Q3 2023 Mayville Engineering Co Inc Earnings Call

Yeah.

Thank you all for joining I'd like to welcome you to the Mayville Engineering company that called out 2023 earnings call.

My name is pretty clear and I wouldn't really the motivator for today's call.

All lines are on mute the presentation portion of the cool with an opportunity for questions and answers today.

If you would like to ask a question. Please press Star then one on your telephone keypad.

I would now like to pass the conference over to your highest Stefan Neely to begin so discussion. Please go ahead.

Thank you operator on behalf of our entire team I would like to welcome you to our third quarter 2023 results conference call, leading the call today is Max President and CEO, Jack ready and Todd Butz, Chief Financial Officer. Today's discussion contains forward looking statements about future business and financial expectations.

Actual results may differ significantly from those projected in today's forward looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the Securities and Exchange Commission.

Except as required by law, we undertake no obligation to update our forward looking statements.

Further this call will include a discussion of certain non-GAAP financial measures reconciliation of these measures to the closest GAAP financial measure is included in our quarterly earnings press release, which is available at Mec, Inc. Dot com.

Following our prepared remarks, we will open the line for questions.

With that I would like to turn the call over to Jack.

Thank you Stephanie and welcome to those joining us on the call and webcast as anticipated our third quarter results demonstrated significant year over year growth in revenues adjusted EBITDA and free cash flow. These strong results were the product of continued steady end market demand and targeted market share gains, particularly.

In our commercial vehicle military and power sports markets early in the third quarter. We closed on the acquisition of mid stage to aluminum or MSA, which was also a contributor to our revenue and earnings growth in the third quarter. In addition to the cross selling opportunities afforded by Msa's aluminum fabrication.

Extrusion capabilities, our core business continues to enjoy a robust sales pipeline entering 2024.

As we look forward into a potentially more muted environment or end market growth. We are optimistic about our ability to deliver above market growth through the cycle by expanding our share of wallet with our current customers and improving the utilization of our existing assets important.

Ali our operational and commercial self help initiatives are continuing to Delaware improved profitability and cash generation through improved cost absorption value based pricing and enhanced working capital efficiency.

During the third quarter, we generated a record $16 1 million of free cash flow representing cash conversion in excess of 80% a new record for our business.

Consistent with our capital allocation priorities, we have reduced our outstanding borrowings by more than $17 million in the third quarter, while repurchasing $1 billion, what the common equity, leaving $17 million under our existing 25 million authorization as of September.

Unknown Executive: Thank you all for joining. I'd like to welcome you all to the Mayville Engineering Company, third quarter, 2023 earnings call.

Got there yet.

<unk>, we have repurchased $2 million worth of shares under our existing authorization in September we hosted our inaugural Investor day event at our Hazel Park facility outside of Metro Detroit update that we introduced a three year roadmap for Mack one debt leverage.

Unknown Executive: My name is Breaker, and I will be the moderator for today's call. All lines are on mute for the presentation portion of the call with an opportunity for questions and answers at the end today. If you would like to ask a question, please press the star then one on your telephone keypad.

Stefan Neely: I would now like to pass the conference over to your host, Stefan Neely, to begin. So Stefan, please go ahead. Thank you, operator.

Just the key pillars of our Mdx framework to drive long term value creation for our shareholders.

At the event, we underscore how we intend to drive organic sales growth adjusted EBITDA margin and improved free cash flow generation, while continuing to develop a leading manufacturing platform of scale within key growth markets such as energy transition.

Jack Ready: On behalf of our entire team, I'd like to welcome you to our third quarter, 2023 results conference call.

Jack Ready: Leading the call today is next president and CEO, Jack Ready, and Todd Butz, Chief Financial Officer. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements. Actual results due to various risks and uncertainties, including the risks described in our periodic reports filed with the Securities and Exchange Commission. Except it's required by law, we undertake no obligation to update our forward-looking statements. Further, this call will include the discussion of certain non-GAAP financial measures. Reconciliation of these measures to the closest GAAP financial measure is included in our quarterly earnings press release, which is available at mechink.com.

Team, we are committed to excellence through accountability and introduced new three year financial targets update event, which our entire team is focused on achieving.

The year end 2026, we expect to deliver between 105 and 135 million of annual adjusted EBITDA, along with annual net sales between 750 and $815 million adjusted EBITDA margins between 14% to 16% and annual free.

Cash flow generation up 65% to $75 million. While these are ambitious targets. They are entirely achievable our third quarter results demonstrate early progress towards this plan.

Unknown Executive: Following our prepared remarks, we will open the line for questions.

Jack Ready: With that, I would like to turn the call over to Jack. Thank you, Stefan, and welcome to those joining us on the call and webcast. As anticipated, our third quarter results demonstrated significant EF-Orea growth in revenues adjusted EBITDA and the pre-cash flow. These strong results were the product of continued steady end-market demand and targeted market share gains, particularly in our commercial vehicle, military, and power sports markets. Early in the third quarter, we closed on the acquisition of mid-stage aluminum, our MSA, which was also a contributor to our revenue and earnings growth in the third quarter.

We remain focused on delivering ratable consistent growth into 2024 building upon our track record of execution.

While we are very pleased with our third quarter performance. It is important to highlight that these results include continued cost under absorption associated with planned ramp ups at our Hazel Park them Atkins facilities.

Fixed costs under absorption and Hazel Park alone impacted the third quarter, adjusted EBITDA and adjusted EBITDA margin by $1 $7 million and 110 basis points, respectively. Excluding.

Jack Ready: In addition to the cross-selling opportunities afforded by MSA's aluminum fabrication and extrusion capabilities, our core business continues to enjoy a robust sales pipeline entering 2024. Even as we look forward into a potentially more muted environment for end-market growth, we are optimistic about our ability to deliver above-market growth through the cycle by expanding our share of wallet with our current customers and improving the utilization of our existing assets. Importantly, our operational and commercial self-help initiatives are continuing to deliver improved profitability and cash generation through improved cost absorption, value-based pricing, and enhanced working capital efficiency.

Excluding the impact of the Haynesville Park ramp up our normalized adjusted EBITDA was 13, 2%.

We continue to expect that he is a park will ramp up fully by the end of 2024 contributing $100 million in annual revenues with adjusted EBITDA margins of approximately 15% in 2025 as of September 30, We currently had commitment for all but a.

Approximately $25 million of the projected $100 million in annual revenue contribution of that facility.

Turning now to a review of market conditions across our five primary end markets.

Jack Ready: During the third quarter, we generated a record 16.1 million of pre-cash flow, representing cash conversion in excess of 80% in new record for our business. Consistent with our capital allocation priorities, we reduced our outstanding borrowings by more than 17 million in the third quarter. While repurchasing 1 million dollars worth of common equity, leaving 17 million under our existing 25 million authorization as of September 30. This year alone, we have repurchased $2 million worth of shares under our existing authorization.

Again with commercial vehicle market, which represents approximately 40% of our trailing 12 month revenues during the third quarter commercial vehicle revenue increased six 6% on a year over year basis, driven by strong demand and elevated build rates customer demand requirements continue to indeed.

Slowing demand going into the end of the year and into 2024 as the industry navigates regulatory changes as well as a general slowing in economic activity.

Currently ACD research forecast that class eight vehicle production to increased six 6% year over year in 2023 to 336000 units that current projections indicate that build rates will slow during the fourth quarter and declined by nearly 4%.

Jack Ready: In September, we hosted our inaugural, in yesterday event at our Hazel Park facility, outside of Metro Detroit. At the event, we introduced a three-year roadmap for MAC, one that leverages the key pillars of our NVX framework to drive long-term value creation for our shareholders. At the event, we underscored how we intend to drive organic sales growth, adjusted EBITDA margin, and improved free cash flow generation while continuing to develop a leading manufacturing platform of scale within key growth markets, such as energy transition.

On a year over year basis.

For 2020 for ACP projections reflect it deeper softening in demand through the middle of the year with current production estimates, reflecting an 18, 5% decline for the full year 2024.

Furthermore, we are currently experiencing volume disruptions associated with the United Auto workers strike with one of our customers.

Jack Ready: The team were committed to excellence through accountability and introduced new three-year financial targets of the event, which our entire team is focused on achieving. By the year end, 2026, we expected delivered between 105 and 135 million of annual adjusted EBITDA, along with annual net sales between 750 and 850 million, adjusted EBITDA margins between 14 to 16 percent, and annual free cash flow generation of 65 to 75 million. While these are ambitious targets, they are entirely achievable.

This has impacted our volumes for their products so far during the fourth quarter and we will continue to do so until an agreement is reached next is the construction and access market, which represented approximately 18% up our trailing 12 month revenues.

Construction on the access revenue declined two 3% on a year over year basis in the third quarter, given weaker fundamentals within the residential housing market, which continues to be impacted by the elevated interest rate environment.

While residential construction trends appear to have Kraft and infrastructure and energy market demand remains stable, we still expect to see demand softness year over year through the remainder of 2023 and into 2024 with the potential for modest improvement later in 2024.

Jack Ready: Our third-quarter results demonstrate early progress towards this plan. We remain focused on delivering rateable consistent growth into 2024, building upon our track record of execution. While we are very pleased with our third-quarter performance, it is important to highlight that these results include continued cost under absorption associated with planned ramp-ups at our Hazel Park and acting facilities. Fixed cost under absorption at Hazel Park alone impacted the third-quarter adjusted EBITDA and adjusted EBITDA margin by 1.7 million and 110 basis points, respectively.

The power sports market represented approximately 16% of our trailing 12 month revenues and increased by seven 7% on a year over year basis in the third quarter.

We continue to benefit from market share gains, which include new customer programs, which were partially offset by pooling in consumer discretionary spending.

Given current market conditions, we anticipate customers will seek to bolster demand through rebates and incentives going into the holiday season.

Jack Ready: Excluding the impact of the Hazel Park ramp-up, our normalized adjusted EBITDA was 13.2 percent. We continue to expect that Hazel Park will ramp up fully by the end of 2024, contributing 100 million in annual revenues with adjusted EBITDA margins of approximately 15 percent in 2025. As of September 30, we currently had commitment for all but approximately 25 million of the projected 100 million in annual revenue contribution of that facility.

As we look forward into 2024 indications are that continued slowing in demand will result in growth deceleration as dealer inventory levels have normalized.

Agricultural market represented approximately 10% of trailing 12 month revenues and increased four 6% on a year over year basis. During the third quarter. The increased during the quarter was primarily driven by.

Jack Ready: Turning now to a review of market conditions across our five primary and markets. Let's begin with commercial vehicle market, which represents approximately 40 percent of our trailing 12-month revenues. During the third quarter, commercial vehicle revenue increased 6.6 percent on a year-or-year basis driven by strong demand and elevated build rates. Customer demand requirements continue to indicate slowing demand going into the end of the year and into 2024. As the industry navigates, regulatory changes, as well as a general slowing in economic activity.

Growth in large AG demand along with the contribution of Msas aggregated sales, which offset continued overall softness in our legacy small AG market.

This trend is in line with our expectations as global food stocks remain tight and crop prices remain elevated.

The elevated crop prices, we believe producer demand will increase through the end of the year and into 2024 with some deceleration going into the middle of 2020 for.

The demand tailwind in large AG going into 2024 should mostly offset softness in small AG demand.

Jack Ready: Currently, ACT Research Forecast, the Class 8 legal production to increase 6.6% year-over-year in 2023 to 336,000 units. The current projection indicates that build rates will slow during the fourth quarter and decline by nearly 4% on a year-over-year basis. For 2024, ACT projections reflect a deeper softening in demand through the middle of the year with current production estimates reflecting an 18.5% decline for the full year 2024. Furthermore, we are currently experiencing volume disruptions associated with the United Auto Worker Strike with one of our customers. This has impacted our volumes for their products so far during the fourth quarter and will continue to do so until an agreement is reached.

On the military market represented approximately 6% of trailing 12 months revenues increased 70% on a year over year basis in the third quarter, driven by new program wins and bill rate increases.

Customers have solid contractual backlog with the U S government and we continue to see good volumes based on new vehicle introductions and related programs. However, we foresee volume growth moderating during the fourth quarter and into 2024 due to the expected exploration.

Of some legacy projects.

I'd also point out that with the completion of MSA acquisition during the quarter. The majority of MSA revenues are represented within our other end markets category, which grew by over $12 million year over year in the third quarter.

MSA acquisition closed on July one and since then our teams have been hard at work with integration and cross selling activities.

Jack Ready: Next is the construction and access market, which represented approximately 18% of our trailing 12 month revenues. Construction access revenue declined 2.3% on a year-over-year basis in the third quarter, given weaker fundamentals within the residential housing market, which continues to be impacted by the elevated interest rate environment. While residential construction trends appear to have dropped, an infrastructure and energy market demand remains stable. We still expect to see demand softness year-over-year through the remainder of 2023 and into 2024 with the potential for modest improvement later in 2024.

We're all MSA integration is going well and we're on track to have them fully integrated by the end of the year as expected.

Importantly, as we highlighted at our Investor day, we see MSA generating over $100 million of sales by 2026 with at least $25 million coming from revenue synergies with the legacy Mec customers as of end of September we are progressing as expected towards that target.

As well as the expected cost synergies that we are targeting through the implementation of our mdx lean manufacturing framework and MSA.

Shifting now to an update on our Mdx initiative.

Jack Ready: The power sports market represented approximately 16% of our trailing 12 month revenues and increased by 7.7% on a year-over-year basis in the third quarter. We continue to benefit from market share gains, which include new customer programs, which were partially offset by cooling in consumer discretionary spending. Given current market conditions, we anticipate customers will seek to bolster demand through rebate and incentives going into the holiday season. As we look forward into 2024, indications are that continued slowing in demand will result in growth de-separation as dealer inventory levels have normalized.

During the third quarter, we continued to progress in the implementation of our mdx value creation framework I am pleased to report that we are on track to achieve the objectives. We laid out last fall when we first announced the mdx framework as we highlighted at our Investor Day Mdx is rooted in order.

<unk> commercial growth improved cost absorption to lean manufacturing practices value based pricing and working capital efficiency. These key areas of self help initiatives will allow us to create sustainable value and deliver above market growth through the cycle.

Actually we are targeting growth in higher value high growth adjacent markets, including clean technologies and energy transition. In addition to expanding our share of wallet among our current customer base achieve.

Jack Ready: Our agriculture market represented approximately 10% of trailing 12 month revenues and increased 4.6% on a year-over-year basis during the third quarter. The increase during the quarter was primarily driven by growth in large ag demand, along with contribution of MSA's agglator sales, which offset continued overall softness in our legacy small ag market. This trend is in line with our expectations as global cool stocks remain tight and crop prices remain elevated. Given elevated crop prices, we believe producer demand will increase through the end of the year and into 2024 with some de-separation going into the middle of 2024. The demand payments in large ag going into 2024 should mostly offset softness in small ag markets.

Achieving this goal is dependent on improved utilization I'll put equipment through better labor productivity as well as utilizing existing capacity at MSA and Hazel Park.

Allow me to share some of the commercial milestones we achieved during the third quarter.

Starting out we are pleased to report that we have been awarded purchase orders for our first cross selling win after the acquisition of MSA.

First award was in the commercial vehicle space, which was the largest market opportunity within our cross selling targets. We have continued to build momentum in our core.

Code activity and we expect to continue to win awards over the coming quarters.

Jack Ready: Or a military market represented approximately 6% of trailing 12 month revenues and increased 70% on a year-or-year basis in the third quarter, driven by new program winds and bill rate increases. Our customers have solid contractual backlogs with the U.S, government and we continue to see good volumes based on new vehicle introductions and related programs. However, we foresee volume growth moderating during the fourth quarter and into 2024 due to the expected expiration of some legacy projects.

Due to the third quarter, we continued the expansion of our customer relationship to supply battery thermal management products to multiple end customers as the EIA transition continues to progress.

This relationship will continue to expand as our customer growth their electric vehicle battery systems. While we also are starting to work on significant outsourcing programs with this customer.

In the quarter, we further expanded our new customer relationship in the power sports market with the new program wins on new products. We expect to see continued significant growth with this new customer relationships. As we look ahead into 2024, we also made progress on securing additional market share with.

Jack Ready: I will also point out that with the completion of MSA acquisition during the quarter, the majority of MSA revenues are represented within our other end-market category, which grew by over 12 million year-over-year in the third quarter. The MSA acquisition closed on July 1st and since then our teams have been hard at work with integration and cross-selling activities. Overall, the MSA integration is going well and we are on track to have them fully integrated by the end of the year as expected.

Our large AG and construction customers.

These new parks were related to next generation products and to continue to build momentum in winning new business with the capacity we have installed in Haynesville Park.

We have continued to gain additional market share as our commercial vehicle customers plan for their vehicle updates both on next generation products in battery electric vehicle platforms. We expect to continue to grow share or the next two years with the amount of change that will occur in this industry.

Jack Ready: Importantly, as we highlighted at our investor day, we see MSA generating over 100 million of sales by 2026 with at least 25 million coming from revenue synergies with legacy MAC customers. As of end of September, we are progressing as expected toward that target, as well as the expected cost synergies that we are targeting through the implementation of our MBX Lean Manufacturing Framework and MSA.

As we highlighted during our Investor day, our 2026 net sales targets are dependent on capturing incremental customer commitments of $65 million to $125 million, including MSA cross selling synergies.

Based on our current level of sales activity and recent wins, we remain confident that this is achievable.

Jack Ready: Shifting now to an update on our MBX initiative. During the third quarter, we continue to progress in the implementation of our MBX valuation framework. I am pleased to report that we are on track to achieve the objectives we laid out last fall when we first announced the MBX framework. As we highlighted at our investor day, MBX is rooted in organic commercial growth, improved cost absorption through lean manufacturing practices, value-based pricing, and working capital efficiency.

Other pillar of Mdx is commercial excellence, where our focus is to implement strategic and value based pricing models across our customer programs year to date. The teams have been working tirelessly to implement a programmatic pricing model.

On the operational excellence front, we have continued our rigorous implementation approach.

Centered around our quarterly President's kaizen supplemented by monthly operational and commercial excellence.

During the third quarter, we completed 25 zones with the focus on sustainability of cost savings measures identified.

Jack Ready: These key areas of self-help initiatives will allow us to create sustainable value and deliver above-market growth through the cycle. Commercially, we are targeting growth in higher value, high growth in adjacent markets, including clean technologies and energy transition in addition to expanding our share of wallet among our current customer base. Achieving this goal is dependent on improved utilization of our equipment through better labor productivity, as well as utilizing existing capacity at MSA and Hazel Park.

Overall, our team has performed over 100 mdx lean events through the end of the third quarter.

These savings put us on track to achieve the 40 to 70 basis points of margin improvement reflected in our 2023 guidance as well as the 100 to 150 basis points of margin improvement, we expect to achieve by 2026.

Given the current demand environment. The execution, we have achieved with our <unk> initiatives and the ongoing ramp up of new program launches. We continue to expect consistent margin performance and free cash flow conversion to close of the year.

Jack Ready: Allow me to share some of the commercial milestones we achieved during the third quarter. Starting out, we are pleased to report that we have been awarded purchase orders for our first cross-selling win after the acquisition of MSA. Our first award was in the commercial vehicle space, which was the largest market opportunity within our cross-selling targets. We have continued to build momentum in our code activity, and we expect to continue to win awards for the coming quarter.

Looking ahead to 2024, we anticipate some modest softening across our end markets given broader expectations for a general slowing in the U S economic growth next year.

However, we anticipate ongoing operational and commercial growth initiatives will position us to deliver above market growth.

Jack Ready: June the 3rd quarter, we continued the expansion of our customer relationship to supply battery thermal management products to multiple end customers as the EV transition continues to progress. This relationship will continue to expand as our customer grows there, electric vehicle battery systems while we also are starting to work on significant outsourcing programs with this customer. In the quarter, we further expanded a new customer relationship in the power sports market with new programs on new products.

Our ability to deliver above market growth into 2024 depends in part on driving improved asset optimization across our system continued price discipline and sustained cost management, all of which were on pace to Delaware.

2024 will be a year of rateable progress for us one where we expect to begin to fully realize the benefits of mdx initiatives, which are expected to support sustained organic growth margin expansion and improved working capital efficiency.

Jack Ready: We expect to see continued significant growth with this new customer relationship as we look ahead into 2024. We also made progress on securing additional market share within our large ag and construction customer. These new parts were related to next generation products and continue to build momentum on winning new business with the capacity we have installed in Hazel Park. We have continued to gain additional market share as our commercial vehicle customers plan for their vehicle updates both on next generation products and battery electric vehicle platforms.

As before we intend to prioritize cash generation towards the aggressive reduction in outstanding borrowings, putting us on pace to achieve a net leverage ratio between one five X and a two <unk> by the end of 2024.

Since the announcement of the MSA acquisition, we have received numerous indications of interest from potential acquisition candidates, many of which fit nicely within our acquisition criteria for lightweight materials and high growth end market exposure.

Jack Ready: We expect to continue to grow share or the next two years with the amount of change that will occur in this industry. As we highlighted during the last day, our 2026 net sales targets are dependent on capturing incremental customer commitments of 65 to 125 million including MSA cross selling synergies. Based on our current level of sales activity and recent wins, we remain confident that this is achievable.

While we will continue to build a solid funnel of high quality acquisition candidates, our chief focus over the near term will be on reducing net leverage to ensure continued balance sheet optionality through the cycle.

In summary, as I have highlighted today, we delivered on several important strategic growth milestones during the third quarter, all of which play a role in building a leading integrated solutions platform.

Flipped to take share in higher value underserved growth markets.

Jack Ready: The other pillar of MBX is commercial excellence, where our focus is to implement strategic and value-based pricing models across our customer programs. Here today, the teams have been working tirelessly to implement a programmatic pricing model. On the operational excellence front, we have continued our rigorous implementation approach centered around our quarterly president's kaisans supplemented by monthly operational and commercial excellence kaisans. During the third quarter, we completed 25 kaisans with the focus on sustainability of cost savings measures identified.

Team, we remain highly focused on delivering a high say do ratio one where a continued focus on program execution is at the center of all we do collectively we remain focused on delivering a superior return on invested capital whether through organic investments acquisitions.

<unk> or the repurchase of our own common equity.

We look to the coming year, we will continue to hone and refine our approach to capital allocation as we seek to maximize value for all of our shareholders with that I will now turn the call over to Todd to review our financial results.

Jack Ready: Overall, our team has performed over 100 MBX lean events through the end of the third quarter. These savings put us on track to achieve the 40 to 70 basis points of margin improvement reflected in our 2023 guidance, as well as the 150 basis points of margin improvement we expect to achieve by 2026. Given the current demand alignment, the execution we have achieved with our MBX initiatives and the ongoing ramp up of new program launches, we continue to expect consistent margin performance and free cash flow conversion to close of the year.

Thank you Jay I'll begin my prepared remarks, with an overview of our third quarter financial performance, followed by an update on our balance sheet and liquidity.

Total sales for the third quarter increased 16, 1% on a year over year basis to $158 $2 million driven by a combination of the MSA acquisition and improved organic sales volumes, partially offset by softening demand in our construction and agricultural end markets.

When excluding the MSA acquisition organic net sales growth was six 2% on a year over year basis.

Our manufacturing margin was $19 million in the third quarter as compared to $15 5 million in the same prior year period.

Jack Ready: Looking ahead to 2024, we anticipate some modest softening across our end markets, given broader expectations for a general slowing in the U.S, economic growth next year. However, we anticipate ongoing operational and commercial growth initiatives will position us to deliver above market. Our ability to deliver above market growth into 2024 depends in part on driving improved asset optimization across our system, continued price discipline and sustained cost management, all of which were on pace to deliver.

The increase was primarily driven by increased organic volumes Mdx initiative and the acquisition of MSA offset by Unabsorbed fixed costs associated with new product launches and an $891000 negative impact from the inventory valuation step up associated with MSA.

Our manufacturing margin rate was 12% for the third quarter of 2023 as compared to 11, 3% from the prior year period or an increase of 70 basis points.

When excluding the impact of the Unabsorbed fixed cost and the inventory adjustment or manufacturing margin would've been 13, 7% or an increase of 240 basis points as compared to the prior year period.

Jack Ready: 2024 will be a year of readable progress for us, one where we expect to begin to fully realize the benefits of MBX initiatives which are expected to support sustained organic growth, margin expansion, and improved working capital efficiency. As before, we intend to prioritize cash generation towards aggressive reduction in outstanding borrowings, putting us on pace to achieve a net leverage ratio between 1.5x and 2.0x by the end of 2024.

But sharing bonuses and deferred compensation expenses increased by $2 2 million to $2 3 million for the third quarter of 2023.

It was driven by lower stock based compensation expense in the prior year period due to forfeitures of Unvested Awards.

Other selling general and administrative expenses were $8 $6 million for the third quarter of 2023.

As compared to $6 $5 million for the same prior year period.

Jack Ready: Since the announcement of the MSA acquisition, we have received numerous indications of interest from potential acquisition candidates, many of which fit nicely within our acquisition criteria for lightweight materials and high growth and market exposure. While we will continue to build a solid funnel of high-quality acquisition candidates, our chief focus or the near term will be on reducing net leverage to ensure continued balance sheet optionality through the cycle.

The increase was driven by $1 million of legal expenses relating to our former fitness customer.

$100000 of transaction costs associated with the MSA acquisition and increased salaries wages and benefits.

As we highlighted at our Investor day in September we believe that SG&A expenses in the near term will be between four five to five 5% of net sales as our public company costs increase as we work through meeting Sox compliance requirements.

And the longer term, we expect operating leverage will drive our SG&A down to between four 5% and 5%.

Jack Ready: In summary, as I have highlighted today, we delivered on several important strategic growth milestones during the third quarter, all of which play a role in building a leading integrated solutions platform equipped to take share in higher value underserved growth markets. As a team, we remain highly focused on delivering a high-say-do ratio, one where a continued focus on program execution is at the center of all we do. Collectively, we remain focused on delivering a superior return on investor capital, whether through organic investments, acquisitions, or the repurchase of our own common equity. As we look to the coming year, we will continue to hone and refine our approach to careful allocation as we seek to maximize value for all of our shareholders.

Net sales by 2026.

Interest expense was $3 9 million for the third quarter of 2023.

As compared to $830000 in the prior year period, due to higher interest rates and higher borrowings under our credit facility.

The increases in borrowings is due to the acquisition of MSA, which closed on July one 2023, given our current net leverage we are subject to a higher spread on our floating rate debt combined with higher sulfur rates resulted in the elevated interest rate during the quarter.

As we continue to pay down our debt, we expect that interest expense will continue to decline.

Not only due to lower borrowings, but also because of the step down in our spread as a result of declining net leverage adjusted EBIT increased to $19 2 million versus $16 1 million for the same prior year period, adjusted EBITDA margin percent increased by 30 basis points to 12, 1% in the current quarter.

Todd Butz: With that, I will now turn the call over to Todd to review our financial results. Thank you, Jay. I'll begin my prepared remarks with an overview of our third quarter financial performance, followed by an update on our balance sheet and liquidity.

As compared to 11, 8% for the same prior year period.

The increase in our adjusted EBITDA margin was primarily due to increased organic volumes mdx initiatives and the MSA acquisition.

Todd Butz: Total sales for the third quarter increased 16.1 percent and a year-over-year basis to $158.2 million, driven by a combination of the MSA acquisition and improved organic sales volumes, partially offset by softening demand and our construction and agricultural end markets. When excluding the MSA acquisition, organic net sales grow was 6.2 percent on a year-over-year basis. Our manufacturing margin was $19 million in the third quarter, as compared to $15.5 million in the same prior year period.

Partially offset by a $5 million or higher under absorbed fixed costs at Haynesville Park adjusted EBIT margin progression is evident and demonstrates early advancement towards our 2026 goal of 14% to 16% turning now to our statement of cash flows and balance sheet.

Free cash flow during the third quarter of 2023 was $16 1 million as compared to $5 2 million in the prior year period.

Todd Butz: The increase was primarily driven by increased organic volumes and the ex-initiative and the acquisition of MSA, offset by unabsorbed fixed costs associated with new project launches and an $891,000 negative impact from the inventory valuation step up associated with MSA. Our manufacturing margin rate was 12 percent for the third quarter of 2023, as compared to 11.3 percent for the prior year period or an increase of 70 basis points. When excluding the impact of the unabsorbed fixed costs in the inventory adjustment, our manufacturing margin would have been 13.7 percent or an increase of 240 basis points as compared to the prior year period.

Jack mentioned free cash flow generation for the quarter was the highest in any quarter since the IPO and represented a conversion rate of 84% of adjusted EBITDA.

The improvement in free cash flow year over year was primarily due to the $8 $9 million decrease in capital expenditures, resulting from the completion of the Haynesville Park facility and improved inventory turns as we continue to implement lean inventory management processes.

With the heavy capital investment cycle in 2022 behind US we are focused on improving working capital and we were able to generate strong free cash flow result that put us on pace to meet our second half of the year free cash flow goal of 25% to $35 million and show a significant progress towards our 2026 free cash flow target.

Todd Butz: Prophecyaring, bonus and deferred compensation expenses increased by $2.2 million to $2.3 million for a third quarter of 2023, which was driven by the lower stock-based compensation expense in the prior year period due to four apertures of unvested awards. Other selling, general and administrative expenses were $8.6 million for a third quarter of 2023, as compared to $6.5 million for the same prior year period. The increase was driven by $1 million of legal expenses relating to our former fitness customer, $500,000 of transaction costs associated with the MSA acquisition, and increased salaries, wages and benefits.

A 65% to $75 million.

As of the end of the third quarter of 2023, our net debt, which includes bank debt financing agreement finance lease obligations and cash and cash equivalents was $169 $6 million.

As compared to $74 million at the end of the third quarter of 2022 and resulted in a net leverage ratio of 246 times as of September 30th as we have stated previously it is our intention to use free cash flow generation to reduce our net leverage ratio to between one five and two times by the end of 2024.

And during the third quarter alone, we repaid approximately $17 million of borrowings using available free cash flow.

Todd Butz: As we highlighted at our investor the end of September, we believe that estimated expenses in the near term will be between 4.5 to 5.5% of net sale as our public company costs increase as we work through meeting stocks and compliance requirements. In the longer term, we expect operating leverage will drive our SUNA down to between 4.5 and 5% of net sales by 2026. Interest expense with $3.9 million for the third quarter of 2023, as compared to $830,000 in the prior year period due to higher interest rates and higher borrowing to under our private facility.

In light of our third quarter results and the outlook for the rest of the year, we are reiterating our financial guidance for the full year 2023.

For the full year 2023, we continue to expect the following net sales between $580 million and $610 million adjusted EBITDA of between 66 million and $71 million capital.

Capital expenditures of between 15% and $20 million.

Our current full year 2023 guidance does not include any impact from the ongoing strikes within the CV and auto industries beginning.

Todd Butz: The increase has been borrowing to doing the acquisition of MSA, which closed on July 1, 2023. Given our current net leverage, we are subject to a higher spread on our floating rate debt, combined with higher sulfur rates, resulted in the elevated interest rate during the quarter. As we continue to pay down our debt, we expect an interest expense will continue to decline. Not only due to lower borrowings, but also because of the step down in our spread as a result of declining net leverage.

Beginning in November we estimate these strikes could negatively impact net sales by approximately $6 million to $7 million per month, and adjusted EBITDA by $1 million to $2 million per month with that operator that concludes our prepared remarks. Please open the line for questions as we begin our question and answer session.

Thank you.

To ask a question. Please press star followed by one on your telephone keypad.

Todd Butz: Adjusted EBITDA increased in $19.2 million, versus $16.1 million for the same prior year period. Adjusted EBITDA margin per cent increased by 30 basis points to 12.1% in the current quarter, as compared to 11.8% for the same prior year period. The increase in our adjusted EBITDA margin was primarily due to increased organic volumes, MBX initiatives, and the MSA acquisition. Partially offset by $1,500,000 of a higher under-absorbed fixed cost at ASL Park. Adjusted EBITDA margin progression is evident and demonstrates early advancement towards our 2026 goal of 14-16%.

You've got to remove that question. Please.

Sure.

And again, if you would like to ask a question. Please press star one on your telephone.

We have the first question from.

Thanks.

Citigroup. Please go ahead when you're ready.

Good morning, guys. Thanks for taking my call.

Okay.

Good morning.

Yeah.

Great. Thanks.

So thanks for all the information and update today.

Todd Butz: Turning now to our statement of cash flow and balance sheet. Free cash flow during the third quarter of 2023 was $16.1 million, asked for a $5.2 million in the prior year period. As Jake mentioned, free cash flow generation for the quarter was the highest in any quarter since the IPO and represented a conversion rate of 84% of adjusted EBITDA. The improvement in free cash flow year over year was primarily due to the $8.9 million decrease in capital expenditures, resulting from the completion of the ASL Park facility, and improved inventory turns as we continue to implement lean inventory management processes.

Maybe just.

Since you've given some initial thoughts on 2004 here.

Any.

Any color on how we should be thinking about.

Raw material pass throughs impacting 2000 forward, just given given where raws are today.

Sure.

I think the.

Weak because of glad walking into this call.

Friday I would have said.

Hey, no change we have stable steel prices.

And.

We're expecting some price stability.

<unk> almost in the past year right now steel prices have stayed relatively calm but as.

Todd Butz: With the heavy capital investment cycle in 2022 behind us, we are focused on improving working capital, and we were able to generate strong free cash flow results that put us on pace to meet our second half of the year free cash flow goal of $25-35 million, and show a significant progress towards our 2026 free cash flow target of $65-75 million. As of the end of the third quarter of 2023, our net debt, which includes bank debt, financing agreements, finance lease obligations, and cash and cash equivalence, was $169.6 million.

As markets have shown in the last few days.

As steelmakers continue to curtail supply.

We are.

Seeing a bit of a spike.

In our steel prices, we don't expect that to last.

Through 2024, but we are seeing a bit of a spike in the last week or so we're expecting things to stabilize in 2024.

I would just comment that we wouldn't expect it to have the impact that it did in 'twenty, one and 'twenty two.

Todd Butz: As compared to $74 million at the end of the third quarter of 2022, and result in a net leverage ratio of 2.46 times as of September 30th. As we have stated previously, it is our intention to use free cash flow generation to reduce our net leverage ratio to between one and a half and two times by the end of 2024. And during the third quarter alone, we repay it approximately $17 million of borrowing using available free cash flow.

Certainly there has been a little bit in market, but the fluctuation isn't as steep.

Had been previously so again as we look into 'twenty four we don't see it as a real large impact but to get it to pass through and we will disclose it.

Going forward each quarter.

Okay, Great. That's helpful. Thanks, guys.

And then just on the <unk>.

Quarter end into year end here you talked about.

Todd Butz: In light of our third quarter results, and the outlook for the rest of the year, we are reiterating our financial guidance for the full year 2023. For the full year 2023, we continue to expect the following that sales of between $580 and $610 million. Adjust an EBITDA of between $66 million and $71 million. Capital expenditures of between $15 and $20 million. Our current full year 2023 guidance does not include any impact from the ongoing strikes within the CV and auto industries.

Supply chain constraints still impacting some customers.

So can you just talk about sort of.

How you'd characterize the visibility from from your OEM customers in the current environment.

If you are seeing changes in their order patterns or any increasing stability that could be helpful to your own manufacturing operations.

Todd Butz: Beginning in November, we estimate these strikes could negatively impact net sales by approximately $6 to $7 million per month and adjusted EBITDA by $1 to $2 million per month. With that operator, that concludes our prepared remarks.

Sure I would say that in Q3.

We did not see any significant customer supply chain disruption so.

For us it feels like things have calmed down.

And we saw relatively.

Normal order flow.

Coming into 'twenty, sorry, coming into Q4.

Unknown Executive: Please open the line for questions as we begin our question and answer session. Thank you. If you would like to ask a question, please press star for look by one on your telephone keypad. If any reason you'd like to remove that question, please press star two. And again, if you would like to ask a question, please press star and one on your telephone keypad.

We are not expecting any significant changes on that front, either having said that probably the last sentence.

Todd.

Todd remarks, right if you caught it.

Sure.

We have obviously exposure to some customers who are experiencing some UAW strike disruptions.

Unknown Executive: We have the first question from the very first question from City Great. Please go ahead when you're ready. Good morning, guys. Thanks for taking my call, are you? Good morning, last for you. Great. Thanks. Thanks for all the information and the update today.

I would say that by through the end of October our impact has been minimal.

And.

Auto exposure, we have now we can say that in the rest of Q4.

We will be again minimal given the strikes have been at least it looks like theyre going to be settled.

Other CD customer that continues to be down because of the UAW strike.

Unknown Executive: Maybe just, you know, since you've given some initial thoughts on 24 here, any color on how we should be thinking about raw material pastors impacting 24 just given, given where raw is our today. Sure. I think, you know, we cause a lot of blood walking into this call, you know, on Friday, I would have said, you know, hey, no chain, you have stable steel prices. And, you know, we're expecting some price stability, you know, given that almost in the past year, right?

We're optimistic that given the conclusion of the other big three.

Contract negotiations that.

Our CD customer could also wrap up there off their negotiations in the short term.

But if that continues on and we expect some impact as Scott mentioned in his prepared remarks in Q4 outside of those events, we do not expect any disruptions from.

Any supply chain issues are otherwise going into 2024, we have not seen any.

Indications of softness per se in our purchase orders are Adi feeds we normally see.

Unknown Executive: And the steel prices have stayed relatively calm. But as, you know, as markets have shown in the last few days, as steel makers continue to curtail supply, we are seeing a bit of a spike, you know, our steel prices. We don't expect that to last, you know, through 2024, but we are seeing a bit of a spike in the last week or so. So, we're expecting, you know, things to stabilize in 2024.

But the conversations.

<unk> have been.

A little muted.

From some of our customers, even though the order flows haven't changed the demand picture Hasnt changed so given the discussions about macroeconomic conditions high.

High interest rates consumer demands.

Slowly with all of this we're walking into 2024 on a cautious note as we mentioned we continue to expect to perform.

Unknown Executive: In Atlanta, I would just comment that, you know, we wouldn't expect it to have the impact that it did, you know, in 21 and 22. You know, certainly there's been a little bit of an update, but the fluctuation isn't as steep as it had been previously. So, again, as we look at the 24, we don't see it as a real large impact, but again, it's a past room and we'll just go to, you know, going forward each quarter. Okay, great. That's helpful. Thanks, guys.

Our revenue growth to be about.

Market growth next year.

Given our market share gains and new program wins and startup of multiple long term programs in both Haynesville Park.

Atkins and other locations within the company.

Okay. That's really helpful color guys. Thanks. Thank you.

Thank you.

About half.

Jack Ready: And then just on the quarter and into year and year, you talked about supply chain constraints still impacting some customers. So can you just talk about sort of how you characterize visibility from your OEM customers in the current environment? And if you're seeing changes in their order patterns or any increase in existing stability that could be helpful to your own manufacturing operations? Sure. I would say that in Q3, we did not see any significant customer supply chain disruption.

Your next question comes from Bank to Bank.

Please go ahead.

Alright, Thank you and good morning, everyone.

Sure.

I wanted to I wanted to talk on that last point that you made there can you talk about 2004 and about.

You were specific.

Growth drivers is there a way to update us or kind of quantify.

Knowing what you know today in terms of business that you guys have booked or programs incremental programs that you have booked.

To what.

Revenue in.

In 24 relative to 'twenty three would be would be from the business that you're already kind of have visibility on.

Jack Ready: So in a for us, it feels like things have come down and we saw relatively normal or flow. So, coming into Q4, we are not expecting any significant changes on the front either. Having said that, probably the last sentence on Todd's remarks, if you caught it, we have obviously exposure to some customers who are experiencing some UAW strike disruptions. I would say that by through the end of October, our impact has been minimal.

Yes Mig good.

Good morning again.

We were not in a position to provide any guidance on 2024.

At this point, having said that.

<unk>.

We remain committed to the three year.

Jack Ready: And, you know, all of the exposure we have now, we can say that, you know, in rest of Q4 will be again minimal given that the strikes have been at least looks like they're going to be settled. Other CD customer that continues to be down because of the UAW strike, you know, we're optimistic that given the conclusion of the other big three contract negotiations that our CD customer could also wrap up their negotiations in the short term.

EBITDA and cash flow targets, we laid out recently at our Investor Day, we continue to expect progress towards that goals, even with a perhaps new to 2024 growth picture. So we expect 2024 to be a growth year for <unk>.

We expect to grow above market next year, both topline and margin expansion and cash flow generation as well.

So we're pretty optimistic about 'twenty 'twenty four but we're not in a position to provide any particular guidance at this point.

Yes.

And I appreciate that it wasn't.

It necessarily wanting to pin you down on guidance for 'twenty four it was more trying to understand.

November right so.

You probably have a pretty decent idea in terms of the incremental programs that you have that you know will start flowing into 'twenty forward because your macro commentary, obviously more cautious than it was.

Jack Ready: But if that continues on, we expect some impact as Todd mentioned in this prepared remarks in Q4. Outside of those events, we do not expect any disruptions from any supply chain issues are otherwise going into 2024. We have not seen any indications of softness per se in order those are purchase orders or any of EDI feeds who normally see. But the conversations have been a little muted from some of our customers, even though the order flows haven't changed, the demand picture hasn't changed.

So I think we're all trying to figure out.

What specifically can do to sort of offset.

This more difficult macro setup, if you would yes.

Yes.

Okay. So on slide five in our deck that we put out.

This morning, or last night, you can see that we're projecting most of our.

And markets to be either down or slightly flat.

And we're projecting our power sports markets to be up.

Jack Ready: So given the discussions about macro economic conditions, high interest rates, consumer demands, slowing with all of these, we're walking into 2024 on a cautious note. As we mentioned, we continue to expect to perform our revenue growth to be about market growth next year. Given our market share gains and new program wins and startup of multiple long-term programs in both Azure Park, Atkins and other locations.

Even though the market is going to be down up significantly given our new program starts that we discussed multiple times in the last couple of quarters.

I don't want Investor day. Similarly, our commercial vehicles also even though the market may be down a good 18 18, 5% is what HCP is projecting that market is going to be down next year, we're expecting at least to be flat.

In 2024, similarly construction on access.

Sure.

60, 40, construction and axis, that's how we break out our revenues.

Unknown Executive: Thank you very much for coming. Okay, that's a really helpful color guy, thanks. Thank you. Thank you very much.

We expect access market to be pretty good.

Going into 2024, given the customer comments that we've heard in there.

Nick Debrae: We now have your next question comes from Nick Debrae of Bed. Please go ahead. Thank you, and good morning everyone. I want to tack on that last point that you made there. There's Jagade about 24 and about your specific outgrowth drivers. Is there a way to update us or kind of quantify knowing what you know today in terms of business that you guys have booked or programs and criminal programs that you have booked as to what the revenue benefit in 24 relative to 23 would be from the business that you already kind of have visibility on.

<unk>.

Public comments recently.

Construction residential construction, obviously, it's down but we have other programs that we're on that gives us confidence that we will at least be at our sand segment, we will at least be flat next year.

Liang.

Residential small AG is down but large AG and then addition from MSA.

Demand, sorry revenues as well well continues to give us a key step flattish picture next year in our AG markets. This fall and military it's a small segment, we expect to be up given some new program wins.

So overall, that's why it gives us confidence that even though the end markets might be down next year, we will perform above our end market averages.

Nick Debrae: Yeah, I mean, good morning again. We were not in a position to provide any guidance on 2024 at this point having said that we remain committed to that three year revenue, EBITDA and cash flow targets. We laid out recently at our investment aid. We continued to expect progress towards that goals, even with a perhaps muted 2024 growth picture. So we expect 2024 to be a growth year for Mac. We expect to grow above market next year, both top line and margin expansion and cash position as well.

Okay.

And sort of sticking with this slide five in.

And the way the mix the revenue mix is going to be evolving between these verticals.

Is there any insight to be gained in terms of what that looks like from a margin standpoint meet military friends, if it's growing quite a bit positive for margin.

We are now.

Uh huh.

It's I would say generally speaking maybe slightly accretive with that mix change.

For next year.

Yes.

Generally speaking our margin performance in each segment is very similar.

Nick Debrae: So we're pretty optimistic about 2024, but we're not in a position to provide any particular guidance on this point. Yeah, well, and I appreciate that and I wasn't necessarily wanting to pin you down on guidance for 24. It was more trying to understand it's November, right? So you probably have a pretty decent idea in terms of the incremental programs that you have that you know will start flowing into 24 because your macro commentary is obviously more cautious than it was before.

Maybe one or two points. It is in place for hitting 35% margin in one market and another so it's very similar across the board.

Okay.

Understood.

Last question just clarification around this.

W strike so you're.

Our guidance for the fourth quarter.

Does that does that assume any drag.

From the strike like for instance in the month of November.

Or not Youre, just sort of quantifying it but it is not factored into the numbers yet.

Nick Debrae: So I think we're all trying to figure out what makes specifically can do to sort of offset this more difficult macro set up if you would. Yeah, no. Okay, so on slide five in our deck that we put out this morning or last night, you can see that we're projecting most of our end markets to be either down or slightly flat. And we're projecting our power sports markets to be up even though the market is going to be down up significantly given our new program stars that we discussed multiple times in the last couple of quarters and I know in us today.

It has not been factored into the guidance.

In a normal course, we would expect to be within our original guidance analysis, the strike, which we're optimistic again hopefully that gets settled here in the near term if that is prolonged.

Will most likely result in about $6 million to $7 million per month of lost sales and about $1 million to $2 million EBITDA.

EBITDA impact, which again has not been factored into our guidance.

And just to reinforce the point that in October even though.

The month of October.

<unk> was not taking.

Are not running rather at their production lines, we've been able to offset our October volumes with.

Nick Debrae: Similarly, our commercial labels also in the market may be down, you know, good 18, 18 and a half percent is what ACT is projecting that market is going to be down next year. We're expecting at least to be flat in 2024. Similarly, construction access, you know, we're 60, 40 construction and access. That's how we break out our revenues. We expect access market to be, you know, pretty good, you know, going into 2024 given the customer comments that we heard in their public comments recently.

Aftermarket production et cetera that helped us continue to run our production lines in the month.

So if it gets settled in the next week or so right I think we'll be okay, but if it continues to drag on into the second third week of November then we will expect impact as outlined by Todd.

That's clear.

Okay.

Thank you. Thank you.

Okay.

Your next question comes from pulp.

Nick Debrae: Construction, residential construction obviously is down, but you know, we have other programs that were on that gives us confidence that, you know, we will at least be a second segment. We will at least be flat next year. Similarly, ag as the residential small ag is down, but large ag and then addition from MSA ag demand us, sorry revenues as well will continue to give us please get flatish picture next year, you know, ag markets as well.

Jackson This is Nelson will be chunky.

Thanks, very much for taking my question.

So just a couple of questions.

The UAW one that you just answered was one of them, but I got two more.

When you first of all when you talk about.

Growth in 2024 that youre expecting to grow as a business.

Are you I am a little confused is that organic or is that are you talking about just growth.

Uh huh.

A whole combined thing. These are the 2023, we're talking organic growth.

Nick Debrae: And military is a small segment. We expect to be up given some new programs. So overall, that's why gives us confidence that even though the end markets might be down next year, right, we will perform above our end market. Okay, and sort of sticking with the slide five and the way the revenue mix is going to be evolving between these verticals. Is there any insight to begin in terms of what that looks like from margin standpoint?

Kind of ex MSA acquisition are normalized for it.

Are you, saying just youre just talking about.

The wrong number.

Yes, so it's a really good question Ted.

Expecting organic growth in addition to the lapping of <unk>.

MSA first half revenues.

Okay. Okay.

Nick Debrae: I mean, like military, for instance, if it's growing quite a bit, does that positive for margin for make sort of for or not? It's, I would say, generally speaking, maybe slightly a credo with a mix change for next year, Mick. And that was at, you know, generally speaking, our margin performance in each segment is very similar. You know, maybe it's in one or two points. It isn't like creating 35% margin in one market, 15% in another.

Got it.

Didn't want to assume that but I want I.

I did want to assume that.

Yes.

Then just excuse me.

A little more color if you would on the on the commercial vehicle.

Market itself I know.

The macro outlook you provided previously was 23 and now we're looking at 24 and I understand the dynamics with regards to the pull forward of demand as a result of all the regulatory changes for emissions.

You also have some new product wins within the commercial market itself.

<unk>.

Can you provide some I guess some color with regards to.

Nick Debrae: So it's very similar across the board. Okay, understood. Then last question, just clarification around this UAW strike. So your guidance for the fourth quarter, does that, does that assume any drag from from the strike like, for instance, in a month of November or or not, you're just sort of quantifying it, but it's not factored into the number yet. It has not been factored into the guidance, you know, in a normal course, we would expect to be within our original guidance.

What where you see that business going for you as you roll through 'twenty four.

Saying you think you can keep it.

What I mean, so if I was to just take your commercial vehicle.

Revenue for 2003, and as a baseline worst case scenario given what you know today you'd see no growth in that.

Would that is that kind of what you are saying with it.

Nick Debrae: Now, if this, the strike which we're optimistic, again, hopefully they get settled here in the near term. If that is prolonged, that would most likely result that about $6 to $7 million per month of law sale, and about $1 to $2 million of, you know, eagled up impact, which again has not been factored into our guidance. And just to reinforce the point that in October, even though the top most the month of October, the customer was not taking our not running rather their production lines.

If you were to see.

On top of 23 is there something that would happen that would drive that.

Is there something in the.

Your backlog or kind of your dialogue with customers and stuff that would make that a growth business for you with me. That's your biggest vertical so a little more maybe discussion around it might be worthwhile.

<unk>.

Yes, it's a good question as well Ted.

As we said our ACD set.

Nick Debrae: We were able to offset our cover volumes with, you know, aftermarket production, et cetera, that helped us continue to run our production lines in the month of October. So, you know, if it gets settled in the next week or so, right, I think we'll be okay, but if it continues to drag on to the second, third weeks of the number, then we will expect impact at some point by time. That's clear.

Commercial vehicle volumes will be down 18, 5% in 2024, thus our current expectations given our new program wins.

Unknown Executive: Thank you.

Including new tank production volume is going to come online.

In Q1 of next year.

And outsourcing when we talked about and then other program wins, we expect to be flat.

In our commercial vehicle revenues next year.

Our expectation.

Okay, and then remind me I mean.

Unknown Executive: You're next. You're next question.

I've seen this before but it's been a long time ago. It's not like this is the first time that we've had this kind of scenario within commercial vehicles, where.

Unknown Executive: I was your head. Jackson. There's no film security.

Ted Jackson: Thanks very much for taking my question. So, just a couple of questions. The UAW one that you just answered was one of them, but I got two more. When you, first of all, when you talk about growth in 2024, you know, that you're expecting to grow as a business. Are you, I'm a little confused, is that organic, or is that growth, are you talking about, you know, this growth, you know, MSA, you know, the whole combined thing, BCB, you know, 2023.

<unk> changed and you get a lot of forward buying.

Every time that this kind of this.

Every time.

The rates change how long does it usually take for the market to kind of go back to normalized I mean is it like.

A phenomenon.

All else being equal, let's ignore the macro economy, and whatever and that we get through 24, and then we get back to kind of like a base market growth rate.

How much.

Or how much demand gets pulled forward when when the government makes those changes typically.

Ted Jackson: I mean, are we talking, you know, organic growth, you know, you know, kind of X, MSA, acquisition, or normalize for it? Yeah, what you're saying, just, you're just talking about the, you know, the volume number. Yeah, it's a really good question, Ted. We're expecting organic growth in addition to the lapping of MSA first half revenues. Okay, okay, I just, you know, I didn't want to assume that, but I won. I did want to assume that.

Yes.

I would say that typically it's about a year when the markets go down and then contract back to normal levels.

We're expecting obviously right 2024 to be down year even.

Even looking at by quarter by quarter, we expect that.

The softness due to sort of hit mid year and second half to be a little lower than first half of next year, and then 2025, the walgreens or expect it to come back up to normalized levels and I don't think we have a number from ACD, yet, but our expectation is going to be some.

Ted Jackson: Then, excuse me, a little more color if you would on the commercial vehicle market itself. You know, I know, you know, the math though outlook you provided previously was 23, and now we're looking at 24, and I understand the dynamics with regards to the pull forward of demand as a result of all the regulatory changes for emissions. You also have to have new product wins within the commercial market itself. Can you provide some, I guess, some color with regards to what, you know, where you see that business going for you, you know, as you roll through 24, I mean, you're saying, you know, you think you can keep it flat.

We're north of three.

1000 in 2025.

Actually I do have a number from ACD.

Number two and 25 are expected to be around 316.

K units.

2022 US 2016, K 2023 is the 330 6K and 2024 to $2 74, K right. So you can see that dip. So there was a pull in in 2023 pulled back in 2024, and then back to normalized levels of $3 16 and 2025.

Okay, that's great data.

Alright, thanks, very much guys.

Thank you Doug.

Ted Jackson: I mean, so if I was to just take your commercial vehicle revenue for 23, and as a baseline, a worst case scenario, given what you know today, you know, you'd see no growth in that, is that kind of what you're saying with it? And if you were to see growth on top of 23, is there something that would, you know, happen that would drive that? You know, is there something in the, you know, your backlog or kind of your dialogue with customers and stuff that would make that a growth business for you?

Yes.

Thank you.

A reminder, if you'd like to ask any further questions. Please press star one on your telephone keypad.

You have to know.

Please.

Thanks again.

Yesterday.

Good morning, Thanks for those Investor day goals and those credible bridges for your roadmap for EBITDA margin expansion and free cash flow and I just had a hypothetical question to start out here.

Now regarding the auto workers' strikes and if something like this occurs next year for a different end market and or even a large customer disruption and then maybe theres a mild recession in the spring or something.

Ted Jackson: I mean, it's your biggest vertical, so a little more maybe discussion around that might be worthwhile. Yeah, that's a good question. As well, Ted, as we said, our ACT said, the commercial vehicle volumes will be down 18 and a half percent in 2024. That's our current expectations. Given our new program wins, including a new tank production volume that's going to come online and, you know, in Q1 of next year, and that's outsourcing when we talked about, and then other program wins, we expect to be flat in our commercial vehicle revenues next year. That's our current expectation. Okay.

How much flexibility do you have to maybe shift some of the capacity or stalled works.

And markets to backfill that and and cut overtime costs as I think you might've said on Investor day.

20% overtime mix, but maybe you can flex at the time.

Yeah, Great question, Tim, Yes, we were averaging approximately 20 ish percent over time.

In many of our plans our long term goal our target is to be around 15% or so.

Flex.

Our overtime rather.

Immediately we can shut off the overtime.

Ted Jackson: And then remind me, I mean, I've seen this before, but it's been a long time ago. It's not like this is the first time that we've had this kind of scenario within commercial vehicles where, you know, regulations change and you get a lot of forward buying. It happens every time that this kind of, you know, every time, you know, the rigs change. How long does it usually take for the market to kind of go back to normalize?

And also we have the flexibility to.

Freeze hiring we still have about 100 job openings across the company as we speak today.

And we can.

<unk> some of those hiring plans, but also we have the flexibility to.

Switch our operations from producing for one from one end market to another end market given that majority of our plans in fact outside of two plants. So the majority of our planned 18 plus plants.

Ted Jackson: I mean, is it like a phenomena that, then, you know, all of us being equal, it's ignored the macro of the economy and whatever, and, you know, that we get through 24, and then we get back to kind of like a base market growth rate. You know, how much demand gets pulled? When the government makes those changes typically? Yeah. I would say that typically, it's about a year when the market sort of go down and then cut back back to normal levels.

We can.

Yeah.

We can make.

<unk> for any end market, so that gives us the flexibility to quickly switch our customer focus our end market utilization of those assets.

Ted Jackson: We're expecting, obviously, right, 2024 to be that down year, even, you know, even looking at, you know, by quarter by quarter, we expect that the softness to, to sort of hit mid-year and second half to be a little lower than first half of next year. And then 2025, the longings are expected to come back up to normalize levels. I don't think we have a number from ACT yet, but our expectation is going to be somewhere north of 300,000 in 2025.

So those are the levers we have and we have no unexpected.

Any black Swan events or anything like that in the near term and so we don't know.

But if something like that happens we have the ability to quickly switch gears and shift our focus.

Great. That's good contingency planning and nice to hear a lot of companies actually can't do that but whereas easily what about jag on now that you've finished your cargo vans and spend time in all your plants to implement mdx.

How would you kind of quantify maybe what inning youre valued based on strategic pricing is it mostly implemented for contract pricing fresh start in January where do you feel like you wont really fully achieve that maybe to the next next summer.

Ted Jackson: Actually, I do have a number from ACD. The numbers are in 2025, we're expected to be around 316 K units. 2022 was 316 K, 2023 is the 336 K, and 2024 is the 274 K, right? So you can see that diff. So there was a pull-in in 2023, pull-back in 2024, and then back to the normalized levels of 316 in 2025.

Ted Jackson: That's great data. All right.

So a couple of things. So we're just getting started on our mdx implementation and our cadence our ongoing every quarter every month and every plant right. So that's a journey.

Now we're done with that so I am excited and a couple of weeks, we will have in a few weeks. We will have our Q4 presidents guys and we're going to do somewhere between four and six <unk>.

Unknown Executive: Hey, thanks very much, guys. Thank you.

Across the company.

In Q4, so pretty exciting.

Events coming up for us in terms of pricing Tim.

Unknown Executive: As a reminder, if you'd like to ask any further questions, please press star in one on your telephone keypad.

We implemented two.

Kim Moore: We now have Kim Moore of E.A. Patton. Thanks again for the investor day.

Through our commercial excellence activities and.

TPI tight sands.

A programmatic approach to value based pricing what that means is we have a new framework on how we think about pricing.

Jack Ready: Morning. Thanks for those investor day goals and those credible bridges for your roadmap for EBITDA margin expansion and free cash flow. I just had a hypothetical question to start out here. You know, regarding the auto worker strikes, you know, and it's something like this occurs next year for a different end market or even a large customer disruption. Then maybe there's a mild recession in the spring or something. How much flexibility do you have to maybe shift some of the capacity or stalled works to other end markets to backfill that in and, you know, cut overtime costs?

Everything including cost to serve right customer payment terms too.

<unk> up there.

Products and Manny.

Manufacturing processes to now ease of doing business with some of our customers.

<unk> need heavy hand, holding some.

Very easy to do business with right. So there's a lot of criteria that we have used to develop this matrix a complex matrix and our model that we're going to use.

Jack Ready: I think you might have said on investor day about 20% overtime mix, but maybe you could flex at the time. Great question, Tim. Yeah, we were averaging approximately 20% overtime in many of our plans. Our long-term goal or target is to be around 15% or so how flex a time or overtime rather. So immediately we can shut off the overtime and also we have the flexibility to, you know, freeze hiring. We still have about 100 job openings across the company as we speak today, and we can, you know, quickly free some of those hiring plans.

To price all future work right. So that doesn't include all the existing work.

For the existing business that we currently have work continuing to do our quarterly account reviews and looking at.

Almost SKU by SKU, and then see what our profitability is and what should our profitability be for each of these accounts and each of these bodies of work that we currently perform.

For our customers that's it that's a long term process as you can imagine so eventually everything will lap over the next couple of years, but all the new business that we are beginning to coat in the second half of this year are based on the new pricing framework going forward.

Jack Ready: But also we have the flexibility to switch our operations from producing from one end market to another end market. Given that majority of our plans, in fact, outside of two plans or majority of our plans, 18 plus plans, you know, we can, you know, we can make parts for any end market. So that gives us the flexibility to quickly switch our customer focus or end market utilization of those assets. So those are the levels we have and, you know, we, you know, no one expects any black swan events or anything like that in the near term, at least we don't know.

Great Thats helpful.

The rolling basis, plus the for the existing in the future.

Being implemented already.

Yesterday, I believe you might have stated that.

It was about $115 million of new sales opportunities.

I guess signed or won in the last 18 months, maybe averaging about $20 million per quarter.

Everyone's familiar with your.

Battery thermal management win and it sounds like it might be another customer there for he is a part but if you kind of look at your wins and maybe that $20 million a quarter.

Last few quarters.

Would you say that a lot of thats in EV related charging or is it more also beyond that battery thermal management into wind solar.

Jack Ready: But if something like that happens, you know, we have able to quickly switch gears and shift our focus. Create, Jack, that's a good contingency planning and nice to hear a lot of companies actually can't do that, but we're as easily.

Energy grid infrastructure.

What are the kind of recent conversations you've been having potential customers for emerging technologies.

Revenues.

Yes, it's a good question as well, Tim we continue to focus on and.

Jack Ready: What about, Jack, on now that you finish your cousin and spend time with all your plans, implement NBX. How would you kind of quantify maybe what ending your value-based strategic pricing is, is it mostly implemented for contract pricing for start in January, or do you feel like you won't really fully achieve that maybe to the next summer? So a couple of things, we're just getting started on our MDX implementation, and our Kaisens are ongoing every quarter, every month, in every plan, right?

Energy transition as a secular theme within the company and then we're continuing to look for opportunities where we can go win additional business, whether it's in charging infrastructure, whether it's solar or other renewables, but I can say so far the majority of the wins have been in battery.

Electric vehicle management applications, whether it is through that one customer, we talked about or through our existing customers and Cvs.

Jack Ready: So that's a journey, so we're never done with that, so I'm excited in a couple of weeks, we'll have our, in a few weeks, we'll have our Q4 presence at Kaisen, we're going to do some between four and six Kaisens across the company in Q4, so pretty exciting events coming up for us. In terms of pricing, Tim, we implemented through our commercial excellence activities and TPI Kaisens a programmatic approach to value-based pricing, what that means is we have a new framework on how we think about pricing, it's everything including cost to serve, right?

And power sports and others, where they are after high and get a platform. So the majority of the wins have been in bvs, whereas we continue to pursue opportunities in both.

Charging infrastructure and also solar and other animals.

Yeah.

Great. So one last question and this is more so maybe for Todd.

So if this year has $5 million to $7 million media of under absorbed costs.

Drag on EBITDA from the Hazel Park ramp up.

Is it fair to assume that.

Next year might be only $1 million to $2 million with none in the second half as you kind of reach that $100 million sales run rate in the fourth quarter, possibly next year as utilization clients.

Jack Ready: Customers pay in terms to complexity of their products and manufacturing processes to, no ease of doing business with some of our customers. Some need heavy hand holding, some are very easy to do business with, right? So there's a lot of criteria that we have used to develop this matrix, a complex matrix and a model that we're going to use to price all future work, right? So that doesn't include all the existing work.

Okay.

Eric mentioned earlier I mean, we're not at a point yet to provide specific guidance on 'twenty four but certainly a lot of the projects that we've won really don't watch the mid and even into the back half of next year. So there will continue to be a drag in the first half I would say, but as you really we exit the year, we're confident we're going to exit at that $100.

Run rate and at that point I wouldn't expect to see any sort of negative impact on that facility, but it just at this point again, we're not in a position to really get more specific guidance as to the cadence of that but I think your comments are fair.

Jack Ready: For the existing business that we currently have, work continuing to do our quarterly counter views and looking at, you know, almost skew by skew and then see what our property is and what should our property be for each of these, you know, accounts and each of these bodies of work that we currently perform for our customers. That's a long-term process, as you can imagine. So eventually everything will lap over the next couple of years, but all the new business that we're beginning to quote in the second half of this year are based on the new pricing framework going forward.

Generally speaking I do expect it to be better next year from an under absorbed position, but at what point.

So we have to go through the detail.

Do you think Todd just.

Given maybe the macro slowdown that you won't move as much stuff over to his apart from some of your other facilities in the first half of the year. Besides the contract wins, but just existing business they might move.

No I wouldn't characterize it in that frame a lot of the new business. One again it was specifically.

Quoted estimated to be at Asus Park doesn't really launch until mid year and even in the back half and some of those volumes really don't hit their maturity until even the beginning of 2025. The work that we slated internally to move is still on pace.

Jack Ready: Great, Jack, that's helpful to hear. The rolling basis plus the existing in the future being implemented already. And investor day, I believe you might have stated that there's about 115 million of new sales opportunities, I guess find or won the last 18 months, maybe averaging about 20 million per quarter. You know, everyone's familiar with your battery thermal management win and it sounds like there might be another customer there for Hazel Park, but if you kind of look at your wins and maybe that's 20 million a quarter, the last few quarters, would you say that a lot of that's in EV related, you know, charging or is it more also beyond that battery thermal management into wind solar energy grid infrastructure?

It's moving in the right cadence.

So we wouldn't make any changes on that front.

Okay, Great. That's helpful clarification. Thanks, Todd Thanks, that's it for my questions.

Okay. Thanks, Dan.

Thank you.

We now have one eight.

Yes.

You May proceed.

Hi, Thanks, good morning, everybody.

A few questions first.

Maybe Joseph I don't think so but.

$5 million to $7 million under absorbed overhead costs, that's up from I think three years to five previously.

Jack Ready: You know, what other kind of rethink conversations you've been having potential customers for emerging technologies, revenues? Yeah, that's a good question as well, Tim. We continue to focus on energy transition at a secular team within the company and then we're continuing to look for opportunities where we can go win additional business, whether it's in charging infrastructure, whether it's solar or other renewables, but I can say so far, majority of the majority of the wins have been in battery electric vehicle management applications, whether it is through that one customer, you know, we talked about or through our existing customers in CV and power sports and others, where they're after buying their platform. So, the majority of the wins have been in BABs, whereas we continue to pursue opportunities in both charging infrastructure and also a solar or other renewables.

What's driving that.

That delta.

Unknown Executive: Great.

Yes, it did change slightly certainly.

There's been some timing changes from our customer launch perspective, a few of them. We thought we're going to start sooner rather than later.

And so some of Thats moved a little further into 2024 and so we have a couple of large ones that are really set to launch in the back half of 2012, and even some of the smaller ones. Unfortunately, the timing from the customer has in the line and that's why we've seen a little more of a drag on the P&L here in the coming quarter or two.

So does that present any kind of risk next year that we see continued push outs, especially if the macro soft ore.

Adam.

How good do we feel about executing on any of the run rate would be.

Remind us what the full year number should be that we should be modeling.

Well, we feel very good yeah, I mean, I think some of the things are just timing of some of the outsourcing some of exploring for other suppliers. It's just the timing of how they are managing their supply chain and it's really been the impetus and then some design things certainly when they move product they'd like to improve it and make other changes I think a lot of that behind us So I feel confident that the long.

Todd Butz: So, one last question, and this is more so maybe for Todd. So, if this year has, you know, five to seven million maybe of underserved costs, turning on EBITOP in the Hazel Park ramp up, is it fair to assume that, you know, next year might be only one to two million with none in a second half as you kind of reached that $100 million sales run rate in the fourth quarter possibly next year as utilization points?

Now as we see them will come to fruition. We have said at the Investor Day that next year's sales. We think are between 50 and $60 million and for the full year and really that's going to be more back half loaded again, we think we're going to we do believe we're going to exit 2024, we think.

Todd Butz: As Jake mentioned earlier, I mean, when I've had a point yet to provide specific guidance on 24, but certainly a lot of the projects that we have won, you know, really don't watch the mid, even in the back half of next year. So, there will continue to be a drag in the first half, I would say. But as you really, we exit the year, we're confident, we're going to exit at that $100 million run rate.

That fourth quarter with a run rate.

$100 million annually.

Great So yeah.

Yes.

You talked about growing in 'twenty four right.

And getting that.

The big negative, obviously, CV down 18%, but you can get that to flat I believe you said flat CV revenue with the outsourcing the tank production other wins et cetera. So you can offset the negative with CV. But then also are we taking CV flat from high level next year CB is flat and then we're layering on to $50 million to $60 million <unk> on top of that.

Todd Butz: And at that point, I wouldn't expect to see any sort of negative impact on that facility. But at this point, again, we're not in a position to really give more specific guidance to the cadence of that. But I think your comments are fair. You know, generally speaking, I do expect it to be better next year from an underserved position. But at what point is still we have to, you know, go through the deal.

Or just help us tie these numbers together. So we can I know you don't have guidance, but there's a lot of numbers and a lot of delta as well.

Todd Butz: So, do you think Todd just given me the macro slowdown that you won't move as much stuff over to Hazel Park from some of your other facilities in the first half of the year besides the contract wins, but just existing business. You might move. No, I wouldn't characterize it in that frame, but a lot of the new business want, again, that was specifically, you know, quoted and estimated to be at Hazel Park, doesn't really launch until mid year, even in the back half.

But I want to make sure things aren't overlapping.

So the 50 to 60 is index number Larry that's not on top the only thing I would say on top is really the lapping up the first half revenues of MSA.

Okay. So CV.

This is a park the 50 to 60 is a park that we're using to offset the CV. Some portion of that is non TV also right. So how much of the 50 to 60 is offsetting the CV declines and how much of the 50 to 60 is non CV.

Todd Butz: And some of those items really don't have the maturity until even just, you know, beginning of 2025. The work that we've played internally to move is still on pace. You know, it's moving in the right cadence. And so we wouldn't make any changes on that from. Oh, great. That's helpful clarification. Thanks, Todd. Thanks, Jack.

Unknown Executive: That's a different question. Thank you.

We're not providing that level of detail at this point in the cycle, Larry but we're happy to.

<unk> talked about our 2020 guidance.

It's appropriate.

Okay, Yeah, it's just obviously.

I think we're mixing some apples and oranges, but we're all trying to get to some kind of a fair number, but we're committing to growth in 'twenty, four including MSA, including Hazel Park.

Larry: We now have Larry to move it out. That was William Blath. You may proceed. Hey, thanks.

Todd Butz: Good morning, everybody. Hey, a few questions. First, maybe dresses. I don't think so, but the five to seven million under absorbed overhead costs that's up from, I think, three to five previously. What is driving that change that Delta? Yeah, it did change the lately. Certainly, you know, there's been some timing changes from a customer launch perspective. A few of them we thought were going to start sooner rather than later. And so some of that moved a little further into 2024.

<unk> down 18%, maybe according to forecast, but it's offset by as a park and some other things but.

Either way for community count growth next year, assuming obviously.

Let me check.

Larry Let me clarify.

Yes.

We're expecting to grow overall <unk> revenues next year outside of MSA at dish.

Outside of that Okay. That's helpful.

Okay.

Todd Butz: And as do we have a couple of large ones that are really set to launch in the back half of the 24. We've seen a little more drag on the P and L here in the coming quarter or two. So does that present any kind of risk next year that we see continued pushouts especially the macro soft or, you know, how good do we feel about executing on either run rate and be, you know, remind us what the full year number should be that we should be modeling.

Okay, Yeah, I'll set up M&A MSA lapping right.

Thats happier of MSA revenues coming into next year. In addition to that we expect to grow macro revenues overall.

Okay.

Fair enough and then we'll start point of clarification, the 67 million $6 7 million in $1 million to $2 million EBITDA from the potential UAW issue is that number specific to the one customer or that was a gross number hired all these things three getting sorted out.

Is it specific to one customer.

Todd Butz: Well, we feel very good, yeah, I mean, I think some of the things are just timing up, you know, some of it's all sourcing, some of it's moving up to other suppliers. It's just the timing of how they're managing their supply chain. And it's really been an impetus. And it's some design things, certainly when they do product, you know, they like to improve it and make other changes. I think a lot of that's behind it, so I feel confident that the launches now as we speed down, we'll come to fruition.

Gotcha. Okay. Thank you very much pickup in October and just to clarify right in October we were able to manage most of our.

Challenges with overall UAW strike.

We have we have some exposure to auto.

In MSA and in our rest of todays solved one CD customer. So October I think we were able to manage quite well November and December it's just specific to one customer in the CVC.

Todd Butz: We have said it at the investor day that next year's sales, we think are between 50 and $60 million. And, you know, for the whole year, and really that's going to be more of that back afloat. Again, we think we're going to, we do believe we're going to exit 2024 when we think of, you know, that that floor of quarter with a run rate of, you know, $100 million annually. Great. So, believe me this.

Got it. Thank you good luck guys.

Thank you.

Thank you.

As we have no further question I'd like to hand.

Jack <unk>, President and CEO for any closing remarks.

Todd Butz: Yeah, I talked about, you know, growing in 24, right? And getting that, you know, the big negative obviously is CV down 18% being get that to fly. I believe he said flat CV revenue with the outsourcing, the new tank production, other wins, etc. So, you can all step the negative with CV.

Do you guys anticipate.

In anticipation.

We have a follow up from Todd Jackson. Your line is now open.

Okay jumped in at the last minute with a couple of a couple of nitpicky questions for Todd because he is my favorite person to pick on.

Todd Butz: But then, so are we taking CV flat from high level next year's CV is flat, and then we're layering on the 50 to 60 million haze a park on top of that, or just help us tie these numbers together so we can, I know you don't have guidance, but there's a lot of numbers and a lot of help us and we want to make sure things aren't overlapping. So, the 50 to 60 is in that number, Larry, that's not on top.

So one thing just on SG&A Todd.

Quarter, the number was higher than it was in my model I mean, not a big deal you got MSA and Theres clearly a lot of things moving moving parts inside the business what would be the other SGA SG&A expense line, how should I think about that for the fourth quarter, just simply just kind of a reset if you would as I kind of think through the model I mean do you is there.

Todd Butz: The only thing I would say on top is really the laughing of the first half revenues of MSA. Okay. So, CV and this is a park, the 50 to 60 is a park that we're using to offset the CV, some portion of that's non-CV also, right? So, how much of the 50 to 60 is offsetting the CV declines and how much of the 50 to 60 is non-CV? We're not providing that level of detail at this point in the cycle Larry, but we're happy to, you know, talk about our 2024 guidance on this approach.

Some one time stuff in there that we would see it go down or is that 86 kind of a new baseline and we should be building off of that.

Keep in mind, the eight six includes $1 million of legal fees.

<unk>, our former fitness customer and that continues to evolve so I expect that to continue into the fourth quarter.

And then <unk> 5 million of transaction costs, which I don't expect to continue right.

Behind us we have incurred those costs in Q3.

But I do expect to have ongoing legal fees. Unfortunately in the near term until there is ultimate resolution on our claims. So we've said four five to five 5%.

Todd Butz: Okay. Yeah. It's obviously, you know, what I think we're making some apples and oranges and we're all trying to get to some kind of fair number, but we're committing to growth in 24, including MSA, including Hazel Park, CVs, Down 18% may be according to one forecast, but it's offset by Hazel Park and some other things. But either way, we're committing to some growth next year, semi-obviously. So, we also say blow up.

The near term next year as we've talked about we do have the Sox compliance requirements now that will no longer be considered an emerging growth company I feel like we're in great position to do that but certainly unfortunately, I'd rather on audit fees and other related things go up.

And from there, we'll continue to Delever Delever I would say as our sales continue to grow so in the fourth quarter I would say, it's similar without the transaction cost of the half a million dollars.

Todd Butz: Larry, let me clarify. Yeah. We're expecting to grow overall Mac revenues next year outside of MSA edition. Outside of MSA. Okay. Yeah. I'll set up MSA laughing, right? That's happier of MSA revenues coming into next year. You know, in addition to that, we expect to grow Mac revenues overall. Okay. Fair enough. And then we'll start with our own life clarification. The $67 million, $627 million and $12 million EBITDA from the potential UAW issue.

Okay. Okay. That's helpful. And then my second question on the on the NIM.

<unk> for you is on amortization of intangibles.

Sure.

Well you have an updated table for amortization in your Q I assume.

Because clearly with MSA and everything and now that's in your balance sheet.

That's all going to change, but in the interim can you give me some kind of color with what you think amortization of intangibles will be in the fourth quarter and then maybe in the aggregate for 2024.

We're not at a point really this whole event you will see in our Q, which certainly it will be filed.

Todd Butz: Is that number specific to the one customer? Well, that was a growth number prior to all these things, you know, three getting sorted out. Yeah, it's specific to one customer. Gotcha. Okay, thank you very much. Because in October, in just a clarify, in October, we were able to manage most of our challenges with overall UAW strike. As you know, we have some exposure to auto in MSA, and in our stuff, it is all the one CD customer. So October, I think we were able to manage quite well. In November and December, it's just specific to one customer in the TV series. Got it. Thank you.

In the short term.

You'll see the step up there is footnote is related directly to the acquisition and I will just take that number and then continue with rate and use that by quarter.

Into next year I don't see most of those items that we are amortizing our five to seven in some cases, a little longer lengths. So it will be the same very consistent for the near future.

Okay.

When you file your Q at the end of today or when do you plan to put that in.

The expectation is that we will file it by the end of the day to day.

Unknown Executive: Good luck, guys. Thank you.

Okay.

Thanks very much thank you.

Yes.

Okay.

Jack Ready: As we have no further questions, I'd like to hand it back to Jagadeh, President and CEO for any closing remarks. We do have a question.

Once again, thank you for joining our call. We appreciate your continued support of Mac and we look forward to updating you on our progress next quarter.

Should you have any questions. Please contact Noel Ryan our Stefan Neely Investor Relations Council. This concludes our call today you may now disconnect.

Ted Jackson: We have a follow-up from Ted Jackson.

Todd Butz: Your line is now vacant. Okay, I just jumped in at the last minute with a couple of a couple of nitpicky questions for Todd because he's my favorite person to pick on. So one thing just on SGNA, Todd, the quarter, the number was higher than was in my model. I mean, not a big deal. You get MSA, and there's clearly a lot of things moving parts inside the business. What would be on the other SGNA expense line?

Thank you.

Today's conference call has now disconnect has concluded.

You may now disconnect your lines.

[music].

Thank you.

On today's conference call has now just.

Todd Butz: How should I think about that for the fourth quarter? Just simply just kind of a reset, if you would, as I kind of think through the model. I mean, do you, is there some one-time stuff in there that we would see it go down, or is that eight, six kind of the new baseline, and we should be building up to that? Well, keep in mind the eight, six includes $1 million of legal fees related to our former business customer, and that continues to evolve.

Todd Butz: So I expect that to continue in the fourth quarter. And then a half a million of transaction costs, which I don't expect to continue, right? That's kind of behind us, we've incurred those costs in Q3. But I do expect to have ongoing legal fees unfortunately in the near term until there's also resolution on our claims. So we've set four and a half to five and a half percent in the near term.

Todd Butz: Next year, as we've talked about, we do have the tax compliance requirements now that will no longer be a considered emerging growth company. I feel like we're in great position to do that, but certainly, unfortunately, I'd rather audit fees and other related things go up. And from there, we'll continue to deliver. Do you, however, I would say, as our sales continue to grow? So in the fourth quarter, I would say similar, without the transaction cost of the half a million.

Todd Butz: Okay. That's helpful. And then on my second question on the on the nitpick for you is on amortization of intangibles. You know, I mean, I, you know, I, well, you have an updated table for amortization in your QI assume. Just, you know, me because clearly, you know, with MSA and everything. And now that's in your balance sheet, you know, that's all going to change. But in the interim, can you give me some kind of color with what you think amortization of intangibles would be in the fourth quarter?

Todd Butz: And then maybe in the aggregate for 2024? We're not at a point really that's full of that. You will see in our Q, which certainly it'll be filed in your short term. You'll see the stuff up. There's foot knowledge related directly to the acquisition. And I would just take that number and then continue it, right? And use that by quarter into next year. I don't see most of those items that we are amortizing are, you know, five to seven. In some cases, a little longer to love. So it will be the same very consistent for the near future. Okay.

Todd Butz: And will you file your cue at the end of today or when you plan to put that in? Yeah, expectation is that we'll file it by the end of the day today. Okay.

Unknown Executive: Hey, thanks very much. Take care. Thank you.

Unknown Executive: Once again, thank you for joining our call. We appreciate your continued support of Max and will look forward to updating you on our progress next quarter. Should you have any questions, please contact nor Ryan or Stefan Neely at Valem or investor relations counsel.

Unknown Executive: This concludes our call today. You may not disconnect. Thank you. I can confirm today's conference school has now disconnected has concluded. Sorry, you may not disconnect your line. I can confirm today's conference school has now.