Q1 2024 Exco Technologies Ltd Earnings Call
Yeah.
Yes.
Good day, and thank you for standby and welcome to the Exco Technologies limited first quarter 'twenty 'twenty four results conference call.
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And I'd like to hand, the conference over to your Speaker today, Darren Clark President and CEO. Please go ahead.
Thank you Sharon and good morning, all participants welcome to <unk> Technologies' fiscal 2024 first quarter conference call.
I will lead off with an operations overview Matthew boss note. Our CFO will then review the financial aspects of the quarter before we open the call for questions.
Before I begin I'd like to point out the cautionary notes in yesterday's news release and on page two of the presentation that we have posted to our website.
They are applicable to this discussion today.
Overall, we had a fairly decent quarter with solid year over year growth in revenues EBITDA and EPS.
I would emphasize that we did have some incremental challenges this quarter, which we expect will dissipate through the remainder of the year contributing to our expectations for ongoing growth.
Namely these challenges included very modest dampening of sales due to the UAW strike.
But also more pronounced.
Weakness in December that we have seen in a while as well as tightened FX headwinds.
Jumping right into market conditions, and looking at our automotive solutions segment vehicle production volumes in North America, and Europe were up roughly 6% on a combined basis.
This occurred despite UAW strike related production stoppage in October.
Vehicle sales also remained relatively robust ending the calendar year with the U S. Saar of almost 16 million units.
Elevated interest rates and continuing high average transaction prices are certainly headwinds.
Meet pent up demand at the consumer level, while the other inventories continue to be replenished and OEM incentives are clearly picking up.
In relation to the 6% rise in production this quarter or second segment revenues again strongly outperformed overall market conditions, rising, 18% and signalling ongoing growth in content per vehicle hold higher by our focus on accessory products.
We estimate the UAW strike.
Related impact on our revenues with just over $2 million for the quarter.
Looking forward despite macro headwinds vehicle production volumes are expected to remain stable or grow modestly in 2024 as dealer inventory continues to be replenished and pent up consumer demand is satisfied as.
As we've long demonstrated we would expect our revenues to exceed industry rate of growth helped by our new programs that are ramping up.
Quoting activity also remains very deepen which we expect will support our growth longer term.
On the cost side margins were squeezed during the quarter by lost contributions from the UAW strike action as well as rising labor costs, particularly in Mexico.
Labor cost in Mexico have increased significantly over the past several years and we are working to offset these pressures through various measures. These measures include implementing automation and trimming headcount where possible exiting less profitable programs pushing our cost downs and of course targeted price increases.
Turning to our casting extrusion segment, we saw mixed results between Dicast and extrusion related products.
Starting with Dicast demand in that end market remains very firm, particularly for new malls for both new Evs and internal combustion engine vehicles.
This is true for powertrain and structural programs Giga size size and of course, our additive manufacturing operations.
While there is clearly a slowing the pace of adoption. It is important to note that our business is relatively agnostic to the powertrain architecture should be EV revolution slow further or even a shift toward hybrid vehicles, we remain confident in the trend towards aluminum and that demand for our products will continue to grow strongly.
In the years ahead of note our large mol group continues to see record in growing backlog levels.
Demand for consumable extrusion tooling softened during the quarter as Extruders have responded to weaker global macro conditions.
While certain end markets, such as automotive and Green energy applications are still showing growth, but building and construction market deteriorated through the quarter tip.
Typical seasonal softness may have been exacerbated this year as extra.
<unk> consolidated plant shutdowns over the holidays to deal with weaker conditions to that point, we have seen a rebound in demand for extrusion products materialized through January <unk>.
Capital equipment sales within the extrusion end market Nonetheless remain decent as Extruders continues to focus on enhancing the productivity and efficiency through the cycle, a sweet spot for our cask fuel operations.
Margins in our casting extrusion segment improved over the prior year, but weakened sequentially due to the weakness in the extrusion market startup losses at Castro are Mexico and balance sheet FX losses.
We remain confident in the path higher segment margins through our outlook period of 2026 as a greenfield investment season. Our recent capacity additions are utilized and various efficiency initiatives continue to take hold.
Lastly, with regard to our various capital asset investments and growth strategies, we continue to move the ball ahead in Q1.
With the commercial operations of Caf II, Mexico now commenced our capital plans mainly consist of several smaller projects to selectively boost our capacity enhance our capabilities and improve our overall efficiency.
Example, this quarter, we kicked off a new vacuum heat treat project for our Michigan extrusion die facility.
Completed completed a major equipment upgrade to one of our helix plants. We are confident these investments will see great returns over the coming years.
That concludes my prepared remarks, I want to thank all my expertise makes for their tremendous efforts and focus on working safely through the quarter I will now pass the call over to Matthew to discuss the financial highlights.
Thank you Darren.
Good morning, ladies and gentlemen, consolidated sales for the first quarter ended December 31 were $156 7 million and.
An increase of $17 6 million or 13% foreign exchange rate impact was negligible in the quarter.
Consolidated net income for the first quarter was $5 6 million or earnings of <unk> 15 per share compared to $4 5 million or <unk> 12 per share in the same quarter last year.
94% increase in net income.
The effective income tax rate for the quarter was 23, 6% compared to 22, 7% the prior period prior year period the.
The change in income tax rate in the current year quarter was impacted by geographic distribution and foreign rate differentials.
Segment discussions I don't want a solution segment experienced an 18% increase in sales in the first quarter, an increase of $13 million to $83 million.
The sales increase was driven by new program launches and higher vehicle production volumes.
By North American and European vehicle production was up approximately 6% compared to a year ago, which demonstrates the strength of <unk> product mix.
The revenue impact of the UAW strike action, which was resolved in late October was approximately $2 5 million.
Adjusting for the strike impact sales were up at all for the segments locations compared to the prior year quarter.
First quarter pretax earnings in the automotive solutions segment totaled $8 1 million, which is an increase of $900000 or 12% over the same quarter last year. The increase in pre tax profit is largely attributable to higher sales and better absorption of overheads Ira.
Higher volumes from new program launches and increased sales allowed the segment to benefit from improved efficiencies better absorption of fixed cost.
Offsetting these factors were higher labor cost and I'll, let jurisdictions.
Labor cost in Mexico have been particularly particularly challenging in recent years, we will see added pressure in fiscal 2024, given the significant rise in minimum wage levels.
Volumes in the quarter were impacted by the UAW strike action and December holiday shutdowns at certain Oems. These shutdowns reduced profitability as labor levels were maintained and production inefficiencies were incurred for specific parts of programs.
From these specific impacts management is cautiously optimistic that its overall cost structure will improve such that margins should strengthen in coming periods.
The casting and extrusion segment recorded sales of $74 million in the first quarter compared to $69 million last year, an increase of $5 million or 7%.
Demand for our extrusion trailing was lower in the quarter as outlined by Darren as the continued impact of higher interest rates and recessionary conditions in certain end markets, such as building and construction and recreational vehicles caused an overall reduction in tooling demand from Extruders.
And for certain capital equipment sold by cast tool within the extrusion market remains firm as Extruders focus on various efficiency and sustainability initiatives.
Remain focused on developing the benefits of the Companys, new Greenfield locations in Morocco in Mexico, which provide the opportunity to gain market share in Europe, and Latin America to better proximity to customers.
And the Dicast market demand for malls associated consumable tooling like short sleeves Rod brings chips.
And such and rebuild work increased in addition demand for Exco additive three D printed tooling continues its strong contribution as customers focus on greater efficiency.
In the quarter were also aided by price increases, which were implemented to protect margins from higher input costs.
Coating activity remains robust and our backlog for Dicast malls remains at record levels.
Pre tax earnings and the cashing in extrusion segment, a $3 6 million increased 88% or $1 7 million compared to the prior year quarter. The pre tax profit improvement is due to higher sales volumes program pricing improvements and favorable product mix and efficiency initiatives within large Mol Group Inc.
Improved efficiency in the extrusion die business, including improvements at <unk> and the elimination of prior year, one time cost associated with outsourcing do the extrusion heat treat implementation.
As well there was improved absorption and efficiency of Castro's heat treat operation stabilizing raw material and labor costs and lower costume, Morocco startup costs.
Offsetting these cost improvements were startup losses at <unk>, new operations in Mexico, and an $800000 increase in segment depreciation costs associated with recent capital expenditures.
Exco generated cash from operations operating activities of $12 $9 million during the quarter and $2 $9 million of free cash flow after $7 $7 million maintenance fixed asset expenditures. This free cash flow together with the company's cash balances was used to fund fixed assets for growth initiatives, a $4 2 million $4.
$1 million of dividends and $400000 to repurchase shares under our normal course issuer bid exco ended the quarter with $16 million in cash $116 million in bank in long term debt and $37 million available on its credit facility.
<unk> financial position remains strong as such the company's balance sheet and availability under the existing credit facility provides continued support for our strategic initiatives.
Our strong financial position combined with our free cash flow provides the foundation for management to pursue high value growth capital expenditures dividends and other opportunities that may arise that concludes my comments, we can now transition to the Q&A portion of the call. Thank you Shannon.
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Compile the Q&A roster.
Our first question comes from the line of David Ocampo with core Mark Securities. Your line is now open.
Hi, Thank you good morning, gentlemen, good morning, David.
I guess, Gary you guys have put a lot of capital to work or last few years and I guess thats the expectation for this year.
It seems like a lot of equipment has gone there to support the giga size bolt on some greenfield facilities I'm just curious how you expect the revenue and EBITDA to be back filled in the coming years.
What your confidence level is on that just based on your ongoing discussions with customers.
Sure.
Yes, I mean, we have had a number.
Capital initiatives too.
Build capacity in certain regions globally.
Also strengthen our capabilities and depth.
The revenue is.
Is pretty firm.
We've got a target of $750 million by 2026.
It really only requires kind of a mid single digit CAGR to get there, but we're our focus is starting to turn us on.
Improving the margins.
We're still suffering through ramp up costs in the early days of the cast roll facilities, Mexico was just turned on in the last quarter.
So and then.
Our helix operations are still receiving some additional investment to improve those operations, but.
We do see a clear path to margin enhancement through the timeframe of our.
Im not going to articulate on on how the ramp up of that margin progression is but there is numerous pathways to improvement.
Turning to our focus now to achieve such that much.
Much of the capital that's been deployed on these new plants some bigger projects.
Got it that's helpful and just a follow up on that I mean that if I take a look at the margin profile for casting and extrusion. It did take a step back quarter over quarter.
Largely responsible for the startup costs that you guys are staying at the new facilities and if so I was hoping you could potentially quantify that.
Mexico cash startup startup costs were somewhere in the neighborhood of about a half a million bucks or so.
It wasn't the biggest factor quite frankly.
Fact that the extrusion business.
Deteriorated through December.
And this business you've got to run the plants at a high degree of utilization.
To get and keep the margin at <unk>.
The expected level.
Yes.
As I mentioned in my remarks, we did see.
Morris.
Seasonal weakness this year than we've seen in a while and it is.
Operator: Good day, and thank you for standing by. Welcome to the Xcode Technologies Limited First Quarter 2024 Results Conference Call. At this time, all participants are in a listening mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.
Seems likely and it was certainly the case with our operations that we.
Consolidated the downtime through December two.
To offset that weakness with vacation days in the late <unk>.
We've seen that our customers on the extrusion side of things for where likely doing the same thing as I also mentioned the sales have come back in January so that was certainly a factor and then the last.
Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Darren Kirk, President and CEO. Please go ahead.
The thing I would call out is.
The Canadian dollar versus the U S dollar moved around quite significantly during the quarter.
Darren Kirk: Huh. Thank you, Sharon, and good morning, all participants. Welcome to Expo Technology's Fiscal 2024 First Quarter Conference Call. I will lead off with an operations overview. Matthew Posno, our CFO, will then review the financial aspects of the quarter before we open the call for questions. Before I begin, I'd like to point out the cautionary notes in yesterday's news release and on page 2 of the presentation that we have posted on our website. They are applicable to this discussion today.
That backed up on the segment to probably a half a million bucks or so.
FX balance sheet losses.
Got it and just sticking with the theme of margins I mean labor in Mexico has has been an issue for you guys in the past, so certainly not something new but maybe the order of magnitude I think 20% is so what.
When we think about your contracts with your customers are there any price provisions built in for these onetime shocks or how are you guys managing the potential negative impact on your margins.
Darren Kirk: Overall, they had a fairly decent quarter with solid year-over-year growth in revenues, EBITDA, and EPS. I would emphasize that we did have some incremental challenges this quarter, which we expect will dissipate through the remainder of the year, contributing to our expectations for ongoing growth. Namely, these challenges included a very modest gas tank on sale due to the UAW strike, but also more pronounced seasonal weakness in December than we have seen in a while, as well as Titan's FF headwind.
And Theres no provisions in the contract that link pricing to labor costs or anything like that so it is.
Constant negotiation.
Rupert.
We've been successful at least pushing up cost downs.
In recognition of the increased inflationary labor environment.
And we are having some success getting selective.
Darren Kirk: Jumping right into market conditions and looking at our automotive solutions segment, vehicle production volumes in North America and Europe were up roughly 6% on a combined basis. This occurred despite the UAW's price-related production stoppage in October. Vehicle sales also remained relatively robust, ending the calendar year with a U.S. star of almost 16 million units. While elevated interest rates and continuing high average transaction prices are certainly headwinds, there remains pent-up demand at the consumer level while dealer inventories continue to be replenished, and OEM incentives are clearly picking up. In relation to the 6% rise in production this quarter, our segment revenues again strongly outperformed overall market conditions, rising 18% and signaling ongoing growth in content for vehicles, pulled higher by our focus on accessory products. We estimate the UAW freight-related impact on our revenue is just over $2 million for the quarter.
Market price increase but really the.
The bigger opportunity for price increase comps limit the contract rolls over in <unk>.
<unk> got our rebate.
Programs at.
The higher cost structure, and we're certainly doing that.
And.
We're continuing to be successful with awards at that higher.
Cost base, but so there is kind of a protracted period, where youre absorbing the higher costs with the lower pricing and then it.
It corrects over time.
Perfect and last one for me if I take a look at the last few quarters or maybe even the last few years you guys continue to outperform the automotive industry I was hoping you can comment on whether thats.
Being on more platforms or just increasing the content per vehicle on the on the platforms that you're already on.
It's both.
Darren Kirk: Looking forward, despite macro headwinds, vehicle production volumes are expected to remain stable or grow modestly in 2024 as dealer inventory continues to be replenished and pent-up consumer demand is satisfied. As we've long demonstrated, we would expect our revenues to exceed industry rates and growth, helped by our new programs that are ramping up. Quoting activity also remains very decent, which we expect will support our growth longer term. On the cost side, margins were spiked during the quarter by lost contributions from the UAW strike action, as well as rising labor costs, particularly in Mexico. Labor costs in Mexico have increased significantly over the past several years, and we are working to offset these pressures through various measures.
Where its easiest to point to that outperformance is in our automotive solutions group.
Which has a strong correlation of sales to production volumes.
We've been increasing the number of products selling those products two more products to existing programs.
Increasing the number of Oems that we're penetrating in and a new platform. So it's coming from from all sides on that which is which is what you need to do again.
Again this quarter.
18% growth versus 5% to 6% growth in production volumes and we think that.
Aces.
It's going to remain pretty strong pull through from accessory sales as is a big contributor Oems are increasingly looking to accessory sales the.
Darren Kirk: These measures include implementing automation and trimming headcount where possible, exiting less profitable programs, pushing off cost downs, and, of course, targeting price increases. Turning to our casting and extrusion segment, we saw mixed results between die cast and extrusion-related products, starting with DICAP. Demand in that end market remains very firm, particularly for new models for both new EVs and internal combustion engine vehicles. This is true for power trains and structural programs, giga-sized dies, and, of course, for additive manufacturing operations. While there is clearly a slower pace of EV adoption, it is important to note that our business is relatively agnostic to power train architecture.
<unk> had their own profitability and we have a tremendous pipeline.
Our products to help them achieve that goal.
And I guess, just a follow up to that 18% growth. If you had to split that between volumes and pricing.
The bulk of it volumes versus price.
That would be volumes.
Okay. That's it for me I'll hand, the call over thanks, a lot guys. Okay. Thanks, David.
Thank you.
To ask a question at this time, please press star one one Oreo touchtone telephone.
Okay.
Darren Kirk: Should the EV revolution slow further or even shift toward hybrid vehicles, we remain confident in the trend toward aluminum and that demand for our products will continue to grow strongly in the years ahead. Of note, our large mold crew continues to set records in growing fab products. The demand for consumable extrusion tooling softened during the quarter as extruders responded to weaker global macro conditions. While certain end markets, such as automotive and green energy applications, are still showing growth, the building and construction markets deteriorated through the quarter. Typical seasonal sausage may have been exacerbated this year as Friedrich's Consolidated Plant shut down over the holidays to deal with weaker conditions.
And I'm currently showing no further questions at this time I'd like to hand, the call back over to Darin Kirk for closing remarks, great.
Great. Thanks, Shannon and thank you all for joining us on our call today, we look forward to speaking you.
With you at the end of the next quarter take care everyone.
This concludes today's conference call. Thank you for your participation you may now disconnect.
Okay.
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Okay.
[music].
Darren Kirk: For that point, we have seen a rebound in demand for extrusion products materialized through January. However, capital equipment sales within the extrusion end market nonetheless remain decent as extruders continue to focus on enhancing their productivity and efficiency through the cycle of the sweet spot for a cap tool operation. Margins in our cask and extrusion segment improved over the prior year, but they weakened sequentially due to the weakness in the extrusion market, start-off losses at Casco, Mexico, and balance sheet FX losses. However, we remain confident in a path higher to second margins through our outlook period of 2026.
Darren Kirk: As our greenfields invest in seasons, our recent capacity additions are utilized, and various efficiency initiatives continue to take hold. Lastly, with regard to our various capital asset investments and growth strategies, we continue to move the ball ahead in Q1. With the commercial operations of Capsule Mexico now underway, our capital plan mainly consists of several smaller projects to collectively boost our capacity, enhance our capabilities, and improve our overall efficiency. For example, this quarter, we kicked off a new vacuum heat treat project for our Michigan extrusion die facility and completed a major equipment upgrade to one of our head plants. We are confident these investments will bring great returns over the coming years. That concludes my prepared remarks.
Matthew Posno: I want to thank all my Expo teammates for their tremendous efforts and focus on working safely through the quarter. I will now pass the call over to Matthew to discuss the financial highlights. Thank you, Gary.
Matthew Posno: Good morning, ladies and gentlemen. Consolidated sales for the first quarter ended December 31st were $156.7 million, an increase of 17.6 million, or 13%. The foreign exchange rate impact was negligible in the quarter. Consolidated net income for the first quarter was $5.6 million, or earnings of $0.15 per share, compared to $4.5 million, or $0.12 per share, in the same quarter last year, a 24% increase in net income. The effective income tax rate for the quarter was 23.6% compared to 23.7% for the prior year period.
Matthew Posno: The change in income tax rates in the current year quarter was impacted by geographic distributions and form rate differences. Segment discussions, the automotive Solutions segment experienced an 18% increase in sales in the first quarter, or an increase of $13 million to $83 million. The sales increase was driven by new program launches and higher vehicle production volumes. Combined North American and European vehicle production was up approximately 6% compared to a year ago, which demonstrates the strength of EXO's product network. The revenue impact of the UAW strike action, which was resolved in late October, was approximately $2.5 million. Adjusting for the strike impact, shipments were up at all four of the segment's locations compared to the prior quarter.
Matthew Posno: First quarter pre-tax earnings in the outload solution segment totaled $8.1 million, which is an increase of $900,000 or 12% over the same quarter last year. The increase in pre-tax profit is largely attributed to higher sales and better absorption of overhead. Higher volumes from new program launches and increased sales allow the segment to benefit from improved efficiency, and better absorption at fixed costs. Offsetting factors were higher labor costs in all jurisdictions.
Matthew Posno: Labor costs in Mexico have been particularly challenging in recent years, but we see added pressure in fiscal 2024 given the significant rise in minimum wage levels. Volumes in the quarter were impacted by the UAW strike action and December holiday shutdowns at certain OEMs. These shutdowns reduced profitability as labor levels were maintained, and production inefficiencies were incurred for specific parts and programs.
Matthew Posno: Apart from these specific impacts, management is cautiously optimistic that its overall cost structure will improve such that margins should strengthen in coming periods. The casting and excursion segment recorded sales of $74 million in the first quarter compared to $69 million last year, an increase of 5 million, or 7%. Demand for extrusion tooling was lower in the quarter, as outlined by Darren, as the continued impact of higher interest rates and recessionary conditions in certain end markets such as building construction and recreational vehicles caused an overall reduction in tooling demand from extruders.
Matthew Posno: Demand for certain capital equipment sold by capsule within the extrusion markets remains firm as extruders focus on various efficiency and sustainability initiatives, and remain focused on developing the benefits of the companies in the Greenville location in Morocco and Mexico, which provide the opportunity to gain market share in Europe and Latin America through better proximity to customers. In the die-cast market, demand for molds associated with consumable tooling, like shop sleuths, rods, rings, tips, and such, and rebuild work, increased. In addition, demand for Xcube's additive 3D printed tooling continues to be strong as customers focus on greater efficiency. Sales in the corridor were also aided by price increases which were implemented to protect margins from higher input costs. Coating activity remains robust, and our backlog for die-cast molds remains at a record level. Pre-tax earnings in the cash and insurance segment of $3.6 million increased 88%, or $1.7 million, compared to the prior year quarter.
Matthew Posno: Pre-tax profit improvement is due to higher sales volume, program pricing improvement, favorable product mix, and efficiency initiatives within a large whole group. Improved efficiency in the extrusion diagnosis, including improvements at HALAC and the elimination of prior year one-time costs associated with outsourcing due to the extrusion heat treat implementation. As well, there was improved absorption and efficiency at the Capsule Heat Treat operation, stabilizing raw material and labor costs, and lower Capsule Morocco start-up costs. However, offsetting these cost improvements would start losses at capital's new operations in Mexico and an $800,000 increase in segment depreciation costs associated with recent capital expenditures. Exco generated cash from operating activities of $12.9 million during the quarter and $2.9 million of free cash flow after $7.7 million in maintenance fixed asset expenditure. This free cash flow, together with the company's cash balances, was used to fund the Fixed Assets for Growth Initiative of $4.2 million, $4.1 million in dividends, and $400,000 to repurchase shares under a normal course issuer bid. Exco ended the quarter with $16 million in cash, $116 million in bank and long-term debt, and $37 million available in its credit facility.
Matthew Posno: Ex-Skills Finance's position remains strong. As such, the company's balance sheet and availability under the existing credit facility provide continued support for our strategic initiatives. Our strong financial position, combined with our free cash flow, provides the foundation for management to pursue high-value growth capital expenditures, dividends, and other opportunities that may arise. That concludes my comment. We can now transition to the Q&A portion of the call. Thank you, Sharon. Thank you. As a reminder, to ask a question, please press star on one of your telephones and wait for your name to be announced. To withdraw your question, please press star 1 1 again.
Operator: Please stand by while we compile the Q&A roster. Our first question comes from the line of David Ocampo with Cormark Securities, so let us know. Thank you. Good morning, gentlemen. Good morning, David.
Darren Kirk: I guess Darren and I, you guys have put a lot of capital to work over the last few years, and I guess that's the expectation for this year. It seems like a lot of equipment has gone to support the gigafact mold and some greenfield facilities. I'm just curious how you expect revenue and EBITDA to be backfilled in the coming years and what your confidence level is on that, just based on your ongoing discussions with customers. Sure, I mean we have had a number of capital initiatives to build capacity in certain regions globally and also strengthen our capabilities.
Darren Kirk: So, the revenue is pretty firm, you know; we've got a target of $750 million by 2026, and it really only requires kind of a mid-single-digit growth rate to get there, but where our focus is starting to turn is on improving the margins. You know, we're still suffering through a ramp-up cost in the early days of the Catskills facilities, Mexico was just turned on in the last quarter or so, and then, you know, our HALES operations are still receiving some additional investment to improve those operations, but we do see a clear path to margin enhancement through the timeframe of our 2026 targets. You know, I'm not going to articulate how the ramp-up of that margin progression is, but there are numerous pathways to improvement that are turning to our focus now to achieve such that much of the capital has been deployed on these new plants and bigger projects. That's helpful.
Matthew Posno: And just to follow up on that, Matt, if I take a look at the margin profile for casting and extrusion, it did take a step back quarter over quarter. Is that largely responsible for the startup cost that you guys are paying for these facilities? And if so, how does that compare to, potentially, a quantity?
Matthew Posno: Um, you know, the Mexico, uh, cat startup thoughts were, you know, somewhere in the neighborhood of a half a million bucks or so. Uh, it wasn't the biggest factor, but frankly, uh, I think the fact that the exclusion business, uh, deteriorated, uh, through December. You know, in this business, you've got to run the plant at a high degree of utilization to get and keep the margin up at, uh, the expected level. And I think, as I mentioned in my remarks, we did see, um, more, with vacation days and the like, and we've seen our customers on the excursion side of things were likely doing the same thing. As I also mentioned, sales would come back in January. So that was certainly a factor.
Matthew Posno: And then the last thing I would call out is that the Canadian dollar versus the U.S. dollar moved around quite significantly during the quarter, and that backed up on the segment to probably a half a million bucks or so of FX balance sheet losses. Got it. And just sticking with the theme of margins, I mean, labor in Mexico has been an issue for you guys in the past, so certainly not something new, but maybe the order of magnitude, I think 20%. So when we think about your contracts with your customers, are there any price provisions built in for these one-time shocks, or how are you guys managing the potential negative impact on your margins? And there's no provision in the contract that links pricing to labor costs or anything like that.
Darren Kirk: So it is a constant negotiation that has to occur. We've been successful in at least pushing costs down because of the increase in inflationary labor environment, and we are having some success at getting selective pockets of price increases, but really, the bigger opportunity for price increases comes when the contracts roll over, and you've got to refit the new programs at the higher cost structure, and we're certainly doing that. We're continuing to be successful with awards at that higher cost, but so there is kind of a perceptive period where you're absorbing the higher cost with lower pricing, and then it corrects over time. And the last one for me, if I take a look at the last few quarters, or maybe even the last few years, you guys continue to outperform the automotive industry.
Darren Kirk: I was hoping you could comment on whether that's, you know.., being on more platforms or just increasing the content per vehicle on the platforms that you're already on. It's both, you know, I'll... Where it's easiest to point to that outperformance is in our automotive Solutions Group, which has a strong correlation of sales to production volumes, and we've been increasing the number of products, selling those products to more products, to existing programs, and increasing the number of OEMs that we're penetrating, and on new platforms. Coming from all sides on that, which is what you need to do, again, this quarter, we had 18% growth versus 5% or 6% growth in production volumes, and we think that pace is going to remain pretty strong.
Darren Kirk: The pull-through from accessory sales is a big contributor. OEMs are increasingly looking to accessory sales to have their own profitability, and we have a tremendous pipeline of..., a product to help you achieve that goal. And I guess just a follow-up to that, that 18% growth, if you have to split that between volumes and pricing, is the bulk of it volumes versus pricing? So both of that would be blind.
Darren Kirk: Okay, that's it for me. I'll hand the call over. Thanks a lot, guys. Thank you. Thank you. As a reminder, to ask a question at this time, please press star 1 1 or the touchtone telephone. And I'm currently showing no further questions at this time. I'd like to hand the call back over to Darren Kirk for closing remarks. Great. Thanks, Shannon, and thank you all for joining us on the call today. We look forward to speaking with you at the end of the next quarter. Take care, everyone. This concludes today's conference call. Thank you for your participation. You may now disconnect. Thank you.