Q3 2021 NN Inc Earnings Call
Good morning, everyone and welcome to <unk> incorporated third quarter 2021 Conference call. My name is Tom and I'll be your operator for today's call all participants will be in a listen only mode until we reach the question and answer session of the conference call. This call is being recorded at the request of and then if any.
Has any objections you may disconnect at any time.
I would now like to introduce Mr. Jeff <unk> with Lambert IR, and then <unk> Investor Relations firm. Mr. Treichel you May proceed.
Thank you Tom Good morning, everyone and thanks for joining us.
<unk> Investor Relations contact and then Inc, and I'd like to thank you for attending todays business update.
Yesterday afternoon, we issued a press release announcing our financial results for the third quarter ended September 32021, as well as the supplemental presentation, which have been posted on the Investor Relations section of our website.
If anyone needs a copy of the press release or the supplemental presentation, you may contact Lamberton company at 3155 to 9234 H.
Our presenters on the call. This morning will be Warren Veltman, President and Chief Executive Officer, and Mike Voucher, Senior Vice President and Chief Financial Officer.
Before we begin I'd like to ask you that should take notice of the cautionary language regarding forward looking statements contained in today's press release supplemental presentation and in the risk factors section of the company's annual report on Form 10-K for the fiscal year ended December 31, 2020, and went filed the comp.
<unk> quarterly report on Form 10-Q for the three months ended September 32021.
The same language applies to comments made on today's conference call, including the Q&A session as well as the live webcast.
Our presentation today will contain forward looking statements regarding sales margins foreign exchange rates cash flow tax rate acquisitions synergies cash and cost savings for future operating results performance of our worldwide markets the impacts of the coronavirus or COVID-19 pandemic on the.
Company's financial condition and other topics. These statements should be used with caution and are subject to various risks and uncertainties many of which are outside the company's control.
The presentation also includes certain non-GAAP measures as defined by SEC rules, a reconciliation of such non-GAAP measures is contained in the tables in the final section of the press release and the supplemental presentation.
Reviewing the agenda for today's call one will provide a business update from the quarter then Mike Bolger will provide a detailed update on our financial results before turning the call back over to Warren to discuss our segment results and markets as well as the outlook for the remainder of 2021 at.
At the conclusion of the prepared remarks, there will be a Q&A session.
At this time I will turn the call over to Juan Beltman, President and CEO Juan.
Thanks, Jeff and good morning, everyone. If you would turn to page five we will review some of the highlights for the third quarter.
When the third while the third quarter proved to be a challenging one in a number of areas. We were able to continue our trend of year over year growth in revenue as our markets continued to post pandemic recovery highlighted by 25% year over year growth in our residential and commercial electric and market within our power solutions group.
The strong growth in power solutions was partially offset by supply chain challenges, which were most acute in the automotive sector.
Ongoing semiconductor chip shortage affected production globally as Oems shut production lines impacting suppliers. This had a particularly sizable impact on our mobile solutions business and its revenues, which fell two 5% year over year in the third quarter. These.
These increasingly these increasing supply chain challenges within the quarter not only affected our customer operations, but our operations as well to address supply chain disruptions and constraints on materials, we remain flexible and our operations responding quickly to changes in supply and demand.
We also continue to work together with our customers and vendors to ensure we have adequate inventory to maintain production and meet their needs.
Our profitability in the third quarter was also impacted by the reinstatement of a number of programs that were temporarily suspended in 2020 in response to COVID-19, including salary and benefit reductions and incentive compensation programs and travel related expenses, we also experienced material and labor inflation that we were.
Not able to fully pass on to customers during the quarter. However in response to these cost increases we have initiated negotiation when most of our customers for price increases we expect that our price increases will recover the vast majority of all material cost increases and increases associated with outsource off.
Operations freight charges and certain increases associated with labor and other manufacturing costs.
Where appropriate we are pursuing increased pricing for underutilized manufacturing capacity. For example, we expect to conclude on negotiations with a single customer during the fourth quarter, whereby we expect to receive $3 million in compensation for development costs and underutilized capacity for periods from.
2019 to 2023 of which 1 million is expected to be paid in 2021.
From a liquidity standpoint, we maintained solid solid leverage ratios to support our long term growth. We believe that our successful refinancing earlier this year and our current balance sheet offers us the ability to pursue growth investments as opportunities arise.
In the third quarter, we also entered into a three year variable to fixed interest rates swaps to hedge our interest expense and $60 million of our debt. We did this to reduce our exposure to higher interest rates and when factoring in our fixed rate preferred stock achieved what we believe is the right balance between variable and fixed rate.
Exposure.
We also maintained our focus on working capital, though we saw it turns decreased sequentially in the quarter due to higher inventory levels carried to address current supply chain concerns higher inventory and lower mobile solutions sales volumes due to the semi conductor shortage were significant contributors to free cash flow being $3 7 million.
Use in cash during the third quarter while.
While our inventory levels impacted our free cash flow in 2021, they allow us to better insulate our customers from supply chain interruptions in the current environment and will also allow us to react more quickly when automotive volumes rebound in 2022 and will benefit our free cash flow as we return inventory to more no.
My life levels now I would like to turn it over to Mike voucher. So he can provide a more in depth review of our financial performance for the quarter Mike.
Thanks, Warren turning to page six we have summarized some of the key items for the quarter. Our business continued to recover as we posted year over year growth in the quarter compared to the third quarter of 2020, which was not as significantly impacted by the COVID-19 pandemic the improvement in sales was partially offset.
By the impact of the semiconductor shortage mobile solution sales sales for the quarter were $117 2 million up three 1% from a year ago.
Reported operating loss for the quarter was $4 6 million versus a loss from operations of $1 5 million one year ago.
Non-GAAP adjusted EBITDA was $9 7 million or eight 3% of sales down from $14 7 million a year ago. When adjusted EBITDA was 12, 9% of sales.
Profitability was adversely impacted by the reintroduction of costs that were temporarily suspended in the prior year as well as the impact of material and labor cost inflation that has increased as the euro has progressed.
GAAP EPS from continuing operations was a loss of <unk> 13.
Per share versus a loss of <unk> <unk> per share from a year ago.
Our current period results reflect lower interest expense of $3 3 million.
And $4 8 million of income related to revaluation of outstanding warrants, which were offset by a $9 1 million unfavorable comparison for income taxes, primarily attributable to the benefit recognized in the prior year related to the cares Act. Our adjusted income from continuing operations was <unk> <unk> per share.
Versus seven <unk> per share in the prior year.
Let's go to slide seven we saw a sequential decrease in working capital turns.
In the third quarter as inventory remained above normal levels.
Current semiconductor shortages as well as other supply chain issues created increased lead times, requiring added safety stock and our inventory levels.
The carrying amount of our inventory has also been impacted by material inflation, we have experienced we.
We will focus on returning to normal inventory levels as the supply chain stabilizes.
Networking capital at the end of the third quarter was $115 3 million compared to $108 2 million in the prior year, an increase of $7 1 million.
The increase was primarily due to an increase in inventory as part of our efforts to prevent supplied.
Disruption from impacting our customers.
Working capital turns were four one turns versus four two turns in the prior year as a result of the increase in sales from the prior year offset by the increase in working capital.
Sequentially working capital turns decreased from four five turns in the second quarter.
Turning to slide eight we highlight the disciplined approach we have taken the capital expenditures over the past year as we balance the need to prudently manage our cash in the current operating environment, while continuing to fund investments in our growth you can see on an absolute basis, we have increased capex compared to 2020, but we reduced.
Expenditures when compared to the first two quarters of the year for.
For the first nine months of 2021 total capital expenditures were $14 6 million compared to $13 4 million a year ago.
As a result, we are lowering our expected investment for the full year from the $22 million, we communicated last quarter to $19 million.
Slide nine shows a chart of our free cash flow for the quarter.
Free cash flow was a use of $3 7 million in the third quarter 2021, compared to a use of $1 4 million in the prior year our.
Our free cash flow was negatively impacted by lower operating cash flow, resulting from the reduced margins generated during the quarter.
<unk> supply chain and inflationary impacts on our operating results and the increased working capital needs. We remain close to breakeven levels on operating cash flow during the third quarter.
Free cash flow on a year to date basis would have been a positive zero point $3 million, if not for the cash payments related to the sale of our life Sciences group of $9 2 million during Q2, which were primarily for taxes.
We had previously anticipated would be offset by the receipt of our cares Act tax refund this year.
Unfortunately, we now believe the refund will not be received until 2022.
Please turn to slide 10.
Net debt at the end of the third quarter was $132 8 million versus 77.
$772 million.
$772 9 million in the prior year, a decrease of $640 1 million.
The year over year reduction was due to the 700 million dollar debt pay down following the sale of life Sciences, partially offset by a refinancing completed earlier in the year.
Our net leverage ratio stood at 233 times at the end of the third quarter down from $6 seven two times a year ago.
As we have mentioned on prior calls maintaining our leverage ratio at or below three times is important for supporting our long term growth initiatives as it alleviates concerns from customers and suppliers regarding our financial position.
We had $61 $1 million of liquidity, including cash and availability on our revolver as of September 30.
Compared to the second quarter, we saw a reduction in our cash balances due to the due to the free cash outflow and pay down of principal on outstanding debt during the quarter, while our availability increased as a result of increases in our borrowing base on our asset backed facility.
<unk> was undrawn at quarter end.
With that I will turn it back to Warren.
Thank you Mike on page 12, we broadly outline our view of current market conditions within each of our operating groups within mobile solutions, we have seen a significant impact on the semiconductor chip shortage on global auto and light truck production, resulting in a sizable pullback and expectations for the industry.
These supply chain issues directly contributed to a 17, 6% decrease in production volumes in the third quarter of 2021 compared to the third quarter of 2020 further the IHS global production outlook for 2020 was reduced from approximately $88 million to the current expectations of <unk> seven.
$5 8 million.
Just 2% from the pandemic year volume of $74 5 million in 2020.
The outlook for 2022 was reduced by $8 $4 5 million units.
Or nine 3% to approximately 82 6 million units for the fourth quarter IHS is projecting global production of $19 4 million units down 17, 8% from $23 6 million in the prior year, but up 14, 8% so.
<unk> from the third quarter inventory.
Inventory levels remain at their lowest since 2009 currently less than 1 million units or 30 days supply the.
The transition to electric vehicles is backed by significant OEM investment as an example in aggregate GM Ford ins to Lantus will invest approximately $100 billion through 2025, and new electric vehicle technologies vehicles and battery development.
We are well positioned to supply.
Product through both our mobile and power solutions groups.
Within power solutions, we see long term demand drivers as public and private grid operators are pushing to address aging infrastructure to prepare for the new emerging technologies needed under the smart grid.
We see increasing demand for power transmission and storage infrastructure, particularly with increased adoption of electric vehicles for private and commercial use which we believe will benefit our power solutions business while.
While the current administration and Congress continue to negotiate the details for final passage of the infrastructure Bill We know that the bill includes a significant investment in technology and power infrastructure, along with the incentive to adopt more green technology that will benefit both sides of our business over the long term.
While the pace of conversion may be uncertain Green energy will increase significantly as a share of power generation driven by billions and infrastructure spending ultimately the market and policy direction is aligned with our 2025 transformational growth initiatives.
We have presented additional information for each of our operating groups, starting with mobile solutions on page 13.
Mobile solutions sales fell two 5% in the third quarter from one year ago as the ongoing semiconductor chip shortage in the automotive industry caused the loss of $3 3 million production units in the third quarter versus $2 2 million units in the second quarter.
GAAP operating loss for the third quarter was <unk> 3 million compared to operating income of $5 million in the prior year.
Adjusted operating profit decreased to $1 million from $6 3 million last year, adjusted EBITDA decreased to $8 2 million or 11, 9% of sales from $13 7 million or 19, 5% of sales in the third quarter of 2020.
The lower profitability was driven by reduced sales volumes the re implementation of certain cost suspended in the prior year and operating inefficiencies caused by labor availability and ever changing customer production requirements.
<unk> forward, we expect fourth quarter customer demand to remain softer year over year due to the semiconductor shortage.
Impacting the automotive industry with regard to current inflationary pressures we are in active discussions with our customers to finalize price adjustments to recover these cost increases.
Finally, as a result of our recent investments in customer development sales engineers and coordination of selling activities between our operating groups, we are making progress towards our 2025 growth objectives. During 2021, the mobile solutions group has been awarded $24 million in annualized new business.
Wins with start of production dates beginning in 2022 and running through 2023.
This level of new business wins is consistent with our expectations when establishing our longer term objectives.
On page 14, our power solutions group experienced a 12, 1% year over year increase in sales in the third quarter, which was driven by strong recovery in demand to pre pandemic levels in the electrical market along with an increase in precious metals pricing due to the continued rise in commodity costs since 2020.
GAAP income from operations for the third quarter was $1 3 million compared to $1 1 million in the prior year adjusted operating profit decreased to $4 million or eight 2% of sales from $5 4 million or 12, 5% of sales in the third quarter of 2020.
<unk> EBITDA decreased to $5 4 million or 11% of sales from $6 6 million or 15, 2% of sales in the prior year.
Profitability in power solutions was also impacted by the resumption of certain cost suspended in the prior year, including salary and benefits incentive compensation and travel and.
In addition profitability was adversely impacted by inefficiencies associated with unfavorable mix shifts and planned inventory reductions.
Looking forward, we see improving demand trends in power solutions with an expectation of an approx.
Approximate 3% increase in customer demand in the fourth quarter year over year, we have been successful in passing through inflationary cost impacts to customers, which will be reflected in our results beginning in Q4 2021.
We will remain protective of cash flow.
In this segment through prudent working capital and Capex management.
Longer term, we are encouraged by the continuing shift in the power generation side toward renewable energy resources with solid industry demand, we have been awarded $15 million in new annualized new business wins.
With the start of production dates beginning throughout 2022.
Turning to page 15 for some specific items regarding our outlook for 2021.
From a cash flow perspective in the fourth quarter, we expect to receive a $3 $6 million dividend from our China joint venture, reflecting our share of the income from the prior year.
We anticipate making additional tax payments amounting to $2 3 million relating to the life Sciences sale rigor.
Regarding our expectation of a $10 million refund relating to the cares Act. We now expect the timing of that to be pushed out to 2022.
Regarding our full year full year outlook as Mike discussed, we now expect capex of approximately $19 million as we make necessary investments to support our long term growth balanced with our desire.
To maintain cash flow. In addition, our financial drivers are consistent with our previous estimates as we expect cash interest to be approximately $12 million full year depreciation of approximately $33 million and full year amortization of approximately $14 million.
Finally, our full year free cash flow will include approximately $9 7 million in tax payments solely related to the sale of the life Sciences group in 2020.
Turning to page 16, we highlight some activities associated with the building blocks necessary for us to achieve our 2025 sales goal of $600 million annually we.
We have recently restructured our sales and business development teams by changing the power solutions leadership, adding industry specific.
Customer development engineers, and aligning and cross training both groups teams to target opportunities consistent with our strategy.
The the results of these efforts have been a 69% expansion of our pipeline of targeted sales opportunities with significant mix shift toward our targeted product applications, such as electric vehicles and components agnostic to a specific propulsion technology.
Sales opportunities for electric vehicles have increased from 1% of the pipeline a year ago to 14% at the end of the third quarter of 2021. Additionally opportunities for ice independent programs, such as steering braking and electric motors increased from 36.
To 44%, while ice dependent programs, primarily components for gasoline fuel systems decreased from 36% to 24%.
We believe that the expansion of our pipeline and the mix shift to strategic product applications is a leading indicator of our process our progress toward our 2025 sales goal. Lastly, we are in the final stages of recruiting a chief commercial officer with relevant electric grid sales experience.
And hope to have an update on that process in the current quarter.
As I conclude my remarks on page 17, we share our longer term outlook with the continued uncertainty surrounding the supply chain and in face inflationary pressures, we are still not in a position to resume formal revenue or earnings guidance at this time, but we expect to provide a 2022 detailed outlook with our <unk>.
Year end update.
For now we expect the sales environment to be driven by the resolution of the current semiconductor shortages along with the continuing trend towards adoption of electric vehicles in the transformation of the electrical grid we.
We will closely monitor industry and supply chain conditions and remain flexible in our response to evolving changes, particularly with regards to semiconductor issues facing the automotive market.
Our focus on generating free cash flow dictates that we pursue pricing adjustments with customers to recover material and other cost inflation make operational improvements to improve margins and control capital expenditures and working capital, while maintaining an appropriate capital structure.
In summary, we are successfully navigating a challenging environment with the flexibility and responsiveness to maintain our operations and meet the current and future needs of our customers, giving us the foundation for improved performance in the future.
That concludes our prepared remarks, and I will now turn the call back to the operator for questions.
We will now begin the question and answer session to ask a question Press Star then one on a touchtone phone.
If you would like to withdraw your question Press Star then two.
And the first question comes from Rob Brown with Lake Street Capital markets. Please go ahead.
Good morning.
Just wondering Rob a little bit on the discussion around the ability to negotiate new pricing could you just give us a sense of how much flexibility you have there are these long term contracts youre going back to talked about pricing are these pricing.
No.
Redo times that you can you can get pricing as part of our future negotiation or just help me understand the pricing.
Ability here.
Sure. So most of our if you break it down.
Our business down into two groups right. If you talk about power solutions first.
A material standpoint.
Most of that pricing is reflected on the precious metal side on the data shipping. So we have been adjusting price.
Within power for material throughout.
The increase in the precious metals that we've seen over the last year as it relates to inflationary related costs.
Implemented.
Increase for resin out of our plastic injection molding group.
Near the beginning of this quarter that was an across the board approximate 6% increase to our customers to reflect the material costs and some of the other inflationary pressures in that business. So that's done as it relates to other customers from an inflation standpoint, we're.
<unk> conversations with them right now.
For cost increases outside of the material and we expect to be successful doing that going forward on the mobile side, where we tend to have more longer term contracts most of our contracts allow for opportunities to reprice in the event that the.
Volumes under the contract fall outside of that 15% window.
So we use that as an opportunity to go back to our customers and look our customers understand whats going on in the industry right. They understand the pressures that are going on and they like they would like to have successful and stable suppliers. So I would tell you that those those conversations have gone.
Reasonably well when.
When we look at it on an overall basis for the mobile solutions group, we're looking at.
Price increase for for cost increases in the range of 2% to 3%.
Annually.
And breaking that down about half of that maybe a little bit less than half of that truly relates to just material and outsource related price increases that we've seen in our business. The rest is inflationary pressure that we've seen associated with freight it's real costs, okay, but its freight it's <unk>.
Manufacturing supplies that type of thing so we're talking to all of our customers currently about all of that my expectation is that the material piece of it will be the easiest piece to <unk>.
Resolved with them and we expect to have most of that done by the end of this year.
And when pricing comes in play on January one.
We can have some of the other pieces as well.
Okay, great. Thanks, Thanks for the comprehensive overview.
And then on your on your sales pipeline.
Maybe.
Dig a little bit into the increase in the EV activity as this really pipeline kind of opportunities developing or are these design wins, you've won and now youre executing that will turn into revenue by.
A year or two out.
Yes, so Rob these are opportunities that we have in the business that we've targeted it would be business that we've identified at various stages. It's business that we've identified or in a lot of cases business that we are actively quoting with customers today that has not been awarded to us and Thats why we talk about it in terms.
Of opportunities, but for me. The key is the large expansion that we've seen we brought in new customer development engineers over the last six to nine months that have allowed us to expand our reach.
Outside of our existing customer base substantially bringing much more opportunities to us to quote and its extremely encouraging when you see the shift from as I indicated away from ice dependent type of applications into applications that are going to provide growth opportunities for us over the long.
Term.
Okay. Thank you I'll turn it over.
Okay.
The next question comes from Steve Barger with Keybanc. Please go ahead.
Good morning.
Good morning, Steve.
Yeah really great to see and then getting more proactive and recovering costs in getting appropriately compensated for capacity.
Can you tell us what the margin impact from negative price cost was in the quarter and while the actions you've taken gets you to price cost neutral or better in <unk>.
Steve I think that on the on the power side its going to come quicker.
The negotiations on the auto side tend to be a little bit more lengthy I would say that our expectation is that in the first quarter of next year is where it will be more.
Neutral from a cost standpoint, we'll hopefully see some of it.
On the mobile side in the fourth quarter like I said, we implemented a 6% across the board increase in power at the beginning of the fourth quarter. So we will see some benefit there that was excuse me that was an across the board. It was for across the board for our plastic injection molding business.
The rest of it has been implemented will be implemented throughout the quarter.
Got it.
Given how you see volume and mix and pricing.
How should we think about gross margin for <unk> is it going to look more like <unk> or where can that get a little better sequentially.
Look I would tell you.
The difficulty for US right now is we're still seeing a tremendous amount of movement.
As it relates to volumes as our customers are planning.
<unk>.
Production levels during the holidays, we have seen significant shifts week to week on what our customers are expecting so at this point in time I would tell you if you looked at it.
It's safer for me to say if you looked at the third quarter volumes on a pro forma basis, what would be the impact I would tell you. We would expect that it would be somewhere once these price increases are implemented would be somewhere in the range of one 5% to 2% improvement in margins.
Okay.
Got you ultimately volume is going to dictate what happens in Q4 right.
Right right right.
To that point slide five says you expect to achieve normalized margins when things stabilize.
Haven't seem stable for a while right. So can you just level set expectations on where you think segment margins will trend when that happens.
Yes, I think.
If you looked at where we were in 2019 from a margin standpoint.
Our.
<unk> is that we're going to be moving down a path towards our goal that we established which was an overall basis, 16% to 18% EBITDA margins in 2025, So if you take where we've been.
Our expectation is we're going to see improvement toward that maybe well my view is that once the volumes rebound I mean, if you look at it.
They're up 20% year over year from a production standpoint, we're still expecting the fourth quarter volumes to be down significantly. So your question as it relates to fourth quarter volumes is difficult to answer as it relates to production volumes when production volumes on a global basis jumped back.
Up into the high Eighty's, that's when I would expect that some of the margins that we're talking about youll start to see.
Got it.
For the $24 million of new business wins year to date, what's the net number meaning did you have any business roll off.
Yeah, So when we Steve when we put our goals together for 2025, obviously, we expected that there would be some end of production.
As is normal in our business right programs do run them. So when when my comment was that we landed $24 million in new business wins that was consistent with our expectations that was the level that we had targeted for this year to offset any expected run.
Off that we have for next year.
Okay great.
And upfront tooling spend for that $24 million I think a lot more and more of it was skewed to power does that have better dynamics, yes.
Yes, so we had $24 million in mobile and $15 million in power right. So yes, so from a capex standpoint.
Look at some of the business that we have we've been talking about the fact that we have access capacity.
In the business, both from a shift standpoint, and from a pure hour standpoint on the existing machine tools that we have so.
Our expectation is that there will be some growth capex associated with that it's really program by program.
There are some programs, where we may have to buy as an example, we reviewed a program the other day that had.
A higher capex profile to it because there was some center less grinders and some other specific capacity that we needed that we didn't have currently but I would tell you that by and large we expect that $24 million to be launched with a capex profile than that is much less than what we've seen here.
Storage <unk>, so we're still looking at maintaining.
Annual cash Capex amount, which is consistent with what we've been running okay, and we revised our estimates down for this year to $19 million, but.
That $22 million to $24 million level is where we expect to be going forward as we continue to grow the business.
Got it I have some more but I'll jump out of line to let anybody else take a shot.
Sure.
Okay.
This concludes our question and answer session I will now turn the conference back over to Mr. Warren Veltman for any closing remarks.
Well, Hey, first as Steve said, we had a couple more questions and he was going to get back in line I just wanted to make sure that.
He does have a question we address it.
Alright, I have Steve <unk> line open again.
Great. Thank you.
Sorry about that.
No. That's okay I just wanted to see if anybody else was there.
It's encouraging to see recruiting a chief commercial officer I think you said he was grid focused like where are you recruiting them from and are the are the interview is already taking place you have candidates.
Yes look I would characterize it as we are in the final stages of that at this point in time state and and where we were recruiting them from obviously, we are focused on the electrical side of the business, that's where we think we need some additional resources to help us with our <unk>.
Expand our reach there so we have been interviewing.
<unk> from that industry.
Obviously some from.
What our end customers.
Within the power solutions group.
And that in conjunction with the industry specific customer development engineers.
It's a pretty descriptive name, but can you just talk about how more about how that works.
Yes sure. So we brought in we brought in four or five new.
Sales engineers that might be a terminology that is more widely accepted right. So we brought 45, new sales engineers into that group.
We have added leadership specific leadership.
Moved over our new Vice President out of our mobile group and although you didn't have electrical experience had a tremendous amount of general industrial experience and strong experience from a closing.
Sales standpoint, so really solid guy that has been with the company for a long period of time, but.
Those four five customer development engineers that we brought in.
A specific focus where they've had experience selling into the electrical side of the business either there or direct experience on the auto side with electric vehicles and that has opened some doors for us with potential with new customers, where we've been and had an.
<unk> introduced and then and actually our quoting have quoted new programs with some of these customers as well.
That's great and so the commercial officer will essentially take control of this group of people in and direct to the efforts towards new product development.
Yes.
It's the next step.
And this person will will sit above our whole sales group okay <unk>.
Including the auto side of our business and obviously, that's an area where they will have to step up a little bit, but our view was that given the opportunity that we see with battery electric vehicles and the grid side that it was most important for us to get somebody that had experience in <unk>.
That side of the business because our view is on the auto side, we have a strong sales group there.
That has been pushing the envelope from a growth standpoint, and that we needed the electrical expertise.
Is it you probably haven't seen your 'twenty five targets, but is it your expectation that over the next three or four years as you trend towards that that the mix shifts more towards power solutions can that can that ultimately be a bigger business in mobile.
I think that we have some pretty good growth in mobile so I think and a three or four year period, it will be difficult to pop for power to overtake them from a size standpoint, but from a percentage growth standpoint, our view is that there.
There is significant opportunity within power so.
So we would expect that side of our business maybe to grow faster when you look at.
Everything that we've seen on the electric vehicle side.
With the bus bars, and the connectors and we quoted programs that are.
Bus bars that are plastic over molded a lot of that plays to the technologies that we have within the power solutions side of the business. So our.
Our expectation is is that they're going to take advantage of that.
And I think you threw out a $100 billion number for the spend in coming years for electrification.
<unk> addressable market in that.
Well, we've looked at it.
As it relates to the addressable market.
And the Oems spend thats them building out their infrastructure, right and and battery plants and et cetera, but just showing you how serious they are those three Oems and obviously, it's across the board, but our view continues to be that on a content per vehicle, which is a better way for us.
To talk about it frankly and to look at it internally that when you look at the opportunities that exist with some of the items that I just mentioned as it relates to.
Electrical flow storage connection points within an electrical vehicle there is actually an increase in content per vehicle opportunity for us in electric vehicle over what we have today in an internal combustion engine.
Understood and last one.
There's a lot of new faces on the board it seems like that maybe some of the things you are talking about now are a reflection of them.
What what is the board's priorities going into 'twenty two beyond what we've talked about here today.
Yes look.
The board and the management team are aligned and the strategic direction of this organization and what we're working on is consistent.
With.
The strategy. The board is supportive of the strategy that our management team has laid out to them. So our objective of growing.
And the electrical grid space and with battery electric vehicles is very much supported by our board and.
As it relates to the expertise that we've added you can tell that we are purposely added directors that are geared towards our ability to better understand that space and.
And have additional connection points to that space that will allow us to grow and that's what we're focused on.
Perfect. Thanks.
Thank you.
At this time, we have no further questions I would now let's turn the call back over to Mr. Warren Veltman for any closing remarks.
Operator, thank you for everybody on the call today, we certainly appreciate you.
Your interest in our organization and like I said in my conclusion, obviously, it was a challenging quarter, it's a challenging environment.
For all of Us.
We're very confident in the way that we're going about dealing with some of the difficult issues presented to us and are very optimistic about our future. Thank you very much for your time today.
The conference has now concluded.
You for attending today's presentation you may now disconnect.
Okay.
Yes.
[music].