Q1 2024 Adient PLC Earnings Call
Please standby for today's conference will begin momentarily. Thank you.
[music].
Operator: Thank you so much. Thank you, Shirley. Good morning, and thank you for joining us as we review Adient's results for the first quarter of Fiscal 2024. The press release and presentation slides for our call today have been posted to the investor section of the website at www.adient.com. This morning I'm joined by Jerome Gorelick, Adient's President and Chief Executive Officer, and Mark Oswald, our Executive Vice President and Chief Financial Officer. On today's call, Jerome will provide an update on the business, followed by Mark, who will review our Q1 financial results and outlook for the remainder of fiscal 2020. After our prepared remarks, we will open the call to your questions.
Welcome to the audience first quarter financial results Conference call. Your lines have been placed on a listen only mode until the question and answer session at that time, if you would like to ask a question you May press star one.
Today's conference is being recorded.
Now I'll turn the conference over to Eric Dayton, Sir you may begin.
Thank you Shirley and good morning, and thank you for joining us as we review <unk> results for the first quarter of fiscal 2024.
Press release and presentation slides for our call today have been posted to the investors section of our website at adient dotcom.
Eric Dayton: This morning, I'm joined by Jerome Dolak audience, President and Chief Executive Officer, and Mark Oswald, Our executive Vice President and Chief Financial Officer.
On today's call Jerome will provide an update on the business followed by Mark who will review our Q1 financial results.
Outlook for the remainder of fiscal 2024.
Speaker Change: After our prepared remarks, we will open the call to your questions.
Before I turn the call over to Jerome and Mark there are a few items I'd like to cover.
Speaker Change: First today's conference call will include forward looking statements. These statements are based on the environment as we see it today.
Operator: Before I turn the call over to Jerome and Mark, there are a few items I'd like to cover. First, today's conference call will include forward-looking statements. These statements are based on the environment as we see it today and therefore involve risks and uncertainties.
And therefore involve risks and uncertainties I would caution you that our actual results could differ materially from these forward looking statements made on the call. Please refer to slide two of the presentation for a complete sale of our safe Harbor statement.
Operator: I would caution you that our actual results could differ materially from these forward-looking statements made on the call. Please refer to slide two of the presentation for a complete safe harbor statement. In addition to the financial results presented on a GAAP basis, we will be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures to the closest GAAP equivalent can be found in the appendix of our full earnings release. And that concludes my comment. I'll now turn the call over to Jerome Dorlak.
In addition to the financial results presented on a GAAP basis, we will be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance reconciliations for these non-GAAP measures to the closest GAAP equivalent can be found in the appendix of our full earnings release.
This concludes my comments.
Speaker Change: I will turn the call over to drum Garlock.
Thanks, Eric.
Good morning, Thank you to our investors prospective investors and analysts joining the call.
Jerome Dorlak: Thanks Eric. Good morning. Thank you to our investors, prospective investors, and analysts joining the call as we review our first quarter results for fiscal year 2024. Turning to slide four, let me begin with a few comments related to the quarter. As we began fiscal 2024, the company maintained its laser focus on business performance, including launch, execution, and continuous improvement. Teams navigated challenges and strike-related production disruptions while maintaining focus on the day-to-day operational execution that is driving the business forward. Despite the challenges in the beginning of the quarter, the focus on operational execution and cash management actions allowed us to successfully navigate any short-term impact. Turning to Adient's key financial metrics for the quarter, which are shown on the right-hand side of the slide. Revenue for the quarter, which totaled $3.7 billion, was down about 1% compared to last year's fiscal quarter.
As we review our first quarter results for fiscal year 2024.
Turning to slide four let me begin with a few comments related to the quarter.
As we began fiscal 2024 the company maintained its laser focus on business performance.
Including launch execution and continuous improvement.
The team navigated challenges from strike related production disruptions, while maintaining focus on the day to day operational execution that is driving the business forward.
Despite the challenges in the beginning of the quarter.
Our focus on operational execution and cash management actions allowed us to.
To successfully navigate any short term impacts.
Turning to audience key financial metrics for the quarter, which is shown on the right hand side of the slide.
Revenue for the quarter, which totaled $3 $7 billion was down about 1% compared to last year's fiscal quarter.
First quarter.
Adjusted EBITDA for the quarter totaled $216 million up 2%.
Jerome Dorlak: In the first quarter, adjusted EBITDA for the quarter totaled $216 million, up 2%. The UAW strike at certain of our North American customers ultimately impacted Adient by approximately $125 million in sales and $25 million in EBITDA. Adient ended the quarter with a strong cash balance and total liquidity of $990 million and $1.9 billion, respectively.
The UAW strike at certain of our North American customers.
Similarly impacted adient by approximately $125 million in sales and $25 million in EBITDA.
Adient ended the quarter with a strong cash balance and total liquidity of $990 million and $1 $9 billion respectively.
We continue to drive the business forward, winning both new and replacement business with customers that are expected to drive continued margin improvement in the coming years.
Jerome Dorlak: We continue to drive the business forward, winning both new and replacement business with customers that are expected to drive continued margin improvement in the coming years. We're demonstrating our ability to add value to customers through our engineering capability. Manufacturing Footprint and Process Discipline. At the bottom of the slide, we've highlighted a number of customers and industry awards received in each of our regions in Q1 as proof points of our commitment to delivering excellence. Both the business we have been awarded and the recognition we've received show that our strong business performance, Operational excellence, and mindfulness towards sustainability are driving value for adding stakeholders and shareholders, including customers, suppliers, and employees. As the production environment became clearer, following the resolution of strike-related production disruptions, the company resumed its return of capital to shareholders through a balanced capital allocation strategy. We deployed $100 million toward share repurchases during the quarter, which Mark will talk more about in a moment. Again, our commitment to return capital to shareholders is an important part of our balanced capital allocation strategy.
Well, I mean, demonstrating our ability to add value to customers through our engineering capabilities.
Manufacturing footprint and process discipline.
At the bottom of the slide we've highlighted a number of customers and industry awards received in each of our regions in Q1 as proof points of our commitment to delivering excellence.
Both the business, we have been awarded and the recognition we've received show that our strong business performance.
Speaker Change: Operational excellence and mindfulness towards sustainability are driving value to adient stakeholders and shareholders, including customers suppliers and employees.
As the production environment became clear.
Following the resolution of strike related production disruptions. The company resumed its return of capital to shareholders through its balanced capital allocation strategy.
We deployed 100 million towards share repurchases within the quarter, which mark will talk more about in a moment.
Again, our commitment to return capital to shareholders is an important part of our balanced capital allocation strategy.
Speaker Change: The last point on this slide shows we released our 2023 sustainability report.
I led in a number of accomplishments and commitments, marking our path toward our long term sustainable transformation.
Jerome Dorlak: The last point on the slide shows that we've released our 2023 sustainability report, highlighting a number of accomplishments and commitments marking our path toward a long-term sustainable transformation. I'll discuss this in more detail on the next slide, but the achievements that we highlight demonstrate that Adient has firmly integrated sustainability into the core of our business. Turning to slide 5 and further on that point.
Mark A. Oswald: I'll discuss this in more detail on the next slide.
But the achievements that we highlight demonstrates that adient is firmly integrated sustainability into the core of our business.
Turning to slide five and further on that point.
Since we began publishing our annual sustainability report four years ago, a lot has changed.
As both the environment in which we operate and our ESG development has evolved our goals have evolved as well.
Jerome Dorlak: Since we began publishing our annual sustainability report four years ago, a lot has changed. As both the environment in which we operate and our ESG development have evolved, our goals have evolved as well. One thing that has not changed is our commitment to a long-term, sustainable transformation focused on limiting our negative environmental impacts on the planet and focusing on social and economic changes to create a better environment for everyone. The sustainability report outlines how we are aligning our strategic priorities to where our sustainability activities can deliver the greatest impact.
One thing that has not changed.
As our commitment to have a long term sustainable transformation.
Focused on limiting our negative environmental impacts on the planet and focusing on social and economic changes to create a better environment for everyone.
The sustainability report outlines how we are aligning our strategic priorities to where our sustainability activities can deliver the greatest impact.
This includes our ongoing focus on product design to support not only our own sustainability goals.
Mark A. Oswald: But those of our customers as well.
Jerome Dorlak: This includes our ongoing focus on product design to support not only our own sustainability goals but those of our customers as well. You can see on the slide a number of highlights and accomplishments achieved in fiscal year 2023. I won't read each of these, and there are more highlights in the report.
Mark A. Oswald: You can see on this slide a number of highlighted a number of highlights and accomplishments achieved in fiscal year 2023.
I won't read each of these and there are more highlights within the report.
Mark A. Oswald: These examples reflect the milestones as we advance our sustainability mission focused on products processes and people.
Jerome Dorlak: But these examples reflect the milestones as we advance our sustainability mission focused on products, processes, and people. We've included a link to the full report. Please take a few minutes to see the progress we've made on our sustainability journey and the commitments we intend to deliver on in the future. Now, turning to slide six.
We've included a link to the full report.
Please take a few minutes to see the progress we've made in our sustainability journey and the commitments, we intend to deliver on in the future.
Now turning to slide six.
Let's take a look at our business wins and launch performance.
Mark A. Oswald: As you can see on slide six.
Jerome Dorlak: Let's take a look at our business lens and launch performance. As you can see on slide 6... We highlight several of the important recent and ongoing launches. Although the production environment in the Americas was disrupted in the quarter, our process discipline and execution enabled us to effectively execute our launches, including launches in our Jit, Foam, Trim, and Metals business that support the decreasing levels of vertical integration in business that we are winning. We are able to successfully navigate the delays caused by strike-related production stoppages at our customers that cause certain program starts to be delayed. The team continues to maintain process discipline, which is key to managing the number and complexity of launches scheduled for this fiscal year. Now, turning to slide seven.
We highlight several important recent and ongoing launches.
Although the production environment in the Americas was disrupted in the quarter, our process discipline and execution enabled us to effectively execute on launches, including launches in our jet film trim and metals business that support that deepening levels of vertical integration and business that we are.
Winning.
Mark A. Oswald: We were able to successfully navigate the delays caused by strike related production stoppages at our customers that caused certain programs starts to be delayed.
The team continues to maintain process discipline, which is key to managing the number and complexity of launches scheduled for this fiscal year.
Now turning to slide seven.
As usual several recent new business awards are highlighted here.
Mark A. Oswald: These new business awards once again represent a strong mix.
Jerome Dorlak: As usual, several recent new business awards are highlighted here. These new business awards, once again, represent a strong mix of customers, geographies, and various levels of electric, hybrid, and ICE platforms. Also important to note are deepening levels of vertical integration in recent winds. More than 90% of business awarded by sales volume in the last fiscal year contained some level of vertical integration in foam, trim, and or metals.
Of customers geographies various levels of electric hybrid and ice platforms.
Important to also note our deepening levels of vertical integration and recent wins.
More than 90% of business awarded by sales volume.
In the last fiscal year contained some level of vertical integration and foam trim and or metals.
Mark A. Oswald: This continues an advances a trend starting in fiscal year 'twenty, two driven by our deep expertise and engineering logistics purchasing and operational execution.
Jerome Dorlak: This continues and advances a trend starting in fiscal year 22, driven by our deep expertise in engineering, logistics, purchasing, and operational execution that allows us to drive value for Adient and our customers when we control a greater portion of the seeding value chain. I'd like to especially highlight a new business sourcing on a BEV program that is supported by our Bridgewater Interiors joint venture. As a reminder, BWI is a successful, diverse joint venture that we have been involved in for more than 25 years. We're particularly proud of this partnership and the competitive advantage that it brings to Adient, along with our Avanzar joint venture, which is also a diverse JV. We'll provide more details on this one at a later time. Flipping to slide 8.
That allows us to drive value for adient, and our customers when we control a greater portion of the seeding value chain.
Mark A. Oswald: I'd like to especially highlight our new business sourcing on a bed program that is supported by our Bridgewater interiors joint venture.
As a reminder, VW is a successful diverse joint venture that we have been involved in for more than 25 years, we're particularly proud of this partnership and the competitive advantage that it brings to adient, along with our Avon's our joint venture, which is also a diverse JV.
We will provide more details on this win at a later time.
Flipping to slide eight.
Jerome Dorlak: We've talked about the emerging trend that we're seeing in increased feeding content as an opportunity recently. Customers in China specifically have reimagined the vehicle interior around creature comforts like deep recline, long rails, massage, and sound in the feet, to name a few. Safety features like delta seats and pelvic crash management are becoming increasingly relevant as comfort features change the cabin interior configuration, and sustainable innovations like non-leather seating surface materials and low carbon steel are driven by both ESG goals and cost reduction efforts. These times represent an opportunity for Adient, but they also increase a level of complexity that we will have to manage. As content increases, we see that the JIT assembly environment can become increasingly complicated unless properly managed.
Customers in China, specifically have re imagined the vehicle interior around creature comforts like deep recline long rails massage and sound and seat to name a few.
Safety features like belt to seat and pelvic crash management are becoming increasingly relevant as the comfort features change the cabin interior configuration.
And sustainable innovations like non leather seating surface materials and low carbon steel are driven by both ESG goals and cost reduction efforts.
These trends represent an opportunity for adient, but also increased a level of complexity that we will have to manage.
As content increases, we see that the assembly environment can become increasingly complicated complicated unless properly managed.
We have the engineering capability and manufacturing footprint to take the increasing content features and industrialize them in a way that is cost effective driving win win solutions for adient and our customers.
Jerome Dorlak: We have the engineering capability and manufacturing footprint to take the increasing content features and industrialize them in a way that is cost-effective, driving win-win solutions for Adient and our customers. This is especially relevant as our customers look to offset increasing labor costs at their assembly plants. We demonstrated a few of our strategies for driving process efficiencies to investors recently at our Plymouth Tech campus, as well as at a recent conference. Our ES3 process leverages available knowledge to create opportunities and value for our customers.
This is especially relevant as our customers look to offset increasing labor costs at their assembly plants.
We demonstrated a few of our strategies for driving process efficiencies to investors recently at our Plymouth Tech campus as well as at a recent conference R. E. S. Three process leverages available knowledge to create opportunities and value for our customers.
We can identify opportunities for reducing operational waste engineering simplification and network optimization.
Jerome Dorlak: We can identify opportunities for reducing operational waste, engineering simplification, and network optimization. We use value stream mapping to identify manufacturing process improvements that we can bring to our customers and industrialize. We're able to leverage our world-class manufacturing footprint capabilities to engineer and execute solutions like modular assembly. By leveraging the metals business that we own, we can assemble seat, back frame, and cushioned pan modules in our existing footprint and enable labor, freight, and inventory efficiencies that not only reduce the carbon footprint but also cost. It's essential that we own the metals real estate to execute on this particular opportunity.
We use value stream mapping to identify manufacturing processes improvements that can bring that we can bring to our customers and industrial lies.
We're able to leverage our world class manufacturing footprint capabilities to engineering execute solutions like modular Assembly.
By leveraging the metals business that we own we can assemble seat back frame and Cushing pan modules in our existing footprint.
And enabled labor freight and inventory efficiencies that not only reduce carbon footprint, but also cost it's essential that we own the metals real estate to execute on this particular opportunity.
We're able to share these efficiencies with our customer in order to manage the increased the increasing complexity, while driving financial benefits.
Jerome Dorlak: We're able to share these efficiencies with our customers in order to manage the increasing complexity while driving financial benefits. It's important to note that we have modular assembly processes planned to go into production during the fiscal year. We're continually evaluating and improving how we operate the business. The key takeaway is that ES3 encompasses a range of benchmarking, continuous improvement, and VAVE practices that give us the ability to demonstrate opportunities for both our customers and Adient that enable us to deliver our commitments on business performance. I'm turning to slide 9 now.
It's important to note we haven't modular assembly processes planned to go into production. During this fiscal year, we're continually evaluating and improving how we operate the business.
The key takeaway is that E. S. Three encompasses a range of benchmarking continuous improvement and V E practices, they give us the ability to demonstrate opportunities for both our customers and adient that enable us to deliver our commitments.
Mark A. Oswald: Business performance.
Turning to slide nine now.
Heading into the end of the fiscal year 'twenty three there were reasons to be cautious and conserve cash.
With a strike looming at the time, our strategy was to prepare our balance sheet for a longer term production disruption in the Americas.
Jerome Dorlak: Heading into the end of fiscal year 23, there were reasons to be cautious and conserve cash. With the strike looming at the time, our strategy was to prepare our balance sheet for a longer-term production disruption in the Americas. As the uncertainty around the length and breadth of the production disruption was resolved, we were able to get a clear line of sight on our ability to generate cash. With cash on the balance sheet and good clarity around free cash flow for the year, the company returned $100 million to shareholders via repurchases, totaling approximately 3 million shares.
Is the uncertainty around the length and breadth of production disruption was resolved, we're able to get clear line of sight on our ability to generate cash.
With cash on the balance sheet and good clarity around free cash flow for the year. The company returned 100 million to shareholders via repurchases totaling approximately 3 million shares.
Our capital allocation plan remains balanced we're committed to returning capital to shareholders. While also balancing the cash needs of the business.
Jerome Dorlak: Our capital allocation plan remains balanced; we're committed to returning capital to shareholders while also balancing the cash needs of the business. I'll also point out that our ability to improve margins, generate cash, and prudently manage our balance sheet was recognized by both S&P Global and Moody's recently. The company's corporate credit ratings were upgraded by both in recent months.
I'll also point out that our ability to improve margins generate cash and prudently manage our balance sheet was recognized by both S&P global and Moody's recently.
The company's corporate credit ratings were upgraded by both in recent months.
Our balance sheet strength and financial performance also enabled us to amend and extend our term loan b subsequent to the quarter.
Mark A. Oswald: Our balance sheet strength and financial performance also enabled us to amend and extend our term loan B subsequent to the quarter. It is safe to say that our confidence in the company's ability to generate cash, along with the flexibility we have built into the capital structure, is expected to underpin significant returns to our shareholders. With that, I will turn it over to Mark to cover the financials. Thanks Jerome.
Thanks, Jerome let's jump into the financials on slide 11 adhering to our typical format. The pages formatted with our reported results on the left side.
Mark A. Oswald: Let's jump into the financials on slide 11. Adhering to our typical format, the page is formatted with our reported results on the left side and our adjusted results on the right side. We will focus our commentary on the adjusted results, which exclude special items that we view as either one-time in nature or otherwise skew important trends in the underlying performance. For the quarter, the biggest drivers of the difference between our reported and adjusted results were related to purchase account amortization, as well as restructuring and impairment. Details of all adjustments for the quarter are in the appendix of the presentation. High level for the quarter.
Adjusted results on the right side, we will focus our commentary on the adjusted results, which exclude special items that we view as either onetime in nature or otherwise skew important trends in the underlying performance.
Mark A. Oswald: For the quarter the biggest drivers of the difference between our reported and adjusted results were related to purchase accounting amortization and restructuring and impairment costs details of all adjustments for the quarter or in the appendix of the presentation.
High level for the quarter sales were approximately $3 7 billion down about 1% compared to our first quarter results last year.
Lower volumes, primarily in the Americas, resulting from strike related production stoppages at our customers were partially offset with positive FX movements between the two periods.
Mark A. Oswald: Sales were approximately $3.7 billion, down about 1% compared to our first quarter results last year. Lower volumes, primarily in the Americas, resulting from strike-related production stoppages at our customers, were partially offset by positive FX movements between the two periods. Adjusted EBITDA for the quarter was $216 million, up 2% year-on-year.
Adjusted EBIT for the quarter was $216 million up 2% year on year. The increase was primarily attributed to benefits associated with improved business performance.
These benefits were partially offset by the impact of lower volume and mix and to a lesser extent the negative impact of currency movements between the periods and timing of material economics.
Mark A. Oswald: The increase is primarily attributed to benefits associated with improved business performance. However, these benefits were partially offset by the impact of lower volume mix, and to a lesser extent, the negative impact of currency movements between the periods on timing of material economics. I'll expand on these drivers in just a minute.
I'll expand on these drivers in just a minute.
Finally at the bottom line Adient reported adjusted net income of $29 million or <unk> 31 per share.
Mark A. Oswald: Finally, at the bottom line, Adient reported adjusted net income of $29 million, or $0.31 per share. Let's break down our first quarter results in more detail. I'll cover the next few slides rather quickly, as details for the results are included on the slides. This should ensure we have adequate time for the Q&A portion of the call. Starting with revenue on slide 12, reported consolidated sales of approximately $3.7 billion, a decrease of $39 million compared with Q1 fiscal year 23. The primary driver of the year-on-year decrease was lower volume and pricing, call it $95 million, including about $36 million of lowest commodity recovery.
Let's break down our first quarter results in more detail I'll cover in the next few slides rather quickly as details for their results are included on the slide. This should ensure we have adequate time for the Q&A portion of the call.
Starting with the revenue on Slide 12 reported consolidated sales of approximately $3 7 billion, a decrease of $39 million compared with Q1 fiscal year 'twenty three.
The primary driver of the year on year decrease was lower volume and pricing call it $95 million, including about $36 million of lower commodity recoveries.
The favorable impact of FX movements between the two periods benefited the quarter by $56 million.
Focusing on the table on the right hand side of the slide Adient consolidated sales were lower in the Americas and Asia Pacific while sales in EMEA grew by about 1%.
Mark A. Oswald: The favorable impact of FX movements between the two periods benefited the quarter by $56 million. Focusing on the table on the right-hand side of the slide, Adient's consolidated sales were lower in the Americas and Asia-Pacific, while sales in the EMEA grew by about 1%. America's market performance was primarily driven by key platforms that were impacted by strike-related production practices like the Ram, Wrangler, and GM's midsize SUVs, as well as program launches that were taking place in the quarter, such as the Tacoma. In Europe, the top line benefited from new program launches in a favorable program mix, which was offset by certain planned program expeditions. In China, the end of production of certain programs in model year changeovers resulted in lower year-on-year sales.
America's market performance was primarily driven by key platforms that were impacted by strike related production stoppages like the Ram Wrangler in Gms midsized Suvs as well as program launches that were taking place in the quarter such as the Tacoma.
In Europe, the topline benefited from new program launches and favorable program mix, which was offset by certain planned program exits.
In China end of production of certain programs and model year changeovers resulted in lower year on year sales.
To note, we still expect to outpace regional production in China on a full year basis.
With regard to adient unconsolidated seating revenue year on year results were up about 10% adjusted for FX.
Mark A. Oswald: Important to note, we still expect to outpace regional production in China on a four-year basis. With regard to adding unconsolidated seeding revenue, year-on-year results were up about 10% adjusted for FX. In China, where a large majority of Adient's unconsolidated sales are derived, the strong increase in sales was driven by customers like FVW and Toyota.
In China, where a large majority of adient unconsolidated sales are derived the strong increase in sales was driven by customers like VW and Toyota. Additionally, our hyper joint venture benefited from production growth with domestic Chinese customers, including SAIC Cherry and B.
Mark A. Oswald: Additionally, our Kuiper joint venture benefited from production growth with domestic Chinese customers including SAIC, Cherry, and BYD. Moving to slide 13, we've provided a bridge of adjusted EBITDA to show the performance of our segments between periods. In the big picture, adjusted EBITDA was $216 million in the current quarter versus $212 million reported a year ago.
I D.
Moving to slide 13, we've provided a bridge of adjusted EBITDA to show the performance of our segments between periods.
Picture adjusted EBITDA was $216 million in the current quarter versus $212 million reported a year ago.
Mark A. Oswald: The primary drivers of the year on year comparison are detailed on the page and are consistent with what we expected heading into the quarter.
Mark A. Oswald: The primary drivers of the year-on-year comparison are detailed on this page and are consistent with what we expected heading into the quarter. Improved business performance was the primary driver of these results, benefiting the quarter by $39 million. Looking deeper within that bucket, the biggest positive driver was an improved net material margin of $30 million. In addition, freight costs were $23 million improved year on year, as well as improvements we saw in labor and overhead.
Improved business performance was the primary driver of the results benefiting the quarter by $39 million looking.
Looking deeper within that bucket. The biggest positive driver was improved net material margin of $30 million. In addition freight costs.
Mark A. Oswald: Were $23 million improved year on year as well as improvements we saw in labor and overhead.
Partial offsets within business performance, we're launching tooling costs as we managed increased launch volume and complexity as well as the timing of engineering spend and other onetime SG&A costs.
Mark A. Oswald: Partial offsets within business performance were launch tooling costs as we managed increased launch volume and complexity, as well as the timing of engineering spend and other one-time SG&A costs. I'll note that SG&A's cost comparison is driven in part by certain asset sales in the year-ago period that did not repeat. Headwinds, partially offsetting the business performance, included Volume and mix impacts of about $18 million. Adient's program mix in the Americas was influenced by the UAW strike-related production stoppages. Outside of the strike, Toyota Tacoma volumes were impacted as the program moved through the launch curve. In APAC, certain programs reached year-end production or model-year changeover, resulting in lower Adient production volumes. The timing of commodity-related recoveries drove the lower net commodity earnings, call it $8 million for the quarter.
That SG&A cost comparison is driven in part by certain asset sales in the year ago period that did not repeat.
Headwinds, partially offsetting the business performance included.
Mark A. Oswald: Volume and mix impacts about $18 million, adding.
Mark A. Oswald: <unk> program mix in the Americas was influenced by the UAW strike related production stoppages.
Outside of the strike Toyota Tacoma volumes were impacted as the program moves through the launch curve.
The negative impact of currency movements between the two periods was $7 million note that the favorable translation impact on our sales primarily driven by the euro were more than offset by transactional FX headwinds in the Americas and Asia.
Mark A. Oswald: The negative impact of currency movements between the two periods was $7 million. Note that the favorable translation impacts on our sales, primarily driven by the Euro, were more than offset by transactional FX headwinds in the Americas and Asia. As we indicated in November, we expect the FX to be a headwind for the quarter, and we expect the FX pressures to intensify as we move through the fiscal year. I'll have additional commentary on what we can expect for the remainder of the year in just a few minutes. And finally, equity income was lower by $2 million.
As we indicated in November we expect FX to be a headwind for the quarter and we expect suspect the FX pressures to intensify as we move through the fiscal year I will have additional commentary and what we can expect for the remainder of the year and just a few minutes.
And finally equity income was lower by $2 million. This was the result of certain onetime benefits in the prior period that did not repeat and to a lesser extent the restructured pricing agreement within adient paper joint venture.
Mark A. Oswald: This was a result of certain one-time benefits in the prior period that did not repeat, and to a lesser extent, the restructured pricing agreement within Adient's Kuiper joint venture. Important to note, the improved net material margin within the business performance bucket was aided by that change. All in all, a quarter very much in line with our internal expectations, driven by continued strong execution. Similar to past quarters, we've provided our detailed segment performance slides in the appendix of this presentation.
Mark A. Oswald: Important to note the improved net material margin within the business performance bucket was aided by that change.
All in all a quarter very much in line with our internal expectations driven by continued strong execution.
Similar to past quarters, we've provided our detailed segment performance slides in the appendix of the presentation.
High level for the Americas improved business performance was the primary factor driving positive results business performance was driven by increased net material margin inclusive of the benefit of the restructured pricing agreement at our <unk> joint venture.
Mark A. Oswald: At a high level, for the Americas, improved business performance was the primary factor driving positive results. Business performance was driven by increased net material margin, inclusive of the benefits of the Restructured Pricing Agreement at our Kuiper Joint Venture, lower freight costs, and improved labor and overhead performance. In partially off-setting, these benefits were increased once in tooling.
Our freight costs improved labor and overhead performance in.
And partially offsetting these benefits were increased launch and tooling in.
Mark A. Oswald: In EMEA the year on year comparison was influenced by several factors such as improved net commodities favorable currency movements.
Mark A. Oswald: In EMEA, the year-on-year comparison was influenced by several factors, such as improved net commodities, favorable currency movements, and improved business performance. Partial offsets within business performance were higher SG&A costs, as certain one-time benefits recognized last year did not repeat, as well as the timing of customer launches, which drove engineering and launch. Volume mix was a slight headwind resulting from programming. In Asia, business performance reflected the negative impact of war on year-on-year commercial recovery, as well as the timing of launch activity, which drove increased engineering and launch spend. These headwinds, which we view as temporary, more than offset efficiencies in labor and overhead. Equity income was driven lower by the revised pricing agreement between the joint venture partners at our Kuiper JV. Again, our Conciliate Americas business benefited from the revised pricing agreement. Currency movements between the periods resulted in a $4 million headwind, primarily related to the Japanese Yen's exchange rate for the Thai Baht.
Prove business performance.
Partial offsets within business performance were higher SG&A costs as certain onetime benefits recognized last year did not repeat as well as the timing.
Customer launches, which drove engineering and launch spend.
Volume and mix was a slight headwind, resulting from program mix.
In Asia business performance reflected the negative impact of lower year on year commercial recoveries.
As well as the timing of launch activity, which drove increased engineering and launch spend.
Mark A. Oswald: These headwinds, which we view as temporary.
More than offset efficiencies in labor and overhead.
Equity income was driven lower by the revised pricing agreement between the joint venture partners at our paper JV.
Our consolidated Americas business benefited from the revised pricing agreement.
Currency movements between the periods resulted in a 4 million dollar headwind primarily related to the Japanese yen in the Thai baht.
Mark A. Oswald: And finally volume and mix was a modest headwind.
As I mentioned on the previous slide Adient program mix in that region was impacted by certain model year changeovers.
Mark A. Oswald: And finally, volume and mix with a modest headwind, as I mentioned on the previous slide, Adient's program makes the net, by certain moderator changeovers and use of production of others. We continue to expect strong regional performance in five years for the balance of the year. We now shift to our task, liquidating capital structures on slides 14 and 15. Starting with cash on slide 14, Adjusted Free Cash Flow, defined as Operating Cash Flow, RUSCAPX, was an outflow of $14 million. This compares to an outflow of $17 million in last year's first quarter.
Mark A. Oswald: The production of other models.
Mark A. Oswald: We continue to expect strong regional performance in volume and mix.
For the balance of the year.
Let me now shift to our cash liquidity and capital structure on slide 14 and 15.
Mark A. Oswald: Starting with cash on slide 14, adjusted free cash flow defined as operating cash flow less capex was an outflow of $14 million. This compares to an outflow of $17 million in last year's first quarter the.
The relative improvement despite the UAW strike impact for the quarter is a testament to the cash management actions the team was able to execute within the quarter.
Mark A. Oswald: The relative improvement, despite the UAW strike impact for the quarter, is a testament to the cash management actions the team was able to execute within the quarter. The primary drivers of the year-on-year improvement are listed on the right-hand side of the slide. I won't read each one, but it's important to point out that the modest cash outflow in the quarter is in line with our internal expectations. One last point, as we called out on the slide, Adient continues to utilize various factoring programs as a low-cost source of liquidity. At December 31, 2023, we had $85 million of factored receivables versus $171 million at fiscal year-end. Flipping the slide 15.
The primary drivers of the year on year improvement are listed on the right hand side of the slide.
I won't read each but important to point out that the modest cash outflow in the quarter is in line with our internal expectations.
Mark A. Oswald: One last point as we called out on the slide Adient continues to utilize various factoring programs as a low cost source of liquidity at December 31, 2023, we had $85 million of factored receivables versus $171 million at fiscal year end.
Flipping to slide 15.
As noted on the right hand side of the slide we ended the quarter with about $1 9 billion total liquidity comprised of cash on hand of 999 $990 million and $938 million of Undrawn capacity under adient revolving line of credit.
Mark A. Oswald: As noted on the right-hand side of the slide, we ended the quarter with about $1.9 billion in total liquidity, comprised of cash on hand of $990 million and $938 million of undrawn capacity under Adient's revolving line of credit. Adient's debt and net debt position total about $2.5 billion and $1.6 billion, respectively, at December 31st, 2023. On the lower right-hand side of the page, we have noted several important highlights with respect to our debt and capital structure. First, as Jerome discussed earlier, we returned $100 million to our shareholders in the quarter. As we indicated previously, the cash on the balance sheet, combined with our confidence in our ability to generate cash, underpins the company's ability to execute its share repurchase program. As a reminder, we have $435 million remaining on our share repurchase authorization.
<unk> debt and net debt position totaled about $2 5 billion and $1 6 billion, respectively. At December 31 2023.
On the lower right hand side of the page. We have noted several important highlights with respect to our debt and capital structure.
First as Jerome discussed earlier, we returned $100 million to our shareholders in the quarter as we indicated previously the cash on the balance sheet combined with our confidence in our ability to generate cash underpins the company's ability to execute our share repurchase program.
As a reminder, we have $435 million remaining on our share repurchase authorization, our commitment to execute opportunistically and share repurchases as an important part of the capital allocation strategy.
Mark A. Oswald: Our commitment to execute opportunistically and share repurchases is an important part of the capital allocation strategy. Both S&P Global and Moody's recognize the company's earnings growth, ability to generate cash, and the flexibility of our capital structure with upgrades to the company's corporate credit ratings in December and January, respectively. This is a good external validation of the progress we've made in reshaping our balance sheet over the past couple of years, as well as the company's positive trends in earnings and cash generation. The recent amendment and extension to our Term Loan B demonstrate we're not sitting still. The amendment improves our pricing to SOFR plus 275, a 50 basis point improvement, as well as extends the maturity to 2031. The average tenor of our outstanding debt after the deal increased from 4.2 to 4.8 years. We ended the quarter with a net leverage ratio of 1.65 times, well within our targeted range of 1.5 to 2 times.
Mark A. Oswald: Both S&P global and Moody's recognized the Companys earnings growth the ability to generate cash and the flexibility of our capital structure with upgrades to the company's corporate credit ratings in December and January respectively.
This is a good external validation of the progress we've made in reshaping our balance sheet over the past couple of years as well as the Companys positive trend in earnings and cash generation.
The recent amend and extend to our term loan b demonstrates we're not sitting still.
The amendment improves our pricing to solar plus $2 75, a 50 basis point improvement as well as extended the maturity to 2031.
The average tenure of our outstanding debt after the deal increased from four two to four eight years.
Mark A. Oswald: We ended the quarter with a net leverage ratio of 165 times.
Well within our targeted range of one and a half to two times.
The team will continue to evaluate and execute actions that will further enhance the strength and flexibility of our cap structure.
Mark A. Oswald: The team will continue to re-evaluate and execute actions that will further enhance the strength and flexibility of our cap structure. With that, let's flip to slide 16 and review our outlook for the remainder of fiscal 2024. Adient's fiscal year 24 guidance has been updated to reflect its Q1 results in current market conditions, including revised production assumptions and current FX rates. Adient's consolidated sales are expected to land between $15.4 and $15.5 billion.
With that let's flip to slide 16, and review our outlook for the remainder of fiscal 2024.
Heading into fiscal year 'twenty four guidance has been updated to reflect our Q1 results and current market conditions, including revised production assumptions in current FX rates.
Mark A. Oswald: <unk> consolidated sales are expected to land between $15, four and $15 5 billion we.
We have seen currency movements, particularly the euro favorably impact our top line forecast.
That said, while S&P production forecast have increased catching up to what we already were aware of based on customer releases.
Mark A. Oswald: We've seen currency movements, particularly the Euro, favorably impact our top line forecast. That said, while S&P production forecasts have increased, catching up to what we already were aware of based on customer releases, certain of Adient's programs are moving in the opposite direction, driven primarily by launch delays in alignment with customer demand.
Sure enough adient programs are moving in the opposite direction, driven primarily by wants delays and alignment with customer demand.
Mark A. Oswald: In China. The recent upward revisions to production forecast are weighted towards a select group of local manufacturers with limited editing adient content, such as BYD SAIC and Geely.
Mark A. Oswald: In China, the recent upward revisions to production forecasts are weighted towards a select group of local manufacturers with limited AAD content, such as BYD, SAIC, and Geely. The net result is a revenue outlook that is more heavily weighted towards H2 versus H1. For adjusted EBITDA, we're reaffirming our previous guide at $985 million.
The net result is the revenue outlook that is more heavily weighted towards <unk> versus H one.
Mark A. Oswald: For adjusted EBITDA, we are reaffirming our previous guide at $985 million.
Business performance is expected to be a significant driver of the year on year earnings and margin growth.
Based on the current guide the implied all in EBITDA margin of six 4% represents an FX adjusted 70 basis points of margin expansion over fiscal year 2023.
Mark A. Oswald: Business performance is expected to be a significant driver of year-on-year earnings and margin growth. Based on the current guide, the implied all-in even margin of 6.4% represents an FX adjusted 70 basis points of margin expansion over fiscal year 2023. Important to note, given the revenue outlook just discussed, as well as the normal seasonality of our equity income, we expect second half EBITDA to outpace the first half as business performance continues to improve for the second half volumes pull-through. With regard to equity income, consistent with prior years, it's common to see a significant decrease as we move sequentially from our first quarter into Q2, driven, of course, by the Chinese New Year. Last year, for example, Adient's equity income was $15 million lower in Q2 vs. Q1.
Important to note given the revenue outlook, just discussed as well as the normal seasonality of our equity income, we expect adient second half EBITDA to outpace the first half.
<unk> business performance continues to improve for the second half volumes pull through.
With regard to equity income.
System with prior years, it's common to see a significant decrease as you move sequentially from our first quarter into Q2, driven of course by the China New year.
Last year for example, adient equity income was $15 million lower in Q2 versus Q1, I anticipate a similar decrease this year.
Mark A. Oswald: One last point on the cadence of our earnings the timing of our commercial settlements is also a key driver of Lumpiness between quarters.
Mark A. Oswald: I anticipate a similar decrease this year. One last point on the cadence of our earnings; the time of our commercial settlements is also a key driver of lumpiness between quarters. Moving on, interest expense is still expected to be about $185 million, given our expected debt and cash balances, as well as interest rate expectations. Note that the recently completed Term Line B actions were planned and contemplated within our previous guidance. Cash taxes continue to be forecast at about $105 million. However, for modeling purposes, tax expense is estimated at $115 million.
Mark A. Oswald: Moving on interest expense is still expected at about $185 million, given our expected debt and cash balances as well as interest rate expectations.
Note that the recently completed term loan B actions were planned and contemplated within our previous guidance.
Mark A. Oswald: Cash taxes continue to be forecast at about $105 million for modeling purposes tax expenses estimated at $115 million.
Capex largely based on customer launch schedules is forecast at 310 million no change from the November guide.
Mark A. Oswald: CapEx, largely based on customer launch schedules, is forecast at $310 million, no change from the November guide. And finally, our free cash flow is expected to be $300 million if the calls for cash remain stable. Again, no change from November. With that, let's move to the question and answer portion of the call. Operator, can we have our first question? We will now begin the question. I'd like to thank all of you for joining us today.
And finally, our free cash flow is expected at $300 million.
The calls for a cash remains stable again no change from November.
Speaker Change: With that let's move to the question and answer portion of the call.
Operator can we have our first question. Please.
Speaker Change: Thank you we will now begin the question and answer session. If you would like to ask a question. Please on mute your line and press Star. One you will be prompted to record. Your name to withdraw that question. You May Press Star two again press star one to ask a question and one moment for our first question.
Operator: Thank you. All those questions, you may. Good morning, everybody.
Rod: Thank you. Thank you. Thank you. Thank you. I have a couple questions.
Mark A. Oswald: It's really nice to see the acceleration in share repurchases. Can you just remind us, is your minimum cash position still $700,000? Bye.
Speaker Change: Our first question comes from Rod Lache with Wolfe Research. Your line is open you may ask your question.
Mark A. Oswald: Can you remind us how much you hear Mark towards Sherry? That because it looks like it will actually complete your forum to 30 for remaining cooperation. Yeah, thanks. Thanks for the question, Rod. Yes, I do think that we could run the company with, call it, $700 million of cash. That said, we also look at the overall macro environment, right, to see whether or not, you know, if there's certain times that we want to run with a little extra cash on there. The way I think about the capital allocation this year, Rod, is we're off to a strong start with the Sherry purchases. We expect to generate more cash. We do have to balance that, though. We do have some 3.5% notes that we have to take care of this year. Let's call that about $130 million, right?
Rod Lache: Morning, everybody.
Rod Lache: A couple of questions.
Really nice to see the acceleration in share repurchases could.
Could you just remind us is your minimum cash position is still $700 million.
Rod Lache: Which would imply maybe 300 almost $300 million of excess cash now and if you do achieve the $300 million of free cash flow.
Can you remind us how much you would earmark towards share repurchases versus debt because it looks like you could actually complete your $430 million.
Rod Lache: Meaning authorization, while still staying in the leverage targets.
Speaker Change: Yeah. Thanks, Thanks for the question Rod.
Yes, I do think that we could run the company with call it $700 million of cash.
That said, we also look at the overall macro environment right to see whether or not there are certain times that we want to run with a little extra cash on there the way I think about the capital allocation this year right as well.
Mark A. Oswald: There could be an opportunity to, you know, take down a little bit of our higher-priced debt, right? So, again, I look at it as a balanced approach there. And as we move through the year, clearly, we'll be looking at, you know, we're adding stocks trading and the pacing of that measured approach as we go through 2024. It does look like.
We're off to a strong start with the share repurchases, we expect to generate more cash we do have to balance that though we do have some three 5% notes that we have to take care of this year called out about $130 million right. There could be an opportunity to take down a little bit of our higher price debt right. So again I look at it.
A balanced approach there.
And as we move through the year clearly we'll be looking at.
We're adding stock is trading and the pacing of that measured approach as we go through 2024.
Okay.
Thanks for that it does look like.
Speaker Change: Something like the space is achievable, even with the $1 30.
Speaker Change: Hmm.
What it's worth.
The margins are improving despite.
Mark A. Oswald: and Wictor One Purdue, work, the margins are improving despite, um... labor headwinds, transactional headwinds, you've mentioned that performance is a net positive. Could you just remind us of the impact of labor and transactional headwinds on what actually may be, that's actually achieved a positive. Yeah, so let me start and then Jerome, feel free to jump in.
Labor headwinds transactional headwinds.
In fact mentioned that performance is a net positive could you just remind us of the impact of labor and transactional headwinds.
What actually is mitigating that to actually achieve the positive performance.
Yes. So so let me start and then Jerome feel free to jump in so youre absolutely right business performance continues to improve and we said all along rod that that business performance continues to be pause there needs to be positive to offset the challenges or the.
Mark A. Oswald: So you're absolutely right, you know, business performance continues to improve. And we said all along, Rod, that business performance needs to be positive or needs to be negative to offset the challenges or the macro external headwinds, such as labor inflation, etc. Right. So, you know, we had indicated before that we thought FX was going to be about a $60 million headwind this year. We're still in that camp, you know, where we sit today.
Macro external headwinds such as labor inflation et cetera, right. So.
We had indicated before that we thought FX was going to be about a $60 million headwind. This year, we're still in that camp, where we sit today.
Which means we have to get better in terms of our continuous improvement we have to basically our balance and balance out continues to improve that helps.
Mark A. Oswald: Which means we have to get better in terms of continuous improvement; we have to basically keep improving our balance in balance out, which helps, you know, lower freight costs, right? It's just what I'd call just core operating efficiencies that we have to pull through. And with respect to your question, Adam, you know, what's kind of enabling some of that?
Lower freight costs right. It's just what I would say just core operating efficiencies that we have to pull through.
And with respect to your question Rod on whats, what's kind of enabling some of that it hits.
Speaker Change: It really is when we talk about things related to Es three and.
Some of the things we'll highlight next week.
Jerome Dorlak: It really is when we talk about things related to ES3 and some of the things we'll highlight next week when we're actually with you around modularity. You know, looking at activities like long-distance chip, remapping our supply chains in concert with our customers, and not just what I would call the standard blocking and tackling, but really... redesigning the way we conduct some of our core business and taking large chunks of the labor swath and relocating them and displacing them to lower-cost countries or eliminating them altogether so that we can really start to leapfrog, And then the other piece of that would be, and we've talked about it, as we roll on and roll off some of the legacy programs and make progress in rolling into some of this business that's, I'd say, priced correctly for the market. You know, we started down that journey in 23, you know, 24, we see more of it, and we'll continue as we get into 25 and 26.
You know when we're actually with you around modularity.
Looking at activities like long distance jet re mapping our supply chains in concert with our customer.
And not just <unk>.
What I would call the standard blocking and tackling but really.
Speaker Change: Re designing the way we conduct some of our core business in <unk>.
Speaker Change: Taking large chunks of labor swath, and relocating them and displacing them.
To lower cost countries or eliminating them altogether. So that we can really start to kind of leapfrog and.
And get out of the day to day trench warfare.
And actually take big chunks out is what's enabling some of these changes and then the other piece of that would be and we've talked about it as we rollout and roll off some of the legacy programs and make progress.
<unk> into some of this business, that's I'd say priced correctly for the market. We've started down that journey in 'twenty three 'twenty four we see more of it and we will continue as we get into 'twenty five 'twenty six.
And we've been very vocal Theres some metals projects in particular, you know when we get into 'twenty six and 27 now that we expect to continue the rollout of our portfolio.
Jerome Dorlak: And, you know, we've been very vocal. There are some metals projects in particular, when we get into 26 and 27, now that we expect to continue to roll out of our portfolio. And that's what we, you know, we just continue to make progress on that front. Our next question comes from John Murphy with Bank of America. You may ask your question. Good morning, guys.
And that's what we just continue to make progress on that front.
Thank you. Our next question comes from John Murphy with Bank of America, You May ask your question.
Good morning, guys.
John Murphy: Obviously, there's been an all up malate, it's broken out around ice versus EV, and what's going to happen as far as penetration rates and volumes here.
Jerome Dorlak: You know, obviously, there's been an all-out melee that's broken out around ICE versus EV and what's going to happen as far as penetration rates and volumes are concerned. Jerome, I just wonder if you could kind of run through, as simply as you can, what your relative exposure or content potential is on an ICE versus an EV and how much it impacts you and how you think about cap allocation and the business in general. Yeah, I think when we think about, you know, content between ICE and an EV. It really varies by region, I would say.
Jerome I, just wonder if you could kind of run through it.
Simply as you can you know what your relative exposure or content potential is on ice for versus an EV and how much. It impacts how you think about cap allocation in the business in general.
Yes, I think when we think about.
John Murphy: Content between ice and an easy.
It really varies by region I would think in the Americas, when we think ice versus EV, it's generally.
A push for us if we just look at our platforms in which platforms, we have ice versus EV.
Jerome Dorlak: In the Americas, when we look at ICE versus EV, it's generally... A push for us, if we just look at our platforms and which platforms we have, ICE versus EV. Really, where we see an acceleration is in China. You know, in China, when we go to market on the EV side of the house, especially with NIO and Shaopeng, we're on their very highly competitive EVs, you know, the Neo high-end, and the Xiaopeng high-end EVs. And you compare that to an average content per vehicle level in China, and we see kind of a 2x or 3x multiplier there.
Really where we see an acceleration is in China.
John Murphy: In China, when we go to market on the EV side of the house, especially with Neil and Xiaopeng were on Theyre very highly contented evs.
The Neal high end Xiaopeng high end Tvs.
And you compare that to an average content per vehicle level in China, and we see kind of a almost two extra three X multiplier there.
And that's why if you look at our.
By segment, what I would call penetration, it's almost <unk>, if you compare that to buy dollar penetration in the EV market in China, and Thats, just because of the content per vehicle. There. So that's where we really see this multiplier effect is in China and when you look at content per vehicle.
Jerome Dorlak: And that's why, you know, if you look at our, by segment, what I would call penetration, it's almost 2x if you compare that to the dollar penetration in the EV market in China, and that's just because of content per vehicle there. So that's where we really see this multiplier effect in China when you look at content per vehicle. And we talk a lot about when you think, you know, pelvic craft management, belts to see, you know, massage systems, crowned-in-seat, and those things are now being taken across into Europe and into the Americas.
And we've talked a lot about when you think pelvic crash management belt to seats.
John Murphy: Massage systems sound in seat and those things are now being read across into Europe and into the Americas. So that's where you see this really big accelerator of content per vehicle to.
To your second question.
<unk> and risk of capital and capital deployment.
Jerome Dorlak: So that's where you see this really big accelerator of content for vehicles. To your second question, you know, exposure and risk of capital and capital deployment. We've been.
We've been.
John Murphy: I think very good stewards of capital when it comes to leveraging existing brick and mortar.
From an EV versus ice deployment.
Jerome Dorlak: I think they are very good stewards of capital when it comes to leveraging an existing brick and mortar from the EV versus ICE deployment and really looking at things like long-distance jets, particularly in the Americas. And what we've gone after in the EV platform, we haven't installed new brick and mortar. We've really leveraged existing asset footprints; we've leveraged, or can leverage existing lines, run those programs side by side with their EV counterparts or with their ICE counterparts, sorry, such that, you know, we're somewhat agnostic. If the EV platform doesn't hit, we've got the ICE platform, and we can kind of run the two side-by-side and play off the volume when we Counterpart, we at least have the building; we have the brick and mortar.
John Murphy: And really looking at things like long distance jet, particularly in America, and the Americas and where we've won after an EV platform, we haven't installed new brick and mortar.
We've really leveraged existing asset footprints, we've leveraged where we can't existing lines run those programs side by side with their EV counterparts or with their ice counterpart sorry.
John Murphy: Such that we're somewhat agnostic as to the EV platform doesn't hit we've got the ice platform and we can kind of run the two side by side and play off on the volume.
Where we don't have the ice counterpart, we at least have the building we have the brick and mortar.
So we're not stranded with a bunch of fixed costs were able to offset that with either more trim volume or put trim foam our metals capacity end of the building or other jet platforms into the building and utilize that labor. So we don't have a lot of stranded cost and we've been able to do that really in Europe, and the Americas pretty effectively so we don't have this big fixed cost.
Jerome Dorlak: And so we're not stranded with a bunch of fixed costs. We're able to offset that with either more trim volume or putting trim or foam or metals capacity into the building or other JIP platforms into the building and utilizing that labor. So we don't have a lot of stranded costs.
Hang on the business right now, yes, that's incredibly helpful. And then just the second question.
Jerome Dorlak: And we've been able to do that in Europe and the Americas pretty effectively. So we don't have this big fixed cost overhang on the business right now. Yeah, that's incredibly helpful.
The JV is being rebalanced and reprice can you just remind us your exposure.
In totality for the consolidated and non consolidated business your exposure to the Chinese domestic manufacturers.
John Murphy: Just a second question, with the JVs being rebalanced and repriced, can you just remind us your exposure in totality for the consolidated and unconsolidated business, your exposure to Chinese domestic manufacturers? Yeah, right now it's about 40-60, John, so about 40% exposed to domestics, 60% foreign. What we've indicated, though, is if you go out over the next three years, that flips. And so based on our business wins, based on what we see launching over the next two to three years, it becomes 60% exposed to local domestics and 40% to foreign. Thank you. Our next question comes from Emmanuel Rosner. Thank you very much.
John Murphy: Yeah right now it's about 40 60, John so about 40% exposed to domestics, 60% foreign what we've indicated though is if you go out over the next three years that flips and so based on our business wins based on what we see launching over the next two to three years it becomes 60%.
Exposed to local domestics, 40% to foreign.
Thank you. Our next question comes from Emmanuel Rosner with Deutsche Bank. Your line is open you may ask your question.
Alright. Thank you very much my first question is around.
The expectations for the outlook for growth of the market this year.
In Europe in your slides discussing the fourth quarter performance.
Emmanuel Rosner: My first question is around the expectations for active growth in the market this year. In your slide discussing the fourth quarter performance, there was obviously a lot of volatility around it and inputs and takes around program launches. I'm curious if you could just discuss at a high level what you think about this.
Volatility around it and puts and takes around program launches.
So platform. It I'm curious if you could just as SaaS at a high level.
Think about this for the.
The balance of fiscal 'twenty four.
Yes.
I'll start with that and then I'll hand, it over to mark to kind of finish it.
Jerome Dorlak: Yeah, I'll start with that. And then I'll hand it over to Mark, to kind of finish it out, you know, for the entire year to kind of be, I'd say, flattish, you know, from a growth over market standpoint, just looking at how we balance between the regions. You know, China, as we've said, we still expect China to be significantly positive to overall growth despite where we were in Q1. If you then go through kind of the other regions, you know, the Americas will be down versus market, Europe down versus market, and Asia really kind of flattish versus market.
Mark A. Oswald: We still expect.
For the entire year to kind of be I'd say flattish.
From a growth over market standpoint, just looking at how we balance between the regions.
China as we've said and we still expect China to be significantly.
Positive to overall growth over market, despite where we were at.
In Q1, if you then go through kind of the other regions the Americas will be down versus market Europe down versus market in Asia really kind of flattish versus market and that's just.
The effect of where we have certain launches in certain platforms and those markets, especially in the Americas really looking at launches within the year in particular Toyota Tacoma.
Jerome Dorlak: And that's just, you know, an effect of where we have certain launches and certain platforms in those markets. You know, especially in the Americas, really looking at launches within the year, in particular, the Toyota Tacoma, and then certain other customers with the Wrangler taking out shifts. You know, there are certain launches on RAM this year that will be impacted by another thing. But, you know, the impact of launches in the Americas, along with other shift reductions that will drive that. And then in Europe...
And then certain at our customers with wrangler, taking out shifts.
There are certain launches on Ram this year that will be impacted by and other things.
An impact of launches in the Americas, along with other shift reductions that will drive that and then in Europe.
In Europe, we've always said there are certain programs there that we've wound off and it's just a continuing of those wind off programs with non profitable customers I don't know Mark if you want to add any.
Jerome Dorlak: In Europe, we've always said there are certain programs there that we've wound off, and it's just the continuation of those wind-off programs with non-profitable customers. I don't know, Mark, if you want to add any additional... No, I think that was a good summary. The only...
I think that was a good summary, the only.
Mark A. Oswald: I'd, just reiterate China as the growth engine for us right and so we're still expecting youll call. It five to 600 basis points of growth over market. There. So a good news story there.
Mark A. Oswald: I'd just reiterate, China is the growth engine for us, right? And so we're still expecting, call it 500, 600 basis points of growth over market there. So a good news story there is actually helpful.
Yes, that's really helpful.
And then shifting to.
The margin outlook, So you know about.
70 bps of improvement, obviously youll framework over number of years, let's say three years was for about call. It three points of improvement to get to a balance of its beyond what youre guiding for 2024 is it.
Emmanuel Rosner: And then, you know, shifting to, you know, the margin aspect, so, you know, about 70 bits of improvement in your framework over, you know, number of years, let's say three years was the best, or three points of improvement. To get the balance of it beyond, you know, what you're getting for 2024, is that, is that, is there like a specific timeline around it? Do some of the actual items you would like to see in terms of the wind view of new things and inspiration through the future of design.
Is there like a specific time line around us doing some of these actions.
Same thing time like unwinding of our programs.
Is there an opportunity to I guess accelerate.
Accelerated this will be my question.
Speaker Change: So I think.
Speaker Change: Yes.
When we look at this business Mark and I mean, we still firmly believe.
Jerome Dorlak: So I think, you know. When Mark and I look at this business, we so firmly believe, Emmanuel, this business is an 8% business. And that's the potential of our portfolio and our business and where it should be. What I would say is, you know, as Mark and I are into the business now, we continue to evaluate it, and we go through our strategic plan. You know, with the extension of certain ice platforms, the extension of certain metals programs, and where those sit, we have to go through, look at our strategic plan, and look at the layout.
Emmanuel this business is a.
An 8% business.
And that's the call it the potential of our portfolio and our business and where it should be at what I would say is as mark and I are into the business now and we continue to evaluate it and we go through our strategic plan.
With the extension of certain ice platforms, the extension of certain metals programs.
Speaker Change: And where are those set.
You have to go through look at our strategic plan look at to lay out.
And as we go through that we go through our strategic planning cycle will come back to you with what that looks like and kind of a timeline to achieve the leverage to pull.
Jerome Dorlak: And as we go through that, we go through our strategic planning cycle. We'll come back to you with what that looks like and kind of a timeline to achieve and the levers to pull to get to that 8% margin target and what that looks like. Well, Oh, great. Um, just to follow up on what I said on the camera...
To get to that 8% margin target and what that looks like.
Thank you. Our next question comes from Colin Langan with Wells Fargo. You May ask your question. Your line is open.
Oh, great. Thanks for taking my questions.
Colin Langan: Just a follow up on the comment I was actually going to ask about the metals business. So.
Emmanuel Rosner: So, in the past, you've mentioned, I guess, about 500 million-ish of unprofitable roll-off. So is that the business that's now delayed? And is that going to be now instead of 25?
Colin Langan: So there is in the past you've mentioned I guess about $500 million ish of unprofitable business that needed to roll off so is that the business. That's now delayed and is that going to be now instead of 'twenty five 'twenty six more like 26 27.
Mark A. Oswald: 7, And also, in your overall comments, you actually sounded a little more positive about that I was talking about how... The whole system integration. Thank you. Thank you. Yeah, I'll start, and then Jerome can jump in.
And then also in your overall comments you actually sounded a little more positive on metals talking about how we need to run the whole system integration, having metals was important.
Mark A. Oswald: But you're absolutely right. You know, certain of that metals business that we were planning on rolling off in 2025-26, as our customers have expanded certain of their ICE programs, clearly, they want us to continue to run those. And so we have to evaluate, you know, how long they want to run this, obviously, there'll be some commercial discussions with them, etc. And that's what Jerome was talking about earlier; we have to go through the strategic plan now and understand, you know, what those rubber ducks are and what we want to do with that. And you're absolutely right, there are certain parts of that business, because we've been very strategic and very targeted over the past, you know, call it two or three years in terms of which businesses we wanted to win in metals and which ones added no value.
What's your sort of long term view of that business can you comment a little bit more optimistic.
Yes, I'll start and then Jerome could could jump in but youre, absolutely right certain of that metals business that we were planning on rolling off in 'twenty five 'twenty six as our customers have expanded certain of their ice.
Grams, clearly they want us to continue to run those and so we have to evaluate.
Colin Langan: How long they want to run this obviously there'll be some commercial discussions with them et cetera, and Thats. What Jerome was talked about earlier, we have to go through the strategic strategic plan now and understand what those levers are and what we want to do with that.
And Youre absolutely right there are certain parts of that business, because we've been very strategic and very targeted over the past call. It two or three years in terms of which business. We wanted to win in metals, and which ones added no value right. So as we've gone through that process. We are now left with what I would call a.
A good chunk of that metals business that is very favorable for us to do things like the modularity that Jerome was talking about.
Mark A. Oswald: So as we've gone through that process, we are now left with what I'd call a good chunk of that metals business that is very favorable for us to do things like the modularity that Jerome was talking about. Yeah, just build on top of what Mark said. You know, there's portions of that business in particular. You know, certain Assembly Sequences, if you can imagine on the cushion fan, where to really drive the modular assembly solutions that we're putting into production this year. That real estate is proving to be extremely precious, and just based on how you have to route, you know, certain wire harnesses, occupant detection sensors, and calibration sequences, and... you know, fan routing and things like that, in order to really drive this modular assembly.
Yes, just building off of what Mark said.
There are portions of that business in particular.
Colin Langan: Certain.
Assembly sequences, if you can imagine on the cushion and.
We're really drive modular assembly solutions that we're putting into production this year.
Is that real estate is proving to be extremely precious.
And just based on how you have to route certain wire harnesses occupant detection sensors and calibration sequences.
Colin Langan: And fan.
Colin Langan: Fan routing and things like that in order to really drive this modular assembly.
Sequence and concept you need that real estate and that real estate has proven to be very precious and.
Colin Langan: And what we've seen with certain customers, where we have design authority and sourcing authority, we're really able to drive this concept.
Jerome Dorlak: Sequence and concept, you need that real estate, and that real estate is proving to be very precious. And what we've seen with certain customers, where we have design authority and sourcing authority, we're really able to drive this concept and quickly accelerate it, and it's proven to be extremely beneficial to them.
And quickly accelerate it and it's proven to be extremely beneficial to them.
We're seeing a rapid acceleration on that front. So it is with those customers our metals business is proving to be an asset and a real accelerator.
Jerome Dorlak: And we're seeing a rapid acceleration on that front. So, with those customers, our metals business is proving to be an asset and a real accelerator. You know, that said, yes, there are going to be certain levels of programs that we were anticipating to roll off that are now lingering that we need to, again, go back and revisit either commercial agreements or certain of our footprints and really look at what impact that has on our system. And then just going back to the puts and takes within guidance.
That said, yes, there are going to be certain metals programs that we were anticipating in the roll off that are now lingering that we need to again go back and revisit any of their commercial agreements.
We're certain of our footprints and really look at what is what impact does that have on our strategic plan.
Got it and then just going back to the puts and takes within guidance.
To be clear are there any recoveries in guidance. It feels like most suppliers have been sort of expecting some level of recoveries is that driving some of the performance and any update on commodities I thought the initial guidance had $10 million of health or something like that and I think this quarter had almost $10 million of headwinds.
Mark A. Oswald: I just want to be clear, are there any recoveries in guidance? It sounds like most suppliers have been sort of expecting some level of recovery. Is that driving some of the performance?
Mark A. Oswald: And any update on commodities? I thought the initial guidance had $10 million in health care or something like that. Yeah, absolutely. We're expecting, you know, recoveries included in, you know, the business performance, right? Commercial recoveries as we go through them. Now, again, as I indicated during the prepared remarks, Colin, those are rumpy as we go through the different quarters, right? So they tend to smooth out over the course of the year, but going from Q1, for example, into Q2 will be bumpy, right? You get a little bit smoother as I go from H1 into H2, but there is just that element in there.
Yeah, absolutely we're expecting recoveries included in the business performance as recoveries right commercial recoveries as we go through there.
Now again as I indicated during the prepared remarks, Colin those are lumpy as we go through the different quarters right. So they tend to smooth out over the course of the year, but going from Q1 for example into Q2 will be lumpy right, you'll get a little bit smoother as they go from each one into H two right, but there is just that element in there.
From a commodities aspect.
You are right that there was about a $10 million.
Mark A. Oswald: From a commodities aspect, you're right. There was about a $10 million benefit that we saw as we went into the fiscal year. But as I looked at Q1 results, though, clearly timing of those recoveries versus, you know, the overall price, you know, the gross price coming down, right? So, again, I look at that as more timing-related than anything else at this point. Thanks, good morning everyone.
The benefit that we saw as we went into the fiscal year as I looked at Q1 results, though clearly timing of those recoveries versus the overall price the gross price coming down right. So again I look at that as more timing related than anything else at this point.
Thank you. Our next question comes from Joseph Spak with UBS you May ask your question.
Hi, Thanks, Good morning, maybe just picking up there because obviously in North America. The results in the quarter. The margin was was really strong even even stronger ex strike closer to closer to 6%, but it does seem like.
Unnamed Speaker: Maybe just picking up there, because obviously in North America, the results in the corridor, the margins were really strong, even stronger, X strike, you know, closer to 6%, but it does seem like... That and the timing of those recoveries did help a little bit, so I guess how much of that was sort of... out of carriers of unusual with the sort of lumpiness and what should we expect sort of that sequential, you know, maybe decline to occur And then just more broadly, it sounds like there are a bunch of moving parts in North America with the Peso and the Kuiper-JV benefit. I think previously you sort of hinted that the North American margin for the year X strike could show some expansion. But given the performance to date, is that – can we even see expansion with the strike, or is there really going to be some, you know, puts and takes that sort of knock that back down over the course of the year?
The timing of those recoveries did help a little bit so.
I guess, how much of that was sort of.
Out of period or sort of unusual with the sort of lumpiness and what should we expect sort of that that sequential.
Maybe declined two to occur and then just more broadly there's it sounds like there's a bunch of moving parts in North America with with the peso in the Kuiper JV benefit I think previously you sort of hinted that the north American margin for the for the year ex strike <unk>.
Some expansion, but but given the performance to date is that is that could we even see expansion with the strike or is there really going to be some some puts and takes of that sort of knocked that back down over the course of the year.
Speaker Change: Yes, yes, clearly theres going to be timing with the commercial recoveries right. So I wouldn't take my first quarter and just kind of lay that out in terms of expectations for commercial recoveries that could be lower in Q2 et cetera. As I indicated we do expect margin expansion as we go through the year year on year, even ex strike.
Mark A. Oswald: Yes, clearly, there's going to be timing with the commercial recoveries, right? So I wouldn't take my first quarter and just kind of lay that out in terms of expectations for commercial recoveries; they could be, you know, lower in Q2, etc. As I indicated, we do expect margin expansion as we go through the year, year on year, even extra count or go inside. I do expect that, as I, you know, consistent with our prior comments around the margin and just a couple of comments on the Americans, you know, America's business in general, and really why it's a good example of, you know, this business is really... It's difficult to run on a quarter-to-quarter basis.
Joe and so I do expect that as I can.
Consistent with our prior comments were around the margins.
And just a couple of comments on on the Americas.
Speaker Change: Yes.
The Americas business in general and really why it's a good example of.
This business is really.
Yeah.
I would say difficult to run on a quarter to quarter basis. Thats. One reason why we don't really provide kind of quarter to quarter guidance anymore, just because of that reason.
We don't want to drive kind of quarter to quarter behavior, and there was a lot of lumpiness in that first quarter in the Americas, especially associated with timing.
Jerome Dorlak: It's one reason why, you know, we don't really provide kind of quarter-to-quarter guidance anymore, just because of that reason. You know, we don't want to drive that kind of quarter-to-quarter behavior. And there was a lot of lumpiness in that first quarter in the Americas, especially associated with the timing of some of the commercial recoveries that were out there. And really, what's key for us is when we look at the Americas or any one of our segments, we expect the Americas, even with the strike impact, to be expanding operating margins year over year, driven by business performance within that segment. And that's what we expect to see there. Okay, thank you, and then just getting back to some of the growth over market commentary. I just wanna say that.
Speaker Change: Of some of the commercial recoveries that were out there.
But really what's key for US is when we look at the Americas or any one of our segments. We expect the Americas, even with the strike impact to be expanding.
Operation operating margins year over year, driven by business performance within that segment.
Speaker Change: And that's what we expect to see there.
Okay.
Thank you and then just getting back to I'm.
Some of the growth over market commentary I just wanted to.
It seemed like there were a couple of statements.
At odds because you mentioned you know obviously there was a in China, there was meaningful underperformance in the first quarter, but you still expect meaningful outperformance for the year I think.
Unnamed Speaker: It seemed like there were a couple of statements at odds because you mentioned, you know, obviously there was in China, meaningful underperformance in the first quarter, but you still expected meaningful outperformance for the year. I think in the last quarter when you showed it, it was almost 11%. But then, in your prepared comments, you sort of talked about how some of the production uplift was from players that you don't have a lot of content with. What really sort of drives that acceleration in the outpours over the balance of the air?
Last quarter. When you showed that it was almost 11%, but then in your in your prepared comments you sort of talked about how some of the production uplift was from players that you don't have a lot of content with so.
Speaker Change: What really sort of drives that acceleration in the in the outgrowth over the balance of the year.
I think it's the launches right and the pacing and cadence of those launches. So for example in our first quarter. That's the fourth quarter of the calendar year certain of those customers that we mentioned, whether it's the BYD saic's obviously.
Mark A. Oswald: I think it's the launches, right? And the pacing and cadence of those launches. So, for example, in our first quarter, that's the fourth quarter of the calendar year, certain of those customers that we mentioned, whether it's the BYDs, or FDICs, obviously, you know, they're performing very strongly to hit their year-end targets, right? We know that we are going through certain launches in our Q1. We also understand where we're going to be on those launch curves as we go through Q2, Q3, right?
They're performing very strong to hit their year end targets right. We know that we're going through certain launches and our Q1, we also understand where we're going to be on those launch curves as we go through Q2 Q3, right. So again, that's all predicated or based on our guidance. So we expect that to improve and progress as we go through 2010.
For ultimately outperforming by the 500 600 basis points that I'd indicated.
Mark A. Oswald: So again, that's all predicated or based on our guidance. So we expect that to improve and progress as we go through 2024, ultimately, you know, outperforming by the five, 600 basis points that I've indicated, to remind you. Hi. Great. Good morning. Thank you for taking the question. Wanted to, um...
Thank you and as a reminder, if you'd like to ask a question press star one.
Our next question comes from Dan Levy with Barclays. You May ask your question. Your line is open.
Hi, great. Good morning, Thank you for taking the questions.
Wanted to.
Just go to the slide which you talked about some of your new wins.
Wins, and specifically I don't think you've talked in the past about.
Colin Langan: I think you showed a slide in which you talked about some of your new wins, and specifically, I don't think you've talked about BYD in the past. This is, I think, the first time we've seen a BYD one for you. So I know you generally don't talk much about... even the amount that DYD is responsible for some of the positive revisions in China. Maybe you could just talk about this particular win and what you might be expecting. B.Y.D. Garand, Colin Langan.
BYD. This is I think the first time, we've seen a BYD one for you. So I know you generally don't talk much about.
Speaker Change: Specific customers, but given the amount that BYD is responsible for.
Speaker Change: The positive revisions in China, maybe you could just talk about this particular win and what you might be expecting with.
BYD going forward.
Yeah, I mean, just a couple of words on.
You know that.
That win for US, it's it's one where.
Jerome Dorlak: Yeah, I mean, just a couple of words on. You know that, that win for us. It's one where. I think it shows the ability of our team to really, demonstrate value for a customer on our components segment and, You know, without going into a lot of details, in particular on BYD and their total supply chain, you know, I think it is known they have a portion of seeding they do in-house and a portion of seeding that they outsource. And for us to really go in with our team, you know, very deep expertise on the component side and demonstrate to their in-house feeding company that they have how we can provide value on the components piece of it through that foam and trim, was a very important, what I would call conquest for us and to show we don't have to be just a JIT type of supplier and we're willing to play on the component side, we're willing to demonstrate our expertise and really drive a significant amount of value for the customer there.
Speaker Change: I think it shows the ability of our team to really.
Demonstrate value for a customer on our components segment and.
Without going into a lot of details in particular on BYD and their total supply chain and I think it is known they have a portion of seeding they do in house and a portion of seating that they outsource.
And for Us to really go in with our team very deep expertise on the component side and demonstrate to their in house seating company that they have how we can provide value on the components piece of that through that film and trim.
It is a very important.
Speaker Change: What I would call conquest for us and to show, we don't have to be just a jet type of supplier and we're willing to play on the component side, we're willing to demonstrate our expertise and really drive a significant amount of value for the customer there.
So for us it's.
Speaker Change: It's really kind of a way to dip our toe in the water there.
And add a tremendous amount of value and this is our real first foray directly.
Jerome Dorlak: And so for us, it's really kind of a way to dip our toe in the water there and add a tremendous amount of value, and this is, you know, our real first foray directly into BYD. We did have in a prior call through one of BYD's joint ventures, a win on the complete side that included JIT, foam, trim, and metals that we had announced in our Q3 FY23 earnings call through another joint venture they had that wasn't directly with BYD. It was through a joint venture. And I think it is also important to point out that through our Kuiper joint venture, you know, where we're a 50-50 holder in that. VYD is a very significant customer to them through the mechanism side that we don't always break out the customer breakdown, obviously, of that joint venture. But we do get a significant amount of GED income kind of indirectly through VYD on the Kuiper side of the house as well. So there's been growth there. We've been enjoying that growth through Kuiper and then through the equity income side as well. Thank you. As a follow-up, I want to ask about Nick's whereabouts, and specifically... North America.
Into into BYD, we did have in our prior call.
Speaker Change: Through <unk> joint ventures.
A win on the complete seat side that included <unk> foam trim and metals that we had announced in our Q3 of FY2023 earnings call.
Through a another joint venture they had that wasn't directly with BYD was through a joint venture and I think it is also important to point out that through our paper joint venture.
Where we're at $50 50 holder in that <unk>.
<unk> ideas in a very significant customer to them.
Through the mechanisms side that we don't always break out the customer breakdown, obviously of that joint venture, but we do get a significant amount of.
JV income.
Indirectly through BYD through the hyper side of the house as well so theres been growth there we've been enjoying that growth through kuyper, and then through the equity income side as well.
Speaker Change: Great. Thank you.
As a follow up I wanted to ask about mix and specifically in <unk>.
In North America.
I think we know obviously from a mixed perspective any benefit tremendously from.
Three row Suvs larger vehicles.
Unnamed Speaker: I think we know, obviously, from a mixed perspective, you benefit tremendously from three-row SUVs, you know, larger vehicles. I think one of the questions out there right now is with prices, where they are, and the potential for negative mix in the industry, what would be the impact on you? To what extent, if there was maybe some slightly negative mix in the industry, could you still hold your past 8%?
I think one of the questions out there right now is with prices, where they are and potential for.
Negative mix shift.
And the industry, what would be the impact to you and to.
To what extent if there is maybe some slightly negative mix in the industry could you still hold.
Your your path to 8% how critical is mix in the path to getting to 8% margin.
Speaker Change: Yes.
Mark A. Oswald: How critical is mix? Have a great day. Take care. Bye. Yeah. And again, it's de minimis, right? It's a very small piece. As we've indicated before, it's all about volumes and the stability of those volumes. Mix, again, is not going to be, you know, what I would say the enabler for us to achieve that 8%.
Speaker Change: Dan It's de Minimis right, it's a very small piece as we've indicated before it's all about volumes and the stability of those volumes.
Mix mix again is not going to be what I would say the enabler for us to achieve that 8%.
Yeah, great. Thank you nothing more to add I agree with markets.
It certainly isn't mix between high end to low end vehicles, and it's nothing along those lines.
Mark A. Oswald: Nothing more to add. I agree with Mark. It certainly is a mix between high-end and low-end vehicles.
Great. Thank you.
Speaker Change: Yes. Thank you. Thank you.
Operator: Nothing wrong. Thank you. Thanks everyone for joining the call. We'll be available for follow-up as necessary throughout the day or afterwards. Reach out to me or Mark, we'll be happy to take any other questions. That's all we have today. Thank you very much.
At this time I'm showing no further questions I will turn the call back over to the speakers.
Speaker Change: Thanks, everyone for joining the call appreciate it will be available for follow ups as necessary throughout the day or afterwards reach out to me or Mark.
And we'll be happy to take any other questions. So we have today. Thank you very much.
Yeah.
Thank you. This does conclude today's conference. We thank you for your participation at this time you may disconnect your lines.