Earnings call transcript Q4 2022

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Operator

Good morning, ladies and gentlemen, and welcome to the CVG’s Fourth Quarter and Full Year 2022 Earnings Conference Call.

During this presentation, all parties will be in listen-only mode.

Following the presentation, the conference will be open for questions with instructions to follow at that time.

As a reminder, this conference is being recorded.

I would now like to turn the conference over to Mr. Officer. Financial Chief Cheung, Andy Please go ahead.

Andy Cheung

and Thank call. to conference everyone you, operator, our welcome

Joining Harold we’ll brief today CEO call XXXX our me the on full and is call well commentary This year for we’ll fourth quarter as after of morning, Bevis, the provide update a which, company results, as regarding open CVG. and President questions.

including, is may reminder, webcast expectations periods and among earnings new statements, presentation being contain to, conference Both a product website. is available not call this our for As regarding a cost-saving on limited market initiatives, but forward-looking initiatives supplemental future others. trends, and

for and conditions Actual fluctuations compliance because covenant and in business production of in CVG results volumes which and These in in results and but risks with in from of SEC uncertainties currencies uncertainties. foreign may anticipated detailed certain may the other associated risks economic liquidity, not vehicles the CVG supplier, differ is as markets our conducting operates, a and financial countries include, which risks filings. to, risks limited

now turn a Harold to call update. I will over company the to provide

Harold Bevis

morning, you, Thank good Andy, everyone. and

on is to our aligned you it performance. presentation, will an to we area As that which that to few efforts a have say wanted presentation comments that while my overview and three you I I could when website document, increase be One additional and we’ve document, to in is areas. referring find short-term implemented usual is locate format, that, appreciate found our if earnings I’d presentation

is mix and of economics our our operating transformation. results. Second revenue is additional the versus improve And third the accounting efforts product GAAP to long-term

or on point short-term first performance. quarterly the Regarding performance

in performed full release story that and report the sales same for were in very XX% year. XX% here up see businesses today You’ll And and the profits. overall well it’s they vehicle our our earnings

Our were up in income. operating and businesses vehicle sales up in

year, full for $XXX offset up our revenues industrial a about CVG’s the although, $XX million were fact, decline vehicle In automation. million in businesses

our the industrial the industrial quarter in have weakness for expect the year. profit year-over-year automation the higher improvement taken and additional in show revenue mix same Class towards in changing This to at continue improvement a we We time in business the industry. automation and and spectrum now of automation, vehicles, business offset about to customer away X actions electrification short-term this our especially weakness go we wider from of vehicle commercial electric as and concentration

inflation focused those been few the spike combating who cost increases of business program. startup in you costs logical with on have CVG following and last we’ve that years, cost you new been For know out a price

this industrial worked performance slowdown. evidenced has of businesses, demand enough it the profits offset advance the our automation was as as by and not wanted it While much vehicle we as to

So increase we’ve to few to – improved our increase our added new a improve performance. and angles quarterly

QX COGS. and that program bigger and plus we’ve cost a We cuts SG&A in cost cost with targeting during XXX out First, and is program. implemented programs. of million targeted we began we both upsized are out with headcount in This already $XX underway it and XXXX reduction announced

expect in beginning We to show this quarter. results

We automation process cuts, savings. plant have that a procurement consolidations, program multifaceted and includes headcount

especially by in is a layer, curtailing startup far onion would in the to per you growth are dollar costs the the business. that business. seating costs businesses, exposure we startup Secondly, the our When back most high vehicle seating peel you the see

and exit have program mutually their the That’s vehicle of fixing delivery seating new exiting an is or customer to hard or of we true business, seating is problematic us. for and for old, word with company. Seating it’s customer whether van new This Staying a one easy have has been with business. electric our the we cost point right in focal furthermore, growth a this our growth startup the And business. overruns. implement. growth to startup decision CVG main to agreed This

I are will the Their the this and widely elaborate by to we them. production of are to seat and the passenger except say customer particular problems press have exit we We not right end of seat suppliers speak and driver’s in in now beginning exiting as and been we stages published for the exiting year. the this program will transitioning this are other

wins eight a margins this ramp full up. working some at pain will and have in And ratio of around larger primarily programs. than growing We’ll do is even better during program cover we’re the It’s year exiting makes OE. we’ve deck. with going year newly program a in already startup sauce a company. We we one growth years, and that Conversely, bigger and and seat that investor electrical vehicle other areas this van exiting. also business we’re program generate we we’re not and in traditional It cover systems prototype way, here electrical accretive continuing it’s this well-established new It’s systems growth deck. run van the believe electrical the approximately sense company, a gain architecture by And our will for to the with on secret electric a the investor and with and XXXX. it where delivery $XX won win delivery our with million design production is customer of and in begins backfilled our

smaller we business business. just we and restricted well automation reality now Thirdly, our business to in bellwether made this it’s industrial by this persist in evidenced comments expect face is industry by and The softness much Amazon.

was category. in of improvement team, inventory our have in this QX hit we right-size need We our completed has in believe a we now XXXX much moved segment don’t we that our plans our and profile. and right-size to to out business the we enterprise We This right-size business plant, close it work QX. upside

it do it does it with are Those go? I P&L? do out? of what this yourself, happen? announcement When Where million asking Where’s be $XX be the going might you questions. of Now will logical to cost

profit and offset steady performance industrial we’re this improving now, and For automation. doing to quarterly underpin

your to this models add don’t CVG just on yet. So

accountable be will out and program. cost report our progress our for deepened out against We team we intend to goals. We’ve our this

program This XXXX to take underway actions intend right lead we and additional is cost items program. during now XXXX out long for successfully the time for

expectations. You ask forecast above The and a is builds also performance rate, starting might for additive truck Another above XXXX out well. high going with rate quite our annual the logical wonder question. started at which external vehicle yourself, I It’s out how businesses to good year our of CVG? run

so need this industry’s the at as pace a build underproduction far year due can couple to the build, The clear of stated the XXX,XXX if be before, to get North trucks and to they they’ll American trucks. industry parts, industry backlogs built years

So out right the cost now to we program wins believe electrification have we automation startup a focused cost we vehicle tied industrial on offset business larger already production and to programs lower underway program higher expect new weakness and vehicle expected, corrected that’s than prices, it and automation.

this also an moderating and and and already. growth finish seating will exposure, problematic Automotive We focus board the and this Ketteringham unit of our Russell hired industry week. from he’s cost announcement what increase will veteran few on BOS new over named out making mentioned and given for and come culminate right he’s money business. solutions leader as high North in next that down customer the in we our startup we programs specifically are house blend on have now Europe I We’ve new business CVG the To quarters the vehicle with this seating exiting narrowing America an

that lead Solutions better industry the we’ve than way. and XXXX segment for believe be We to XXXX added the in CVG will significantly and veterans overall, actions and firm Vehicle

expecting – but come at expect level. Industrial Automation comeback low big continued not modest a out We’re the a instead we contribution in segment,

GAAP to last is prologue operating results. topic My accounting versus with regards

that those stance he saw would provisions of and follow few big profile tax cash will, and accounting some ago well led inventory reading and Warren better GAAP to fan it underlying his results I’m, and Berkshire deserves operating year-end than that usual alive are are course, chucking but CVG of GAAP in And be Buffett’s you if letter like a now follows week to Hathaway closure annual and He flow accounting. that the year-end he Andy that. will GAAP took CVG’s For right posted explanation and and a of same pension dynamic precisely results. always a do

Andy will performance, But our customer year-end inventory nor rights our freshly recovery our provision, later. reverse at itself tax certain flow. negotiations set legal GAAP long-term Further, that to the the free be and commercial XXXX. year-end And items these performance, U.S. clear, XXXX will an none cash inventory we active business were our short-term believe and provision this at and have impacted of likely up with elaborate plans, regarding

So you turn attention wanted little an on and want Page and things bit I to overview to to to presentations X. Andy say the investor deck a the I, and right your now give and those presentation upfront, of

in delivered delivered our X.X% margins target our expectations We driving by the and progress year-over-year, strategy. net quarter. during hitting to operating and team volume quarter, during up volume transformation driven price target significant our quarter, increased Turning performance levels million, of operating the good levels, utilization $XXX sales making in the with again line

all million, with a income free $XX.X contribution no from of Automation EBITDA our adjusted million, cash of flow segment. delivered We operating $XX million, Industrial of $X.X adjusted

fourth results segment. the the program, Our included were costs, quarter Vehicle expensed which in quarter mentioned seating in the startup Solutions previously

especially launched electrification. as to meaningful cost have Furthermore, program than additional corrections during we We quarter busy areas, price January continued earlier offset had an future on we new selected already a and multiple which and quarter, modest fourth well Automation. achieved electrical expanded growth program negotiated mentioned out XXXX, Industrial Xst, more begun awards in performance our as additional in and

our recovery a to inflation year have year while off full Looking the it suppressed vehicle of XXXX, and areas, costs temporarily peaked quarterly cut our in in these negotiate offset cooling during the at and and certain to price areas. results we businesses seems

meaningful Our the in teams way up the year, to XXXX negotiated the all businesses and cut year-end vehicle during costs XXXX. almost achieved and recovery continuously throughout including profit

focused on same produce long-term revenue of business. time, very change mix mile is vehicles. the we’re obtaining systems middle on business, on our electric is markets. continued long-term in last focus focused primarily the profile aftermarket growth mile strategy commercial autonomous and executing At electrical on and our A long-term and to agreements and Primarily mix improving which the secondary new profit

new when new ramp. had vehicle these $XXX our production during of against million approximately of We secured team great the at accomplishing additional set programs valued growth full revenue full in a year year an improvements is objectives and

our to also were we able flow, and all down cash debt. fund Regarding pay of activities internally

exceeded the million which million For the full communicated we debt, to that down during $XX $XX $XX XXXX. we year, pay of million range

was in area debt to $XXX level debt reduced key remains a for low by end million XXXX. net CVG Our maintaining year XXXX, focus and a

comments Page X to XXXX. for a few more on Turning

While level these significant ramp one at a issues of hold employee make of we inflation most during did face year, were temporary and a we short-term China, induced several industrial our on overcame a including and stoppage shutdown rapid war we automation, and in in progress execute, Ukraine at high a facilities plant, our business COVID-based down X,XXX transformation. own to our results profitable and the hurdles able

vehicles. revenue we electric of tied revenue with growing record to annual results financially Along proportion million the a delivered of accretive such end-market $XXX and as way,

business already five going wins multitude this alluded platforms I’ve during securing a we’ve institutionalized year year to, approximately in a and the new of strong with new $XXX goal per As forward. million product delivered year we of wins on

XXX also XXXX programs We won this year – won and business out platforms. vehicle And and existing we multiple XXX new started new customers on already. business well new have across in we have wins has

we increases as exit offset businesses. We Additionally, continue our the in Industrial business. lower segments size underperforming vehicle profits of We able this improve of our were segment the transformation, our part right Automation with to business. in to

new a launch. nearing ready we aftermarket expansion progress us significant on lines business also in now and e-commerce year, we have for to up the this software aftermarket dedicated in business, the new product which for support plant as and During XXXX. growth setting storefront electronic gear on focused the We a is made up place our for platform

X. Page to Turning

demand promising Our end across and and supported from forecasts key our is customers. markets large commentary vehicle is by our very public outlook

new ACT focus medium Research North both that American improvements For full a North predicting it’s America a are will Class in builds slight truck a be A area especially slight trucks, duty and is focused year-over-year increase for electrification. – and FTR for also forecasting year year-over-year ACT us,

eight The our the area build are and CAGR growing at grow and investing and the vehicle to business wire is growing backlog, this historical a growth at electric is The ratio X% and automotive Xx continuing we beyond. business and in sitting at modest through XXXX aftermarket commercial average. global months wire commercial And in harness X.X% is harness XXXX. around in

around With regards XXXX to expect within electric be at selected vehicle and is expected our growth legacy in line and The XXXX X% moving market grow to winning truck to and from beyond, in XXXX from currently we the specific expected and earth the this agricultural long-term grow with rates and to area markets outlook. that, growing market to also to CAGR continue in XX% segments expected is market CVG this very attractive global segment. approximately business new is

see collectively with truck So relatively moving the aftermarket systems, electrical growth XXXX. earth we strong to markets our stable across expect business across and in markets,

Page X. to Turning

for new positioned top well XXXX end with are have level industry record business expected issued are across customers participate new and up Our the in positive to These of record deliver we’re third-parties in publicly from already consecutive our predicting. and well year what seeing and wins higher third with the are to ramping customers the markets demand growing CVG customers. a revenue year line traded a and outlooks as in and existing as demand key trends for many the market

approaching in a platforms. new product across balance between wins, they’re electrical and end concentrated are our and and XX% diversified ICE healthy systems powertrains EV multiple Of

and importantly, at new accretive on the margins most measured production rates. Additionally, profitability EBITDA by wins is full

Turning to Page X.

and growth connectivity. trends We secular continue electrification, increased in to automation take of advantage vehicle

success revenue new in accretive us self-fund designs allowed an as Our as electrical new towards a this shift systems. well participant as to market mix has

engineering Our coupled that combination plants product and fast with accurate of fast our sauce. and is accurate are secret

which our spot good is it’s to low onto targeting volumes, for medium targeting We’re participation and selectively our a sweet margin.

as or We Morocco. voltage commercial both focused And have vehicles. for toll TAM, customers in adding right solutions with a both previously high now full in located variety of it’s available mentioned, voltage. and plant propulsion covers vehicles and in electric new we’re systems on CVG market large connectivity low targets Europe and ICE and a markets it

XXX action van in one wins product of An in is larger Page one it’s example most of plus approved of many about we XXXX. on the voltage example albeit, That products customers. We lines began began at became wins, X. recent. strategy our factories market and and our and year, an This in and for our is an targeting of our these CVG designing certifications achieve delivery necessary bidder same electric make low supplier and vehicles to these our XXXX. we high equipped

that in we With the targeted connectivity then production and early lifetime designed bidding participated we our type has the is here this electric be new In business, at a over the example it believe of this this customer added future We example, market awarded it, million drive Mexico. and program for the wins of the well-established the vehicle are of portion plant in the produced business value physical won won new development in good business we XXXX. and we new the This along is the in growth. this We to to design layouts. we’ve program, attractive and architecture for way. of winning very a $XXX a a

we CVG. the overall and impact will CVG, make current but Electrification to sales only positively expect return we new Electrical XX% invested This margins X we which in and for for in our of believe new to based programs, XXXX not the significantly to and and within revenues business, within supports the commercial automation our of our would the largest outlook growth on continue margins Page momentum Systems systems strong outpace grow vehicle nearly from bring will electric they market. secured outlooks our on the Highlighted capital. accretive and segment our our business segment operating growth years on growth come,

Furthermore, from decline to as in by systems, XXXX. the within our of expect approximately waiting truck classic its XX% half we electric mix we current XX% see exposure grow to revenue

apart new We will areas, other expect in modest to in shift is reduction systems, profitable effort wins this of cyclical new be part by towards more wins driven electric mix our and business. a and less focused

And business. risky committed and backdrop, fully we to Industrial the performance our is exiting CVG XX. short-term improving out. Slide or difficult long-term. unprofitable value committed shareholder profitability demand business believe Despite Automation our to Turning increasing bottomed segment of ongoing a we’re and has to

earlier, Automation in to win renamed Warehouse mentioned as have warehousing. of areas business we new of Industrial I we outside to Automation As segment automation look

automation right people, markets, approach industrial or to shows our rooftops, where business. while or we’ve markets Our inventory, our to unprofitable our sized in improving industrial our broadening non-strategic exiting our commitment wider

to We tightly our our here capital allocate and opportunities. and support resources growth structure control focused cost will

fund the electrification to especially is curves, for We to in strategic and position in automation. the and continue diversifying our strong to The capture flow cash automation result ourselves ourself attaching the down, allow our of business. pay customer acquisitions, base growth, to cyclicality and trend and our drive and connectivity debt expected for in growth space secular electrification reducing

debt paydown. Automation win in business. higher and roadmap up I in a XX. before flow and make free strong and we’re and turn Page revenue, I vehicle the over record We Industrial on highlight to downsize XXXX businesses a just and exited of And deliver year our want position hall and EBITDA our in money revamped to again set We believe to cash Andy, that XX our continued

concentrated diversify with $XXX to at and customer which million continue least business base product portfolio, and our systems, growth exposure. accretive electrical will will improve our target our of profitability We annual

be The discipline in paydown with debt we’re and and on result fund bolt-on position in to at in solid margin a $X.X prioritized deliver flow revenue for combined potentially approach track capital adjusted will our in billion X% transformation additional XXXX. our growth cash in believe with working We a M&A. EBITDA

We cost approve non-core the in time. position to and at the costs our are cut areas same convicted

a like over financial of Andy to our for the results. review detailed to back I’d turn Now call more Andy?

Andy Cheung

you, Thank and good morning Harold, everyone.

XX. was The Slide growth period. year revenues along turn If primarily material following XXXX $XXX.X million quarter attributable you the increases. year-over-year the million to as pricing are from prior to to please presentation, offset Fourth was to compared increased $XXX.X cost

Foreign currency four unfavorably million revenues or quarter XXXX impacted $X.X X.X%. by translation by

The company to reported an operating income the prior increased due to compared year in includes which XXXX restructuring fourth $X to special in of the of million and write-down due Automation inventory costs million This segment. consolidated for was $X.X items, loss of primarily quarter Industrial the demand period. the

operating impacted unfavorably translation loss currency by million. $X.X foreign Additionally,

Adjusted during to million of for to expense quarter EBITDA compared in EBITDA higher compared the of the XXXX. base primarily was balance Interest related and adjusted fourth as EBITDA a average $X.X quarter million the rates $XX.X million was net in to in to debt the compared compared fourth the to the up quarter year-over-year increase XXXX. fourth fourth higher of XXXX. margins quarter margins expense XXXX The of interest prior interest was X.X% of $XX.X million $X.X X.X% were as quarter fourth Adjusted in year.

to was results This $X.X of reported million pricing. in impacted diluted loss headwinds. Net $X.XX prior during steel some operating million the financial per $X.XX $XX period. the pressures, net by were compared or included inflationary solid negative performance share diluted negatively or as shares particularly income quarter our the quarter, Despite for continued per

we have Although expect pricing cost taken as high and some the these offset Harold mentioned, alleviation actions in to near-term. already

segment business to results. Turning

income, increased to to operating Our compared due Vehicle to prior the $X $X.X and excludes which $XXX.X million quarter pass-through higher the to quarter adjusted inflation versus material year special start decreased Solutions revenues for costs. operating million. due segment cost decreased price income quarter in than ago in cost fourth to period, XXXX, up primarily million and Operating million planned the compared to to income year XX% a fourth $X.X primarily cost, of XX% quarter, higher volume. recovery lack Fourth

increase XX% Our Electrical to $X.X and mentioned $XX.X the quarter, of an due from new previously year compared ago pass-through to fourth million, the increase the pass-through from Adjusted a from contributions $X.X favorable an fourth Operating ago increase quarter. Systems of income in segment volume business resulting XXXX compared cost wins. of million, of material income of achieved operating $X.X quarter was material million the and as revenues mix. an was fourth to year XXX% cost million,

million segment quarter, ago material increase Aftermarket Our XX% to primarily and $X.X $X.X increased cost. The year pricing. and $X.X increased of increase of year million increase to $X.X pricing million income to compared ago from revenues fourth to and attributable quarter. compared Adjusted volume sales year in increase million primarily Accessories period. $XX.X an resulting Operating the million, the to in was the is was operating income the operating offset to increase prior in income compared XX%

period. on growth shown powerful can the $XX.X combined bottom in our growth an related and million demonstrates year XX, performance compared year was line. to quarter. see to the to Slide profit vehicle the the three $XXX basis. income adjusted on revenues of operating compared Electrical in XX% The Systems ago our million the of million $XX.X on combined $XXX you in in increased segments has the Combined prior segments increase impact XX% Aftermarket million, the operating The adjusted As

period. million million loss inventory $XX.X charge attributable volumes $X.X compared the fourth of million. income Our of $X.X million, of Industrial compared prior the the $XX million of $XX.X over previously demand in was due to as loss lower $X.X in sales to lower ago XX% to an XXXX, levels. to a quarter fourth of to quarter, quarter primarily mentioned Operating was million operating decrease Adjusted operating Automation segment the produced of year year compared decrease revenues $XX.X in the million income a and

at at trends million, quarter. some Slide came the line margin for in revenues highlights $XXX revenues the despite the in previous X.X% in production along in quarter adjusted Following XX The quarterly came Fourth quarter. financial below the days. fewer previous in with quarter, on slightly lower the key quarter, EBITDA presentation,

free quarter, out shown for the has paydown. million the aided the fourth and cash during which Additionally, flow quarterly debt few $XX last improvements quarters was

Turning to would I some Slide EPS XX. on highlight few to like items include items. special which bridge, a adjusted the

First, million of for as result non-cash assets or took [ph] growth a of our $XX.X evaluating per tax share. $X.XX a charge

we and Second, completed $X.XX per $XX.X or the recognized million non-cash after restructuring inventory of the a share business Industrial tax. Automation down of write

recorded a Finally, $X.X of tax or U.S. pension company’s of termination related per to $X.XX we million plan. charge legacy share after the the

expenses we addition, incurred higher our wins. new support to the startup In also business in quarter

Foreign currencies. the stringent items Adjusting been was $X.XX dollar well several also per as against restructuring these a our U.S. exchange EPS headwind would’ve for as as share.

will Thank Harold our remarks. back final turn you. I for now to the call

Harold Bevis

base. recovery although comments able to been by Andy. strong resilient that vibrant we’ve on focus our to of you, fueled customer and XXXX, growing had efforts, basis, strategy clear initiatives like thought, by a and had than been of our transformation good conclude and year my profit and a large plan lagged reiterating some and our And pace progress the in we’ve prioritization the on achieve I’d we’ve Thank have has and of our a better and strategic a we them

towards forward calls. successes And on capitalize these profits look to ready we’re the and XXXX, in to sharing trend in you we growth company with higher secular in stronger and electrification. future much a We’re

I’ll questions. over And the our operator Thank line up to turn call the to you. now for open

Operator

go Thank you. Sidoti [Operator at Instructions] question & comes Please John First Company. from ahead. Franzreb

John Franzreb

the Thanks Good Andy. for taking Harold and questions. morning

Harold Bevis

bet, John. You

John Franzreb

I’ll positive eight, modestly, you Harold, commercial bookings the market, improved seven into it might five some be you’re to sort sounds three have had about or that that getting second maybe say, of to you give truck starting not the order confidence it see ago? more you months it half like phrase are

Harold Bevis

have we our and can has customers stronger visibility. have outlook basically top we year Yes, we have we and from making improved a remarks good and than are public confirmation expectations started definitely – the out

are that outlook business Our and as business we visibility have, a half, we’re second extends the seeing and startups our new on yes, stronger into seeing for core well. attempts we our for

for and demand the have that headed strong we that we’re there’s So vehicles onto.

John Franzreb

that’s want markets, what’s new to revenues on you new there? Automation get the to access pathway Good, generate into but those good Industrial to markets business, the it And news. extend and sounds like end

Harold Bevis

Right.

mainly we’re positions smaller had. So, leveraging business our that

bit in we business it. We that to are automation. not a investing more Minja or We warehouse The brand whole helped it back it bought into that went was business a of thing event per a industry automation it that businesses put and or areas the new was warehouse than distractions leveraging. time little new with were broader a now; a he last We it’s Zahirovic. background spike us while retrospect legacy into But through leader almost effort year, had se. like lot And crazy came brother. a

following outlook time period just it, is we provision took. so gap still small suggest would We we it’s business. that it’ll have And stay the for just accounting a and that smaller small have our automation a of warehouse and that

contract really and so of on And it’s manufacturing, system end John. the builds small

John Franzreb

Okay. you on And you. just up aftermarket helpful. how That’d bring your speed Thank can initiative, that’s proceeding? us to be on

Harold Bevis

Yes, with completed inventory now. our profiles we are virtually

lead versus windshield are The Shopify high are business, pricing primarily of that it’s it’s profit our raise seats run a out stock our building primarily, John. put ship from brought Amazon to a and we’ll stock a place week not experienced shipping going in X% growth we monitoring as from with it’s and And is – eight X%. a we shipper. won’t there profit, before from have grab aftermarket inventory business experience And we leader and And software be we prices or because going to that will wipers. we happens. his And on pricing – demand in time. be we We’re we order based our an daily an to understands

aftermarkettruckparts.com called and going to So, business, here couple going a weeks. be it’s we’re in launch to running e-commerce it’s an

John Franzreb

Okay, thanks. I’m queue. to back into going

Harold Bevis

John. you, Thank

Operator

you. Thank

Next NOBLE Gomes comes go ahead. from Please at question Capital. Joe

Joe Gomes

my Good and questions. taking for morning thanks

Harold Bevis

You bet, Joe.

Joe Gomes

Pardon me.

So in of revenue negotiations quarter in we talked about the you had about, for XX% to you the last the – contracts were there. improve

these You where think talked price Kind inflationary on those stand more do they year. offset to this you that about of sufficient you Are increase do to increases price you pressures? some be beginning the made Or necessary? all in and going there’s January. of remaining

Harold Bevis

now ahead. Nope, we’re

fully in benefiting recovered. of ahead our And negotiations increase we took to realizations price the January additional that quarter. were that from did and fourth were we had this in and expected quarter on X price costs, effect Our we fully as alluded I that the that

Joe Gomes

Okay, in also of freight XXXX. XX% had you ocean great. And How there? do about early you eliminating stand the talked

Harold Bevis

Yes, in We’ve freight we’re our that offset and too. benefiting production ocean quarter. that in region as that and is this done fully program underway from and implemented we’ve half we’ve well our improvement cost of

we business, very and So on our Automation doing the sized just this and further businesses vehicle it should, rip business had as Systems a low price Vehicle we into Industrial expected, year, in and and the level cost is the quarter. in side, it Joe, rebounding had still improvement we’ve big still are where we were quite and, the of the right from fourth as but well cost out we coming

Joe Gomes

this talked today? wondering, where’s slide And pipeline you quarter And out in put last didn’t pipeline. billion $X the just you that same Excellent. presentation, about a

Harold Bevis

Andy took seat both were $X could at startup – a bespoke bespoke increased I new the see And that versus XXXX, and doing in of tied costs we we and into we business million alluded definitely we Yes, and We so in-house focused that Industrial programs XXXX pipeline they portion a platform bunch pattern to, our called heavily and both Unity. as and common seats. Automation of our a the using that further have also a pipeline. out we that stopped we’re big removed stared

very pipeline vehicles. the dominated automation, electrification, electric by So now is

Joe Gomes

margin in where same of last just margin That revenue billion could I’ll And And Okay, roadmap and you back adjusted showed clarify today, to then I out changes an again, long-term that you for you wondering, there. quarter. compare that clarification of get kind if adjusted one, two. of looking XXXX I’m and X%. about billion come roadmap I about $X.X one talked put X.X%. thanks roadmap that the in you last that put And revenue of Kind EBITDA the out of the and at, of $X.X into queue. operating

Andy Cheung

me let so Yes, take that one.

So the things we between of the here, focus key the our strategy the now version clearly $X.X growth. last $X.X right and of fractured

in our of alluded by, shining winning we’re we are business that Harold as unprofitable a away selective and lot business. executing from So not being to are more terms exiting and we

the So, we better for enterprise. is that value that approach overall believe the of a

more executable in So, and XXX plan, we creating now basis are improvements definitely our a confidence a us terms bottom point give new to to target, our the to and more new of over aligning line. will strategy that that get of roadmap

So that’s Harold mentioned. the just new thinking. It’s everything aligned with

financial this as targets. there we a focus lot think our that’s and why new reentered, out I more put of it more is execution so

Harold Bevis

we’re And it hardwiring too.

in our vehicle growth the non-electrical areas or going our So curtailed modified we’ve business areas, plans where forward. the

portfolio to those job We cut is the costs cash growth. additional and deliver in EBITDA have and areas in their

and and we’ve and person margin portfolio operating it So the flow clarified we’re of missions automation in of improved each it. industrial some generate a and aspirations basically cash in good plan businesses. And vehicle tight implementing with it’s underway will the growth removed then the non-electrical and free

Joe Gomes

Great. Thanks guys.

Harold Bevis

you, Thank Joe.

Andy Cheung

Joe. Thanks,

Operator

Thank you.

Company. from Next follow-up question is Franzreb at Please John ahead. go & Sidoti

John Franzreb

are debt but thoughts what this Harold, repayment have XXXX? guys. Great, might thanks about I missed the presentation, your in in

Harold Bevis

had Yes, flow out and of probably to the, do we cash plan. coming have not as some be last going hanging a ocean free but fruit all the We COVID freight low stuff, year. as it’s strong

we’re we it incurring, do here, $XX target million – a we modestly. should will we working and of is to million but going what net-net $XX We cash. generating now, Right do but have upside aiming. into we right contemplating we’re so capital, that here now growth a back are the growth capital we working we’re be consume to You use do somewhat, plans, have use, cash do

doing That’s because use of year heavy and too. the we it’s hot starts year, quarter similar first to the out building that last and this cash truck

it overdue. accounts AR last our and was got about of really if that look AR, goes going source didn’t year So up. a pay was of of they so blended And we that And the you plus it managing components time, at had our the as AR in customers big customer terms we and out automation were had receivable, after well. industrial extended on cash the good profile

that I and We range. an to be year in Andy, have is think improvement plan going explicit this

Andy Cheung

John that’s of a looking and That be steady next both the pay for couple years. we’ll at down more why

starting comfortable I feel are that approaching, to we’re a think we level with. better

we So mentioned. and now Harold right that’s are where that’s

growth grow years for going the own So we’ll this be next funding, company all couple cash. and with our to the of

So at that’s what thinking point. this are we

John Franzreb

the of And impact be much is $XX Got the to takeout? cash And how heard million income. to is calling case? going operating cost a you year, Why correctly, cost you’re neutral this it. it I if that takeouts the requiring

Harold Bevis

add year. to the I’m EBITDA the just not suggesting let’s outlook for

growth course underpin to We’re are and, increase steady of we’re significant headcount with we now, pretty with in We plans expectations that’s quarter of want the us trying and in underway use there a Europe deliver. to on cut ability initiated track. underway out to severance. first regards the the And our cash programs our that’s to

blend there’s on Our severance off. severance We is on they today, tomorrow additional payroll no pay the They’re don’t continuation, and use of so cash. lump sum. salary they’re

will associated year. CapEx year CapEx some have out our do cost programs and similar to the We be with last this

and we’re profits. areas cash grow, the going grow where ongoing to accomplish same of John we’re focus use that? everything the you then our with be optimizing where Andy, that. incremental very gusto to net to to try It’s cost not a other focused, cutting we’re going where down no where more add and So of we to business would

Andy Cheung

well, reduction comments, cost high. Yes, the business. optimize new ramp for new time, EBIT right? curve net year up so continue The at our positive reduction look for that will the two of Harold back of what a factories, there That’s can building this year, are the will we cash to answer margin the execute our CapEx a it required and the us. be bit At a about. is talking not And there’s say So is cost amount with short to is, as what John, with to businesses. cost little productivity same you existing

So net-net through I think pretty right I slightly ramp factories, see but now road. as those benefit at down we’re new positive, the stable, think a we’ll we looking

Harold Bevis

we to couple performance, of not for as comments, after wanted break to a get our structure be much. modify going we’re the [ph] quarters and cost gusto going now we’re areas but John, as ICE know We’ll we that just everyone growing through let with our the that in

John Franzreb

look of end for you, Okay, again What you settlement. got I impact year? guess, pension I of quick in tax on And is ease Can any there you think that at the and easily those? kind through rate like just reversal P&L the year. it. the the regarding you two expect walk Is the said the a from the on And to just tax? me

Andy Cheung

Yes.

finished we here, things the the settlement pension. one couple completely the So is, of

the which no a thing good in we is for have company. really the a U.S. So now liability, pension longer

in the can see implication mentioned that on and settlement filing, tax the that. see [ph] here And can the we topic for you charge follow rate. recorded So tax also the you is the you the filing other a

lot at the adjustments special year I end, large now have think the of we right put items. through a

we of evaluated we right you near million. allowance, the things $XX about the the our the to not in determination about believe – the in tax book profitability, are necessary future. which right due then is on allowance is the $XX going with in rate. ask evaluation, the that and deferred one million, the evaluation that based on size provide a as the may be we future, to that biggest the tax We made And So assets

at tax be point we XXs. at. our effective rate this in looking the think That’s where I will high are

and So, mentioned, there’s there’s done long-term. but here, items are or fewer no operating that know I results these short-term but all cash items all a impact Harold to big as

So feel if comfortable those. you with

John Franzreb

I’ll Great. Thank back into Andy. Thank you. queue. you very get much,

Andy Cheung

you, Thank John.

Operator

Thank you.

Steve Next question Investment Emerson go from comes Group. ahead. Emerson at Please

Steve Emerson

a quarter environment. Congratulations in tough excellent on a

Harold Bevis

Steve. you, Thank

Steve Emerson

XXXX goal your of terms related? in year XXXX were and proportion What EV

Harold Bevis

What related are EV XXXX? What you in our saying? were proportion new of ones

Steve Emerson

No, related? in like your XXXX. of $X.X that How billion is objective EV much

Harold Bevis

that going It’s going question. electric system’s the portion be be Good XX%. of The around, I’m around to half, be good say to be going going to to to going is question. vehicle it’s electric XX%.

Steve Emerson

do have number XXXX And similar a XXXX? business. So XX% of for or you the

Harold Bevis

electrical we secondarily, vehicles. been business but with primarily XXXX, electric program we continuing It ICE majority of only ICE have jump systems. on our vehicle and And been in startups. in on-road went what on-road on-road are on and on ICE, It’s ever started very and has focused secondarily picture and after big we vehicles vehicles the straight manner, vehicles. The that started the We on electric modification. small. vehicle new wins commercial And had and off-road an electric no

up so vehicle, pursuing. the in we exactly working of deck far that’s So example that an is electric put and the we kind programs van a the we’ve have of with example in electric area. program set evergreens all type to The have we’re we’re continue that growing

get be supplier on to as to trucks. there it that bid delivery multiple ICE we and pursuing approved we immediately electric we’re win we vehicle in vans when supplier and multiple We’re are there an get program, well. And the vehicles work an in and an approved

vans you EV Bimbo supplier. ambitions in there So UPS, and at to to there ICE of to look switch any right our as proof if Amazon, they delivery FedEx, all are the their we’re out and Bakery, have

voltage is. side the care opportunity electric low only don’t vehicle. a type There’s what an powertrain when on high voltage it of systems it’s the electric Our

we So, for and them, of going both we’re a Steve, for hard. have equally solution both

Steve Emerson

loaded Excellent. quite terms of And year’s I to going assume in be backend your that by this EBITDA. comments

let’s and EV the program. You’ve startup, say got the plants on up starting two van

Andy Cheung

Steve, at quarter four pretty I even very I would out because say per continued we’re think QX, strong year looking we QX this production. see year

program I there Clearly mentioned. with even the little bit market but is already pretty we a Harold risk extreme. the not very place. half, of of in would As it’s say on have second extra improvement

Steve Emerson

you. Thank Excellent.

Harold Bevis

Steve. you, Thank

Operator

queue. in questions further no are There you. Thank

may proceed. You

Andy Cheung

results Very that, our look performing end and conference out in call. on this you everyone and short-term for reporting With to Thank call. forward good. in Joanna we and listening long-term our the year, next will

Operator

We call this gentlemen, and lines. participating you for disconnect for that we thank today. ask and Ladies your concludes you please conference your

Commercial Vehicle (CVGI) 7 Mar 232022 Q4 Earnings call transcript