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Cooper-Standard Holdings, Inc. (CPS) Q4 2022 Earnings Call Transcript

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Cooper-Standard Holdings, Inc. (NYSE:CPS) Q4 2022 Earnings Conference Call February 16, 2023 9:00 AM ET

Company Participants

Roger Hendriksen - Director, IR

Jeffrey Edwards - Chairman & CEO

Jonathan Banas - EVP & CFO

Conference Call Participants

Brian DiRubbio - Baird

Ben Briggs - StoneX Financial

Patrick Sheffield - Beach Point Capital Management

Operator

Good morning, ladies and gentlemen, and invited to nan Cooper Standard Fourth Quarter and Full Year 2022 Earnings Conference Call. [Operator Instructions]. As a reminder, this convention telephone is being recorded, and nan webcast will beryllium disposable for replay later today. I would now for illustration to move nan telephone complete to Roger Hendriksen, Director of Investor Relations.

Roger Hendriksen

Thanks, Josh, and bully morning, everyone. We admit your continued liking successful Cooper Standard, and we convey you for taking nan clip to participate successful our telephone this morning.

The members of our activity squad who will beryllium speaking pinch you connected this telephone this greeting are Jeff Edwards, Chairman and Chief Executive Officer; and Jon Banas, Executive Vice President and Chief Financial Officer.

Before we begin, I request to punctual you that this position contains forward-looking statements. While they are made based connected existent actual accusation and definite assumptions and plans that guidance presently believes to beryllium reasonable, these statements do impact risks and uncertainties. For much accusation connected forward-looking statements, we inquire that you mention to Slide 3 of this position and nan company's statements included successful periodic filings pinch nan Securities and Exchange Commission.

This position besides contains non-GAAP financial measures. Reconciliations of nan non-GAAP financial measures to their astir straight comparable GAAP measures are included successful nan appendix to nan presentation. With those formalities retired of nan way, I'll now move nan telephone complete to Jeff Edwards.

Jeffrey Edwards

Thanks, Roger, and bully morning, everyone. We appreciate nan opportunity to reappraisal our 4th fourth and afloat twelvemonth 2022 results and supply an update connected our outlook for 2023 and beyond.

So to statesman connected Slide 5, I'd for illustration to item immoderate of nan cardinal information points that we judge are reflective of our continued beardown committedness to operational excellence and our halfway institution values.

In 2022, we proceed to present world-class results successful position of merchandise quality, programme launches and work to our customers. This is reflected by our 98% greenish merchandise value scorecards and 97% greenish programme motorboat scorecards.

Even much importantly, and a shout-out to our works managers, we had our champion twelvemonth ever successful position of worker safety, which is ever our apical privilege arsenic we travel to activity each day. For nan afloat twelvemonth 2022, our information incident complaint was 0.33 per 200,000 hours worked, good beneath nan world-class benchmark of 0.57. We are particularly proud of nan 25 plants that completed nan twelvemonth pinch a cleanable information grounds of zero reported incidents.

In position of continuing manufacture headwinds, we focused connected further rightsizing each facet of our business and improving operating efficiency. During 2022, our manufacturing and purchasing teams delivered $75 cardinal successful costs savings done defined thin programs and different initiatives. We besides successfully reduced our SGA&E disbursal by $22 cardinal compared to 2021 and realized $8 cardinal successful savings from our past restructuring actions.

So successful total, we delivered $105 cardinal successful sustainable costs reductions for nan year. By galore measures, we had a very successful year, and we're surely very proud of our squad for their continued commitment, difficult activity and engagement.

Turning to Page 6. Complementing our attraction connected manufacturing excellence is our committedness to doing business nan correct measurement pinch uncompromised honesty, transparency and integrity. This is 1 of our halfway values and an important constituent of our wide institution culture. Frankly, it's conscionable who we are.

A fewer weeks ago, we were pleased to erstwhile again beryllium named to Newsweek's database of America's Most Responsible Companies. And we are besides named One of nan World's '22 Most Ethical Companies for nan 3rd consecutive twelvemonth by Ethisphere earlier successful nan year.

We spot this type of nickname is an outer acknowledgment of nan value of our institution civilization and really we behaviour ourselves each day. We judge our civilization is cardinal to recruiting and retaining nan champion talent successful nan industry. And further, erstwhile mixed pinch world-class exertion and customer service, it's an important facet successful winning and retaining business from our customers astir nan world.

Turning to Slide 7. On this slide, you tin spot really our customers person continued to support america pinch important caller business awards, which accrued by 32% successful 2022 versus 2021. And this summation successful caller awards occurred astatine nan aforesaid clip we were engaging our customers successful challenging negotiations complete costs recoveries and value adjustments. Significantly, our caller business awards connected EV platforms exceeded awards connected accepted soul combustion motor platforms for nan first time.

We want to convey our customers for their continued support and entrusting america pinch providing captious components and exertion for immoderate of their astir important conveyance platforms. Now I'll move nan telephone complete to Jon to locomotion you done nan financial specifications of nan 4th and nan year.

Jonathan Banas

Thanks, Jeff, and bully morning, everyone. In nan adjacent fewer slides, I'll screen nan specifications of our quarterly and afloat twelvemonth financial results, put immoderate discourse astir immoderate of nan cardinal items that impacted our net and past supply immoderate colour connected our equilibrium expanse and liquidity earlier talking astir expectations for 2023.

On Slide 9, we show a summary of our results for nan 4th fourth and afloat twelvemonth 2022 pinch comparisons to nan anterior year. Fourth 4th 2022 income totaled $649 million, an summation of 8% versus nan 4th fourth of 2021. The betterment was a consequence of favorable measurement and operation successful each of our automotive segments arsenic request for our products stay beardown and proviso concatenation issues proceed to improve. Volume and operation besides included nan affirmative effect of our ongoing commercialized negotiations and costs betterment initiatives.

Adjusted EBITDA for nan 4th fourth of 2022 was $27.6 cardinal aliases 4.2% of income compared to $2 cardinal aliases 0.3% of income successful nan 4th fourth of 2021. The year-over-year summation was driven chiefly by favorable measurement and operation arsenic good arsenic improved operational efficiency, little SGA&E disbursal and nan affirmative effect of our enhanced commercialized agreements and costs recoveries.

On a U.S. GAAP basis, we incurred a nett nonaccomplishment of $88 cardinal successful nan 4th quarter. This included definite noncash plus impairments, restructuring charges, valuation allowances connected nett deferred taxation assets, and pension colony charges. Excluding these and different typical items, we incurred an adjusted nett nonaccomplishment of $31.9 cardinal aliases $1.85 per diluted stock successful nan 4th fourth of 2022. This compared to an adjusted nett nonaccomplishment of $50.3 cardinal aliases $2.94 per diluted stock successful nan 4th fourth of 2021.

For nan afloat twelvemonth 2022, our income totaled $2.53 billion, an summation of 8.4% versus 2021. Again, nan main drivers of nan summation were favorable measurement operation and our enhanced commercialized efforts connected costs recoveries. These affirmative factors were partially offset by unfavorable overseas speech and nan deconsolidation of an Asian associated task astatine nan opening of 2022.

Adjusted EBITDA for nan twelvemonth came successful astatine $37.9 cardinal compared to a nonaccomplishment of $8 cardinal successful 2021. Significantly favorable measurement and operation included commercialized costs recoveries that drove nan result, while different affirmative factors included improved operational ratio and little SGA&E expense. These were partially offset by higher worldly costs, accrued wages and compensation-related costs arsenic good arsenic wide inflation.

Full twelvemonth nett nonaccomplishment was $215.4 million, including a summation recognized connected nan waste leaseback astatine 1 of our European facilities, noncash plus impairment charges, restructuring costs, deferred taxation plus valuation allowances and different typical items.

Adjusted for nan nett effect of these items, we incurred a nett nonaccomplishment for nan twelvemonth of $171.5 cardinal aliases $9.98 per diluted share. This compares to an adjusted nett nonaccomplishment of $222.3 cardinal aliases $13.04 per diluted stock successful 2021.

From a CapEx perspective, we spent $71 cardinal during 2022, which is astir 2.8% of sales. This compared to CapEx of $96.1 cardinal aliases 4.1% of income successful 2021. The simplification successful superior spending was chiefly owed to little programme launches successful 2022 and our continued aggravated attraction connected rate preservation and improved plus utilization.

Moving to Slide 10. The charts connected Slide 10 quantifies nan important drivers of nan year-over-year changes successful our income and adjusted EBITDA for nan 4th quarter. For sales, favorable measurement and mix, nett of customer value adjustments and recoveries accrued income by $89 million. Foreign speech was a partial antagonistic offset of $32 million.

For adjusted EBITDA, favorable measurement and mix, nett of value and recoveries added $48 cardinal successful nan quarter. Manufacturing and purchasing efficiencies accounted for different $13 cardinal of nan improved results. SGA&E disbursal was a affirmative variance of $5 cardinal and savings from restructuring initiatives added $1 million. These improvements were much than offset by $20 cardinal successful accrued worldly costs and $21 cardinal from costs and compensation-related increases, wide ostentation and different items.

Moving to Slide 11. For nan afloat year, favorable measurement and mix, nett of customer value adjustments and recoveries accrued our income by $322 million. Unfavorable overseas speech was a partial offset of $96 cardinal and nan deconsolidation of a associated task successful Asia further offset maturation successful income by $31 million.

For afloat twelvemonth adjusted EBITDA, a number of affirmative factors benefited our profitability, including $167 cardinal from improved measurement and mix, including customer value adjustments and recoveries. $75 cardinal from improved manufacturing and purchasing efficiencies, $22 cardinal from little SGA&E disbursal and $8 cardinal successful savings from earlier restructuring initiatives. These improvements were partially offset by $137 cardinal successful higher worldly costs and $89 cardinal successful higher wages, compensation-related costs and different wide inflation.

Moving to Slide 12. In position of free rate flow, we recorded an outflow of $38 cardinal successful nan quarter. Net rate utilized successful operations was $25.8 cardinal successful nan quarter, chiefly owed to nan nett rate net and changes successful moving capital, which continued to beryllium impacted by challenging manufacture conditions. As antecedently mentioned, CapEx came successful astatine conscionable $12.7 cardinal for nan quarter, owing to our attraction connected rate preservation and improving plus utilization. With rate connected manus of $187 million, and an further $155 cardinal of readiness connected our revolving in installments facility, we ended nan twelvemonth pinch full liquidity of $342 million.

Turning to Slide 13. Subsequent to nan extremity of nan 4th quarter, we successfully completed refinancing transactions that widen nan maturity connected nan mostly of our semipermanent indebtedness to 2027. The refinancing strengthens our equilibrium expanse and provides america pinch important added financial elasticity to turn and further optimize our business. After utilization of rate required successful conjunction pinch nan closing of nan refinancing transactions and based connected our existent expectations for ray conveyance production, request for our products and importantly, nan sustainable commercialized value support from our customers, we expect that our rate balances and entree to elastic in installments accommodation will supply capable resources to support our ongoing operations and nan execution of planned strategical initiatives.

Turning to Slide 14. On this slide, we supply our first guidance for 2023 on pinch our expectations for location ray conveyance accumulation that shape nan ground for our yearly plan. For this year, we expect income successful nan scope of $2.6 cardinal to $2.8 cardinal and adjusted EBITDA successful nan scope of $150 cardinal to $175 million. We judge these estimates are appropriately blimpish fixed nan continuing uncertainties wrong our industry, and nan macroeconomic trends successful each of our cardinal operating regions.

We expect CapEx to beryllium successful nan scope of $70 cardinal to $80 cardinal successful 2023, astir successful statement pinch 2022. As a percent of sales, this would put america beneath 3%. So continuing disciplined finance successful nan business to support caller programme launches, while cautiously monitoring and managing wide plus utilization.

Cash restructuring successful 2023 is estimated astatine $35 cardinal to $40 million. The mostly of this finance will beryllium focused connected further rightsizing our operations and fixed overhead successful Europe and elsewhere astir nan world, accordant pinch nan strategy we person laid retired to reconstruct profitability and our loss-making segments.

In position of rate interest, we expect to salary $50 cardinal to $55 cardinal successful 2023, a simplification from 2022 levels fixed nan elasticity of nan PIK Toggle characteristic successful nan notes we issued successful nan refinancing past month.

Moving to Slide 15. This floor plan provides immoderate further item astir nan main factors impacting our 2023 adjusted EBITDA outlook. These are wide estimates based connected existent marketplace conditions and our ain assumptions for nan remainder of nan twelvemonth and bespeak nan midpoint of nan EBITDA scope we person provided.

We expect improving measurement and mix, including customer value adjustments to thrust $150 cardinal of improved profitability successful 2023. This includes nan anticipated further affirmative impacts of support from our customers successful nan measurement of sustainable pricing and recoveries of inflationary costs pressures that we proceed to absorb.

With improving volume, we besides expect our manufacturing and purchasing teams to proceed their fierce thin initiatives successful 2023, driving mixed planned savings of astir $60 cardinal for nan year. These anticipated gains are expected to beryllium partially offset by astir $80 cardinal successful headwinds from continuing wide ostentation and higher wages.

As mentioned earlier, we judge our first guidance for 2023 is appropriately blimpish fixed nan continuing uncertainties successful nan marketplace, specified arsenic nan tight labour marketplace successful our cardinal regions, proviso concatenation challenges and erratic accumulation schedules. We are factoring successful nan betterment of a adjacent stock of nan higher costs being imposed connected our business, but there's nary guarantees connected nan level of betterment aliases value adjustments we will yet achieve.

On nan different hand, location could beryllium perchance immoderate upside opportunity if accumulation volumes travel backmost stronger than we presently expect. Having said each that, we judge that 2023 will return america to affirmative free rate flow. That concludes my comments. So I'll move it backmost complete to Jeff.

Jeffrey Edwards

Thanks, Jon. Before concluding our chat this morning, I want to stock a fewer thoughts regarding our near-term and longer-term outlook and why I stay highly optimistic astir our opportunities ahead. Moving to Slide 17.

One of nan cardinal reasons I'm optimistic is that complete nan past 4 years, we've importantly leaned retired our costs structure. On a cumulative basis, we've taken retired much than $480 cardinal successful yearly operating costs, and we expect these savings to transportation guardant into 2023 and beyond.

We besides expect to proceed our laser attraction connected thin initiatives, manufacturing efficiencies and further optimization of our operating footprint successful 2023. We want to guarantee that we are aligned pinch marketplace and customer request going forward. And we stay committed to either hole aliases exit those segments of our business that don't supply capable returns.

Turning to Slide 18. Another cardinal logic for optimism is nan enhanced commercialized agreements that we've established pinch our customers complete nan past year. We are amended positioned now to negociate done commodity costs fluctuations than we person ever been before. With nan mostly of our cardinal commodity inputs now nether indexed-based agreements, our customers will stock successful a greater proportionality of immoderate further impacts from commodity inflation.

In addition, we are moving pinch our customers to set pricing to screen different elements of costs ostentation that are beyond our control.

The 2nd shape of our costs betterment inaugural is still underway but we person made bully progress. As I said successful my opening comments, our customers person recognized nan worth that we person provided them complete nan years, evidenced by nan galore awards they springiness america and they've been supportive, some successful position of awarding america caller business arsenic good arsenic successful position of value concessions wherever necessary.

I'm much assured coming than astatine immoderate different time, that we will beryllium paid reasonably for nan world-class technology, products and work that we supply to our customers, and that surely bodes good for our future. Turning to Slide 19.

Because of our beardown customer relationships, world-class work and innovative technology, our customers proceed to look to america to proviso captious components connected immoderate of nan industry's astir desirable and celebrated conveyance platforms and nameplates. On Slide 19, we supply a database of our anticipated apical 10 conveyance programs for 2023. The conveyance images and names bespeak nan lead nameplate connected each cardinal platform.

We are proud of nan continued beardown operation of our apical programs, which maintains a dense weighting connected trucks, SUVs and world platforms. This beardown operation provides america pinch maximum opportunity to summation merchandise contented per conveyance and income complete time.

Combined, these apical platforms correspond astir 40% of our planned 2023 revenue. On an unweighted basis, our contented per conveyance crossed these apical 10 platforms is expected to beryllium astir $200 this year. I would besides statement for nan first time, an electrical conveyance has made our apical 10 list. Turning to Slide 20.

Our strategical attraction connected ray trucks and puts america successful a awesome position to use from nan continuing world ray conveyance marketplace trends. As shown successful nan floor plan connected nan left, maturation successful nan trucks and SUV conception of nan marketplace is expected to importantly outpace nan rider car conception complete nan adjacent 5 years.

For Cooper Standard, was 75% of our 2023 world gross expected to travel backmost -- to travel from trucks and SUVs and astir 90% successful North America. We expect to use from nan higher marketplace maturation rate. In summation to marketplace volume, we besides use from a contented per conveyance perspective. On average, our contented per conveyance connected trucks and SUVs is much than double our contented connected cars, creating important maturation opportunity arsenic nan marketplace trends continue. Turning to Slide 21.

The trends successful electrical conveyance conception are besides creating opportunities for us. We proceed to present cardinal innovative technologies, specifically for EV applications. And these innovations person been good received by our customers. We are presently a supplier connected 3 of nan apical 5 and 9 of nan apical 15 EV nameplates globally.

Over nan past 3 years, we've been awarded much than $400 cardinal successful annualized caller business connected early electrical conveyance platforms. In fact, successful 2022, nett caller business awards connected electrical vehicles exceeded our awards connected accepted thrust train vehicles by a facet of 4 to 1. Based connected our existent outlook, and caller new business wins, we expect our income successful nan EV conception will summation astatine a compound yearly complaint of complete 43% successful nan adjacent 5 years, importantly outpacing expected maturation successful full EV production.

In addition, we are progressing our merchandise strategy that will supply sophisticated, highly method solutions for fluid guidance and electrical vehicles that improves nan wide efficiency. The caller products besides grow our full addressable marketplace successful nan segment, further adding to our maturation and separator opportunities. Turning to Slide 22.

To summarize our chat this morning, we expect to leverage our institution culture, our halfway values and our streamlined costs building to thrust improving results successful 2023. Over nan longer term, we expect to spot incremental benefits from nan galore customer-focused, value-added innovations that we person introduced and that are opening to motorboat into production.

This includes invention successful automotive technology, specifically for electrical vehicles arsenic good arsenic nonautomotive exertion for footwear. We are pleased to denote that our footwear customer has precocious launched wide accumulation of shoes utilizing our Fortrex exertion and nan shoes should beryllium connected shop shelves by precocious spring.

Of course, our business is limited connected nan continued support of our customers, and we strive to gain their business each time pinch value service, exertion and innovation. We are proud to partner pinch our customers to create sustainable solutions and worth together, and we convey them for their ongoing spot and confidence.

We besides want to convey our labor astir nan world for their continued dedication, difficult activity and their committedness to excellence successful each facet of our business. Our institution and nan manufacture wide person been done a very challenging play since nan pandemic, and our squad has stepped up to do a awesome occupation contempt nan difficult circumstances. The bully news is that each nan difficult activity is opening to salary off, and we look guardant to a much successful twelvemonth successful 2023. This concludes our prepared comments, truthful let's unfastened up for questions.

Question-and-Answer Session

Operator

[Operator Instructions]. Our first mobility comes from Brian DiRubbio pinch Baird.

Brian DiRubbio

Just a mates of questions connected my end. First of all, Jeff, pinch nan guidance that you gave, are you anticipating each 4 regions to beryllium EBITDA affirmative successful fiscal '23?

Jeffrey Edwards

As we beryllium present today, that's what we expect. Clearly, we have, arsenic we mentioned, commercialized negotiations that person not concluded yet. We expect those will beryllium concluded by nan extremity of nan first quarter. But our anticipation is those will beryllium completed and consequence successful nan important uplift that we request to make each of nan regions profitable. And past I deliberation that nan volumes that we've used, arsenic Jon mentioned successful nan call, albeit conservative, bespeak benignant of what we're seeing present successful nan first quarter. So we're highly optimistic.

I'll show you. I deliberation that '23 is mounting up arsenic a twelvemonth wherever things person stabilized and we're capable to foretell nan commercialized negotiations that we concluded past twelvemonth gave america assurance and a existent bully commencement to those negotiations present for '23. So I expect it to beryllium positive, and we look guardant to creating nan type of sustainable footprint astir nan world that's going to proceed to present financial results good into nan future.

Brian DiRubbio

Got it. That's helpful. And conscionable 1 of nan issues that you faced past twelvemonth and nan past mates of years has been nan deficiency of a dependable accumulation cadence connected your extremity fixed nan changing schedules that your customers have. Do you expect that -- truthful what are your customers saying connected that end? Is astir of nan proviso concatenation issues from your position and customer position -- has that been fixed already? Just emotion to get a consciousness of really that's developing.

Jeffrey Edwards

Well, I guess, successful comparison to '21 and '22, importantly improved. I deliberation nan forecast betwixt North America and Europe still shows vehicles being missed betwixt Europe and North America anyway. Just nether 1 cardinal units are being predicted for nan spot shortage, if you will, that wounded america importantly nan past 2 years.

So while that's still a ample number of vehicles that they're forecasting to beryllium missed, it's a full batch amended than it was. And past nan scheduling and their expertise to get person to nan releases, I would propose is besides dramatically improved. So not cleanable yet, but I deliberation that arsenic we spell done nan year, we'll proceed to get amended astatine both.

Brian DiRubbio

Two last ones. First, conscionable connected nan early restructuring actions, you laid retired what you want to do successful '23. Do you spot further restructuring occurring successful 2024? Or do you deliberation you tin wrap astir of that up successful 2023?

Jonathan Banas

Brian, it's Jon. I'll return this one. We're presently successful formation connected programs that we've already announced successful executing connected successful 2022 chiefly successful nan measurement of headcount simplification initiatives and rightsizing there. But -- truthful our first statement of show going into '23 and beyond will beryllium connected nan connected nan wide value chat to make judge we're getting reasonably compensated arsenic we've been talking astir here. And that will thief optimize profitability successful each those regions, arsenic Jeff conscionable described to you a infinitesimal ago. If those things don't happen, past we'll proceed to look astatine nan footprint to spot if there's thing important that needs to beryllium done. But astatine this point, we don't person immoderate awesome plans successful '24 that would importantly origin america to walk a batch much money than we've different predicting correct now.

Brian DiRubbio

Fair enough. And past last 1 for you, Jon. Just station nan recap of nan caller indebtedness that was placed connected board. What is liquidity looking for illustration today?

Jonathan Banas

Brian, we typically don't springiness intra-period liquidity updates. But for illustration I said successful my prepared remarks, pinch nan rate equilibrium that we did person connected manus and nan readiness nether our ABL facility, we're beautiful comfortable pinch nan existent liquidity business and we'll beryllium capable to springiness you immoderate heavy dive specifications travel our Q1 telephone arsenic we ever do. But we're emotion nary bully astir our wide equilibrium sheet, surely getting nan refinancing down america was a bully milestone. And now we tin spell backmost to focusing connected moving nan business and executing successful position of worth creation.

Operator

Our adjacent mobility comes from Ben Briggs pinch StoneX Financial.

Ben Briggs

So going done your guidance a small and listening to nan prepared remarks, I'm conscionable funny what percent of gross do you guys deliberation that nan footwear shaper is going to lend successful 2023? And tin you springiness immoderate much benignant of actual specifications connected benignant of really that footwear statement is going to effect nan financial capacity of nan business.

Jonathan Banas

Sure, Ben. It's Jon again. If you recall, successful Q4 of 2021, we really recorded immoderate gross from nan footwear deal. It was a guaranteed minimum nether that contract, astir $12 cardinal that we booked successful Q4 of past year. So astatine this point, it's a minimum measurement commitment. So we're not anticipating immoderate important worldly alteration from that successful 2023. It's surely each measurement limited into nan future. And if they transcend nan minimum bid quantities connected nan volumes, past there'll beryllium upside to what we've already recorded.

So astatine this point, it's conscionable erstwhile nan shoes commencement leaving nan mill and group commencement buying them, past we'll commencement seeing nan rate travel successful connected that guaranteed minimum. But astatine this point, thing worldly incrementally for 2023.

Ben Briggs

Okay. So astir $12 cardinal of gross is nan correct number to deliberation about?

Jonathan Banas

Yes. But again, already recorded past year, 2021.

Operator

[Operator Instructions]. Our adjacent mobility comes from Patrick Sheffield pinch Beach Point Capital.

Patrick Sheffield

Just a mates of housekeeping items. One, could you benignant of stock really overmuch nan refinancing costs and fees successful nan first quarter?

Jonathan Banas

Patrick, Jon again. We haven't gone done successful nan disclosed fees and different costs to impact nan refinancing but however, erstwhile you deliberation astir taking retired nan antecedently existing elder secured notes, we did person to incur that prepayment premium and past arsenic besides disclosed, location were discounts connected nan recently issued notes, nan backstop fees and nan customary fees, I'll say, for advisories successful nan measurement of financial and lawyer bills and nan different customary closing costs. So astir of those fees are already publically retired there, and we're racking up nan remainder of those costs, and we'll person those successful our Q1 rate travel that we'll talk astir present successful a mates of months.

Patrick Sheffield

Okay. And past connected moving capital, do you -- is location immoderate model you tin stock astir whether you deliberation that's going to beryllium a root aliases usage of rate successful '23?

Jonathan Banas

Yes, Patrick, successful my prepared remarks, I indicated that we deliberation free rate travel is going to beryllium affirmative pinch each of nan existent assumptions that we're operating with. And a portion of that free rate travel affirmative will beryllium further optimization of our inventory balances. Jeff described things looking much unchangeable this year. That will thief america negociate inventory a small spot better. We only request to person arsenic overmuch information banal connected manus and we'll beryllium capable to person a amended minimum bid quantities erstwhile those -- nan merchandise schedules and EDI schedules stabilize. So that will beryllium a constituent of affirmative moving capital.

And also, we are looking to proceed to thrust our tooling balances down. As a reminder, we walk tooling dollars connected behalf of our customers and get reimbursed erstwhile those devices are yet built and PPAP and approved by nan customer. So we're -- successful portion of our ongoing conversations pinch our customers, we're looking for much progressive payments connected devices alternatively than waiting until nan extremity and tying up Cooper Standard Capital and utilizing our equilibrium expanse to money those tools. Instead, we're looking for assistance from our customers to thief ft nan measure connected nan devices they yet own.

So we deliberation there's opportunities to thrust nan tooling balances down and arsenic a framework of reference, we ended 2022 pinch astir $100 cardinal of devices connected our equilibrium expanse that personification other owns. And pinch our existent costs of capital, not nan astir businesslike usage of our resources, hence, nan hike conversations pinch our customers there. So betwixt those 2 moving superior statement items, we spot a batch of benefit. With a rising income environment, and of course, you ever person nan offsetting effect that accounts receivable will spell up and necktie up immoderate moving superior astatine year-end. But net-net moving superior should beryllium a affirmative for us.

Patrick Sheffield

Got it. Okay. And past connected nan 2023 span -- EBITDA bridge, you person $150 cardinal use from measurement operation and price. And I was conscionable funny really overmuch of that $150 cardinal is still taxable to finalizing commercialized agreements successful Q1? In different words, does that bespeak what you've already achieved? Or is that taking successful immoderate presumption connected incremental affirmative advancement successful your Q1 commercialized discussion.

Jonathan Banas

Yes. It is forward-looking connected our expectations. As Jeff described a mates of minutes ago, we'll person amended statement of show arsenic Q1 closes here, and we person a batch of those customer agreements negotiated and locked up. So nan $150 cardinal includes our expectations astir really those will go, but not solidified arsenic of yet. So we'll person a amended update for you present erstwhile again, we adjacent Q1.

Patrick Sheffield

Okay. And it's difficult to astir apt quantify nan stuff, but really overmuch of that number is already benignant of locked in? Or really overmuch was astatine play successful 2023 versus had already been agreed to successful '22? And conscionable broadly, is this thing that each twelvemonth you person you are going to do negotiations pinch your customers? Or is this conscionable trying to -- conscionable for illustration nan last strokes of your broader effort to get greater indexing crossed your full -- crossed your commodity costs structure?

Jeffrey Edwards

Patrick, this is Jeff. I'll effort to reply each of that present succinctly. So constituent one, we'll -- we are successful negotiations virtually pinch each customer successful nan world. Per my prepared remarks, we are assured that those are going well. I deliberation we're very transparent pinch them, and we've been going done those discussions really since astir apt November. So we sewage an early start. And we expect that nan result is going to beryllium affirmative for us. And we judge that nan relationships that we person coming will proceed to beryllium preserved going forward. That's our expectation.

Related to really we'll quantify that, we'll conscionable hold until nan closing successful nan quarter, and past we'll springiness you a summary connected that erstwhile we study retired our first 4th results. I deliberation it's nan champion measurement to woody pinch it.

Patrick Sheffield

This is thing you do each twelvemonth aliases -- it seemed for illustration there's a large alteration past twelvemonth and nan twelvemonth earlier to effort and alteration nan later contracts work? And is this much for illustration conscionable an yearly chat that you have? Or is it a continuation of nan efforts from nan past mates of years?

Jeffrey Edwards

It surely seems for illustration it's an yearly discussion, I agree. But nan intent this twelvemonth is successful nan discussions that we're having correct now, we intend to create sustainable businesses successful each region. And wherever we do, we'll stay. Where we don't, we will leave.

Operator

It appears that location are nary much questions. I would now for illustration to move nan telephone backmost complete to Roger Hendriksen.

Roger Hendriksen

Okay. Thanks, everybody, for joining our telephone today. We admit your continued interest. If you didn't get a chance to inquire your questions this morning, please scope retired to me, and we'll beryllium successful touch. Happy to prosecute successful immoderate questions aliases comments you'd for illustration to stock down nan road. Thanks again for participating. This concludes our call.

Operator

Thank you. This concludes today's convention call. Thank you for participating. You whitethorn now disconnect.

Editor: Naga



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