Unique Fabricating, Inc.

Greetings and welcome to Unique Fabricating's fourth quarter 2020 earnings call. Currently, all participants are in a listen-only mode. A question and answer session will follow the phone presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Rob Fink of FNKIR. Please go ahead.

Thank you, operator. I would like to welcome everyone to Unique Fabricating's fourth quarter and full year 2020 earnings conference call. Hosting the call is Doug Cain, Unique Fabricating's President and Chief Executive Officer, and Brian Loftus, Unique Fabricating's Chief Financial Officer. Before I turn the call over to Doug, I would like to remind everyone that matters discussed on this conference call will include forward-looking statements defined in the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. Forward-looking statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause the company's actual results, levels of activities, performance or achievements to be materially different from any future results, levels of activities, performance or achievements expressed, or implied statements made on today's call. All such forward-looking statements are based on management's present expectations and are subject to certain risk factors, uncertainties that may cause actual results, outcomes, performance to differ materially from those expressed by such statements. These risks and uncertainties include, but are not limited to, those discussed in the company's annual report on Form 10-K for the period ended December 31st, 2020, which was filed last week with the SEC pursuant to Rule 424B, and in particular, the section entitled Risk Factors. All statements on this call, including those in this afternoon's press release, are made as of today, and Unique Fabricating does not intend to update this information unless required by law. In addition, certain non-GAAP financial measures will be discussed during this call. These non-GAAP measures are used by management to make strategic decisions, forecast future results, and evaluate the company's current performance. Management believes the presentation of these non-GAAP financial measures are useful to investors in understanding and assessing the company's ongoing core operations and prospects for future. Unless it's otherwise stated, it should be assumed that any financials discussed on this call will be on a GAAP basis. Full reconciliations of non-GAAP to GAAP are included in the press release that was issued earlier today. With all that said, I'd now like to turn the call over to Doug. Doug, the call is yours.

Thank you, Rob. And good afternoon, everyone. Unique Fabricating, Brian, and I appreciate your investment of time this afternoon for an update regarding our outlook, overall operations, and financial results. As most of you are aware, we filed our fourth quarter and full year results approximately two weeks later than we normally would as a result of a restatement of our first three quarters of 2020. We corrected accounting errors that resulted from control failures related to turnover and a staff shortage, which required us to restate our financial results to the first, second, and third quarters of 2020. That process is now complete, and we have filed updated and corrected financial statements. We are glad to put this challenge behind us and to move forward with confidence in the reported financial results. The most significant errors were attributable to the first quarter of 2020 with nominal adjustments to the quarter-to-date statement of operations for the quarters ended June 30, 2020 and September 30, 2020. As a reminder, Brian, our CFO, joined Unique Fabricating in early April 2020 after the first quarter had been completed and he needed to rebuild the finance organization while working through the first quarter reporting period. This was also the time during the onset of the significant COVID impacts on our business and our activities to secure the PPP loan. We share this as an explanation, not as an excuse. We want to make it clear that today we have the team in place to ensure that issues like this do not reoccur. In fact, our new and capable team discovered the errors and worked tirelessly and diligently so that we could file our results on April 15. We are now back on track from a financial reporting perspective. In a few moments, Brian will discuss the details of the restatement. We have seen continuing commercial success over the last months in our targeted markets across all of our locations and processes. For full year 2020, we won 208 million of new customer order intake, or COI. Over the last 15 months, we have made significant improvements in the capability and capacity of the organization. Combining the continued commercial success, ongoing operational enhancements, including the implementation of the Plex ERP system in all U.S. locations, and the completion of our consolidation activities, We are positioned for a positive path forward despite the well-documented supply chain impacts affecting many industries and businesses at the present time. The latest independent North American automotive production forecast for 2021 shows approximately 15.6 million units. This is 21% above the 2020 full-year production of 12.9 million units. This forecast does include the current expected impact of reduced OEM production from the chip shortage and other supply chain challenges estimated now at approximately 800,000 units concentrated in Q1 and Q2 with an expected recovery of 400,000 units in the second half of 2021. Light duty new vehicle inventory levels remain well below historical norms down 25% from March of 2020. Fleet signals have also remained depressed at 28% below Q1 2020 levels, but with demand strengthening as travel increases. For 2022, the current outlook is for approximately 16.2 million units, or a 4% increase from 2021 full year. We continue to see strength in our appliance business, despite this market also being impacted by the chip and petroleum-based raw material shortages. Home building and home improvement trends are expected to remain positive throughout 2021 and well into 2022. We have also begun to see recent success with our initiatives in winning consumer and off-road business, including marine applications. For the first quarter, we're expecting revenue of approximately $34.5 million. We are achieving this level in spite of the supply chain headwinds I mentioned. Despite the impact of these supply chain challenges on our customers and suppliers, we expect sales to increase slightly in the second quarter from the first quarter levels, assuming conditions do not worsen, and for the second half to reflect sequential and year-over-year increases. These higher volumes represent both the market share gains we see from our COI wins and the expected higher overall North American production as our customers recover some of the lost first half 2021 production. The Q4 financial results reflect the pandemic impacts and other challenges, particularly in the supply chain and labor markets. Brian will now provide an overview of our fourth quarter and full year 2020 financial results.