Commercial Vehicle Group, Inc.

Good morning, ladies and gentlemen, and welcome to CBG's fourth quarter and full year 2021 earnings conference call. During today's presentation, all parties will be in a 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 Bonnard, 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 fourth quarter and full year 2021 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 CVG 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 Beavis to provide a company update. Harold?

Thank you, Chris, and good morning, everyone. On today's call, I'll be referring to a presentation in the investor section of our website. It's the March 1 earnings call presentation. I'll be providing an overview of our fourth quarter and full year 2021 results, followed by an update on our three-point strategy designed to achieve higher growth and higher profits by leveraging our strengths and entrepreneurially pursuing new areas. As we execute on our strategy, we are positioning CVG to deliver more stable results as we strive to expand our breadth and competitiveness. During the fourth quarter, our operations were impacted by our past mainly by several legacy Class 8 supply contracts where our profitability has been impacted by cost inflation combined with a shortfall in truck production due to the challenges impacting their global supply chains. While our results have been impacted by these transitory factors, we believe they will improve in the first half of 2022, and we will be successful expanding into new end markets, which will open CVG to improved growth and profitability in the second half of this year and in the coming years. And following my remarks, Chris will then discuss our financial results in more detail, and we will conclude by opening the call and answering your questions. Turning to our financial results on slide four of our earnings presentation, we delivered fourth quarter sales of $228.9 million, an increase of 6% as compared to the year-ago fourth quarter. This increase was driven primarily by increased pricing to offset material cost inflation pass-through. Our operating income increased 30% to $6.5 million in the fourth quarter as compared to $5 million in the year-ago fourth quarter. The improvement was largely a result of lower SG&A related to reduction in special costs. Excluding these special costs, adjusted operating income for the 2021 fourth quarter rose 2.4% to $8.5 million compared to last year. Our operating income remains compressed due to a lag in price cost offsets in these legacy contracts and higher than expected new business wins with resulting startup costs. Adjusted EBITDA was $12.9 million in the fourth quarter as compared to $13 million in the fourth quarter of 2020 and $0.13 of adjusted earnings per diluted share in the fourth quarter as compared to a loss of $0.05 per diluted share in the year-ago fourth quarter. We had over $200 million of new business awards secured in 2021, adding to the more than $200 million won in 2020 of new business in the first two months of this year. We also terminated over $90 million of business due to inability to achieve mutually satisfactory terms with some of our customers. We are committed to a transformative organic growth platform to diversify our customer roster, add new market entrants, improve our profitability, and lessen our cyclicality and customer dependence. Turning to page five, we delivered Record revenues for the full year of 2021 with revenues growing 35% to $972 million as compared to $718 million in 2020 and up 7.9% compared to the $901 million of 2029. Our revenue growth as compared to 2020 was driven by strong growth in warehouse automation new business wins and modest recovery in the global vehicle markets and material cost pass-throughs. Likewise, our operating income margin expanded to 5.5% in 2021 as compared to 3.3% in 2020 and 4.9% in 2019. Over the last two years, we have made strong progress diversifying our in-market participation. Signs of our progress can be seen on the right side of the slide as we grew the warehouse automation business to be $188 million and delivered 24 projects. 0.5 million in adjusted operating income. As I will touch on in a moment, we've made strong progress winning new business and in markets with new growth factors such as warehouse automation and electric vehicles. Turning to slide six, while we have been successfully diversifying our business, which points to accelerating growth and profitability, our fourth quarter and full year results were impacted somewhat by our past by a challenging global supply chain and cost inflation price lag offsets that were persistent over the near term. Product shortages, most notably chips, impacted Class 8 truck production during the quarter and full year, while the cost of raw materials, freight, and labor continued to climb in the second half of 2021. We expect inflation and supply chain challenges to persist in the first half of 2022. A key pillar of our strategy to transform CVG is focused on optimizing our legacy business as we work to renegotiate our contracts and unlock the trapped profit that resides within that portion of our business. Our legacy agreements were not designed to accommodate the rapid inflation that we've been experiencing, which has pressured our results. To solve this and unlock the profit potential of this business, We have been renegotiating our legacy contracts that are dilutive to the company's operating income and EBITDA. So far, we have reworked many of these customer contracts and expect the majority of the remaining contracts to be resolved during 2022. Turning to slide seven, we believe we are becoming an emerging leader in the electric vehicle industry for both low voltage and high voltage electrical systems. which positions CBG well for the coming conversion to electric vehicles and fuel cell vehicles. We are seeing an increase in truck miles, given the continued growth in e-commerce, and which looks set to continue, and on a go-forward basis, we expect electric vehicles will be our biggest and fastest-growing business. Currently, our largest end market remains the North America Class 8 truck market, and due to the continued supply chain challenges, we've taken a conservative stance towards production outlooks for 2022. We're estimating the industry will be able to make approximately 270,000 trucks, which is roughly flat year over year. The industry continues to be experiencing a backlog due to global supply chain shortages. Hence, the projections show a continued increase in Class 8 truck builds in the coming years. And as a reminder, for CVG, Every 10,000 trucks built equates to approximately 13 million of sales for us. While production has been impacted, the North American fleet continues to age, which sets the industry up for several years of strong growth given the large backlog that has been built. This will likely create several years of steady production as the industry attempts to catch up, and we will be in a strong tailwind situation for our results. Turning to page eight, And as Chris will discuss in more detail, we resegmented our financial reporting into four segments, which are vehicle solutions, electrical systems, warehouse automation, and aftermarket and accessories. At year end, our four segments were more balanced as compared to our previous segments and highlights the areas where we intend to strengthen our revenue and profit profiles with the creative new business. As we expanded to new growth markets and reinvigorate our aftermarket business, we will experience improved profitability and accelerating earnings growth. Likewise, a key mandate is to improve our legacy business, renegotiate our contracts, enable inflation pass-through, and improve our profitability, as I mentioned previously. Turning to slide nine, a second pillar of our transformation is driving new profitable business and growth markets with higher value-added products. We have now secured over $500 million of new business, in the last 26 months with over 100 new products. And this includes an additional 75 million of new awards so far in this early part of 2022. As previously mentioned, we offset 90 million of business we terminated due to inability to achieve mutually acceptable economic terms. And we expect to continue this mindset as we negotiate terms on the remaining portions of our legacy contracts. In 2021, we're really happy to say that roughly 79% of our new business wins were in the electric vehicle industry. Overall, we are pleased with the success our team has achieved as our new business momentum continues to build and points to strong growth over time as we gain new business awards in electric vehicles, last mile vehicles, power sports equipment, and other areas. Given that a majority of our new business awards are in the electric and fuel cell vehicle markets, It will take a few years to ramp up fully before delivering the full impact of that business on our P&L. Electric vehicles represent a $7 trillion market opportunity by 2030 and $46 trillion by 2050. Government regulations combined with global environmental initiatives are driving this significant transition. We're well positioned to partner with new market entrants who are looking for technical expertise to launch their electric vehicles. Likewise, we are an ideal partner with existing market entrants and are growing with that segment of the industry also. Our competitive advantage resides in the fact that we are a natural value-added product offering that makes it convenient to design and produce new vehicles and partner and deliver on time. We can design, prototype, and build a bundle of products for partners and we have over 40 years of global experience doing it. We've made strong progress expanding into electric vehicle markets as evidenced by the new business wins over the last 26 months, which includes both existing manufacturers that are expanding into the EV market as well as new EV market entrants. On slide 10, another area that we are excited about is our aftermarket business, where we have formed a business unit and hired an experienced leader to reinvigorate this profitable business segment. Our new business leader has put a plan in place to create dedicated manufacturing capacity, launch an e-commerce site to penetrate the independent trucking channel, as well as develop new products to add to our portfolio while expanding our addressable market. We're very happy with the progress we're making and expect this business to grow 10% CAGR annually over the next five years while delivering margins that are accretive to our business. Turning to page 11, We have a broad set of initiatives that are focused and designed to expand our business into fast-growing end markets that carry improved profitability. As we expand our business, we're working aggressively to reduce our dependence on complex supply chains while driving improved pricing terms with legacy business as we strive to unlock the trapped profits and be able to pass through inflation more readily. As we do this, our cash flows will continue to improve, providing capacity to pay down debt while further investing in the business for growth and new product development. And lastly, we're working on our first corporate sustainability report as we increase our focus on ESG. Moving to page 12, the CBG leadership team is successfully transforming the business with a three-point strategy. First, we want to strengthen the company's revenue profile with a creative new business that increases our company's value proposition and decreases our legacy customer dependencies. As I mentioned, we secured over $500 million of new annualized business in the last 26 months. Approximately 80% of this is in the electric vehicle industry. Secondly, we're improving the company's legacy business by renegotiating contracts to improve their profitability. And finally, we want to improve the company's balance sheet, increase our cash flow, and pay down debt. As we execute these initiatives, we see a path to $1.9 billion in sales by 2025, and we see a path to 8.5% operating income margins by 2025. These are long-term goals, and we believe they're achievable as we execute against the opportunities in front of us. Now, I would like to turn the call over to Chris for a more detailed review of our financial results.