now expects 2025 NA Class 8 builds ~239k (-28% YoY) and trimmed the outlook vs Q2 (252k), contributing to guidance changes . Tariff mitigation and SG&A/capex discipline underpin maintained FCF guidance .

Earnings Call Themes & Trends

TopicQ1 2025 (two quarters ago)Q2 2025 (prior quarter)Q3 2025 (current)Trend
Operational efficiency, marginsSelf-help drove +240 bps seq. gross margin; focus on freight/labor/overhead Adj. gross margin up to 12.0%; continued freight/overhead gains Adj. gross margin 12.1%; sequential expansion despite ~11% QoQ revenue decline Improving
End-market outlook (Class 8)ACT: -23% 2025; potential 2026 rebound tied to emissions timing ACT: -24% 2025; flat 2026, +12% 2027 ACT: -28% 2025; -14% 2026, +34% 2027; sequential 2H25 down 37% vs 1H25 Deteriorated near term
Global Electrical SystemsDemand soft in Con/Ag; restructuring, low-cost footprint Stabilizing; adj. op inc +$0.4M YoY Returned to YoY growth (+5.9%) on new program ramps; margin expansion Positive inflection
Tariffs/mitigationInitiated mitigation, customer recovery, reshoring options Progress in customer recovery, supplier reshoring plans “Demonstrable progress” with customers; daily tariff tasking; mitigation roadmap Improving
SG&A/cost actionsTarget $15–$20M cost savings; headcount actions Ongoing; SG&A down ~15% YoY run-rate Continued SG&A and overhead flex; more actions underway Ongoing
Cash/working capitalFCF introduced (> $20M); inventory reduction plan Raised FCF guide to > $30M; strong FCF in Q2 Q3 WC build (China move); expect Q4 WC release; >$30M FCF intact Near-term dip, FY intact
Interest expense/leverageNet leverage ~5.0x; covenant flexibility Refinancing completed; net leverage 4.8x Higher interest expense ($4.1M); leverage 4.9x; paydown focus Headwind until deleveraging

Management Commentary

  • “We continued to benefit from our operational efficiency improvement... evidenced by the continued sequential expansion in our adjusted gross margin in the quarter, despite the lower demand environment.” — James Ray, CEO .
  • “We are encouraged by the continued improvement in Global Electrical Systems... driven by new business wins outside of the Construction and Agriculture end markets... This segment also saw continued margin expansion year-over-year.” — James Ray .
  • “We remain focused on cash generation, with an expectation to drive at least $30 million in free cash flow for the full fiscal year.” — Andy Cheung, CFO .
  • “What is even more notable is that we were able to expand margins sequentially in the third quarter despite an 11% drop in revenue versus the second quarter of 2025.” — James Ray .
  • “Interest expense was $4.1 million ... driven by higher interest rates following our June 2025 debt refinancing.” — Andy Cheung .

Q&A Highlights

  • Cost actions runway and capex flexibility: Management sees further headcount and SG&A/manufacturing overhead efficiencies without cutting into “muscle”; capex largely maintenance near term, rising only with new program ramps later in 2026+ .
  • Guidance cut mechanics: Larger EBITDA cut vs revenue reflects mix and deleverage in fixed-cost-heavy North American Trim business amidst Class 8 declines .
  • Offsetting 2026 Class 8 weakness: Expect Electrical Systems growth (new program ramps) to offset Class 8 declines; enterprise revenues could be flattish in 2026 with better operating leverage; full annualized ramp in late 2027–2028 .
  • Tariff recovery: Active customer negotiations and supplier mitigation (reshoring, design changes) with tangible progress and agreements; daily management given changing policy .
  • Interest expense: Q3 interest reflects full quarter post-refinancing; ~$1–$1.5M higher per quarter initially, expected to recede with debt paydown .

Estimates Context

  • Q3 2025 vs S&P Global consensus: revenue $152.5M vs $156.3M* (miss), adjusted EPS -$0.14 vs -$0.12* (miss), adjusted EBITDA $4.642M vs $4.759M* (slight miss) .
  • Implications: Street models likely need lower 2H/FY revenue and EBITDA reflecting steeper ACT build cuts and soft Trim, with partial offset from Electrical Systems program ramps and ongoing SG&A/COGS efficiency. FCF expectations should remain supported by Q4 working capital release given management’s reaffirmed >$30M target .

Values with asterisk (*) are retrieved from S&P Global.

Key Takeaways for Investors

  • Margin resilience is real: sequential adjusted gross margin expansion amid sharp revenue declines shows structural efficiency gains; watch for continued expansion as Electrical Systems ramps .
  • Near-term volume headwinds persist: North America Class 8 and Con/Ag softness drove revenue and Trim underperformance; FY25 revenue/EBITDA guidance lowered accordingly .
  • Cash focus intact: Despite Q3 WC build (China move, softer orders), management still expects >$30M FY25 FCF, prioritizing debt reduction; monitor Q4 WC release and net leverage trajectory .
  • Segment mix shift: Electrical Systems has re-accelerated on new wins (autonomous NA OEM, European OEM), providing a growth/margin pillar into 2026–2028; Trim remains cyclical but offers operating leverage on recovery .
  • Interest an EPS headwind: Higher post-refi interest expense pressured GAAP EPS; deleveraging and FCF deployment are critical to restoring earnings power .
  • FY25 setup: With consensus misses and lowered guidance, stock narrative likely hinges on (i) execution on margin/SG&A and tariff recovery, (ii) visible Electrical Systems ramps, and (iii) delivery of Q4 FCF to validate >$30M target .
  • Medium-term thesis: As end-markets normalize and new programs scale, CVG’s slimmer cost base and footprint should drive operating leverage; monitoring ACT revisions, tariff policy, and program ramp cadence remains key .

Appendix: Additional Data

  • Liquidity snapshot (9/30/25): $31.3M cash; $20.2M U.S. revolver borrowings; $4.2M China facility; $96.5M availability; $127.8M total liquidity .
  • Q3 non-GAAP adjustments: $2.703M restructuring in operating income; adjusted operating income $1.642M vs GAAP -$1.061M; adjusted diluted EPS -$0.14 vs GAAP -$0.20 .