Martinrea International Inc.

All participants, thank you for standing by. The conference is ready to begin. Good evening, ladies and gentlemen. Welcome to the Martin Rea International Second Quarter 2025 Results Conference Call. Instructions for submitting questions will be provided to you later in the call. I would now like to turn the call over to Mr. Rob Wildeboer. Please go ahead, sir.

Good evening, everyone. Thank you for joining today. We always look forward to talking to our shareholders, updating you on our business, and answering questions. We also note that we have other stakeholders, including many employees, on the call, and our remarks will be addressed to them as well as we disseminate our results and commentary to our network. With me this evening are Pat DiRamo, Martin Reyes' CEO, our President, Fred DiTosto, and our CFO, Peter Cyrillus. Today, we will be discussing Martin Reyes' results for the second quarter and a June 30, 2025. Overall, a strong quarter across the board. I am really happy about our Q2 performance. The results, I think, show that production levels are relatively stable and that we are really good operators. We have good profits, operating margin, and free cash flow in Q2. Congrats to the team. My colleagues will walk you through the results later in the call. I refer you to our usual disclaimer in our press release and our file documents. On this call, I will make a few short comments on the trade and tariff situation and geopolitics at the end. Pat will outline some key highlights of the quarter and make some comments on the business and some really great initiatives we have going on. Fred will discuss operations, and then Peter will review some financial highlights, and then we'll do Q&A. And now, here's Pat.

Good evening, everyone. We're pleased with our performance in the second quarter, both operationally and financially. Margins were notably higher compared to the first quarter, reflecting continued operating improvements and negotiated commercial recoveries from our customers. Vehicle production volumes and production sales also improved quarter over quarter, as inventories returned to a more normalized level, a lower-than-normal level, in fact. Peter will elaborate on our financial performance in more detail. Overall, we had a good first half of the year. Our Q2 and first half operating performance is among the best. in our peer group. Recall that USMCA-compliant auto parts are exempt from Section 232 auto tariffs, which is a positive for us as well as our industry. This is a very good thing. We do have some tariff exposure on some product that we get from Tier 2 suppliers and from parts affected by steel and aluminum tariffs, so there is some tariff impact in our results. Overall, we believe our exposure is manageable. Given the operational improvements, actions we are taking with SG&A, and planned recoveries from customers, we expect to offset a substantial portion of the tariff impact. As such, we are maintaining our 2025 outlook. Peter will elaborate on this more in his remarks. Switching gears, on previous calls, I've discussed our in-house development of machine learning and our plan to install this AI technology across the enterprise. I referred to its impact on plant safety, product quality, and productivity built on our martinrea operating system strategy. Now I'd like to get a little more specific on the benefits we are seeing from three types of machine learning technologies that we developed, and we have more under development. First, we've installed adaptive welding software that we refer to as ADAM on multiple production lines and pilot facilities. The results have been very good with substantial reduction in well-destruct testing, including a reduction in man hours, as well as over 9,000 pounds of scrap and nearly 13,000 kilowatt hours of energy saved each week. And that's not the best part. We also improved the efficiency line from 79% to 94%, resulting in a significant reduction in labor costs on an annualized basis. Our spot welding using Adam is virtually expulsion-free, which significantly improves weld quality, weld tip changes, and line maintenance. All in, total annual savings of these projects came in at $3.5 million in our pilot plan. This is one of those, you kidding me, wow moments. When installing Adam in our second facility, we were able to speed up the line, avoiding $8 million in contractor integration costs and enabling us to commit to a volume increase for our customer. Second is our AI vision system. We haven't thought of a fun name for this one yet. This system is more advanced than the typical vision systems used in our industry. With this system installed in some pilot lines, we have reduced inspection and repair costs in our MIG welding cells. We use it across the company to inspect for part presence and more complicated defects, in many cases eliminating manual checks entirely. We're already saving in inspection and repair costs. In some cases, we've implemented improved vision capability to existing cameras and x-ray machines and modified our software to enhance our capabilities with little hardware costs. Barnray has developed its own tools for synthetic data generation and environmental control to make this product even more robust. We are also piloting the vision system to become the eyes of our autonomous vehicles, what we call AMRs, or autonomous mobile robots. We'll then become AIVs, or autonomous intelligent vehicles. This is an in-house project that will allow us to eliminate predetermined paths and safely move to any desired location on the shop floor. We are using stereoscopic camera algorithms to make a 3D image in a process similar to how humans see depth. This provides a 360-degree coverage enabling us to measure relative velocities of objects that are in the line of sight. We are using visual simultaneous locating and mapping technology, or VSLAM, giving us the ability to track vehicle movement in a dynamic plant environment. Lastly, we have developed what we call press health monitoring, substantially reducing unplanned repairs using early warning analytics. On the four pilots we've run on various presses, we've estimated we've saved over $900,000 in unplanned maintenance to date. I can even break that down. This early warning system allowed us to avoid a $400,000 crown repair, a $300,000 flywheel shaft repair, a $150,000 link repair, an $84,000 motor repair. You get the idea. This is not including any costs associated with the potential of outsourcing of dyes. Press health monitoring is now in the process of being installed on all our large presses, as well as newly purchased machines across Martin Reyes. We are also piloting health monitoring on our first high-pressure aluminum die-cast machine. This level of detail is important to communicate to you. It's not just a generic use of the term AI. It's real machine learning at Martin Rea, and it's more than a dream. It's the real deal. Now, I wouldn't extrapolate those numbers I just gave you across all our plants because every plant is different, but it gives you some perspective of the opportunity we see in front of us with machine learning, and it's meaningful. So now you have some real data on three technologies we have piloted with great results. We're now in the process of deploying the first machine learning tools, and we expect to see the benefits from this activity for many years to come. Plus, I discussed a new vision technology that is under development that will make its way to the factory floor over the next 12 to 18 months. Very exciting times. I want to finish off with a few words on our SG&A cost reduction program. As we indicated on previous calls, we are targeting to achieve a $50 million annual cost savings, and we have a team in place that is helping the business units identify opportunities. We're executing on a variety of initiatives, such as centralizing activities and business functions, logistics costs, efficiency improvements, and much more. We're committed to hitting our target by the middle of next year. Many thanks to the Martin Rea team for their hard work in these dynamic times. With that, I'll turn it over to Fred.