Versigent’s 2026 Q2 Earnings Call: Copper Rebound Fails to Lift EBITDA, Recovery Timing Signals Clash

Date of Call: Aug 4, 2026

Financials Results

• Revenue: $2.4B, up 11% YOY (adjusted net sales growth ~5%)
• EPS: $1.28 per diluted share (adjusted)
• Operating Margin: Adjusted EBITDA margin expanded 120 basis points to 11.1% YOY

Guidance:

• Raised and tightened 2026 net sales guidance to $9.4B-$9.6B from prior $9.1B-$9.4B, driven by macro factors (higher copper pass-throughs, FX).
• Adjusted EBITDA growth and adjusted net sales growth expected to continue.
• Free cash flow guidance reaffirmed at $200M-$300M, including ~$70M separation-related costs.
• Full-year 2026 adjusted effective tax rate expected ~23%.
• Expect ~2% adjusted net sales growth for 2026.
• Anticipate ~$1B cumulative free cash flow between 2026-2028.
• Initiating quarterly dividend of $0.13 per share.
• Share repurchase authorization of $250M remains available.

Business Commentary:

Revenue Growth and Market Performance:

• Versagen reported net sales of $2.4 billion for Q2, up 11% year-over-year.
• Adjusted net sales growth was approximately 5%, excluding the impact of FX and commodity movements.
• The growth was driven by higher volumes in North America and Asia Pacific, despite softer volumes in EMEA, reflecting the company's ability to navigate a dynamic market.

EBITDA and Margin Expansion:

• The company reported adjusted EBITDA of $206 million, with a margin expansion of 120 basis points to 11.1%.
• This was primarily due to disciplined operating execution and higher volumes, offsetting some headwinds from net pricing and FX impacts.

Impact of Commodity and FX Fluctuations:

• Commodity-related pass-throughs contributed approximately $96 million to net sales year-over-year.
• The company experienced a margin headwind of approximately $9 million due to copper price volatility, although this is expected to diminish as customer pass-throughs catch up.
• FX impacts also played a role in adjusting sales figures, reflecting the company's exposure to currency movements.

Guidance and Strategic Investments:

• Versagen raised its full-year 2026 net sales guidance range to $9.4 billion to $9.6 billion, driven by higher copper-related pass-throughs and favorable FX rates.
• The company is focusing on strategic investments in adjacent markets like commercial vehicles and battery storage, viewing them as potential upside opportunities.
• The initiation of a quarterly dividend and share repurchase authorization underscores the company's confidence in its long-term outlook and cash flow generation.

Sentiment Analysis:

Overall Tone: Positive

• "We delivered a strong set of results in our first quarter." "We are leading our industry as a highly engineered, globally scaled, and cash-generative company, ready to unlock even greater value." "We are leading our industry as a highly engineered, globally scaled, and cash-generative company." "Our strategy is well kept. It's what we're built for." "We are leading our industry."

Q&A:

• Question from Chris McNally (Evercore): Could you talk about your confidence in the sales guidance range given second-half schedules and copper assumptions?
  Response: Guidance is a pragmatic approach, considering strong first-half performance but also acknowledging IHS volume reductions, China weakness, customer volume adjustments, and high launch activity impacting second half. Copper's big move in Q1 is largely behind, and the lagging adjustment mechanism limits its further impact.

• Question from Chris McNally (Evercore): On adjacent markets (ag, commercial vehicle, battery storage, robotics), could you provide a qualitative update on potential awards in the next 6-12 months?
  Response: Those sectors are still nascent; current revenue from adjacent markets is small. The company is focused on building engineering and go-to-market capabilities, engaging in pre-development and prototyping, but meaningful revenue contribution beyond 2028 is not factored into current guidance.

• Question from Joe Spack (UBS): What is driving the expected better second-half margin performance versus first half?
  Response: Traditional seasonality with stronger second-half volumes, plus one-time benefits like $7M in tariff refunds, operational execution (purchasing, material productivity), and a better year-over-year copper recovery profile in H2.

• Question from Joe Spack (UBS): Is there any color on quarterly revenue cadence in the back half?
  Response: Launches and strong Asian business create a unique cadence; typical quarterly breakdowns don't apply. Cash flow may be lumpy due to strong H2 cash generation and timing shifts from Q2.

• Question from Matai McCauley (TD Cowan): Given the strong launch activity, how do you feel about the 3-4% long-term growth framework for 2027 and beyond?
  Response: The framework is based on 1% production growth and 1-2% content per vehicle growth. While global production outlook is more depressed, content growth trends remain favorable, and the launches support the long-term outlook.

• Question from Matai McCauley (TD Cowan): What is the expected bookings progression for the year?
  Response: Bookings are tracking on plan; H1 performance was exactly as expected. Bookings can be lumpy quarter-to-quarter, but the overall trend is consistent with the three-year forecast.

• Question from Emmanuel Rosner (Wolf Research): On the H1 to H2 EBITDA bridge, what are the organic puts and takes beyond copper recovery?
  Response: Key drivers include volume ramp-ups, continued copper catch-up, and operational performance (purchasing savings, value engineering, material usage improvements). As a new company, teams are focused on driving efficiency and process improvements.

• Question from Emmanuel Rosner (Wolf Research): On energy storage, what are you seeing in terms of opportunity and relevance to Versagen's criteria?
  Response: Opportunities are evaluated against criteria: high complexity, uniqueness, and scalability. Battery storage in industrial settings is of interest, but data center storage does not meet current filters. The company will continue to explore but prioritize opportunities that align with its strategic and financial criteria.

• Question from Colin Langan (Wells Fargo): How much copper recovery is expected in H2, and why wasn't adjusted EBITDA guidance raised with the sales guide?
  Response: Copper recovery is primarily contractual (~75%) and through hedges/customer discussions (~25%). The Q1/Q2 headwind is abating, with full recovery expected later. Sales guidance raised mainly reflects macro-driven factors (copper pass-throughs, FX), which boost revenue but have minimal EBITDA impact.

• Question from Winnie Dong (Deutsche Bank): What is the latest exposure to China, and how has it changed?
  Response: Export exposure from China has grown: 25%+ of Q1 production exported vs. 35% of Q2 production exported. This trend benefits performance due to depressed local Chinese production and EMEA capacity constraints.

• Question from Winnie Dong (Deutsche Bank): How do you view the growth potential for commercial vehicles as a percentage of total revenue?
  Response: Starting from ~10% revenue, the company aims to be more proactive in this market, leveraging its engineering expertise to gain share irrespective of sector-wide growth, with potential to increase its share beyond current levels.

Contradiction Point 1

Copper Price Impact and EBITDA Guidance

It involves differing explanations for why EBITDA guidance was not raised despite a copper price recovery, impacting financial expectations.

Colin Langan (Wells Fargo) - Colin Langan (Wells Fargo)

2026Q2: The reason adjusted EBITDA guidance was not raised is because the sales guidance increase is primarily due to macro factors (copper pass-throughs and FX) that boost revenue but have a minimal impact on EBITDA or free cash flow. - Doug Osterman(CFO)

Given the $9M copper recovery in Q2 despite Q1 headwinds, why isn't the second-half benefit more significant, and why wasn't adjusted EBITDA guidance raised alongside the sales guidance increase? - Colin Langan (Wells Fargo)

2026Q2: The large copper price move occurred in Q1, and the headwind is easing as pass-throughs catch up. - Doug Ostermann(CFO)

Contradiction Point 2

Adjacent Market Strategy and Revenue Expectations

It involves conflicting statements on the materiality and timeline for revenue from new adjacent markets, affecting growth expectations.

Chris McNally (Evercore) - Chris McNally (Evercore)

2026Q2: Revenue from these areas is currently not material. The strategy is to grow within existing adjacent markets... before pursuing newer, less mature sectors. - Joe Liatini(CEO)

Could you provide a qualitative update on progress in adjacent markets like agriculture, commercial vehicles, battery storage, and humanoid robotics, even if they're not included in the 2028 guidance? - Chris McNally (Evercore)

2026Q2: The company is engaged in pre-development, prototyping, and small-scale production work. Revenue from these areas is not material. - Joe Liatini(CEO)

Contradiction Point 3

Copper Recovery Impact and Timing

It involves a contradiction on the timing and scale of copper cost recovery, affecting financial forecasting.

Can you provide an update on Wells Fargo's financial performance and outlook for the current quarter? - Colin Langan (Wells Fargo)

2026Q2: The headwind is abating and will continue to do so through the year. ... It's important to note that copper cost impacts are equalized over time, not fully recovered in specific quarters. - Doug Osterman(CFO) and Joe Liatini(CEO)

Given the $9M copper recovery in Q2 and the large Q1 headwind, why isn't the second-half benefit more significant, and why wasn't adjusted EBITDA guidance raised alongside the sales guidance increase? - Chris McNally (Evercore ISI)

2026Q1: The significant copper price increase in Q1 is expected to start passing through to customers in early Q2, with the majority of the margin dilution from the lagging cost impact normalized by the end of Q2/early Q3. - Doug Ostermann(CFO)

Contradiction Point 4

Bookings and Revenue Guidance Cadence

It involves a contradiction on the predictability and lumpiness of bookings, affecting revenue forecast confidence.

Matai McCauley (TD Cowan) - Matai McCauley (TD Cowan)

2026Q2: Bookings can be lumpy and shift from initial plans. However, the performance through the first half of the year is exactly on track with expectations. - Joe Liatini(CEO)

"With this quarter's bookings at $2.8B, is there a full-year target, and how are you progressing toward it?" - Itay Michaeli (TD Cowen)

2026Q1: Bookings in Q1 were exactly on plan, supporting the full-year revenue forecast. - Joseph Liotine(CEO)