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    CVGI
    Earnings call· Jun 2026(Q2 FY26)

    Commercial Vehicle Group Q2 FY26 earnings call CVGI

    Aug 4, 2026 Source

    Executive summary

    Commercial Vehicle Group Q2 FY26 — Strong Revenue Growth and Deleveraging Progress

    Commercial Vehicle Group delivered robust top-line growth across all segments in Q2 FY26, driven by new business wins and recovering end markets. The company made significant progress on deleveraging through strategic asset sales and an equity program. While profitability was impacted by elevated SG&A and working capital investments for growth, management remains focused on operational efficiency and achieving its long-term leverage target.

    Highlights

    5

    • Consolidated revenue increased to $195.2 million, up from $172 million in the prior year period.

    • Adjusted gross margin expanded to 12.9%, up 90 basis points year-over-year and 70 basis points sequentially.

    • Net leverage ratio reduced to 3.3x from 4.1x at the end of 2025.

    • Global Electrical Systems segment revenue grew 15.8% year-over-year.

    • Trim Systems and Components segment revenue increased 21.1% year-over-year despite Class 8 truck production decline.

    Concerns

    3

    • Adjusted EBITDA margin decreased 20 basis points year-over-year to 2.8% due to higher SG&A and FX headwinds.

    • Net loss from continuing operations was $8.7 million, compared to $4.1 million in the prior year.

    • Free cash flow from continuing operations was an outflow of $1.4 million, compared to an inflow of $17.3 million in the prior year, reflecting higher working capital investment.

    Guidance & targets

    14
    CategoryTargetConfidence
    Full-year 2026 Revenue
    $725M to $755M
    high materiality
    High
    Full-year 2026 Adjusted EBITDA
    $26M to $31M
    high materiality
    High
    Full-year 2026 Free Cash Flow
    positive
    medium materiality
    High
    Net Leverage Ratio
    2x
    high materiality
    High
    Zoox Production Volume
    2,500 vehicles
    medium materiality
    High
    Zoox Production Volume
    5,000 vehicles
    medium materiality
    High
    Zoox Production Volume
    10,000 vehicles
    medium materiality
    High
    Class 8 Heavy Truck Build Forecast
    9% increase
    medium materiality
    High
    Class 8 Heavy Truck Build Forecast
    9% increase
    medium materiality
    High
    Class 8 Heavy Truck Build Forecast
    13% increase
    medium materiality
    High
    Construction Market Growth
    mid-single-digit percentage range
    medium materiality
    High
    SG&A as % of sales
    just north of 11%, maybe into 11.5%
    low materiality
    Medium
    Gross Margin
    mid-teens level
    medium materiality
    Medium
    Interest Expense
    $2M to $2.5M
    low materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Global Seating
    Revenue increase primarily driven by increased customer demand in international markets, reflecting geographical diversification benefits. Adjusted operating income increased by $0.9 million, with expanded margins on higher sales volumes and benefits from Asia Pacific footprint consolidation.
    		$80M7.5%—$4M
    Global Electrical Systems
    Revenue increase primarily due to the ramp of previously awarded new business wins in North America and internationally (e.g., Zoox, EMEA wins). Adjusted operating income increased by $0.5 million, primarily attributable to volume and product mix. Positioned to accelerate revenue growth in H2 FY26.
    		$62M15.8%—$1.7M
    Trim Systems and Components
    Revenue increase due to higher sales volumes from increasing customer demand in North America, despite Class 8 production volumes being down 6% year-over-year. Strong top-line growth driven by an improved product mix. Adjusted operating profit increased from $0.3 million, primarily attributable to improved volume leverage.
    		$53.2M21.1%—$2.2M

    Operational metrics

    16
    Consolidated Revenue
    $195.2Mup from $172M YoY
    Q2 FY26

    Increased due to customer demand in international markets and ramp of new business wins.

    Adjusted Gross Margin
    12.9%up 90 bps YoY, up 70 bps QoQ
    Q2 FY26

    Driven by improvements in operational efficiency and operating leverage from improved volumes.

    Adjusted EBITDA
    $5.4Mup from $5.2M YoY
    Q2 FY26

    Offset by higher SG&A expenses and foreign exchange headwinds.

    Adjusted EBITDA Margin
    2.8%down 20 bps YoY
    Q2 FY26

    Impacted by higher SG&A expenses and foreign exchange headwinds.

    Interest Expense
    $2.9Mup from $2.3M YoY
    Q2 FY26

    Driven by higher interest rates from refinancing completed in Q2 2025.

    GAAP Net Loss from Continuing Operations
    $8.7Mvs $4.1M loss YoY
    Q2 FY26

    Includes $3.4 million pretax warrant liability revaluation expense.

    GAAP EPS from Continuing Operations
    $0.25 lossvs $0.12 loss YoY
    Q2 FY26

    Diluted share basis.

    Adjusted Net Loss
    $4.6Mvs $2.9M loss YoY
    Q2 FY26

    Impacted by higher sales and improved gross margin, offset by higher SG&A and interest expense.

    Adjusted EPS
    $0.13 lossvs $0.09 loss YoY
    Q2 FY26

    Diluted share basis.

    Net Leverage Ratio
    3.3xdown from 4.1x at end of 2025
    Q2 FY26

    Improvement supported by sale-leaseback and ATM equity program.

    ATM Program Net Proceeds
    $11.6M
    Q2 FY26

    Generated during the quarter, used for debt paydown.

    Total Debt Paydown
    $14.6M
    YTD 2026

    Since end of 2025, enabled by ATM proceeds and sale-leaseback transactions.

    Term Loan Paydown
    $26.2M
    YTD 2026

    Accretive through reduced interest expense.

    SG&A Expense
    —increased YoY
    Q2 FY26

    Primarily reflecting higher incentive compensation (long-term performance awards tied to stock price, annual incentive plans).

    SG&A as % of Sales
    just north of 11%, maybe into 11.5%
    FY26

    Full year expectation, reflecting elevated incentive compensation.

    Tax Rate
    —
    Q2 FY26

    Due to full valuation allowance on U.S. deferred tax assets, no benefit for foreign taxes; pay ~25% rate on international income.

    Industry KPIs

    6
    MetricValueDetails
    Capacity expansion—
    Tariff cost impact—
    Parts aftermarket business—
    Incremental margin operating leverage—
    Order backlog order intake by segment$100MUSD
    Industry production market size forecasts9% increase%

    Product announcements

    1
    ProductTypeDetails
    Zoox Robotaxi Serviceslaunch

    Deals & partnerships

    3
    ZooxSupply agreement for robotaxi components, ramping to commercial scale production.

    Zoox has locked in design and is moving to commercial scale production, preparing for large-scale manufacturing at their Hayward, California facility. CVG is adding staffing and investing capital to support this ramp.

    UndisclosedSale-leaseback transaction on Vonore facility

    Transaction completed, providing cash used to reduce total debt.

    UndisclosedSale-leaseback transaction on Dublin, Virginia facility$3.8M

    Executed subsequent to quarter end, with proceeds used for debt reduction.

    Capital programs

    1
    Zoox Production Ramp Capital Investmentunderway
    Period spend: incremental capital
    Start: Q2 FY26

    Benefit: support production ramp

    Investing in planned incremental capital to support the Zoox production ramp at Aldama, Mexico facility.

    Risks & headwinds

    5
    Macroeconomic Uncertaintiesongoing

    unquantified

    Mitigation: Monitoring, disciplined execution, diversification efforts.

    SG&A Expense PressuresFY26

    Elevated incentive compensation (stock price performance, annual plans); full-year SG&A expected to be 11-11.5% of sales.

    Mitigation: Tightly managing discretionary SG&A spending; mining opportunities on gross margin line to offset.

    Input Cost Volatilityongoing

    Impacts from constrained sea containers (expedite costs), tariffs, fuel surcharges, material costs.

    Mitigation: Leveraging price and mix management to recover costs; acknowledging a lag effect (normally by quarter) in recovery from customers.

    Working Capital Investment for Growthnear-term

    $1.4M free cash flow outflow in Q2 FY26 (vs $17.3M inflow YoY).

    Mitigation: Managing payment terms for receivables, inventory; focusing on efficiency to maximize positive free cash flow.

    Foreign Exchange HeadwindsQ2 FY26

    Contributed to 20 bps YoY decline in Adjusted EBITDA margin.

    Mitigation: Not explicitly stated, but generally managed through diversification and pricing.

    What to watch in Q3 FY26

    5

    Net Leverage Ratio

    next quarter and beyond
    Current3.3x
    Targetcloser to 2x

    Why it matters

    Achieving the 2x leverage target is a key financial priority, impacting interest expense and balance sheet flexibility.

    Our goal remains to bring leverage back down to the 2x level over time⏳.

    Q&A highlights

    7

    Which segments contributed most to the upward revision in revenue guidance?

    All three segments contributed materially to the year-over-year increase and the forward outlook. Trim Systems and Components had the largest percentage increase, Global Seating saw appreciable international demand, and Electrical Systems grew 16% year-over-year.

    “Well, if you look at our percent versus prior year, Trim Systems and Components had the largest percent increase. Our Global Seating business with the international demand that we saw new programs and other end markets internationally had an appreciable increase year-over-year, too. And then Electrical, 16% up year-over-year, which is really big for that business.”

    asked by John Franzreb · answered by James Ray

    2 min read6 chapters

    Detailed Narrative

    01

    Overall Performance and Diversification Strategy

    CVG achieved year-over-year revenue growth across all three segments, reflecting successful efforts to reduce end-market concentration in cyclical North American Class 8 truck exposure through geographic and end-market diversification. New business wins are ramping up coincidentally with a recovery in key end markets, positioning the company for continued growth. Management emphasized disciplined execution and operational efficiency to drive shareholder value.

    02

    Zoox Program Ramp-Up and Facility Utilization

    The Zoox program is moving to commercial scale production, with NHTSA approval for robotaxi services in Las Vegas. CVG has begun adding staffing in Q2 and Q3 at its Aldama, Mexico facility and plans incremental capital investment to support the production ramp. This, along with other programs, is increasing capacity utilization at Aldama and Tangier, Morocco facilities, contributing to gross margin expansion.

    03

    Deleveraging Efforts and Balance Sheet Flexibility

    The company significantly reduced its net leverage ratio from 4.1x at the end of 2025 to 3.3x at the end of Q2 FY26. This improvement was driven by $11.6 million in net proceeds from an at-the-market (ATM) equity program and sale-leaseback transactions, enabling $14.6 million of total debt paydown since year-end 2025. A subsequent sale-leaseback on the Dublin, Virginia facility generated an additional $3.8 million for debt reduction in Q3, further reducing interest expense.

    04

    Gross Margin Expansion and Drivers

    Adjusted gross margin expanded to 12.9% in Q2, up 90 basis points year-over-year and 70 basis points sequentially. This improvement is attributed to operational efficiency, operating leverage from improved volumes, and favorable product mix. The company continues to focus on price and mix management, as well as recovering costs associated with tariffs, freight, fuel surcharges, and material costs to drive further gross margin expansion towards a mid-teens target.

    05

    New Business Wins and Diversification

    CVG targets approximately $100 million in new business wins annually and is on track for the first half of the year. The new business is increasingly global, with significant opportunities in EMEA for the Seating business and diversification beyond Class 8 in North America for Trim Systems, including powersports. This diversification, both regionally and by end market, is expected to provide more pricing flexibility and contribute to long-term gross margin targets.

    06

    End Market Outlook

    ACT's Class 8 heavy truck build forecast implies a 9% increase in year-over-year volumes for 2026, with further increases of 9% in 2027 (up from a prior 2% decline expectation) and 13% in 2028. The construction market is expected to grow in the mid-single-digit percentage range in 2026, driven by stronger industrial production and fiscal stimulus. CVG is seeing increased volumes in the Class 8 truck market and is supporting its customers' growth.

    AI-generated summary of the company’s earnings call. Not investment advice.