Commercial Vehicle Group, Inc.

Good morning, ladies and gentlemen, and welcome to CDG's third quarter 2021 earnings conference call. Today's 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 call over to Mr. Chris Bonner, Chief Financial Officer. Please go ahead, sir.

Thank you, Operator, and welcome to our conference call. Joining me on the call today is Harold Beavis, President and CEO of CVG. We'll provide a brief company update as well as commentary regarding our third quarter results, after which we'll open the call for questions. This conference call is being webcast, and a supplemental earnings presentation is available on our website. Both may contain forward-looking statements, including, but not limited to, expectations for future periods regarding market trends, cost savings initiatives, and new product initiatives, among others. Actual results may differ from anticipated results because of certain risks and uncertainties. These risks and uncertainties may include, but are not limited to, economic conditions in the markets in which CBG operates, fluctuations in the production volumes of vehicles for which CVG is a supplier, financial covenant compliance and liquidity, risks associated with conducting business in foreign countries and currencies, and other risks as detailed in our SEC filings. I'll now turn the call over to Harold to provide a company update. Harold? Thank you, Chris, and good morning, everyone. On today's call, we'll refer to our Q3 presentation, which is on our website. If you could please take a moment and locate that, we are going to refer to that document. We'll provide an overview of our third quarter results, including an update on our strategic initiatives designed to grow our earnings and position CVG as a profitable leader in multiple new markets. While repositioning, we continue to deliver record revenues even in a modest and volatile truck build year. which is a clear validation of our strategy and the success that we are achieving in our global organic sales growth process. We are also thoroughly experiencing the supply chain and inflation issues that exist, but we are in a much better position today than just a year ago. Following my remarks, Chris will discuss our financial results in more detail, and we'll conclude by opening the call and answering questions. Please turn to slide four in our earnings presentation. I first would like to say that we delivered our expected profits, volume adjusted, and we are focused on this going forward. We delivered third quarter sales of $239.6 million, an increase of 28% as compared to a year ago third quarter. This growth was driven by new business wins in warehouse automation, a slightly increased truck build rate year over year in North America, and material cost pass-through. Our operating income also increased 28% to $11.4 million in the third quarter as compared to $8.9 million in the year-ago third quarter. The improvement was largely the result of higher sales volumes as well as our successful efforts over the past year to reduce our cost structure and drive operational efficiencies across the company. As we have discussed on prior calls, optimizing costs is an evergreen continuum for us and continues to be a top priority of our management team. Adjusted EBITDA was $16.9 million in the third quarter as compared to $16.4 million in the third quarter of 2020. The improvement was due to higher sales volumes. We delivered $0.25 of adjusted earnings per diluted share in the third quarter as compared to $0.21 per diluted share in the year-ago third quarter. And our new business awards continue to grow. We have won approximately 190 million of new business year to date and are walking away from approximately 30 million of low profit business to give us a net new award number of 168 million annualized year to date. We're very pleased about this and it is a focus of our management team. Please turn the page with me please to page five. And we'd like to discuss our road ahead and give an update on our four key areas, growing and diversifying our revenue mix, increasing our business in warehouse automation, increasing our business in electric and fuel cell vehicles, and optimizing our service and cost structure. We're pleased that our team has made success in these areas year to date and in the quarter. We're gaining new business awards in electric vehicles, last mile trucks, and power sports equipment. And during the quarter, we secured $39 million of annual new business awards, which brings our year-to-date total to the net number that I just spoke of, $168 million. A majority of the quarter's wins were in electric vehicle market, where we're seeing strong traction with our value-added products, sub-assemblies, and systems. As a reminder, and as we've said on prior calls, when we speak about the value of new business wins, it's the estimated value at peak run rate, once the new business awards have been fully ramped up. Some of the new business wins are shorter cycle from award delivery. So the shorter cycle wins that we secured in 2020 are helping us in 2021. On the other hand, given that approximately 70% of our new business awards are in electric and fuel cell new vehicle markets, they will take several years to ramp up before delivering the full annual revenue impact. This is due to the length of time it takes to develop a new vehicle. That said, this is providing excellent forward visibility for our company's revenue growth over the median term as we continue to win positions on new EV and fuel cell platforms with both new and existing electric vehicle manufacturers. The last point on the right side of this chart on page five is very important and involves the daily activities of the nearly 7,000 people working in our factories, and that is to deliver a quality product on time and on profit. It is a clear focus of our team to be less reliant on the North American diesel truck market as we expanded in new markets like electric vehicles, warehouse automation, and power sports equipment. Ultimately, we'd like to see our growth in these more secular markets be equivalent to or even outweigh our current portfolio mix. Looking at our end markets in more detail, could you please turn to page six? I first want to speak about our largest market, which is the North America truck market. This includes trucks of all types, light duty, medium duty, heavy duty, and specialty trucks. This is approximately 36% of our sales year to date. Demand for medium duty and heavy duty trucks continues to increase as evidenced by the increasing backlog in the industry this year. This backlog is being driven by supply chain constraints, and demand is exceeding the industry's ability to produce. This dynamic is being referred to some of the news agencies as the everything shortage. And as these pressures rippled through our market during the third quarter, customer schedules were impacted, which impeded their output, which impeded our production output, and also impacted our efficiency. Suppliers and OEMs have aggressively implemented reactions to these issues by immediately prioritizing components and managing around resource constraints. It isn't an easy situation and it's hard for our customers to deal with this, but as a just-in-time supplier to them, it's impacting us as well. It is not atypical to get just a few day notice of a park shortage that we must react to. This is a constant situation for us at the moment, but it is expected to persist through the fourth quarter and well into 2022. The ACT update that came out today actually states that the industry backlog is greater than 12 months at this point, so the demand for our products is excellent while the supply chains around the world are struggling to keep up. We expect demand to remain strong in this business and higher than the industry's ability to make products. The market outlook at the bottom of this page for new truck builds is also strong, and the outlook for 2022 and 2023 is is hopeful for growth. The demand certainly makes this possible. However, the supply constraints need to be resolved, the main issue being ocean shipping for many of us. The OECD actually estimates that approximately 90% of traded goods are transported over the ocean. Therefore, ocean shipping rates, container availability, port backlogs, and port operations are keys to enabling this growth to happen. We are aware of this dynamic and it impacts our customers and impacts our own ability to serve our customers. We've been reacting aggressively by onshoring key parts and changing our make buy decisions when needed. As of now, ACT is estimating truck bills will be higher in both 2022 and 2023. And again, this is based on assumptions of the industry's greater ability to produce. Turning to warehouse automation on the same chart, This business continues to be an important driver of diversified growth objectives for our company, and it's approximately 18% of our sales year to date. According to Logistics IQ, the market is expected to grow 14% annually through 2026, driven by the growth in e-commerce. The need to automate labor intensive material handling inside of these distribution centers is great, and improved efficiency in the supply chain is an objective. This is a program by program business for us where we bid on open business against other options at the customer level and win or lose just like any other business. Again, we're holding our line here on walking away and not participating in low slash no profit business opportunities. We've already secured business for 2022 and working on more as we go along. We're also reconfirming that we will do more than a greater, more than 150 million of sales in this business in 2021. This business is also impeded by the supply chain issues that are ubiquitous in the industries that we serve. The vehicle market also on this chart for construction equipment is a business of equivalent size to warehouse automation and represents 17% of CVG's year-to-date sales. We continue to win new business with new and existing OEM customers in this segment. In year-to-date, we've won 18 new programs in Europe, Asia, and North America. We're transforming this business with our customers and working to solve complex problems for both existing and new customers. Looking forward, we continue to see a strong order book for this business as well through the end of the year, which is supportive of demand. No supply chain constraints, again, are an issue that we're monitoring closely. And lastly, our aftermarket business is an important component of our business, representing 11% of our sales year to date. This business is $82 million in revenue year-to-date, and as we walk away from low-margin business at the OE level, we are freeing up capacity to make a higher amount of products for the aftermarket. We made this a business during the quarter and are developing a new e-commerce platform as well. Expanding our aftermarket business is a significant opportunity for us and a future growth engine for our company. Turning to page seven, And as we've discussed and touched on, global supply chain constraints are causing a slowdown in truck building at our customer level, combined with cost pressures and material labor freight and costs in our own operations. These issues have driven pop-up customer shutdowns through the quarter, which in turn causes volatility within our own operations as we get caught with staff and WIPP working on orders that get put on hold. Overall, we had less trucks get built in the quarter than expected for the material that we had ordered at extended lead times due to the ongoing ocean freight issues. So we flex our costs to the actual truck build in the quarter, and we did so in the quarter and held our profit rates for the volumes that we received. These issues are persisting in the fourth quarter, and we are operating in the same manner, and we expect them to persist into 2022. It's important to note that we've taken significant steps over the last year to not only improve our cost structure, but also improve our on-time delivery. We're using this modest period of truck building to continue the optimization of our footprint and cost structure that serves our legacy businesses. We're underway with consolidating multiple global facilities and implementing lean SG&A structures. At the same time, we're opening new facilities in both Mexico and Czech Republic to support newly won business. As our business mix evolves, we will evolve our operating footprint and SG&A structures with it. We expect this to be a continuous process for us. Turning to page eight, I'd like to just touch on warehouse automation for a moment. It continues to be a focus area for us and is helping us diversify our business mix outside of legacy diesel truck Class A vehicles. I'm happy to report that we delivered approximately 37 million of sales in the quarter. We also invested in this business during the quarter with the addition of a key new leader and a startup of a new plant in Europe. We have further investments planned and they're very important to our competitiveness in this area and we'll keep them private for now. This is an investment area for us, same with our electrical systems business. We are learning and investing as we go along and win new business in this area. Year-to-date, we've achieved $131 million of sales in warehouse automation and expect to exceed our $150 million target, as we stated. Turning to page nine, another new end market where we're having great success as a component sub-assembly and systems provider is in the electric vehicle and last-mile delivery van market. Our competitive advantage resides in the fact that we have a natural value-added product offering that makes it convenient for new vehicle companies to partner with us. And importantly, we can design, prototype, and build a bundle of products for these new partners and have many years of experience doing it. We're currently involved with over 40 opportunities globally, which include both existing customers and new startups that are expanding into the electric vehicle and fuel cell markets, as well as the new entrants that I spoke of. We have created a portfolio of new business wins on electric vehicle platforms that will allow us to participate in the coming transitions from diesel to electric and fuel cell. This is set to occur over the next five years, and the substitution rates vary by class of truck. Overall, we've had four new EV wins in a quarter and 18 different EV wins year-to-date across North American Europe. These wins will result in production launches later this year and through 2022. Turning to page 10, we'd like to speak a bit more about the $168 million of net new business wins that we've secured year-to-date. 95% of them are outside of the company's legacy business. We're concentrating on electric delivery vans, fuel cell trucks, electric buses, electric battery systems, ATVs, and side-by-side power sports equipment. Importantly, we continue to significantly lessen our dependence on heavy-duty trucks and older platforms. This is a pivot point approach that we are using. We're pivoting from diesel fuel, heavy-duty trucks, to electric and fuel cell lighter duty vehicles. I'm proud to report that our global team in the last 21 months has landed 236 new programs with 33 new customers located in the United States, Mexico, Canada, the UK, Germany, India, China, and Japan. Most of this business is in the design, development, trial, and or initial production phase and will benefit future periods financially. It's important to reiterate that given the majority of our wins have been on brand new vehicles, that it will take a while for the revenue and profit generation cycle to hit peak. It generally takes a few years to field a new vehicle, and the OEs that are involved with this work have many, many moving parts to get a new vehicle on the road that's tested and proper. That said, our new business wins are putting CVG in an enviable position in the future as we will be tethered to multiple growth end markets. This is purposeful by our team. A product area that I'd like to touch on is plastic injection molded parts. You may have noticed that we put out a few announcements on this business this year, which is a branded business called Advanced Tech. We successfully parlayed our large part making know-how into the power sports vehicle sector, and we're an emerging new leader. In September, we announced our investment in two additional state-of-the-art high-tonnage injection molding machines. to complement the other two large injection molding machines that were announced earlier this year. Our investments are a clear enabler of future success if we diversify our revenue mix properly. Please flip to page 12 for a recap, and then I'll hand over to Chris as he will speak in a few other areas. The demand in our end markets is strong. There are record backlogs for vehicles to be built and a growing need for alternate fuel vehicles of almost every type and vibrant e-commerce dynamics. However, the global supply chain issues cross our markets and have been called an everything shortage, as I referred to, and it impacts our customers and our ability to serve them. We are prudently estimating that this will last, and we're acting upon this assumption. We are making more versus buying, We're locally sourcing parts. We're trying to get our part supplies off of the ocean water routes. And we are addressing our prices to certain customers and opening up new capacity for the new business that we continue to win. We've already won over 200 new programs for new business, and this effort is still underway and is still gaining momentum. The financial contribution of these new awards is largely not in our results yet, just the cost to implement them. Now I would like to turn the call back over to Chris, and he will discuss a few more areas in detail. Chris? Thank you, Harold. If you're following along in the presentation, please turn to slide 14. Third quarter 2021 revenues were $239.6 million, 27.7% higher as compared to $187.7 million in the prior year period. This increase primarily reflects the growth in our warehouse automation business and increased pricing to offset material cost inflation. That said, Class A truck builds came in below expectations for the quarter, which adversely impacted our results on a sequential basis. Foreign currency translation favorably impacted our third quarter revenues by $2.4 million, or about 1.3% when compared to the prior year period. Gross margins decreased slightly to 12.6% as compared to the third quarter of 2020, driven primarily by cost inflation as a result of the global supply chain issues Harold mentioned. Additionally, we invested $1.3 million in new business startup costs in the quarter, which primarily impacted gross margins as compared to the prior year period. The company consolidated operating income of $11.4 million for the third quarter of 2021, which was compared to $8.9 million in the prior year period, an increase of 28.1%. And on an adjusted basis, operating income was $12.2 million compared to $12 million in the third quarter of 2020. Adjusted EBITDA was $16.9 million for the third quarter as compared to $16.4 million last year. Adjusted EBITDA margins were 7.1%, reflecting a decrease of approximately 170 basis points as compared to adjusted EBITDA margin of 8.8% in the third quarter of 2020. This margin contraction was primarily the result of cost inflation I mentioned earlier. Our third quarter interest expense was $1.6 million as compared to $5.5 million in the third quarter. of 2020. The decrease in interest expense was primarily due to refinancing the company's debt on April 30th of 2021. As a reminder, our new debt structure is more flexible as it provides us with up to $200 million of borrowing capacity and will allow us to expand into attractive markets with the goal of accelerating CVG's growth and moderating the historical cyclicality of our business. I'm also pleased to report that our bank group agreed to an amendment on our credit agreement, which provides increased flexibility, including our ability to now engage in supply chain finance with our customers, and will also allow us to increase our capital investment threshold to $32 million, up from $25 million to support new product development and sales growth, which Harold has discussed. Net income for the quarter was $7.5 million, or $0.23 per diluted share, as compared to $4.2 million in the prior year period, or $0.13 per diluted share. Now turning to our electrical segment results on slide 15 for the third quarter, the electrical segment revenue was $164.1 million compared to $121.1 million in the prior year period. This is an increase of 35.6%. Foreign currency translation favorably impacted third quarter revenues by 0.7 million or 6%. The year-over-year sales increase primarily resulted from new business wins in warehouse automation. Our electrical system segment now represents 69% of our total third quarter revenues as we continue to make progress diversifying both our mix of business and our customers. The electrical system segment delivered $17.8 million of operating income in the third quarter compared to $12.2 million in the prior year period. The increase was largely due to the year-over-year sales increase I mentioned in warehouse automation. Adjusted operating income was $17.9 million in the third quarter compared to $13.4 million in the prior year. Now turning to our global seeding segment on slide 16, global seeding revenues increased to $76.5 million in the third quarter as compared to $68.9 million in the prior year period, an increase of 11%. Foreign currency favorably impacted our sales in this segment by $1.7 million, or 2.5% in the quarter. The global seeding segment reported an operating income of $0.4 million in the third quarter compared to $4.8 million in the prior year period. The decrease was primarily due to pricing lags on passing increased material costs to our customers. The third quarter of 2021 adjusted operating income was $0.4 million compared to $5.1 million in the quarter a year ago. As Harold touched on and as we have discussed, our focus remains on improving our operations and profitability. We made significant strides improving our cost structure through the pandemic. That said, we are not standing still. Along those lines, we have restructuring plans to optimize our manufacturing footprint across all of our business segments. We expect these activities to occur over the next several quarters with restructuring costs of $4 to $6 million and are targeting roughly equivalent savings annually. Looking to the fourth quarter, and while we did not provide guidance, I thought it would be helpful to provide a few data points on the key drivers to our business. Per ACT, expectations are for an increase in North American Class 8 truck builds to 64,567 units as compared to 62,850 in the third quarter. However, similar to the third quarter, we believe this truck build estimate may be impacted by supply chain issues. Finally, we're continuing to experience cost increases in key material inputs, as well as freight and labor costs. We've seen these cost impacts and are seeing business and are addressing it through pricing and cost actions. However, we anticipate the supply chain disruptions will persist into 2022 and are managing to the extent possible. We believe the actions we are taking to proactively manage the current environment will help us in the short term and long term, as well as position CVG for margin expansion as the environment normalizes. This concludes our prepared remarks. I'll now turn the call over to the operator and open up the line for Q&A. Thank you.

Thank you. At this time, if you would like to ask a question, please press star 1 on your telephone keypad. Again, to ask a question, simply press star 1 on your telephone keypad. And your first question comes from the line of John Franzrab from Sidoti Company. Your line is now open.

Good morning, guys. Good quarter in a tough environment. Thank you. I actually want to talk about that environment itself. how much um did you actually absorb in higher costs in the third quarter and you talk about the lag and recovering some of them under some of the pricing mechanisms how long would take you to recover those courses you had to absorb in the september period yeah there's two there's actually three types there john one is the actual inefficiencies that we occur from having

what we're calling pop-up customer shutdowns. We'll get a two-day notice that a customer is shutting down their plant. We also had a customer had a strike. And what happens is we get caught in the very short term having excess labor that we then variable down. So we had a little bit more than normal of that in the third quarter. The second piece of this is pricing. And we do have a lag. On that impact, usually there's a burden of proof to show that our costs have gone up. There's transparency agreements with our customers generally. We show that proof, and then we negotiate to pass that through. The third element is with customers who have a contractual right to not let us pass those through, and those are different. Those we have to renegotiate. the contracts altogether. And so that's a third category for us. So we did have multiple million dollars of profit compression in the quarter. We don't really want to say the number. And we've had it here to date. It's not a new dynamic. It's been happening to us, although it's grown in size due to the inflation that's happening around the world. But it is a temporary compression of our profits in the quarter. We can see it. We can forecast it. because we order these materials in advance, and so we negotiate with our customers as it's happening. And so we were impacted both on cost overages in the quarter and on price compression, some of it temporary in that it's going to lag in, and some of it is a harder negotiation where we have to attack written agreements.

Okay, I guess on a written agreement side, it kind of walks into the announcement you did on Volvo. Can you talk to us a little bit about how that renegotiation is going? What should we be thinking about as far as modeling into the future? And if any of the restructuring actions that you've announced, some of the considerations may be operations that supply Volvo.

Yep. Well, we value our relationship with all of our customers, including Volvo. Our hope is to have a mutually beneficial new agreement with them. We obviously took an action there based on the financials not working out, but we can't really speak to any negotiations that are ongoing at this time. It's a private talk, and so I can't really comment on that, John.

Okay. All right. And just one last question. You mentioned you were walking away from low-margin businesses. Can you just give us some examples of some of the businesses you're walking away from, and how does that play into your restructuring actions?

Yeah. So far, none of the business walkaways we've done have impacted or been a part or parcel of any of our restructuring actions, okay? So we've not had anything like that of that magnitude. An example to answer your question, We had a piece of business in China with a large customer that was coming up for renewal. They had seven bidders. And the numbers got very low. And we had a bottom line that we were willing to walk away from that business. And it was contrasted with several new business opportunities in our pipeline that were quite better, financially speaking. And there's a little bit of a lag to it. There's a time differential. It's not like a hot swap. But we ended up losing that business as they rebid it. And so they are going to wind down that business. It's not a snap your fingers thing when a customer is transitioning away. Generally, you want to help them not be disrupted. And so you transition that away. And then when you're freeing up your capacity, then we can ramp in our new business, it usually involves retooling because the products are not quite the same. So we had a, you know, we had a greater, that example was greater than $10 million. We weren't making any money on it. We were tying up working capital on it. And we walked away from it. And we've had over $30 million of that year to date. And so when we report our net wins, same with last year, last year we had, losses as well. We reported our net wins, which were positive, and we expect that we're going to continue to have losses that we overcome with wins, net win.

Okay, Howard. I'll get back to you. Thanks for taking my questions.

Thank you. Thank you.

Thank you. Your next question comes from the line of Chris Howe from Barrington Research. Your line is now open.

Good morning, Harold. Good morning, Chris. Good morning. The warehouse automation side of things, 131 million years dates. You're on track to exceed the 150 million. The business continues to grow in line or outpace the industry. As we consider warehouse automation in the context of the overall business, it's only going to grow as a percent of revenue. What are your thoughts? Have you had any...

internal discussions about potentially highlighting warehouse automation in a different way on a reportable basis yeah two two things there that that is a good business for us and it's a new one for us we're still learning you know we acquired that business september of 2019 and they really had a toehold which we've been able to exploit we've landed several new customers that we're going through initial trials with and they have different equipment lineups and need different capabilities from us that we don't currently have but we're investing in and we we have similar to our legacy truck business we don't want to just have a few big customers we'd rather have multiple medium-sized customers if you will that are profitable and we're thankful that we've expanded our customer set this year um regarding external reporting yes Chris, myself, our board of directors, our audit committee are discussing that on what would be the next set of reporting given that it has exploded in size versus our past. So, you know, we have a duty to be transparent there. It is a business unit. We have multiple business units inside the company. So we are thinking about that for sure.

Okay. On the more prominent questions here, the aftermarket business, about $82 million, you mentioned new e-commerce initiatives surrounding that. That acts as a future growth engine of the business. Can you provide some context, as you may, whether that relates to the people you have in place driving this opportunity and how you see the potential growth? for the aftermarket?

Yeah, the aftermarket business for us is a global one also. And you can do the three-quarters math on that. It's over $100 million annualized business. It's accretive financially. We have not really treated it as a business. It has been in the backseat with OE production being in the frontseat. We're segregating out our production and giving it dedicated production so that it's not impacted by OE production rates and just have those be two separate topics, two separate businesses. And so the business could be growing faster if we had more output. So part of it is production. And then the second part of it is generating business. And we have broad access to the market, having been a participant for many years. We gave it dedicated leadership. We created a business. Chris called out the financials so that we can see what the business is. We dedicated a team to it. We gave it its own set of operating reviews, business plan, strategic plan. And so similar to warehouse automation, we've made it a new business that we're focused on growing. And it is a growth business. And it's somewhat countercyclical to the difficulties that are happening in the OE truck market. If you do the math, the natural replenishment rate for Class 8 heavy duty trucks in North America is around 265,000 trucks per year. That's the replenishment rate for retired trucks. And the industry has not been able to produce at that level for the last two years combined. And it's still having troubles. And so the trucks on the road are getting net incrementally older and are having net higher demands for aftermarket parts and accessories. And that's what we make. So we're already a player. Seats, wipers, mirrors, trim, floor mats. And we're a player globally. And we are focused on growing it differentially. And it is a creative process. on profits, so we have good profit expectations from it as well.

Thank you. And one last question, if I may, here. In the press release, you mentioned injection molding. Is this in response to specific customer demand or more in line with overall demand? Can you talk about this outlying opportunity with injection molding?

Sure, Chris. It's actually both. We've been doing injection molding for a long time, obviously, in the truck space. We do have some new business that some of these parts are going to run on these heavier tonnage machines. So, yeah, it's actually both. And we're trying to expand that business. It's a key focus area for us. We feel like some of these margins are also accretive overall. We've got a global footprint where we can do this. These two pieces of equipment are going into Mexico, which is a key plant for us down there. And so it brings a lot of extra abilities and some capacity for us. So it keeps us as a player, and the advanced tech brand has really created some momentum for us in the industry.

Great. Thanks for taking my questions. Appreciate it.

Thank you.

Thank you. Again, to ask a question, simply press star 1 on your telephone keypad. To ask a question, please press star 1 on your telephone keypad. And your next question comes from the line of Barry Hannes from Sage Asset Management. Your line is now open.

Thanks very much. And again, good quarter in spite of all the issues. I have two questions. One is, you talked about some of the moving parts on price-cost. Could you give us a sense in time when you might be able to catch up where, you know, price increases would offset the cost increases that you've had? And then my second question is, Have you, you know, again, understand all the supply chain issues, but have you had delivery issues at all to your customers or in spite of the challenges that you've generally been able to, you know, deliver on time and keep customer lines going? Thanks.

Yep. Those are good questions, Barry. On the price-cost, you know, catch-up, again, the two components to that are, when we are able to just in the merchant market have a discussion, you know, on what the price is going to be on the next PO, we acknowledge. And then there's the situation where you have a bracket frame agreement that covers the topic that impedes your ability to pass through all the inflation that you're incurring. And generally, our business is not impeded. We've negotiated over 100 agreements this year, letter agreements mainly, in the form of when we receive a PO and acknowledge it, what's our price for that product? And so that business just lags a little bit. Think of a quarter or so. And we track it. We track it every two weeks by business. But in the case of contractual contracts, That's more problematic. We publicly announced we have one big one, and there's a long delay possibly with that. And it could impact price and volume, depending on what the customer chooses to do with the set of economics on the table. That's a mutual outcome kind of a thing. They have to do what's best for them. We have to do what's best for us. Hopefully we meet in the middle. reasonable expectation would be a price volume move of some kind. Um, and so there is a lag on the contractual piece of it on a delivery issues. That's been hard from both angles. Um, our customers are really suffering because they have, they have many, many, many more parts than we do and many, many more issues to run a assembly plant. And, um, Their labor is largely fixed in the short term because they're mostly all unionized. So really their output gets down to part availability. And we generally have forecasts from all of our main vehicle makers so that we can order materials accordingly. And then we get a specific EDI feed that's usually frozen over a 30-day period on exact vehicles needed, colors and features and that sort of thing. And they themselves have been at blanks in these EDI feeds and have changed their mind with day's notice. So it causes an issue for them, to their customers when they do this, and it also causes an issue for us to deliver to them. There's a lot of what's called offline trucks in the industry, and all the big players have thousands of trucks out in their parking lots that are waiting for parks which are in effect a delivery issue from them to their customers and in turn we we have some also and the goal is really to not shut down a production line um and our our delivery has been you know as expected through this process okay thanks and just you know following up on the on the on the price cost um you know given that again a lot of the

the contracts, you know, have the review with, you know, plus or minus a quarter lag, you know, is it right to think that maybe mid-year 22 you'd be caught up? Or I'm just trying to roughly get a very rough time frame in terms of when you think you might catch up. And again, assuming the cost side doesn't get a lot worse, you know, maybe it doesn't get better, but it doesn't get worse.

Yeah. On the compression part of it, We are taking a conservative stance that we're going to have compression in certain contractual arrangements until we negotiate otherwise. So we're adjusting our cost structure to protect our profit rates. Chris, do you want to comment? Yeah, so the only other thing I'd add is some of that's dependent upon how the markets react. You know, if copper and steel start trending down, we'll catch up a little faster, if that makes sense. As they're going up, we have a lag, so we're a little behind. So when these markets turn, we would, in theory, then catch up a little bit faster in the coming quarters, if that makes sense.

Yep, got it. Thanks so much for the call. I appreciate it. Thank you, Barry.

Thank you.

Thank you. Ladies and gentlemen, that concludes our Q&A session for today. I will hand it back over to the management for any closing remarks.

Thank you. I'll summarize and say that I'm thankful that we were able to deliver our expected profit rates on the volume-adjusted reality that we had and navigated through the issues that we had that we faced with our supply chains. We're going to continue to have that conservative mindset of delivering profits irrespective of the volume fluctuations. And we did not cut back at all our endeavors on new business, and we're continuing to have success there, crafting a better midterm and long-term future for our revenue profile. Thank you, everyone, for calling in today. That will end the call, operator.

Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for your participation. Human Addicts.