Commercial Vehicle Group, Inc. 10-Q

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The discussion and analysis below described material changes in financial condition and results of operations as reflected in our condensed consolidated financial statements for the three months ended March 31, 2026 and 2025. This discussion and analysis should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2025 Form 10-K. Business Overview CVG is a global provider of systems, assemblies and components to the global commercial vehicle market and the electric vehicle market. We deliver real solutions to complex design, engineering and manufacturing problems while creating positive change for our customers, industries, and communities we serve. We have manufacturing operations in the United States, Mexico, China, United Kingdom, Czech Republic, Ukraine, Morocco, Thailand, India and Australia. Our products are primarily sold in North America, Europe, and the Asia-Pacific region. We primarily manufacture customized products to meet the requirements of our customers. We believe our products are used by a majority of the North American Commercial Truck markets and many construction and agriculture vehicle OEMs, parts and service dealers, and distributors. Key Developments On March 27, 2026, the Company entered into a Purchase and Sale Agreement (the “Purchase Agreement”), pursuant to which the parties agreed to consummate a sale and leaseback transaction (the “Sale and Leaseback Transaction”). Under the terms of the Purchase Agreement, CVG agreed to sell that certain property located in Vonore, Tennessee (the “Vonore Property”) for a purchase price of $16 million. The Company completed the sale of the Vonore Property on March 27, 2026, and entered into a long-term lease, pursuant to which the Company will lease the Vonore Property at an initial annual base rent of approximately $1.4 million for the first year and annual increases of 3.5% thereafter. The lease will be for a twenty-year term. The closing of the sale of the Vonore Property provided the Company with net proceeds (after tax and transaction-related costs) of approximately $14.6 million. The Company used the net proceeds from the Sale and Leaseback Transaction to prepay a portion of its existing term loan facility, thereby reducing the Company’s leverage profile. We are navigating through several challenging external factors which create uncertainty and volatility in our end markets, including, but not limited to, geopolitical dynamics, new and changing tariff actions and responses, tax regulation and fluctuating foreign exchange rates. We expect the Company’s cost of goods sold will continue to be impacted by tariffs which increase the price of materials purchased and products sold to customers. In the past, we have negotiated with our customers in an attempt to pass on a portion of the increased costs resulting from the tariffs to our customers, although there is significant uncertainty as to our ability to pass these costs, or a portion of these costs, along to our customers. Geopolitical uncertainties may continue to create a challenging operating environment. We continue to closely monitor the situation and are prepared to remain agile in responding to any new developments. In addition, lower courts and administrative processes will need to provide guidance with respect to refund-related questions with respect to the IEEPA tariffs paid prior to the recent U.S. Supreme Court decision. On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”), which includes a broad range of tax reform provisions, was signed into law in the United States. Key provisions of the bill include, but are not limited to, immediate expensing of R&D expenditures, restoration and expansion of 100% bonus depreciation and permanent reinstatement of the EBITDA limitation for the calculation of the Section 163(j) business interest expense deduction. Additionally, the bill extends and modifies certain international tax provisions of the 2017 Tax Cuts and Jobs Act that were set to expire at the end of 2025. The tax provisions in OBBBA did not have a material impact on the Company’s consolidated financial statements or results of operations. 23 Table of Contents Consolidated Results of Operations Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025 The table below sets forth certain consolidated operating data for the three months ended March 31 (dollars are in thousands): 2026 2025 $ Change % Change Revenues $ 171,495 $ 169,795 $ 1,700 1.0% Gross profit 19,815 17,793 2,022 11.4 Selling, general and administrative expenses 19,059 16,385 2,674 16.3 Gain on sale of assets (13,957) — (13,957) NM 1 Other (income) expense 886 (72) 958 NM 1 Warrant expense 4,978 — 4,978 NM 1 Loss on extinguishment of debt 1,958 — 1,958 NM 1 Interest expense 4,095 2,503 1,592 63.6 Provision for income taxes 1,894 2,116 (222) (10.5) Net income (loss) from continuing operations 902 (3,139) 4,041 (128.7) 1. Not meaningful Revenues . The increase in consolidated revenues resulted from: • a $2.1 million, or 1.5%, increase in OEM and other sales; • a $0.4 million, or 1.1%, decrease in aftermarket and OES sales. The increase in revenues of 1.0% is primarily driven by 14% growth in our Global Electrical Systems segment, offset by softer customer demand in the Global Seats and Trim Systems & Components segments particularly in the North America heavy truck market. Gross Profit . Included in gross profit is cost of revenues, which consists primarily of raw materials and purchased components for our products, wages and benefits for our employees and overhead expenses such as manufacturing supplies, facility rent and utilities costs related to our operations. The $2.0 million increase in gross profit is primarily attributable to the impact of increased sales volumes and operational efficiency improvements. Cost of revenues decreased $0.3 million, or 0.2%, as a result of a decrease in raw material and purchased component costs of $0.7 million, or 0.8%, and a increase in labor and overhead expenses of $0.4 million, or 0.7%. As a percentage of revenues, gross profit margin was 11.6% for the three months ended March 31, 2026 compared to 10.5% for the three months ended March 31, 2025. The three months ended March 31, 2026 results include charges of $1.2 million associated with restructuring programs, compared to $0.5 million for the three months ended March 31, 2025. Selling, General and Administrative Expenses . Selling, general and administrative ("SG&A") expenses consist primarily of wages and benefits and other expenses such as marketing, travel, legal, audit, rent and utilities costs, which are not directly or indirectly associated with the manufacturing of our products. SG&A expenses increased $2.7 million compared to the three months ended March 31, 2025, primarily as a result of increased incentive compensation expense. As a percentage of revenues, SG&A expense was 11.1% and 9.6% for the three months ended March 31, 2026 and 2025, respectively. Gain on sale of assets . During the three months ended March 31, 2026, the Company recognized a gain of $13.7 million related to the Sale and Leaseback Transaction. Other (Income) Expense . Other expense increased $1.0 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily related to unfavorable change in foreign currency. Warrant expense. Change in fair value of warrant liabilities represents the mark-to-market fair value adjustments to the outstanding warrants issued in connection with entering into the Term Loan due 2030. The change in fair value of the outstanding warrants liability during three months ended March 31, 2026 was 5.0 million. The change in fair value of stock warrants was the result of changes in market prices and other observable inputs deriving the value of the financial instruments. Loss on extinguishment of debt . The loss recognized from the extinguishment of debt includes a non-cash expense of $0.9 million for the write-off of deferred financing costs, as well as a prepayment premium and make-whole interest totaling $1.0 million, both of which are associated with the repayment of the Term Loan following the Sale and Leaseback transaction. 24 Table of Contents Interest Expense . Interest associated with our debt increased $1.6 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase in interest expense was primarily attributed to higher interest rates from our refinancing completed during the second quarter of 2025. Provision for Income Taxes. Income tax expense of $1.9 million and $2.1 million were recorded for the three months ended March 31, 2026 and 2025, respectively. The primary driver in the tax expense was the Company's mix of profitable foreign operations and losses in the US while maintaining its full valuation allowance position on U.S. deferred tax assets. Net Income (Loss) from continuing operations. Net income from continuing operations was $0.9 million for the three months ended March 31, 2026 compared to net loss of $3.1 million for the three months ended March 31, 2025. The increase in net income is attributable to the factors noted above. Segment Results Global Seating Segment Results Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025 The table below sets forth certain Global Seating Segment operating data for the three months ended March 31 (dollars are in thousands): 2026 2025 $ Change % Change Revenues $ 74,505 $ 73,408 $ 1,097 1.5% Gross profit 10,432 9,091 1,341 14.8 Selling, general & administrative expenses 7,366 6,378 988 15.5 Gain on sale of assets (13,716) — (13,716) NM 1 Operating income 16,782 2,713 14,069 518.6 1. Not meaningful Revenues. The increase in Global Seating Segment revenues of $1.1 million primarily resulted from higher international volumes, offset by decreased customer demand in North America. Gross Profit. The increase in 2026 gross profit of $1.3 million was primarily due to the impact of increased sales volumes and operational efficiency improvements. The decrease in cost of revenues was driven by a decrease in raw material and purchased component costs of $0.9 million, or 2.4%, and a increase in labor and overhead expenses of $0.7 million, or 2.8%. As a percentage of revenues, gross profit margin was 14.0% for the three months ended March 31, 2026 compared to 12.4% for the three months ended March 31, 2025. The three months ended March 31, 2026 results include charges of $0.5 million associated with restructuring programs, compared to zero for the three months ended March 31, 2025. Selling, General and Administrative Expenses . SG&A expenses increased $1.0 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily as a result of increased incentive compensation expense. Gain on sale of assets . During the three months ended March 31, 2025, the Company recognized a gain of $13.7 million related to the Sale and Leaseback Transaction. 25 Table of Contents Global Electrical Systems Segment Results Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025 The table below sets forth certain Global Electrical Systems Segment operating data for the three months ended March 31 (dollars are in thousands): 2026 2025 $ Change % Change Revenues $ 57,446 $ 50,453 $ 6,993 13.9% Gross profit 5,769 3,990 1,779 44.6 Selling, general & administrative expenses 5,784 4,306 1,478 34.3 Operating income (15) (316) 301 (95.3) Revenues. The increase in Global Electrical Systems Segment revenues of $7.0 million was primarily as a result of new business wins. Gross Profit. The increase in gross profit of $1.8 million was primarily attributable to volume and mix. The increase in cost of revenues was driven by an increase in raw material and purchased component costs of $4.1 million, or 17.1%, and an increase in labor and overhead expenses of $1.1 million, or 4.9%. As a percentage of revenues, gross profit margin was 10.0% for the three months ended March 31, 2026 compared to 7.9% for the three months ended March 31, 2025. The increase in gross profit margin was primarily due to mix and improved operational efficiency. The three months ended March 31, 2026 results include charges of $0.5 million associated with restructuring programs, compared to $0.5 million for the three months ended March 31, 2025. Selling, General and Administrative Expenses . SG&A expenses increased $1.5 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily as a result of increased incentive compensation expense. Trim Systems and Components Segment Results Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025 The table below sets forth certain Trim Systems and Components Segment operating data for the three months ended March 31 (dollars are in thousands): 2026 2025 $ Change % Change Revenues $ 39,544 $ 45,934 $ (6,390) (13.9)% Gross profit 3,614 4,712 (1,098) (23.3) Selling, general & administrative expenses 3,714 3,177 537 16.9 Operating income (loss) (100) 1,535 (1,635) NM 1 1. Not meaningful Revenues. The decrease in the Trim Systems and Components Segment revenues of $6.4 million was primarily driven by lower sales volume as a result of softening customer demand in North America. Gross Profit. The decrease in gross profit of $1.1 million was primarily attributable to lower sales volume. The cost of revenues decreased in line with the sales decrease of 13.9%, driven by a decrease in labor and overhead expenses of $1.4 million, or 9.3%; and a decrease in raw material and purchased component costs of $3.9 million, or 14.8%. As a percentage of revenues, gross profit margin was 9.1% for the three months ended March 31, 2026 compared to 10.3% for the three months ended March 31, 2025. The decrease in gross profit margin was primarily due to lower sales volume. The three months ended March 31, 2026 results include charges of $0.2 million associated with restructuring programs, compared to zero for the three months ended March 31, 2025. Selling, General and Administrative Expenses . SG&A expenses increased $0.5 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. 26 Table of Contents Liquidity and Capital Resources Our primary sources of liquidity as of March 31, 2026 were operating income, cash and availability under our credit facility. We believe that these sources of liquidity will provide adequate funds for our working capital needs, capital expenditures and debt service throughout the next twelve months. However, no assurance can be given that this will be the case. We also rely on the timely collection of receivables as a source of liquidity. As of March 31, 2026, we had outstanding letters of credit of $3.5 million and borrowing availability of $99.7 million from our U.S. and China credit facilities (subject to customary borrowing base and other conditions), in addition to $28.7 million of cash. As of March 31, 2026, cash of $28.7 million was held by foreign subsidiaries. The Company had a $0.2 million d eferred tax liability as of March 31, 2026 for the expected future income tax implications of repatriating cash from the foreign subsidiaries for which indefinite reinvestment is not expected. We intend to allocate resources consistent with the following priorities: (1) invest in growth; (2) invest in operational improvements; (3) manage working capital; (4) reduce debt; and (5) other actions deemed appropriate by management to improve operational performance. Covenants and Liquidity Our ability to comply with the covenants in the Term Loan and ABL Revolving Credit Facility, as discussed in Note 4, Debt, may be affected by economic or business conditions beyond our control. Based on our current forecast, we believe that we will be able to maintain compliance with the financial maintenance covenants and the fixed charge coverage ratio covenant and other covenants in the Term Loan and ABL Revolving Credit Facility for the next twelve months; however, no assurances can be given that we will be able to comply. We base our forecasts on historical experience, industry forecasts and other assumptions that we believe are reasonable under the circumstances. If actual results are substantially different than our current forecast, we may not be able to comply with our financial covenants. Sources and Uses of Cash Three Months Ended March 31, 2026 2025 (In thousands) Cash provided by (used in): Net cash provided by (used in) operating activities $ (1,561) $ 15,172 Net cash provided by (used in) investing activities 13,239 (3,806) Net cash used in financing activities (15,726) (18,120) Effect of currency exchange rate changes on cash (550) 337 Net increase (decrease) in cash $ (4,598) $ (6,417) Operating activities. For the three months ended March 31, 2026, net cash used in operating activities was $1.6 million compared to net cash provided by operating activities of $15.2 million for the three months ended March 31, 2025. Net cash used in operating activities is primarily attributable an increase in trade working capital for the three months ended March 31, 2026 as compared to a decrease in trade working capital for the three months ended March 31, 2025. Investing activities. For the three months ended March 31, 2026, net cash provided by investing activities was $13.2 million compared to cash used in investing activities of $3.8 million for the three months ended March 31, 2025. The change was mainly due to $15.9 million in proceeds from the sale of assets in the current year. In 2026, we expect capital expenditures to be in the range of $13 million to $17 million. Financing activities. For the three months ended March 31, 2026, net cash used in financing activities was $15.7 million compared to net cash used in financing activities of $18.1 million for the three months ended March 31, 2025. Use of cash in financing activities during the three months ended March 31, 2026 was primarily attributable to the pay down of our debt which totaled $14.9 million, of which $14.6 million was a mandatory paydown from the Sale and Leaseback Transaction . Debt and Credit Facilities The debt and credit facilities descriptions in Note 4, Debt are incorporated in this section by reference. 27 Table of Contents Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). For a comprehensive discussion of our significant accounting policies, see "Note 1. Significant Accounting Policies", to our consolidated financial statements in Item 8 in our 2025 Form 10-K. Critical accounting estimates are those that are most important to the portrayal of our financial condition and results. These estimates require management's most difficult, subjective, or complex judgments, often as a result of the need to estimate matters that are inherently uncertain. We review the development, selection, and disclosure of our critical accounting estimates with the Audit Com mittee of our board of directors. For information about critical accounting estimates, see Critical Accounting Estimates in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2025 Form 10-K. At March 31, 2026, there have been no material changes to our critical accounting estimates from those disclosed in our 2025 Form 10-K. Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. For this purpose, any statements contained herein that are not statements of historical fact, including without limitation, certain statements under “Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” and located elsewhere herein regarding industry outlook, the Company’s plans to improve financial results, the future of the Company’s end markets, including, but not limited to, global commercial vehicle markets and electric vehicle markets, changes in the North America Class 8 and Class 5-7 truck build rates, performance of the global construction and agricultural equipment businesses, the Company’s prospects in the global commercial vehicle markets and electric vehicle markets, the Company’s initiatives to address customer needs, organic growth, the Company’s strategic plans and plans to focus on certain segments, competition faced by the Company, volatility in and disruption to the global economic environment, including global supply chain constraints, inflation and labor shortages, tariffs and counter-measures, financial covenant compliance, anticipated effects of acquisitions or divestitures, production of new products, plans for capital expenditures and our results of operations or financial position and liquidity, may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believe”, “anticipate”, “plan”, “expect”, “intend”, “will”, “should”, “could”, “would”, “project”, “continue”, “likely”, and similar expressions, as they relate to us, are intended to identify forward-looking statements. The important factors discussed in “Item 1A - Risk Factors”, among others, could cause actual results to differ materially from those indicated by forward-looking statements made herein and presented elsewhere by management from time to time. Such forward-looking statements represent management’s current expectations and are inherently uncertain. Investors are warned that actual results may differ from management’s expectations. Additionally, various economic and competitive factors could cause actual results to differ materially from those discussed in such forward-looking statements, including, but not limited to, factors which are outside our control. Any forward-looking statement that we make in this report speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statement or to publicly announce the results of any revision to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data.