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Transcript Summary

Cooper-Standard Holdings Inc. reported Q1 2026 sales of $686.4 million, a 2.9% year-over-year increase. The company improved its gross margin to 12% through $17 million in lean manufacturing savings, despite facing production headwinds in North America. Adjusted EBITDA was $51 million, impacted by the absence of a one-time $10 million royalty from the previous year. A key achievement was the successful refinancing of debt, reducing annual interest costs by $6 million and extending maturities to 2031. Cooper-Standard secured $128 million in net new business awards, with 60% coming from the Fluid Handling segment, particularly for hybrid and EV platforms. Management highlighted the FlexiCore technology as a driver for sustainable growth and margin expansion. During the Q&A, executives emphasized their 70%+ protection against raw material inflation via contractual escalators. The company remains on track for its 2026 targets and long-term goal of doubling its Fluid Handling business within seven years. While GAAP results showed a net loss due to refinancing costs, the underlying operational performance remains strong, with a high level of confidence in achieving over 20% return on invested capital by the end of the 2028 fiscal year.

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COOPER-STANDARD HOLDINGS INC.: Defensive Governance via Poison Pill Mechanism

Full Earnings Call Transcript — Q1 • 2026-05-07

Operator: Good morning, ladies and gentlemen, and welcome to the Cooper-Standard Holdings Inc. first quarter 2026 earnings conference call. During the presentation, all participants will be in a listen-only mode. Following the prepared comments, we will conduct a question-and-answer session. At that time, if you have a question, please press star then 1 on your telephone keypad. To withdraw your question, press star then 2. As a reminder, this conference call is being recorded, and the webcast will be available on the Cooper-Standard Holdings Inc. website for replay later today. I would now like to turn the call over to Roger Hendriksen.
Roger Hendriksen: 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 Jeffrey S. Edwards, chairman and chief executive officer, and Jonathan P. 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 will turn the call over to Jeffrey S. Edwards.
Jeffrey S. 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. To begin on slide 5, I would 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, in 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 zero for the first three months of the year. That is 84% of all of our production facilities achieving a perfect safety score, demonstrating that our ultimate goal of zero safety incidents is achievable. We are 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 some of the market headwinds we have been seeing, we continue to drive profitable growth and margin expansion through the execution of our plans and strategies. Finally, we are continuing to leverage world-class service, technical capabilities, and our award-winning innovations to win significant new business. During 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 will talk more about the significance of our new business awards in a few minutes. Turning to slide 6, as we have made terrific improvements in our operating metrics and profitability over the past few years, we certainly have not lost sight of the importance of being a good corporate citizen. We continue to work on developing and delivering product and material solutions for our customers that help them achieve their environmental goals. And, of course, we have 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 are 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 is 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 Jonathan P. Banas to discuss the financial results for the quarter.
Jonathan P. Banas: Thanks, Jeff, and good morning, everyone. In the next few slides, I will 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 2026, with comparisons to the same period last year. First quarter 2026 sales were $686.4 million, an increase of 2.9% compared to 2025. The increase was driven primarily by favorable foreign exchange, 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% of sales. This was 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 2025. The year-over-year change was primarily due to the non-recurrence of approximately $10 million of royalty payments that we received in 2025. Otherwise, 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 2026, compared to net income of $1.6 million in 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 their related tax impacts, adjusted net loss for 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 2025. Our capital expenditures in 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 provide additional insights and quantification 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 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 SG&A of $1 million in the first quarter compared to last year. Offsetting these improvements were $7 million of unfavorable volume/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 non-recurrence 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, resulted in total liquidity of approximately $286 million as of 03/31/2026. 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 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, deliver profitable growth, lower our net leverage, and maximize our returns on invested capital. This concludes my prepared comments. I will turn it back over to Jeff.
Jeffrey S. Edwards: Thanks, John. In the last portion of our call, I would 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. I will wrap up with a few comments on our outlook for our business and our industry in general in 2026. Please turn to slide 12. Our strategies and operating plans, as you know, are built around the four 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 provide a concise summary of the progress we have made in restoring the financial strength of the company. Through our successful strategic execution, we have been able to increase our gross profit margins by 160 basis points over the past two years, despite reduced or flat production volumes in our two 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 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, in our cost optimizations we are benefiting from continuing launches of new programs and products with enhanced variable contribution margins. As these new programs ramp up, they are replacing older programs that have lower margins on average. Our booked-business launch cadence and the delivery of run-out business give 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 are already the global leader in the industry, we are leveraging our leading technologies, expertise, and innovation to capture additional share and profitability. We have 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 are winning more than our fair share of new business. Turning to slide 15, in our Fluid Handling segment, we have an 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 increased content per vehicle and profitable new growth. As we have said in the past, our longer-term strategic target is to double the fluids business within the next five to seven years. With recent new business wins and a long list of target business opportunities coming up, we believe we are on track to achieve this goal. Turning to slide 16, in terms of winning new business, as I mentioned at the beginning of the call, we have received $128 million in net awards in the first three 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. 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 two quarters could turn into tailwinds in the back half of the year. And if we could get some resolution to the military conflict in the Middle East, we would expect a strong positive effect on consumer sentiment and consumer demand globally. Meanwhile, we are 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 are 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. This concludes our prepared remarks.
Operator: We will now open the call for questions.
Operator: Ladies and gentlemen, if you would like to ask a question, please press star followed by 1 on your telephone. If you are using a speakerphone, please pick up the handset before entering your request. To withdraw from the queue, press star then the number 2. One moment, please, as we assemble the queue for questions. The first question comes from Nathan Jones from Stifel. Please go ahead.
Analyst: Good morning, everyone. This is Andre Sourette Molla on for Nathan Jones. Thanks for taking my questions. There was a nice step up in new business from 2024 to 2025, and now $128 million in January. I think you released that about $32 million of net new bids were coming from BEV and full hybrid. Can you give us a split between how much of that is within Sealing or Fluid for Q1 2026 as well? Just so we have an indication—obviously, more content on the Fluid business on those powertrains—so curious to hear about that.
Jeffrey S. Edwards: Yes, sure. Good morning. The $128 million that we have booked so far in Q1 is about 60% Fluid and 40% Sealing. 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 will 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 does not surprise me this year that Fluid is outpacing the Sealing 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 have said in the past, that can result in more than double the content per vehicle than what we have seen from the traditional ICE programs that were booked within our Fluid business. So, really a positive story. We are on our way to exceeding the $400+ million of net new business for 2026.
Analyst: Thank you. And then just one more, switching gears to margins. Can you discuss 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 you have in place?
Jonathan P. Banas: Good morning, Andres. 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 suppliers are raising globally, we are fairly well protected. As we have discussed in the past, we are in excess of about 70% covered on contractual indexes with our customers or otherwise negotiate on a regular cadence—every quarter or every six months—with customers to claw that back. So we think any increases will be adequately addressed with those historical mechanisms we have in place 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 you then go back in and recover the previous quarter's inflationary impact, or in a good-news situation, you would give some of that back. That is the typical cadence. In Q1, just given the timing of the oil price ramp-up, there was not a significant inflationary impact. But we certainly expect to see that headwind come in Q2, and then the recoveries would come online in that sequential recovery cadence.
Analyst: Thank you. Thanks for taking my questions.
Operator: Thank you. Your next question comes from Kirk Ludtke from Imperial Capital. Please go ahead.
Kirk Ludtke: Hello, Jeff, John, Roger. Thank you for the call. On slide 16, another impressive quarter for new business, and one of the bullets says 74% related to innovation products. If I remember correctly, those are materially higher margin than your existing average margins. I am just curious if you would be willing to quantify how much more profitable they are?
Jeffrey S. Edwards: Yes, Kirk, this is Jeff. As we have said, going forward—whether it is innovative net new business or traditional products—we have been very consistent with targeting hurdle rates and achieving those hurdle rates as we book net new business. It is why we are able to put out the type of strategic targets we have related to VCM increase, overall margins, and the significant increase of return on invested capital that is forecast over the next several years. That is actually happening. You can see the 160 basis point increase over the last two years. You can see the VCM well over 30% this particular quarter. As all this business launches—from what we booked in 2024, 2025, and what we are booking here in 2026—those numbers will continue to go up. We expect our return on invested capital to be well over 20% at the end of our 2028 business year, tracking to the same strategic targets that we put out last June. Your point is well taken related to innovation. We are seeing further expansion as we launch products that provide customers with cost-down opportunities, light-weighting opportunities, and recycling opportunities. I would expect those numbers to be even better as we present our five-year plan. We have a meeting coming up with our board in June where we will roll out the next five years, and I would expect to see continued margin expansion beyond what we have even said.
Kirk Ludtke: Got it. I appreciate it. Thank you. And then maybe a follow-up on the higher gasoline prices. Have you seen any change in schedules since prices went up?
Jeffrey S. Edwards: The volumes that we have in our business plan had some pluses and minuses as we usually do each quarter. As we start into the second quarter, we are seeing the volumes basically on our plan. 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 end up being a tailwind in the second half. If that does not happen, then your guess is as good as mine. But so far, I think we are well positioned for the first half of the year. We will manage through the increase in oil prices 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 is what I am hoping for.
Operator: Thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star followed by 1 on your telephone. If you are using a speakerphone, please pick up the handset before entering the request. Your next question comes from Doug Carson from Bank of America. Please go ahead.
Analyst: Great, team. Thanks for hosting the call and for taking my question. As I look at the bridge from 2025 to 2026, I know you will be out with more detail in Q2, so I do not want to get ahead of it. But there was a goal that was set—investors thought it was optimistic—but it looks like you are 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—could we get a sense if this is going to be coming more from business wins, or you feel like the lean could get even higher, or maybe more pricing, because volume is going to be challenging? Just a little sneak peek on what to be thinking about as far as the guidance. And then separately, during the deal you talked about 51% of your awards coming from high-growth Chinese OEMs. How has that cadence been with the Chinese?
Jeffrey S. Edwards: Thanks for the questions. Related to how we continue to expand margins, it is all of the above. We have teams in both our Sealing and Fluid businesses across 20-plus countries, and each month and quarter they have detailed plans they are executing—plans that are developed well in advance of a particular business year. As Jonathan and I said on the last call, we had a high level of confidence that execution of cost reductions to help offset inflation was well on its way to being a record performance. We had not seen a year where they came in with 90%+ of these ideas already identified and being worked on before we even started 2026. That is 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. It has been our approach for well over a decade—the process is the process, the team is the team—and they continue to exceed expectations. Related to net new business, when we talk about 2027 and 2028, 85% to 95% of that is already booked. We know what those prices are, we know what our costs are, and we 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. The only thing I cannot forecast is volume and mix. Despite that being a challenge for the last number of years, we continue to expand profitability and returns because of how we are running the business, the decisions we are making, and—most importantly—the people we have in our plants executing. Oil prices have shot up versus what we had in the business plan, but contractually we are largely covered for recovery. There will be some timing issues in the second quarter, but for the full year I am still bullish. I believe the overall macroeconomic environment is positive, and I think the geopolitical environment has to become more positive. That is why I believe the second half could have some tailwinds. We will talk more about that in August. On the China question, the cadence with high-growth Chinese OEMs remains strong and aligned with what we outlined—consistent opportunities and awards as they expand globally, which supports our growth in Asia and beyond.
Operator: It appears that there are no more questions. I would now like to turn the call back over to Roger Hendriksen.
Roger Hendriksen: Thanks, everybody. We appreciate your continued engagement with our calls. If you have questions that did not come to mind and you would like to get in touch with us, we would certainly be open to further conversation—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.
Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.