Good morning, ladies and gentlemen, and welcome to the CVG Q2 2024 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Andy Cheung, CFO. Please go ahead.

Thank you, operator, and welcome, everyone, to our conference call. Joining me on the call today is James Ray, President and CEO of CVG. This morning, we will provide a brief company update as well as commentary regarding our second quarter 2024 results. After which, we will open the call for questions. As a reminder, this conference call is being webcast in the Q2 2024 earnings call presentation, which we will refer to during this call is available on our website. Both may contain forward-looking statements, including, but not limited to, expectations for future periods regarding market trends, cost-saving initiatives and new product initiatives, among others. Actual results may differ from anticipated results because of certain risks and uncertainties. These risks and uncertainties may include, but are not limited to, economic conditions in the markets in which CVG operates, fluctuations in the product volumes of vehicles for which CVG is a supplier, financial covenant compliance and liquidity, associated with conducting business in foreign countries and currencies and other risks as detailed in our SEC filings. I will now turn the call over to James to provide a company update.

Thank you, Andy. I'd like to turn your attention to the supplemental earnings presentation, starting on Slide 3. Our second quarter results fell short of expectations with year-over-year declines in revenue and profitability, as multiple factors, both internal and external, impacted our performance. Specific to our Electrical Systems segment, construction and agriculture markets, a key driver of growth for that segment have continued to soften. This is a continuation of the market weakness we experienced in the first quarter of this year as higher interest rates and lower agricultural commodity prices continue to weigh on the majority of our key customers in this segment. Business margins continue to have FX headwinds and unrecovered economics from several major customers. Additionally, we have also experienced operational inefficiencies within our Vehicle Solutions segment as we have incurred disruptions during the execution of a significant product launch with a large customer across multiple sites, coupled with activities to optimize our cab structures facility in Kings Mountain, North Carolina as we progress through the sale process. I'll dive deeper into the actions we're taking to strengthen our Vehicle Solutions segment shortly. Despite the challenges we experienced in the second quarter, we took multiple corrective actions to stabilize the losses and position CVG for future success and advanced several key strategic initiatives. First, we executed an agreement for the profitable sale of our cab structures business in Kings Mountain, North Carolina. This transaction will serve to streamline and focus our product portfolio. I will cover this in more detail in a moment. We also made progress on our ongoing cost reduction and business optimization efforts. Year-to-date, we have deployed almost $7 million in restructuring expenses to optimize our cost structure, and we are reducing our headcount by more than 10%. We also continued to drive new…

Thank you, James, and good morning, everyone. If you are following along in the presentation, please turn to Slide 7. Consolidated first quarter 2024 revenue was $230 million as compared to $262 million in the prior year period. The decrease in revenues is due primarily to a softening in customer demand impacting all segments and the anticipated wind down of certain programs in our Vehicle Solutions segment. Adjusted EBITDA was $10 million for the second quarter compared to $20.8 million in the prior year. Adjusted EBITDA margins were 4.3%, down 360 basis points as compared to adjusted EBITDA margin of 7.9% in the second quarter of 2023, driven primarily by lower volumes, inflationary impacts and the operational inefficiencies we experienced in vehicle solutions. Interest expense was $2.5 million as compared to $2.8 million in the second quarter of 2023. The decrease in interest expense was primarily related to lower average debt balances, offset by higher interest rates on variable rate debt during the respective periods. Net loss for the quarter was $1.6 million or $0.05 per diluted share as compared to a net loss income of $10.1 million or $0.30 per diluted share in the prior year. Adjusted net income for the quarter was $2.1 million or $0.06 per diluted share as compared to $10.7 million or $0.32 per diluted share in the prior year. Moving to the segment results beginning on Slide 8. Our Electrical Systems segment achieved revenues of $50.2 million, a decrease of 21.2% as compared to the year ago quarter with the decrease resulting primarily from lower customer demand and the phaseout of lower-margin business that commenced in the second quarter. We maintain our goal of making electrical systems our largest segment and still hold our view of this segment as our area of focused growth.…

Thank you, Andy. Turning to Slide 14. I'll reiterate our short-term plan to simultaneously generate our end market demand declines and improve our operating model. Within vehicle solutions, we're counteracting headwinds associated with the key customer product launch and operational inefficiencies that impacted multiple sites through several dedicated actions. These include the consolidation of our Chile coffee facility, which we expect to complete in Q3 of this year, the sale of our cab structures business and deploying both internal and external teams to improve productivity going forward. These efforts should result in the streamlined vehicle solutions business with increased operating leverage moving forward. Within Electrical Systems, the significant dislocation and construction and agriculture end markets, and corresponding slower ramp of new business wins is being offset by our efforts to reduce headcount, rightsize production and allocate utilization to our lower-cost facilities. These efforts should result in a new operating model that positions CVG as a beneficiary once these end markets recover with improved economics as our new business wins ramp up with a lower cost structure than they would have had previously. Within aftermarket, as we mentioned earlier, we remain diligent in our actions to take steps that optimize our internal processes, including seat delivery performance and reduced lead times. Taking these productive actions ahead of an improved customer demand environment should prove to be fruitful, similar to actions taken across the company. Our collective efforts are poised to effectively transform our business through our strategic refocusing of our efforts toward our core vehicle business and our high-growth segment electrical systems. We look forward to reshaping CVG to be a more profitable industry leader and a partner of choice for our customers. With that, I will now turn the call back over to the operator to open up the line for questions. Operator?

[Operator Instructions]. Your first question comes from John Franzreb with Sidoti.

I'd actually like to start with the delays and deferred revenue that you're experiencing. Can you kind of put that in context? And when would you expect that to catch up?

Yes, John, this is James. Thanks for the question. Thanks for calling in. Several customers that we both do business with modify their start production days as well as their ramp schedules. As you may have noticed with several of the EV OEMs, they have significant delayed ramp-up schedules, some of the major nonelectrical vehicle OEMs that have electrical vehicle platforms as well as electric vehicle OEMs in both light-duty, medium-duty, heavy-duty truck markets and other delivery van in markets like that. So we don't know for sure when they will get to the original volume that they had telegraphed when we won the business. But we expect as markets recover, that their ramp schedules will go up. But they don't give us any indication exactly what volumes will hit in what time period post when we are awarded the business. They expect us to have capacity in place and be able to respond to the awarded quoted volume that we won the business at. So we make adjustments when their volumes don't materialize or when they're delayed or slowed with our cost structure, but we still have to be ready whenever they ramp up to a point where they're closer to the awarded volumes.

Okay. And then a similar vein, you mentioned that there's program wind downs. How much in revenue was hurt by that process? And is that process completed? And if not, when will it be?

Yes. So each year, when we win new business, some of it is replacing business that's ending. And also we have programs that we have exited contracts with because it's a different configuration or we didn't win the replacement business or it was a nonprofitable revenue stream for us. So we intentionally allow that program to end without continuing our work with our customers and OEMs to make sure that we have alignment on a reasonable and consistent exit strategy there in it. We might be able to share a little more from Andy's perspective on quantifying the impact on that.

Yes. So John, it's Andy. So the one that I think you are asking about is what we noted in our electrical system segment this quarter as we indeed have one program related to passenger vehicles in Europe that back a year ago, when we remember, we have a lot of price negotiations with our customers. And when we discussed that when we saw business that's not profitable, we will walk away from them. So as you know, that the passenger vehicles tend to have lower profitability. And that's one program that we exited in Europe. It's not so big in terms of the overall company's revenue is the low single digit million dollars. But nevertheless, that's something that we committed to not to maintain an unprofitable business.

And I got to say, guys, that slide about the bridge to the new guideline and the old guideline, it was very helpful. And I'm kind of curious about 2 things that -- on that slide. One, when you're talking about in the slide before, can you talk about the softening in the ag and the construction markets of 10% and 15%, are you signaling to us that you expect your business to be down in lockstep with global market declines? Or will you be different from that because the new program wins?

John, I would say, overall, our legacy business will tend to follow our OEM schedules. So we saw them talking about 15% to 20% declines in different subsegments of the overall construction and agriculture markets. We clearly have some offset with new programs. And as you can see our end market exposures in electrical systems, we have the majority of our exposure to the construction and agriculture market, but we also started to have medium-duty trucks and other end markets as well. So those would be a little bit of an offset to the current dynamics.

Okay. I was just trying to get a sense of that. And I don't want to hog this, but just -- I mean, I am curious about how this changes your CapEx budget for the full year and what you're looking to spend for 2024?

Yes. So as we look towards the next couple of quarters as the company will remain a business portfolio with on the cab business and industrial automation. Our PoS forecast of 2% to 3% CapEx of revenues will apply. So meaning that as the revenues come down, we'll also see CapEx coming down in a similar fashion.

[Operator Instructions]. We do not have any questions at this time. I will turn the call back over to Mr. James Ray for closing comments.

Thank you, operator, and I would like to thank you all for joining today's call. I want to thank the entire CVG team for their hard work and continued focus on executing our long-term growth strategy. We are working aggressively to position CVG as a more durable business. We look forward to executing our transformation strategy, and we are confident we can improve our operating model and sustain a profitable business in the future. Thank you very much.

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