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01/11 11:26
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed outlook. Basic financial performance showed improvement but was offset by external volatility concerns. Product development updates were positive with new launches, yet challenges remain. Market strategy is cautious due to economic uncertainties. Financial health is improving, but guidance remains broad. Shareholder returns were not discussed. The Q&A highlighted ongoing issues with EV sales in North America and external factors like tariffs. Overall, the sentiment is neutral with potential for growth but significant uncertainties remain.
Net Sales $246.9 million, a decrease of 16% year-over-year due to lower volume across all segments. Sequentially, sales increased by 3%.
Adjusted Net Loss $6.7 million, an $11.9 million change from fiscal 2025. Sequentially, adjusted net loss reduced by $1.1 million.
Adjusted EBITDA $17.6 million, down $9.1 million year-over-year. Sequentially, adjusted EBITDA increased by $1.9 million.
Adjusted Diluted Loss Per Share $0.19, a $0.33 decrease from the prior year second quarter. Sequentially, it improved by $0.03.
Net Debt Down $29.6 million year-over-year as a result of cash flow and debt reduction efforts.
Cash Balance $118.5 million, up $21.5 million year-over-year.
Operating Cash Usage $7.4 million in the second quarter. However, $17.7 million was generated in the first half of fiscal 2026. A $10 million inventory build for vendor-managed inventory impacted the quarter.
Free Cash Flow Usage of $11.6 million, reflecting a $46.8 million improvement year-over-year compared to a usage of $58.4 million in fiscal second quarter 2025.
Data Center Activity: Generated over $80 million in annual sales in fiscal 2025, up from $40 million in fiscal 2024. Positioned for long-term growth with solutions like vendor-managed inventory and high-voltage solutions.
Power Solutions: Expected fiscal 2026 sales to align with fiscal 2025, with future sales acceleration anticipated due to data center growth strategy.
Corporate Headquarters Relocation: Relocated to Southfield, Michigan, to be closer to automotive customers and improve operational efficiency.
Facility Improvements: Significant progress in Egypt and Mexico facilities, with quality, delivery, and cost improvements. Egypt is ahead in transformation.
Leadership and Organizational Changes: Transitioned from regional siloed organization to a global, cross-functional team structure. Leadership upgrades nearly complete.
Transformation Journey: Focused on stabilizing operations, improving execution, and building a foundation for leveraging synergies. Nearing the end of the foundation-building phase.
Operational Challenges in Egypt and Mexico: Significant management attention and leadership upgrades were required in facilities in Egypt and Mexico due to quality, delivery, and cost issues. While progress has been made, these facilities still require ongoing focus to ensure sustained improvements.
Decline in Year-over-Year Sales: Second quarter net sales decreased by 16% compared to the previous fiscal year, reflecting lower volume across all segments. This decline poses a challenge to achieving growth targets.
Adjusted Net Loss: The company reported an adjusted net loss of $6.7 million for the second quarter, a significant deterioration compared to the prior year. This highlights ongoing financial pressures.
Inventory Build Impact on Cash Flow: A $10 million inventory build to support vendor-managed inventory for data center customers negatively impacted operating cash flow in the quarter, which would have otherwise been positive.
Execution Risks in Transformation Journey: The company is undergoing a significant transformation, including leadership changes and operational restructuring. While progress has been made, the success of these initiatives is critical to future performance and remains a risk.
Dependence on Data Center and EV Growth: The company’s growth strategy heavily relies on megatrends like data centers and vehicle electrification. Any slowdown in these markets could adversely impact long-term growth.
Fiscal 2026 Sales Guidance: Reaffirmed sales guidance of $900 million to $1 billion.
Fiscal 2026 Adjusted EBITDA: Reaffirmed adjusted EBITDA guidance of $70 million to $80 million.
Second Half of Fiscal 2026: Expected to be stronger than the first half, with Q3 reflecting traditional seasonality and improvement expected in Q4.
Free Cash Flow for Fiscal 2026: Expected to be positive compared to an outflow of $15 million in the previous fiscal year.
Power Solutions Sales: Fiscal 2026 Power sales expected to be in line with fiscal 2025, with future sales acceleration anticipated due to data center growth strategy.
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The earnings call presents a mixed outlook. Basic financial performance showed improvement but was offset by external volatility concerns. Product development updates were positive with new launches, yet challenges remain. Market strategy is cautious due to economic uncertainties. Financial health is improving, but guidance remains broad. Shareholder returns were not discussed. The Q&A highlighted ongoing issues with EV sales in North America and external factors like tariffs. Overall, the sentiment is neutral with potential for growth but significant uncertainties remain.
The earnings call highlights strong financial metrics, including net debt reduction and increased cash flow, alongside growth in data center sales. Although EV sales faced regional challenges, optimistic guidance suggests future growth. The Q&A section reveals strategic focus on automotive and data center sectors, with promising developments in Asia. Despite some vague responses, overall sentiment is positive due to operational efficiency, strategic focus on key growth areas, and reduced capital expenditures.
The earnings call highlighted several negative factors: a decline in net sales, delays in EV program launches, and potential regulatory risks. Although there were improvements in cash flow and debt reduction, the Q&A session revealed lowered expectations for key programs and ongoing economic challenges in the automotive sector. Despite some operational improvements, the overall sentiment is negative, especially with weak guidance and sales headwinds.
The earnings call highlighted several challenges, including an 8% sales decline, operational headwinds, and decreased EV demand. Despite improved pretax loss and EBITDA, the weak sales guidance and lack of share repurchase plan indicate ongoing financial struggles. Additionally, the Q&A revealed concerns about program rollout delays and market volatility, further dampening sentiment. With no new partnerships or shareholder returns announced, the overall outlook remains negative, likely resulting in a stock price decrease of -2% to -8%.
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