Q4 2021 NN Inc Earnings Call
Good day and welcome to the NN incorporated fourth quarter and full year 2021 earnings conference call. All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note. This event.
Is being recorded I would now like to turn the conference over to Jeff Treichel. Please go ahead.
Thank you Jason Good morning, everyone and thanks for joining us I'm, Jeff bracket Investor Relations contact for NN NN, Inc.
Thank you for attending todays business update.
Yesterday afternoon, we issued a press release announcing our financial results for the fourth quarter and full year ended December 31st 2021, as well as a supplemental presentation, which have been posted on the Investor Relations section of our website.
Anyone needs a copy of the press release or the supplemental presentation, you make contact Lambert at 3155 to 92348.
Presenters on the call. This morning will be worn Beltman, President and Chief Executive Officer, and Mike <unk>, Senior Vice President and Chief Financial Officer.
Before we begin I'd ask you to take note 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 when filed the company's annual report on.
<unk> Form 10-K for the fiscal year ended December 31, 2021, 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 input cost inflation supply.
[laughter] constraints the impact of the automotive semiconductor chip shortage foreign exchange rates cash flow tax rates acquisitions synergies cash and cost savings future operating results performance of our worldwide markets the impacts of the coronavirus or COVID-19 pandemic and.
The Russia Ukrainian conflict on the company's financial conditions and other topics. These statements should be used with caution and are subject to various risks and uncertainties many of which are outside of 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 Warren will provide a business update from the fourth quarter and full year and Mike will provide a detailed update of the financial results before turning the call back over to Warren to discuss our segment results and markets as well as the outlook for the 2022 fiscal year there'll be a Q&A session. Following the conclusion.
On the prepared remarks.
At this time I will turn the call over to Warren Veltman, President and CEO Warren.
Thanks, Jeff and good morning, everyone. If you would turn to page five we will review some of the highlights and accomplishments of our team over the past year and touch on recent events that have occurred at the start of 2022.
Let's start with our strategic objectives of growing the business around ice independent applications, including electric vehicles and the expansion of the electric grid.
Our first objective was to substantially expand the number of opportunities that we were pursuing on that front. We were successful during 2021, our pipeline for the mobile solutions group increased 22% year over year, while power solutions pipeline increased 161% the mix of our pipeline.
So continues to shift towards applications consistent with our strategic objectives as indicated here and graphically on the next page and overall pipeline is approximately 80% concentrated on applications independent of the gasoline internal combustion engine like.
While our 2021, new business wins, which totaled over $50 million only 13% we're on ice dependent applications as.
As we have discussed previously our power solutions sales team was restructured during 2021, and we further strengthened and sales team with the January 2022 appointment of Andrew Wall as our Chief Commercial Officer, Andrew brings strong leadership and 20 years of experience with extensive sales.
Marketing and operations background, and the power and industrial solutions space to earn with these actions I believe our sales teams are well positioned to capitalize on growth opportunities in our targeted growth areas of electric vehicles, and the expansion and modernization of the electrical grid rigor.
Adding 2021, we.
We started the year with rapidly rebounding markets and demand returning to more normalized levels. Following the impact of Covid during 2020.
The favorability resulted in solid year over year growth in revenues and profitability during the first half of 2021.
As we entered the second half of the year, we saw an increase in supply chain challenges affecting our business and that of our customers. Most notable was the semiconductor chip shortage that significantly impacted the automotive industry during the third and the fourth quarters, causing production disruptions at our customers, which rippled through the supply chain.
We increased safety stock levels on critical material and tooling and finished good components in an effort to protect our ability to supply our customers. While these efforts used.
Cash to increase inventory, we utilized customer programs to improve receivable terms and an attractive cost to mitigate the overall working capital impact.
To combat the inflation pressures mounting in the second half of 2021, we have negotiated or enacted price increases to recover or mitigate material and labor inflation. Further we have improved our position on recovering future material price increases by negotiating a 100% material price pass through.
With the majority of our customers.
We balance the short term impacts of timing between cost increases and pricing recovery with a long term partnership we have with our customers to reach the right solution for each of us.
Subsequent to year end, we took action to improve our operating margins and cash flow as we announced the closure of our Taunton, Massachusetts facility. This action will have the impact of reducing costs through the rationalization of our A&M manufacturing footprint, while 2021 presented several challenges with inflation and the <unk>.
STREAMWAY contagious honor Con Covid variant disrupting our production facilities and disruptions to the global supply chain, the dedication and hard work of our employees allowed us to meet and deliver against customer expectations and position us to generate strong financial performance in the future.
With effective management of working capital. We were all we were able to generate $11 6 million of free cash flow before payments of $14 2 million related to the sale of life Sciences.
Cares Act FICA deferral repayments litigation costs and severance.
During the first quarter of 2021, we successfully completed our $265 million refinancing, which strengthened our balance sheet and provided us with long term financial stability to reach our 2025 growth objective.
The refinancing included $150 million term note $65 million in preferred equity and a $50 million ABL, which reduced our borrowing costs from approximately 15% down to approximately 12% <unk>.
Recently, we also proactively amended leverage ratio requirements of our term loan agreement to maintain adequate flexibility given the uncertain and challenging macro economic climate.
Also during the first half of 2021, we enhanced our board with the appointment of three directors, who has expertise aligns with our strategic growth focus areas. The addition of these board members has provided valuable insights into some of the key mega trends in the auto and electrical industries.
That are influencing our overall business today.
We also strengthened our executive leadership team by adding two new members during the year, Mike Voucher was promoted from Chief accounting officer to CFO and as I mentioned previously Andrew Wall joined US in January as our Chief commercial officer, a new executive position to help and then achieve its growth objectives.
Lastly, we are enhancing our proactive communications and investor outreach in 2022, we are planning to host a virtual investor day in May which will feature a range of presentations and Q&A sessions from our leadership team and highlight our strategic vision and the many ways, we differentiate ourselves from our customers.
We will be launching a new web site in the second quarter that will better reflect who we are as a company. We are also fully engaged in the development of our first corporate sustainability report and plan to make environmental social and governance key topics.
Our focus in our external communications.
As we flip to page six you can see the graphics, showing our pipeline of new business wins that I. Previously discussed we are excited about our electric vehicle pipeline expanding over eight times in the past year. You will note that we are all we are still accepting business awards for gasoline.
Independent excuse me absolute gasoline ice dependent applications typically those programs will utilize existing capacity in our business, thus requiring low lower levels of capex or are being priced to generate higher than normal return on invested capital.
Now I'd 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 seven we have summarized some of the key items for the quarter.
Sales for the quarter were $110 4 million down seven 3% from a year ago, we saw.
Improvement in our residential and commercial electric and market within our power solutions group, resulting in year over year revenue growth of one 8% for the segment.
This growth was more than offset by a 12, 6% decrease in revenues in the mobile solutions business due to supply chain challenges, which were most acute in the automotive sector, where the ongoing semiconductor chip shortage affected production globally.
As Oems shut production lines this directly impacted our tier one supplier customers, which in turn affected our production.
To help mitigate these supply chain disruptions and constraints on materials, we worked throughout the quarter to remain flexible while continuing to work together with our customers and vendors to ensure we have adequate inventory to maintain production and meet our customer needs.
Throughout the second half of 2021, we experienced significant material and labor inflation, which impacted our margins in response to these cost increases we implemented price increases in the power solutions business in 2021, which we anticipate will recover the inflationary impact along with margin and <unk>.
Mobile solutions, we implemented price increases in the first quarter of 2022 with a focus on recovering material cost inflation and where appropriate.
Pact of lower volumes on fixed manufacturing costs.
Lastly, our profitability in the fourth quarter continued to be impacted by the reinstatement of a number of programs that were temporarily suspended in 2020 in response to Covid.
non-GAAP adjusted EBITDA for the fourth quarter was $12 1 million or 10, 9% of.
Of sales down from $16 8 million a year ago, when adjusted EBITDA was 14, 2% of sales.
Profitability was adversely impacted by material labor cost inflation that accelerated in the second half of the year the impact that the omicron variant and customer ordering patterns had on our U S manufacturing efficiencies as well as the reintroduction of costs that were temporarily suspended in the prior year.
GAAP EPS from continuing operations was a loss of seven for the fourth quarter versus a loss of <unk> 44 per share in the fourth quarter of 2020.
Our current quarter results reflect the $2 3 million increase in other income related primarily to warrant revaluation and a $1 million increase in our share of income from our China joint venture, partially offset by higher interest expense of $1 6 million.
The fourth quarter of 2020 included a loss of $14 8 million related to the discontinuation of hedge accounting on an interest rate swap.
Our adjusted diluted EPS from continuing operations was a loss of <unk> per share versus a profit of <unk> 17 per share in the prior year.
Moving to slide eight we will review full year results.
Overall, our results significantly improved year over year.
Economy, and our business recovered from the impact of the Covid pandemic in 2020.
Sales increased 11, 7% to $477 6 million with growth fairly balanced between mobile solutions and power solutions.
GAAP operating loss improved to a loss of $9 million from a loss of $117 5 million in the prior year, which included a $92 9 million impairment of goodwill and power solutions.
non-GAAP adjusted operating income increased to $10 1 million from $7 8 million, while adjusted EBITDA increased 12, 1% to $52 1 million from $46 5 million.
GAAP diluted EPS from continuing operations improved to a loss of <unk> <unk> per share from a loss of $3 60 per share in 2020, non-GAAP adjusted diluted EPS improved to a profit of <unk> <unk> per share from a loss of <unk> 16 per share last year.
Turning to slide nine we saw a sequential decrease in working capital turns in the fourth quarter of inventory remains above normal levels due to safety stock needed to address increased lead times due to the ongoing semiconductor shortages as well as the other supply chain issues.
The carrying amount of our inventory has also increased due to material inflation, we have experienced.
We are focused on returning to normal inventory levels as the supply chain stabilizes, which will result in improved turns and cash flow.
Net working capital remained flat to the prior year at $109 7 million as noted previously we were able to offset the increase in inventory in 2021 with lower accounts receivable.
This was due to lower fourth quarter sales compared to last year as well as utilizing customer programs to improve receivable term.
Working capital turns were 4.0 turns versus four three turns in the prior year as a result of the lower sales level during the fourth quarter of 2021 compared to the prior year.
Turning to slide 10, we highlight our disciplined approach we have taken the capital expenditures over the past year as we prudently manage our cash in the current operating environment, while continuing to fund investments in our long term growth.
You can see on an absolute basis, we have increased capex compared to 2020, but reduced expenditures from $11 million in the first half of the year to $7 2 million in the second half.
Slide 11 shows a chart of our free cash flow for the quarter.
Free cash flow was an inflow of $6 2 million in the fourth quarter 2021, compared to a use of $7 1 million in the prior year.
Which included $14 $3 million of transaction costs related to a life sciences cell free.
Free cash flow for the full year included cash generation of 11 6 million before payments of $14 $2 million related to the sale of life Sciences.
Cares Act FICA deferral repayment litigation and severance costs, resulting in free cash flow being a use of $2 6 million for the year.
We had also previously expected receipt of our cares Act tax refund this year, which we now anticipate in 2022.
Please turn to slide 12 net debt at the end of the fourth quarter was 134 point.
We are a $1 million versus $46 9 million in the prior year.
An increase of $87 1 million.
The year over year increase was due to the refinancing completed earlier in the year, which better positions our balance sheet to achieve our 2025 growth objectives are.
Our net debt to adjusted EBITDA ratio stood at 257 times at the end of the fourth quarter up from one point or one times a year ago.
We had $64 $7 million of liquidity, including cash and availability on our revolver as of December 31, 2021, which was an increase of $3 6 million from Q3 2021.
With that I will turn it back to Warren.
Thanks, Mike.
On page 14, we broadly outline our view of current marketing conditions within each of our main markets within the automotive the transition to Evs continues to gather strength with significant OEM investment a report by a report by route writers.
On November 10, 2021 noted that global automakers are planning to invest an estimated 515 billion in electric vehicles and batteries through 2030.
We are well positioned to supply product through both our mobile and power solutions groups.
Semiconductor chip shortage has impacted global auto and light truck production, resulting in continued uncertainty for the industry over the near term. These supply chain issues directly contributed to a 14% decrease in light vehicle production in the fourth quarter of 2021 compared to the fourth quarter of 2020 despite.
These ongoing concerns we have seen some improvement in the outlook as 2021 global production came in at $76 2 million units compared with the previous forecast of 75 eight <unk>.
<unk> global production outlook for 2022 was revised upward by $3 2 million units or three 9% to approximately $85 8 million units.
Within the electrical space, we see long term demand drivers as public and private grid operators prepare for new emerging technologies needed under the smart grid as well as the transition to Green energy we.
We see increasing demand for power transmission and storage infrastructure to tie grid energy sources to green power generation, such as wind and solar. In addition, we believe the increased adoption of electric vehicles for private and commercial use will benefit our power solutions business through increased content per vehicle opportunities and.
Charging infrastructure demand.
Green initiatives that green initiatives have been the focus of the current administration and Congress and significant investment in technology and power infrastructure were included in the infrastructure Bill passed last year, while the pace of conversion may be uncertain. The long term shift towards green energy will increase significantly as a share of <unk>.
How're generation driven by billions of <unk> infrastructure spending.
Ultimately these mega trends driving the market are aligned with our 2025 transformational growth initiatives we.
We have presented additional information for each of our operating groups, starting with mobile solutions on page 15.
Mobile solutions sales fell in the fourth quarter from one year ago as the ongoing semiconductor chip shortage in the automotive industry caused the loss of approximately 2 million production units in the fourth quarter versus $3 3 million units in the third.
The lower profitability was driven by reduced sales volumes the implementation of certain cost to spend it in the prior year inflationary pressures and operating inefficiencies caused by labor availability and the impact of Covid.
Looking forward, we expect demand to remain soft in the first quarter as the semiconductor chip shortage continues to impact a broad range of our customers.
We were able to successfully pass through most material cost increases to customers through pricing actions taken in the first quarter and have also in certain instances negotiated pricing for loss contribution due to below contract volume.
On page 16, our power solutions group experienced a year over year increase in sales in the fourth quarter, which was driven by a recovery in demand to pre pandemic levels in the electrical market and increases in precious metals, partially offset by reduction in automotive sales.
Profitability in power solutions was adversely impacted by lower margins in our ADM business and the resumption of certain cost suspended in the prior year. In addition profitability was also impacted.
Adversely by inefficient inefficiencies associated with unfavorable mix shifts supply chain disruptions uneven customer ordering patterns and labor labor constraints caused by pandemic interruptions looking forward, we see improving demand trends in power solutions driven by market growth.
And increased volumes associated with new business wins.
We have been successful in passing through inflationary cost impacts to customers, which will be reflected in our results going forward. We will remain protective of cash flow in this segment through prudent working capital and Capex management.
Turning to page 17 for our outlook and guidance for 2022 for the year, we are anticipating new sales to increase.
Net sales to increase between 8% and 13% from 2021, resulting in a net sales range of $515 million to $540 million rigor.
Regarding the semiconductor shortages that have been affecting our business and that of our customers. We anticipate that the shortage will remain a headwind through the first half of the year with recovery in the second half of the year.
Our guidance does not anticipate production disruptions due to COVID-19 beyond the first quarter, nor does it reflect any disruptions that may arise due to the Russia, Ukraine conflict.
We expect that the majority of our pricing actions will be implemented during the first quarter.
Based on these assumptions, we expect to generate adjusted EBITDA in the range of 57% to $63 million for the full year, an increase of 9% to 21%.
With the pricing increases implemented or expect it to be implemented we believe we have positioned the company to recover the vast majority of historical and future material cost inflation.
Labor costs have been partially recovered due to the customer expectation of year over year productivity improvements.
If inflation escalate significantly above current levels it would likely require additional pricing action with customers. In addition, we expect to implement deferred investments in indirect head count in the second half of the year contingent on the resolution of supply chain disruptions.
And a return to more normal volumes.
In terms of EBITDA, we expect that the Taunton facility adjusted EBITDA improved $2 5 million from a loss of $5 million in 2021 as the facility ready for closure in late 2022.
Beginning in 2023, we expect a run rate savings of $5 million annually.
Turning to free cash flow, we expect to generate between 14 and $20 million for the full year you can see some of the main inputs in our free cash flow guidance for the year on this slide.
I would also note that our guidance does not include the expected cares act tax refund of approximately $10 million due to the uncertainty of the timing.
In summary, we accomplished several key initiatives during 2021, including establishing a pipeline of strategic opportunities to drive future sales and a financial foundation with our balance sheet to support our long term growth.
We strengthened our leadership team to include our new CFO and a new CTO that will help drive our long term success.
We still have challenges and uncertainties ahead of us, but we will continue to navigate the current environment with the flexibility and responsiveness to improve our operations and meet the current and future needs of our customers, which will drive our future success.
That concludes our prepared remarks, and I will now turn the call back to the operator for questions.
Thank you we will now begin the question and answer session.
A question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
Our first question comes from Steve Barker from Keybanc capital markets. Please go ahead.
Good morning, guys.
Good morning.
The midpoint of revenue guidance is about a 10% increase.
Much of that is in backlog, where you have firm line of sight versus expected relative to these <unk> and power grid opportunities.
I'm, just trying to get a sense for our base business increase versus conquest revenue gains.
Yes sure Steve.
Let me, let me speak about the groups separately, okay. So.
On the automotive side or the mobile solution side.
The concept of backlog is not one that we spend a lot of time on.
So when we think about the forecast for that group. It really is being driven by business that exist today that we have been awarded.
Okay. So given that we've talked about the lead times for business development.
Being 18 months some times greater.
So when we look at our guidance for 2022, it's really on the mobile side. It relates to programs that were we're relatively certain that we're that we've been awarded are we have been awarded and has contracted the <unk>.
The only uncertainty could calm.
As it relates to macroeconomic conditions that would drive automotive production volumes.
And programs that we have been awarded and what is the start date of those the scheduled start up production date, if that were to slip or be accelerated that could change the timing of it.
On the power solutions side, a lot of our historical business is carrying over and growing there is some.
Expectation that we're going to grow that business organically through market gains, but I would tell you.
It's not a significant portion of what we're projecting from a guidance standpoint.
Got it so so really what does it mean to have 161% increase in the power pipeline is that the year over year changed identified opportunities or customer requests for quote or or actual quotes do you have out in the marketplace.
Yeah.
It's all of those all of those things and what it what it really says to me.
As a leader of this organization is that the plans that we've put in place.
On the sales side for the power solutions group are taking hold we re did.
From a.
Personnel standpoint, the majority of that group in early 2021, we replaced the leadership in that team has done a really solid job of pursuing new opportunities that fit our objectives.
In the marketplace.
To see that pipeline of opportunities and in most cases, it's business that we have quoted on our we are engaged with the prospective customer to receive a business award, but it hasn't been awarded yet and Thats why its in the pipeline.
And I know this is a hard question, but how are you thinking about likely conversion rates.
Yes, so when we look at the pipeline on the mobile solutions side I would tell you. There's two factors that go into that one is how strategic is it to what we want to do and how hard do we want to pursue it I think if you look at it on an overall basis, our hit rate normally might be in the <unk>.
<unk> to.
20% rate, but something that we've targeted and we've really sharpened our pencils from an engineering standpoint on how we would process the job that really fits with our goals our hit rates may be higher in all likelihood they are.
And on the <unk>.
The power side I would tell you the data population surrounding that is being developed.
We've had some pretty solid hit rates recently, but given the expansion in the pipeline.
Our hit rate probability could go down given the amount of projects that we've added that were pursuing and.
And we need to be diligent and some of these I have to tell you. Some of these programs have some capital associated with them. There is and as we've looked on the power side, specifically, we've moved we've shifted our objectives.
Certainly from.
What we've pursued in the past which was smaller programs.
There is some more big game hunting going on here than what we've done in the past to secure some programs that have some more size to them and in some more consistency as it relates to volumes when you look at that business.
We have really a couple of major customers that we have long term contracts with the rest of it is repetitive business through annual purchase orders that type of thing and what we'd like to do which shifts some of the business dynamics for our power group to include some larger programs.
That our multiple year contracts, where we become a more strategic.
Part of our customer supply chain.
Understood and last one for me I first I'll, just say congratulations on negotiating the material cost pass throughs I know that's been a big headwind in the past.
Are you.
And you used the term sharpening your pencil that.
The things that you have the quotes you have out in the marketplace are going to come through.
Better contribution margins than where you've been running in the past.
Aye.
I think.
I think that is subject to ongoing evaluation, but I would tell you I talked a little bit about the inherent the gasoline internal combustion engine product that still is in our pipeline that in our view.
To the extent that it would require any additional capex on our part we would expect that the margins on that business going forward would be greater than what we had normally I would tell you. The other thing that we're seeing in the marketplace. Today is on some of these larger programs that we are quoting.
There is a demand for multiple processes.
And what I mean by that is historically, we would have the mobile group quote.
Sure.
Precision termed <unk>.
Components, right and now customers are coming to us with programs that require deep draw stamping along with some components that are precision turned our ground along with the need for plastic injection molding. So it gives us an opportunity to really differentiate ourselves with our customers and that.
I believe can lead to some margin expansion over the long term.
That's great. Thanks.
Yes.
Again, if you have a question. Please press Star then one.
The next question comes from Rob Brown from Lake Street Capital markets. Please go ahead.
Hi, good morning.
Morning, Brian . The first question is on on the <unk> pipeline of nice expansion there.
Maybe could you give us a sense of whats struggling expansion is it just the growth in the EV market or is there a greater content per vehicle that you were you able to.
It provides.
Yes, I think it's a combination of things Rob certainly you've seen the Oems and we talked about this briefly have have pulled forward significantly expanded the number of electric vehicle offerings.
That's number one number two.
Our sales group has a more defined.
We'll set an objective on what we're pursuing strategically we.
We spent a lot of time on that over the last year and certainly with Andrew coming on we're refining that.
Even further.
And lastly, I would say that as we've continued to explore the opportunities with our customers there's the opportunities to increase that.
The content and provides on cars today has gone up.
From what our original expectations are and its example, I'll give you an example.
Been working with a customer on a braking system application for an electric vehicle that requires because theres no brake booster.
In the assembly that can be driven by the power of the engine. There is a lot more sensors that are required on that breaking application, which requires more precision parts then.
We previously had understood which has given us a great opportunity to work with the customer on that okay. There is other opportunities that we have discovered that our plastic injection molding.
Facility can provide and that's why as I indicated earlier and then is really uniquely positioned in the market today to deliver to some of these large multinational companies that are pursuing.
New applications on the electric vehicle side, because we can service them in all these areas whether it be grinding turning plastic injection molding.
Or precision progressive stamping, we have all of those capabilities under our roof, which is really unique for some of the suppliers that they deal with.
Okay, great. Thank you for that overview and then.
And then on the pricing that youre to give us a range or a sense of what that pricing.
On average is that price increase.
Yes.
I'm going to caution you first on this.
That.
As you evaluate the number against our total sales you need to remember that the company already had systems and processes in place to capture price increases for material.
Okay, where we would have a material share arrangement with the customer whether it be 70, 30 or 80 20 right. So.
Material coverage that we already had in our contractual arrangements with customers is not in the number that we're talking about but I would tell you and in a large bucket some of the pricing that we've looked at globally throughout and Anne is approaching about $20 million.
At this point in time.
And when you think about where we are globally.
If you look at the Brazil economy as an example, with.
With the inflation characteristics down there, we've been able to pass through price increases to our customers in Brazil, and the 9% and up range. Okay.
Some of our other low or other geographies the inflation dynamics might not certainly are not as high as they are in Brazil, but we have been to me. The key is that we have been successful on the materials side agreeing with our customers that and then really can't bear given how materials move.
We can't bear the risk, even if 20% of that price increase.
So we've been able to get the majority of our customers to agree to take on more of that cost increase by going to a 100%. We still have in all frankness, we still have situations with customers where they are.
Yes.
We're still in negotiation because theyre not willing to accept some of that risk. So there have been situations, where we've had to play.
Take a harder stance in the negotiation.
In order to reach some some some sort of compromise our conclusion, there, but I've used the word majority and I think that thats, an accurate statement that in the majority of instances, we've got our customers to take 100% of the risk on the materials side.
I think thats a big step.
Okay, great great to hear that and then.
And then last question pull harder maybe to answer but in terms of your outlook and the visibility how do you sort of feel about visibility now compared to a quarter ago.
In terms of the market from the customers.
Man profiles and things.
Police not great, but how.
How has it changed over the last couple of months.
Yes.
Think we've seen the up and downs of Covid right. So we're we're cautious when we say this.
That.
As we set our guidance for the full year assumes that we're not going to have significant interruption from COVID-19 going forward. After the first quarter and just to give you an idea.
Our operations in North America as an example on the mobile side, 74% of the absenteeism that we experienced in 2021 occurred in the fourth quarter.
When omnicom became prevalent, especially in our western Michigan facilities. So that was a pretty extreme hardship on that team to manage through that and he did a.
A great job in all honesty so.
We think we have we think we're cautiously optimistic that some of that is behind us.
We've spent a lot of time evaluating and looking at the semiconductor chip issue that.
That would be the other one that's on the table.
And then lastly.
Would be the Ukrainian and Russian complex and that one is relatively new I said in my prepared remarks that.
<unk> was projecting I think it was $85 8 million in projects.
Production this year, but just yesterday, we received an alert.
As it relates to.
Our revision of that number down into the high 80, threes I think they took it down $1 million to a $1 million for because of disruptions in OEM production in Europe .
Because some of the componentry for the European Oems was coming out of Ukraine or that area, which was causing them. Some difficulties. So there still are some things that are moving around on us.
But it is certainly I would tell you.
A little clearer for us today than it was.
A year ago.
And that's why that's why we wanted to step forward and provide some guidance. Because this is what we think the business is capable of doing. This is this is our view of it today and we wanted to make sure that our investors our shareholders and our analysts understood our view going out through 2021, but certain.
There is still some uncertainty.
Okay, great. Thank you I'll turn it over.
There are no more questions into queue. This concludes our question and answer session I would like to turn the conference back over to Warren Veltman for any closing remarks.
Thank you operator, I'd just like to thank everybody for taking the time to listen to our earnings call. This morning, certainly appreciate it appreciate the support and the interest.
That everyone's had certainly throughout 2021 and as I said in my concluding remarks, I think the team here has done.
A fine job of riding the ship that wasn't and positioning this company to be extremely successful and really converting.
Our our management efforts now into full growth mode in order to provide ongoing value. So.
<unk> everybody's time today. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yes.
Okay.
Thanks.
Okay.
Okay.
Okay.
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