- **Operational Resilience**: Despite 11% YoY revenue decline, adjusted EBITDA margin improved 50bps to 3.0%, driven by $3.7 million SG&A savings and supply chain efficiency.
- **Growth Catalysts**: Global electrical systems revenue up 6% YoY, with 2026 growth expected to offset Class 8 truck market decline. Autonomous vehicle program ramp-up in late 2027.
- **Cash Flow Focus**: $25 million year-to-date free cash flow; $30 million+ full-year target to reduce net leverage to 2x.
- **Risk Mitigation**: $15-$20 million annualized cost savings by end-2025; tariff mitigation via reshoring and customer price recovery.

**【CEO Summary Section】**
- **Revenue and Profitability**: Q3 revenue was $152.5 million, down 11% YoY due to North American market softness. Adjusted gross margin improved to 12.1% (up 50bps YoY), driven by operational efficiency initiatives like reduced freight costs and optimized supplier terms. Free cash flow for the first nine months was $25 million, up $14 million YoY, with Q4 expected to generate additional free cash flow.
- **Segment Performance**: Global electrical systems revenue grew 6% YoY, benefiting from new program ramp-ups with an autonomous vehicle manufacturer in North America and a European OEM. Adjusted EBITDA for this segment increased by $1.6 million YoY. Trim systems and components revenue fell 29% YoY due to Class 8 truck production declines, but the segment maintained a sequential improvement in margin.
- **Cost Management**: SG&A expenses were reduced by $3 million YoY, and manufacturing overhead was flexed to align with demand. The company is right-sizing its North American manufacturing footprint while optimizing production in EMEA and Asia-Pacific for lower costs.
- **Guidance Update**: Full-year 2025 revenue guidance was revised to $640-$650 million (down from $650-$670 million), and adjusted EBITDA guidance was lowered to $17-$19 million (from $21-$25 million) due to macroeconomic headwinds and market softness.
- **Future Outlook**: The company expects global electrical systems revenue to grow in the high single to low double digits in 2026, driven by new program ramp-ups. Margins are expected to expand as operational efficiency improvements offset lower demand in other segments.

**【CFO Financial Commentary】**
- **Financial Results**: Q3 net loss was $6.8 million (-$0.20 per share), up from $0.9 million (-$0.03 per share) YoY, due to higher interest expenses (+$1.7 million YoY) and market softness. Adjusted EBITDA was $4.6 million (3.0% margin), up 50bps YoY. Free cash flow was negative $3.4 million Q3, but the company expects to generate $30 million+ for the full year.
- **Segment Breakdown**: 
  - Global ceiling systems: Revenue down 10% YoY, but adjusted operating income up $3.7 million YoY due to cost cuts.
  - Trim systems: Revenue down 29% YoY, but adjusted loss narrowed to $0.3 million vs. $4.1 million YoY.
- **Leverage and Liquidity**: Net leverage was 4.9x at end of Q3, up from 4.8x Q2, but the company expects to reduce leverage to 2x over time through free cash flow generation.

**【Q&A Highlights】**
- **Cost Savings Sustainability**: Management expects to achieve $15-$20 million in annualized cost savings by end of 2025, with focus on SG&A and manufacturing overhead. No significant muscle-cutting risks as reductions are surgical and aligned with demand.
- **Tariff Mitigation**: Progress made on price recovery with customers and supply chain reshoring. 2026 electrical systems revenue growth expected to offset Class 8 declines.
- **Cash Flow Allocation**: Free cash flow will be used to pay down debt, with net leverage target of 2x.
- **Program Ramp Timing**: Key electrical systems programs (autonomous vehicle and European OEM) expected to reach full production in late 2027, with meaningful contributions to 2026 revenue.
- **Market Sensitivity**: Trim systems segment is most sensitive to Class 8 truck production, but the company is actively pursuing onshore opportunities to fill excess capacity.

Commercial Vehicle Group, Inc. (CVGI) Q3 2025 Earnings Call Transcript

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