Q4 2023 Martinrea International Inc Earnings Call

Operator: All participants, please stand by; your call is ready to begin. Good afternoon, ladies and gentlemen. All instructions for submitting questions will be provided to you later in the call. I would now like to turn the call over to Mr. Rob Wildeboer.

All participants please standby your call is ready to begin.

Good afternoon, ladies and gentlemen, and welcome to the Martin Ria International fourth quarter results Conference call.

Instructions for submitting questions will be provided to you later in the call I would now like to turn the call over to Mr. Rob will the board. Please go ahead Sir.

Robert P. Wildeboer: Good evening, everyone. Thank you for joining us today. We always look forward to talking with our shareholders. We hope to inform you well and answer questions. We also note that we have many other stakeholders, including many employees, on the call, and our remarks are addressed to them as well as to our wider audience, through our network. With me on the call are Pat DiRemo, MARTINREA's CEO, and our president and still CFO, Fred Tosto.

Good evening, everyone. Thank you for joining US today, we always look forward to talking with our shareholders and we hope to inform you well and answer.

Your questions. We also note that we have many other stakeholders, including many employees on the call and our remarks are addressed to them as well as we disseminate our results and commentary through our network.

With me are packed to Raimo, Martin Ray as CEO, and President and still CFO Fred di Tosto.

Robert P. Wildeboer: Today, we will be discussing MARTINREA's results for the year and quarter ended December 31, 2023. I refer you to our usual disclaimer in our press release and file documents. I will speak, then Pat and Fred, and then Pat again briefly, and then we'll do some Q&A.

Today, we will be discussing Martin ranch results for the year and quarter ended December 31 2023.

I refer you to our usual disclaimer in our press release and filed documents I will speak that Pat and Fred and then Pat again briefly and then we'll do some Q&A.

2023 was a record year for Martin area in many ways. We are very pleased with the progress made during the year.

Robert P. Wildeboer: 2023 was a record year for MARTINREA in many ways, and we are very pleased with the progress made during the year. Before we get to the financial numbers, which reflect solid and improving progress year over year, let's start with two very important numbers to us: our safety record and our employee survey results. Both are mission critical for your leadership team at MARTINREAF and for our people also. We believe that these numbers demonstrate the underlying health and resilience of our company and are a strong base of support for our financial performance today and going forward. First, safety results. As you can appreciate, we both want and need to keep our people safe.

Before we get to the financial numbers, which reflect solid and improving progress year over year, let's start with two very important numbers to us.

Our safety record and our employee survey results.

Both are mission critical for your leadership team at Martin RAF and for our people also.

We believe that these numbers demonstrate the underlying health and resilience of our company and our strong base of support for our financial performance today and going forward.

First safety results as you can appreciate we both want and need to keep our people safe.

Robert P. Wildeboer: We have been doing that increasingly well over the past decade, and our industry-leading safety metrics will continue to improve in 2023. We take safety seriously. Our Total Recordable Injury Frequency, or TRIF, was 1.10, an improvement of 9% over last year. More impressively, we have shown an 89% improvement over the last decade when we made it a priority in all of our operations. A TRF of 1.10 is less than half of the industry standard.

We've been doing that increasingly well over the past decade.

Our industry, leading safety metrics continued to improve again in 2023, we take safety seriously.

Our total recordable injury frequency our trip.

Was 1.10 and improvement of 9% over last year.

More impressively, we have shown an 89% improvement over the last decade, when we made it a priority in all of our operations.

A terrific 1.10 is less than half of the industry standard.

Robert P. Wildeboer: As you know, our company has not only grown organically over the past 20 years, but we have also acquired a sizable number of troubled plants where safety may not have been the first priority. We have a safety-first culture as a primary feature of our operation. Safety discussions occur daily in our plants. Our board of director meetings have a safety presentation and report. Our people come first.

As you know our company has not only grown organically over the past 20 years. We've also acquired a sizable number of troubled plants, where safety may not have been the first priority.

We have a safety first culture is a primary feature of our operations.

Safety discussions occur daily in our plants, our board of director meetings have a safety presentation and report.

Our people come first and we've consistently demonstrated that in normal times and also difficult times.

Robert P. Wildeboer: We've consistently demonstrated that in normal times and also in difficult times. A safe plant generally means a better work environment for our people. As well, we see positive impacts on employee satisfaction and profitability. Our employee survey results for 2023 are very strong, even improved over last year overall when we had record positive results. We talk about culture a lot here at MARTINREA.

Safe plant generally means a better work environment for our people.

As well, we see positive impacts on employee satisfaction and profitability.

Second our employee survey results from 'twenty to 'twenty three are very strong even improved over last year overall, when we had record positive results.

We talk about culture, a lot here at Martin ramp.

Robert P. Wildeboer: But if your employees don't believe in it, talk is cheap. Every year, our people complete a detailed employee survey administered by a third-party expert who performs similar surveys for many companies, including some of our competitors and customers. We are told we have not just industry-leading stats, but we are one of the best-performing companies anywhere. Our employee surveys are voluntary, but we had over 15,000 surveys submitted.

But if your employees don't believe in it talk is cheap.

Every year our people complete a detailed employee survey administered by a third party expert who perform similar surveys for many companies, including some of our competitors and customers.

We're told we have not just industry, leading stats, but we were one of the best performing companies anywhere.

Our employee surveys of voluntary, but we had over 15000 surveys submit it that's a really strong sample.

Robert P. Wildeboer: That's a really strong sample. We have 56 locations now in 10 countries on five continents in different product groups. That's also a good number.

We have 56 locations now in 10 countries on five continents and different product groups. That's also a good sample.

Robert P. Wildeboer: We scored very well in the key categories, the way we work, which includes health and safety, the work environment, teamwork, and collaboration, and supporting our people, which includes communication, fair treatment, diversity, and inclusion. Value and recognition, which includes compensation and incentives, career advancements, appreciation, and shaping the future, which includes personal goals, performance feedback, growth, and development. While the scores are not perfect, and we can always improve, and we'll strive to do so, here are some answers to some critical questions. I fully understand my job role and responsibilities. 95% agree

We scored very well in our key categories. The way, we work, which includes health and safety work environment teamwork and collaboration.

Supporting our people, which includes communication fair treatment diversity and inclusion.

Value in recognition, which includes compensation and incentives career advancements appreciation in shaping the future, which includes personal goals performance feedback growth and development.

While the scores are not perfect and we can always improve and we will strive to do so here are some answers just some critical questions.

I fully understand my job role and responsibilities 95% agree.

Robert P. Wildeboer: Our location works to improve health and safety, 89% agree. I feel a sense of personal accomplishment at the end of the workday, 82% agree. I respect my plant general manager. 95% agree. MARTINREA prioritizes and encourages diversity, 90% agree. My direct supervisor treats me with dignity and respect.

Our location works to improve health and safety, 89% agree.

I feel a sense of personal accomplishment at the end of the workday, 82% agree.

I respect my plant general manager, 95% agree.

Martin rare prioritizes and encourages diversity, 90% agree.

My direct supervisor treats me with dignity and respect 89% agree.

Robert P. Wildeboer: 89% agree. outstanding results overall. In order to get this feedback from your people, you have to walk the talk. You have to care for your people.

Outstanding results overall.

In order to get this feedback from your people you have to walk the talk you'll have to care for your people.

Robert P. Wildeboer: We believe a happy, motivated, empowered, purpose-oriented workforce is the foundation of company success in the short, medium, and long term. As some commentators have written, happiness at work leads to success, not the other way around. We agree. A strong thank you to our people. So now that we have those two sets of numbers as a baseline, let's talk briefly about our culture.

We believe a happy motivated empowered purpose oriented work for US is the foundation of company's success in the short medium and long term.

As some commentators have written happiness at work leads to success not the other way around we agree.

Strong thank you to our people.

So now that we have those two sets of numbers as a baseline let's talk briefly about our culture.

Robert P. Wildeboer: We talk about our culture a lot at MARTINREA, as all our stakeholders have come to know. Our vision is making lives better by being the best supplier we can be in the products we make and the services we provide. Our mission is basically to take care of our people, our customers, our communities, and our stakeholders, lenders, and shareholders. Our ten guiding principles represent the way we approach our business. Our culture, depicted on this slide, is a standard image for us in all our internal and external presentations.

We talk about our culture, a lot of Martin ranch as all our stakeholders have come to know.

Our vision is making lives better by being the best supplier, we can be and the products, we make and the services we provide.

Our mission is basically to take care of our people our customers our communities and our stakeholders lenders and shareholders.

Our 10 guiding principles represent the way we approach our business our culture depicted on this slide is a standard picture for us in all our internal and external presentations.

Robert P. Wildeboer: Our sustainability and success, we believe, comes down to culture. As leaders, we are the chief culture officers of the company. Living our vision is at the core of the future. Our culture, especially as we have cultivated it more and more over the past few years, is a sustainable competitive advantage. To us, the Golden Rule means treating people the way you want to be treated. We do this regardless of formulaic DEI programs or ESG mandates that may be popular one day and less popular the next. The Golden Rule covers dignity and respect.

Our sustainability and success, we believe comes down to culture.

As leaders, we are the chief culture officers of the company.

Living our vision is at the core of the future our culture, especially as we have cultivated it more and more over the past few years is a sustainable competitive advantage.

To us the Golden rule means treating people the way you want to be treated with.

We do this regardless of formulaic D I programs or ESG mandates may be popular one day and less popular the next.

The Golden rule covers dignity and respect and covers teamwork and covers integrity in truth. He covers diversity equity and inclusion it covers ESG. It covers good leadership.

Robert P. Wildeboer: It covers teamwork. It covers integrity and truth, it covers diversity, equity, and inclusion, it covers ESG, and it covers good leadership. It helps us to be a great company. Your people have to trust you to lead them this way, to trust that you care for them.

It helps us to be a great company.

Europe people have to trust you to lead them. This way to trust that you care for them leadership as stewardship progress travels at the speed of trust.

Robert P. Wildeboer: Leadership is stewardship. Progress travels at the speed of trust. In brief, we believe we work in a pretty special company, and we think our people believe that too. We work every day with purpose, serving our constituencies to the best of our abilities and taking care of our own. Now let's look at some of the other highlights of 2023. In many ways, our predictions for 2023, made early last year, held true for the most part. We did experience a UAW strike in the fall of 2023 that had some short-term negative effects on second-half numbers, but the strike is over now. We saw some major geopolitical headwinds, some expected, such as the continuing Ukraine-Russia conflict with its challenges for Europe, and more trade issues involving China and some others, but also some unexpected, such as the situation in the Middle East. Despite these challenges, 2023 was a very good year, with many improvements from 2022. Here are some of the highlights of 2023.

In brief we believe we work in a pretty special company and we think our people believe that too we.

We work every day with purpose, serving our constituencies to the best of our abilities and taking care of our own.

Now, let's look at some of the other highlights of 2023.

In many ways our predictions for 'twenty twenty-three made early last year held true for the most part we.

We did experience a UAW strike in the fall of 2023 that has some short term negative effects on second half numbers, but the strike is over now.

We saw some major geopolitical headwinds some expected such as the continuing Ukraine, Russia conflict with its challenges for Europe, and more trade issues involving China and some others.

But also some unexpected such as the situation in the Middle East.

Despite these challenges 2023 was a very good year with many improvements from 2022.

Here are some of the highlights of 2023, a fuller description is found in our annual information form our 2023 sustainability report and our various year end releases, including our latest investor presentation.

Robert P. Wildeboer: A fuller description can be found in our annual information form, our 2023 sustainability report, and our various year-end releases, including our latest investor presentation. We generated a record level of adjusted EBITDA of $616.7 million in 2023. This operating cash flow also translated into free cash flow for the year of approximately $195.4 million, most of it generated in the second half of the year. This was a new free cash flow record for our company. Fred will go on to give some details.

We generated a record level of adjusted EBITDA of $616 7 million in 2023.

This operating cash flow also translated into free cash flow for the year of approximately 195.4 million most of it generated in the second half of the year.

A new free cash flow a record for our company.

Fred will go into some detail.

Robert P. Wildeboer: We recorded record revenues of $5.34 billion, an increase of 12.2% from 2022. We saw increased revenues from some of our key programs, but we have also launched a lot of new business over the last three years that is driving some of the growth. We've experienced huge revenue growth over that period. Our revenue increase is well over a billion dollars annually. The increase alone would make it to the top 100 list of top suppliers in the North American auto parts industry, according to Automotive News.

We recorded record revenues of $5.34 billion, an increase of 12, 2% from 2022.

We saw increased revenues from some of our key programs, but we have also launched a lot of new business over the last three years that is driving some of the growth.

We've experienced huge revenue growth over that period.

Our revenue increase as well over $1 billion annually. The increase alone would make the top 100 list of top suppliers in the North American auto parts industry. According to automotive news.

Robert P. Wildeboer: Our number of employees grew to approximately 19,000 and went up approximately 3.3 percent from 2022 relative to a year-over-year revenue increase of 12.2 percent. We saw continued growth in operating margins in 2023. Year over year, adjusted operating income margin grew from 4.8% in 2022 to 5.6% in 2023, even with the UAW strike impact. Fred and Pat will talk to Martin.

Our number of employees grew to approximately 19000 and went up approximately three 3% from 2022 relative to a year over year revenue increase of 12, 2%.

We saw continued growth in operating margins in 2023 year over year adjusted operating income margin grew from four 8% in 2022 to five 6% in 2023, even with the UAW strike impact Fred and Pat will talk to margins.

Robert P. Wildeboer: Our 2023 fully diluted net earnings per share of $2.22 adjusted or $1.93 unadjusted was higher than the $1.76 adjusted and the $1.65 unadjusted in 2022. Our balance sheet improved year over year, ending 2023 with a net debt-to-adjusted EBITDA ratio, excluding IFRS 16, of 1.4 to 1, the best it has been since before the pandemic, We maintained our dividends to our shareholders in 2023. We did not reduce dividend payments during the pandemic.

Our 2023 fully diluted net earnings per share of $2.22 adjusted or $1 93, unadjusted was higher than the 176, adjusted and the $1 65 unadjusted in 2022.

Our balance sheet improved year over year, ending 2023 with a net debt to adjusted EBITDA ratio. Excluding Ifr 16 of 1.4 to one the best it has been since before the pandemic and comfortably within our target range of one five to one or better.

We maintained our dividends to our shareholders in 2020 three we did not reduce dividend payments during the pandemic.

Robert P. Wildeboer: We returned capital to shareholders, repurchasing approximately 2.3 million common shares under a normal course issuer bid at a cost of approximately $29.1 million, all while strengthening our balance sheet. Quality is important to us and our customers. Many of our products are safety parts, and we won a number of quality awards in many of our plants again this year. We continue to invest in the business, given our backlog of new business. Having said that, cash capex returned to a more normal level in 2023, below depreciation and amortization expense for the year. We note that in the past four years, we have spent over a billion and a quarter dollars on CapEx, the highest for a four-year period in our history.

We returned capital to shareholders repurchasing approximately 2.3 million common shares under our normal course issuer bid at a cost of approximately $29 1 million all while strengthening our balance sheet.

Quality is important to us and our customers many of our products are safety parts and we won a number of quality awards in many of our plants again this year.

We continued to invest in the business given our backlog of new business, having said that cash capex returned to a more normal level in 2023 below depreciation and amortization expense for the year.

We noted in the past four years, we have spent over 1 billion in the quarter dollars on Capex the highest for a four year period in our history.

But the majority of the spend was to launch work. We had one we did not slow down our investment activity during the pandemic and that is a primary reason we are coming out of it with significantly higher revenues now many automotive parts suppliers have a similar experience.

Robert P. Wildeboer: But the majority of the spend was to launch work we had won. We did not slow down our investment activity during the pandemic, and that is a primary reason we are coming out of it with significantly higher revenues. Not many automotive parts suppliers have a similar experience.

We do not believe in perfect launches, we believe in better ones. Each time, we had many good ones.

Not only have we grown our business we have significant content on the vehicles our customers are making.

Electric hybrid or ice.

Our portfolio is matching what the industry is making.

Robert P. Wildeboer: We do not believe in perfect launches. We believe in better ones each time. We have had many good ones. Not only have we grown our business, but we have significant content on the vehicles our customers are making. Electric, Hybrid, or Ice.

Our light weighting technologies are precisely what our industry needs regardless of propulsion type.

We continue to both utilize and invest in leading edge technologies and our regular operations and through Martin Ray innovation development ore mined.

Robert P. Wildeboer: Our portfolio matches what the industry is making. Our light-weighting technologies are precisely what our industry needs regardless of propulsion type. We continue to both utilize and invest in leading-edge technologies in our regular operations and through MARTINREA Innovation Development, or MIND. For example, we have investments in graphene and graphene-enhanced batteries through our Nano Explorer relationship. Aluminum Air Battery Technology through Alumipower and several other new technologies, such as FANCO using ultra-capacitor technology.

We have investments in graphene and graphene enhanced batteries through our nano explore relationship aluminum.

Aluminum are battery technology through alumina power and several other new technologies, such as a faint go using ultracapacitor technology.

We program and use our own software and have established a separate internal group called mine can to develop it and sell it to interested third parties.

We believe sustainable companies with a great culture will be around for a long time.

Pat will talk more about sustainability in his remarks, we have a solid foundation.

Robert P. Wildeboer: We program and use our own software and have established a separate internal group called MindCan to develop it and sell it to interested third parties. We believe sustainable companies with a great culture will be around for a long time. Pat will talk more about sustainability in his remarks. We have a solid foundation. As we look to 2024 and beyond, we do so with confidence. Our future is bright. We look forward to sharing it with you. And now, here's Pat.

As we look to 'twenty 'twenty, four and beyond we do so with confidence our future is great. We look forward to sharing it with you.

And now here's Pat.

Thanks, Rob and good evening, everyone as noted in our press release, we generate on adjusted net earnings per share of <unk> 37 cents.

Adjusted EBITDA of $140 million in the fourth quarter.

Adjusted operating income margin came in at four 4% on production sales that were just under $1 2 billion, which was basically flat year over year, but down quarter over quarter.

Pat DiRemo: Thanks, Rob. Good evening, everyone. As noted in our press release, we generated an adjusted net earnings per share of $0.37 and an adjusted EBITDA of $140 million in the fourth quarter. Adjusted operating income margin came in at 4.4% on production sales that were just under $1.2 billion, which was basically flat year over year, but down quarter over quarter. We faced some challenges in the quarter that resulted in a lower operating income margin compared to Q3. First, volumes were lowered due to the UAW strike that impacted multiple plants at General Motors, Ford, and Stellantis.

We faced some challenges in the quarter that resulted in lower operating income margin compared to Q3.

First volumes were lower due to the UAW strike that impacted multiple plants at general Motors Gordon's to Lantus.

We flex costs, where we could to mitigate the impact this was somewhat challenging given the tight labor market. We are operating in the strike clearly lowered production volumes and by extension our margin profile for the quarter.

Second I said on our previous call that we have been fortunate to not have really experienced any significant disruptions with their own supply base over the last three years. Unfortunately, I spoke too soon we experienced a rather significant disruption with one of our suppliers during the quarter, which resulted in premium costs that in.

Approximately 70 basis point impact on our Q4 consolidated operating income margin.

Pat DiRemo: We flexed costs where we could to mitigate the impact, but this was somewhat challenging given the tight labor market we are operating in. The strike clearly lowered production volumes and, by extension, our margin profile for the quarter.

Over the past three years, we've been able to mitigate disruptions coming from our supply base. This one slip past the goalie.

The good news here is we were able to protect our customers, albeit at a cost. The issue is now been resolved. So we do not expect to see an impact in Q1.

Pat DiRemo: Second, I said on our previous call that we have been fortunate to not really experience any significant disruptions to our own supply base over the last three years. Unfortunately, I spoke too soon. We experienced a rather significant disruption with one of our suppliers during the quarter, which resulted in premium costs and an approximately 70 basis point impact on our Q4 consolidated operating income margin. However, over the past three years, we've been able to mitigate disruptions coming from our supply base. This one slipped past the goalie.

On a really positive note our free cash flow performance was exceptional coming in at $120 million in the fourth quarter and $195 million for the full year of 2023.

As we have indicated on past calls tooling sales have been elevated this year, we collected a nice amount of tooling money in the quarter contributing to our strong free cash flow performance.

Some of this was timing related notwithstanding this is a really good result for us we've been seeing the 2023 was going to be a breakout year for us from a free cash flow perspective, and that's exactly what happened I am really proud of the people and all the hard work they have done to make this happen.

Pat DiRemo: The good news here is that we were able to protect our customers, albeit at a cost. The issue has now been resolved, so we do not expect to see an impact in Q1. On a really positive note, our free cash flow performance was exceptional, coming in at $120 million in the fourth quarter and $195 million for the full year of 2023. As we have indicated on past calls, tooling sales have been elevated this year. We collected a nice amount of tooling money in the quarter, contributing to our strong free cash flow performance. Some of this was timing-related.

Our adjusted operating income margin for 2023 came in at five 6% consistent with the guidance. We provided on the last call that it would likely fall short of 6%. They would still be close absent of the tier two supply disruptions and the UAW strike, we encountered during the quarter.

Looking forward there are some notable positives UAW strike is behind us the supplier disruption we experienced in Q4 is behind US vehicle demand is still high and inventories are still below pre pandemic levels, while EDI softness and higher interest rates are likely to result in a relatively flat year over year industry production volume.

Profile, we expect 'twenty 'twenty four will be another good year with steady production sales strong positive free cash flow and Fred will talk about this more in his 2024 outlook in his remarks.

Pat DiRemo: Notwithstanding, this is a really good result for us. We've been saying that 2023 was going to be a breakout year for us from a free cash flow perspective, and that's exactly what happened. I am really proud of the people and all the hard work they have done to make this happen.

Turning to our operations, we continue to make steady progress the industry headwinds, we've been dealing with since the pandemic from supply shortages place scenario cost pressures and part tight labor market conditions are making steady improvement and we're finding new opportunities to drive efficiencies and reduce cost through our Martin Raya operating system.

Pat DiRemo: Our adjusted operating income margin for 2023 came in at 5.6 percent, consistent with the guidance we provided on the last call that it would likely fall short of 6 percent, though it would still be close, absent the Tier 2 supply disruptions and the UAW strike we encountered during the quarter. Looking forward, there are some notable positives. The UAW strike is behind us, the supplier disruption we experienced in Q4 is behind us, vehicle demand is still high, and inventories are still below pre-pandemic levels. While EV softness and higher interest rates are likely to result in a relatively flat year-over-year industry production volume profile, we expect 2024 will be another good year with steady production sales, and strong positive free cash flow, and Fred will talk about this more in his 2024 outlook in his remarks.

Hmm.

Adjusting for the impact of the strike the production environment remains generally stable in North America.

As we indicated on previous calls volumes have been weaker and below planned levels in Europe and China.

And that continued to be the case.

We restructured some operations in Germany during the quarter and closed a small facility in Canada, which was aimed at matching our cost structure to anticipated OEM programs and volume levels. This resulted in a restructuring and impairment charges of $28 million with the vast majority of that being incurred in Germany.

Our efforts to offset inflationary cost pressures as well as volume shortfalls on certain programs to the commercial negotiations with customers continued and we're happy with the progress.

Overall commercial activity was a bit more weighted in North America in the fourth quarter with lower level of settlements in Europe compared to Q3.

As we have talked about many times commercial settlements can create unevenness quarter to quarter and therefore, our operating performance is best looked at over a long time periods.

Pat DiRemo: Turning to our operations, we continue to make steady progress. The industry headwinds we've been dealing with since the pandemic, from supply shortages, inflationary cost pressures, and tight labor market conditions, are making steady improvement. And we're finding new opportunities to drive efficiencies and reduce costs through our MARTINREA operating system. Adjusting for the impact of the strike, the production environment remains generally stable in North America.

Commercial negotiations will continue to be part of our business in 2024.

In addition to addressing inflationary cost pressures. We will also continue to address new program volume shortfalls, including lower than planned volumes on electric vehicle platforms, which has become a significant issue in our industry.

And one that we predicted as you may recall.

Overall, we're well positioned on our <unk> book of business, owing to our disciplined approach to quoting on these programs.

Pat DiRemo: As we indicated on previous calls, volumes have been weaker and below planned levels in Europe and China, and that has continued to be the case. We restructured some operations in Germany during the quarter and closed a small facility in Canada, which was aimed at matching our cost structure to anticipated OEM programs and volume levels. This resulted in restructuring charges of $28 million, with the vast majority of that being incurred in Germany.

In certain cases, we've managed to mitigate some of the risks through complex contracts, which includes features such as upfront capital payments with minimum volume commitments, where risk is higher but not necessarily everywhere.

And really we've attempted to align ourselves with platforms that we believe will have the greatest potential for success over the long term.

There is a slide in our investor presentation, showing the EV programs that we have content on.

Overall, we continue to feel good about the long term prospects of electric vehicles over time.

Pat DiRemo: Our efforts to offset inflationary cost pressures, as well as volume shortfalls, on certain programs through commercial negotiations with customers continued, and we're happy with the progress. Overall, commercial activity was a bit more weighted in North America in the fourth quarter, with a lower level of settlements in Europe compared to Q3. As we have talked about many times, commercial settlements can create unevenness quarter to quarter, and therefore, our operating performance is best looked at over a long period. However, commercial negotiations will continue to be part of our business in 2024. In addition to addressing inflationary cost pressures, we will also continue to address new program volume shortfalls, including lower-than-planned volumes on electric vehicle platforms, which has become a significant issue in our industry and one that we predicted, as you may recall. Overall, we're well-positioned on our EB book of business, owing to our disciplined approach to quoting on these programs. In certain cases, we've managed to mitigate some of the risks through complex contracts, which include features such as upfront capital payments with minimum volume commitments, where risk is higher, but not necessarily everywhere.

However to date current volumes are coming in well below where they were originally projected to be by now when youre looking at IHS and other data providers to see how the volumes are trending they are running at less than half of planned levels in many cases.

Again this is an industry wide issue. So we don't believe we are unique in this regard.

But it's resulting in some under absorption of overhead costs and other inefficiencies, which is likely to persist until issues that are preventing wider adoption of evs, such as price and charging infrastructure have progressed.

In the meantime, we will need to address the gap and we will be seeking to offset a portion of these excess costs with our customers and this will be an area of focus of our commercial activity in 2020 for longer.

Longer term, we believe we are in great shape as we are relatively propulsion agnostic and lower EV sales implies higher ice sales until the EV transition gains momentum at some point in the future.

Moving on I'm pleased to announce that we have been awarded new business worth 75 million in annualized sales and mature volumes consisting of $65 million in lightweight structures commercial group, including various structural components of general Motors, BMW and Nissan along with other customers and $10 million in.

Pat DiRemo: Generally, we've attempted to align ourselves with platforms that we believe will have the greatest potential for success over the long term. There is a slide in our investor presentation showing the EV programs that we have content on. Overall, we continue to feel good about the long-term prospects of electric vehicles over time. However, to date, current volumes are coming in well below where they were originally projected to be by now.

Our propulsion systems group with Eaton and Volvo truck.

In addition, we were awarded replacement business were $375 million in sales at mature volumes on Gms light duty truck platform. The T. One xx dash to which benefits both our lightweight structures and propulsion systems groups.

Okay.

In reference to Rob's earlier comments I'd like to take a moment and talk about some of the achievements. We have made in our sustainability initiatives over the last year.

Pat DiRemo: When you're looking at IHS and other data providers to see how the volumes are trending, they are running at less than half of planned levels in many cases. Again, this is an industry-wide issue, so we don't believe we are unique in this regard. But it's resulting in some underabsorption of overhead costs and other inefficiencies, which is likely to persist until issues that are preventing wider adoption of EVs, such as price and charging infrastructure, have progressed.

We encourage you to read our 2023 sustainability report for more detailed description of our sustainability journey and how we are making a difference for our people as well as our communities in which we operate.

Here are a few key highlights carbon intensity has reduced by 32% since our 2019 baseline.

Energy intensity has reduced 23% since our 2019 baseline.

Approximately 36% of our electricity usage globally is obtained through utility grid using varying percentages of renewable energy sources. We also installed onsite solar panels and facilities to help power plants with renewable energy.

Pat DiRemo: In the meantime, we will need to address the gap, and we'll be seeking to offset a portion of these excess costs with our customers. And this will be an area of focus of our commercial activity in 2024. Longer term, we believe we are in great shape, as we are relatively propulsion agnostic, and lower EV sales implies higher ICE sales until the EV transition gains momentum at some point in the future. Moving on, I'm pleased to announce that we have been awarded new business worth $75 million in annualized sales at mature volumes, consisting of $65 million in our Lightweight Structures Commercial Group, including various structural components with General Motors, BMW In addition, we were awarded replacement business worth $375 million in sales at mature volumes on GM's light-duty truck platform, the T1XX-2, which benefits both our lightweight structures and propulsion systems groups.

Next in 2022, we set a target to reduce our carbon emissions by 35% by 2035 without the use of carbon credits, we are working on reaching that goal.

Lastly, the diversity Committee led by me personally inform additional subcommittees to focus on mental health called mines matter women at Martin Ray are focused on women in manufacturing and young professionals.

In 2023, Martin <unk> was the center for automotive diversity inclusion and Advancement impact award winner of systemic change.

And the winner of leadership commitment for advancing diversity equity and inclusion.

We think that's pretty cool.

In closing the challenges we faced in Q4 were centered on two events that we see is isolated.

And hence we remain very constructive on the year ahead.

We are managing well operationally and I would like to thank the entire Martin Ray a team for their hard work and dedication with that I'll pass it to Fred.

Pat DiRemo: In reference to Rob's earlier comments, I'd like to take a moment and talk about some of the achievements we have made in our sustainability initiatives over the last year. We encourage you to read our 2023 Sustainability Report for a more detailed description of our sustainability journey and how we are making a difference for our people as well as the communities in which we operate. Here are a few key highlights. Carbon intensity has reduced by 32% since our 2019 baseline. Energy intensity has reduced 23% since our 2019 baseline. Additionally, approximately 36% of our electricity usage globally is obtained through utility grids using varying percentages of renewable energy sources. We also installed on-site solar panels in facilities to help power plants with renewable energy.

Thanks, Pat and good evening everyone.

As Pat mentioned, we faced some challenges in the fourth quarter that impacted our operating income margin.

The good news is the UAW strike and supplier issue that Pat spoke about are behind us.

And as such we expect better results in the first quarter.

Notably and despite these Q4 headwinds we generated record free cash flow in the fourth quarter and for the full year of 2023.

Which allowed us to materially reduce our net debt and further improve our leverage ratio.

Taking a closer look at the results quarter over quarter, we generated adjusted operating income of $56 $6 million, which was down from $83 million in the third quarter on production sales they were down by about 7% quarter over quarter.

Note that adjusted operating income excludes $28 $2 million in restructuring and impairment charges that Pat referenced earlier.

We may see some additional restructuring costs in Q1 thrown belt the activity, but it will be at a substantially lower level nowhere near what we saw in Q4.

Pat DiRemo: Next, in 2022, we set a target to reduce our carbon emissions by 35% by 2035 without the use of carbon credits. We are working on reaching that goal. Lastly, the Diversity Committee, led by me personally, formed additional subcommittees to focus on mental health, called Minds Matter.

The strike impact in select plans to the Detroit three Oems reduce production sales by approximately $50 million with the vast majority impact taking place in the fourth quarter.

Adjusting for the impact of the strike production sales would've been down a more modest 3%, reflecting some typical seasonality in the quarter.

Tooling sales were similar quarter over quarter.

Pat DiRemo: Women at MARTINREA focused on women in manufacturing and young professionals. In 2023, MARTINREA was the Center for Automotive Diversity, Inclusion, and Advancement Impact Award winner of Systemic Change and the winner of Leadership Commitment for Advancing Diversity, Equity, and Inclusion. We think that's pretty cool. In closing, the challenges we faced in Q4 were centered on two events that we see as isolated.

As noted on the last call tooling sales are elevated in 2023 and part due to upfront capital payments from customers on certain programs and other volume up requests from Oems, which gets treated as tooling sales as prior for our standards.

Expect a more normal year tooling sales in 2024.

Adjusted operating income margin came in at four 4%, which was down 160 basis points from the six 6% we earned in Q3.

Breaking it down approximately 70 basis points of the quarter over quarter Delta is due to the supplier issues noted as Pat noted and which is now behind us.

Pat DiRemo: And hence, we remain very constructive about the year ahead. We are managing well operationally, and I would like to thank the entire MARTINREA team for their hard work and dedication. With that, I'll pass it to Fred.

The remaining Delta agenda explained by normal decremental margins on the lower quarter over quarter production sales largely driven by the UAW strike also.

Also now behind us.

Moving on adjusted net earnings per share came in at 37 cents.

Fred Di Tosto: Thanks, Pat, and good evening, everyone. As Pat mentioned, we faced some challenges in the fourth quarter that impacted our operating income margins. The good news is that the UAW strike and supplier issue that Pat spoke about are behind us. And, as such, we expect better results in the first quarter. Notably, and despite these Q4 headwinds, we generated record-free cash flow in the fourth quarter and for the full year of 2023, which allowed us to materially reduce our net debt and further improve our leverage ratio. Taking a closer look at the results quarter-over-quarter, we generated adjusted operating income of $56.6 million, which was down from $83 million in the third quarter. On production sales, they were down by about 7% quarter-over-quarter. Note that adjusted operating income excludes $28.2 million in restructuring and impairment charges that Pat referenced earlier.

In the quarter, which is below the 16th since generated in Q3 due to the same factors affecting adjusted operating income as well as a $1 $3 million net foreign exchange loss in the fourth quarter versus a $7 1 million gain in the prior quarter, which falls below operating income.

Free cash flow came in at $119 $9 million in the third quarter.

$195 4 million for the full year of 2023, a record level for our company.

As Pat noted, we experienced a nice inflow from tooling related working capital during the quarter.

Each contributed to our free cash flow.

Again some of this is timing related.

Notwithstanding if you were to assume end of your tooling related working capital at roughly 2022 levels. We still would have exceeded the low end of our 23 free cash flow outlook of $150 million to $200 million, which was better than what we were expecting at the time of our last call I am extremely proud of the hard work our team has done to make this happen.

Looking at our performance on a year over year basis fourth quarter adjusted operating income of $56 6 million was down 19, 7% over Q4 of 2022 on.

Production sales are about flat and.

Fred Di Tosto: We may see some additional restructuring costs in Q1 to round out the activity, but they will be at a substantially lower level, nowhere near what we saw in Q4. The strategic impact in select plants of the Detroit 3 OEMs reduced production sales by approximately $50 million, with the vast majority of the impact taking place in the fourth quarter. Adjusting for the impact of the strike, production sales would have been down a more modest 3%, reflecting some typical seasonality in the quarter.

And our adjusted operating income margin of four 4% was down 110 basis points from the five 5% we generated in Q4 of last year.

Again, the tier two supplier disruption accounted for 70 basis points of the impact with the remainder mainly reflecting our geographic sales mix.

That is the impact of decremental margins on lost sales in our higher margin North American business, which is due to the strike along with higher sales and a lower margin European segment.

Yes.

Turning to our balance sheet strong free cash flow enable us to reduce our net debt, excluding <unk> 16 lease liabilities by $107 million quarter over quarter to $782 million.

Fred Di Tosto: Tooling sales are similar quarter to quarter. However, as noted on the last call, tooling sales are elevated in 2023, in part due to upfront capital payments from customers on certain programs and other volume-up requests from OEMs, which gets treated as tooling skills as per IFRS standards. We expect a more normal year of tooling sales in 2024. Adjusted operating income margin came in at 4.4%, which is down 160 basis points from the 6% we earned in Q3.

We continue to make great progress on deleveraging and this includes spending roughly $8 million buying back approximately 650000 shares during the quarter through our normal course issuer bid.

Our net debt to adjusted EBITDA ratio continued its downward trend and in the quarter one four times.

Down from 156 times at the end of Q3 of 'twenty three and.

Fred Di Tosto: Breaking it down, approximately 70 base points of the quarter recorded delta are due to the supplier issues noted, as Pat noted, and which are now behind us. The remaining doubt is generally explained by normal decremental margins on the lower quarter-over-quarter production sales, larger driven by the UW strike, also now behind us. Moving on, Adjusted Net Earnings per share came in at $0.37 in the quarter, which is below the $0.68 generated in Q3, due to the same factors affecting adjusted operating income, as well as a $1.3 million net foreign exchange loss in the fourth quarter versus a $7.1 million gain in the prior quarter, which falls below operating income.

And $1 seven one times at the end of Q2 2023.

Our leverage ratio now sits comfortably within our long term target range of one five times or better.

Subsequent to the fourth quarter, we amended our lending agreements extending the maturity of our both our Canadian and U S dollar banking facilities out to 2027 and.

And pending an additional $100 million in borrowing capacity.

Pricing terms are generally similar to the previous agreements.

Which is a notable achievement given the current interest rate and credit market environment.

This is a testament to the strong relationships, we have with our lenders.

We can't thank them enough for their ongoing support.

Yes.

Turning to our 2024 outlook as Pat noted.

We expect our results to improve over the fourth quarter as the disruptions that affected us in Q4, namely the UAW strike and supplier disruption are behind us.

Having said that most industry forecasters are currently calling for a relatively flat production volume environment in 2024 in both North America and Europe, our two main operating regions.

Fred Di Tosto: Free cash flow came in at $119.9 million in the third quarter and $195.4 million for the full year of 2023, a record level for our company. As Pat noted, we experienced a nice inflow from tooling-related working capital during the quarter, which contributed to our free cash flow. Again, some of this is timing-related.

The slower than expected ramp up in electric vehicle programs and higher market interest rates are likely contributing to this view.

As such it stands to reason that our production sales are also likely to be relatively flat in 2024.

As noted our tooling sales were elevated in 2003.

Fred Di Tosto: Notwithstanding, if you were to assume end-of-year tooling-related working capital at roughly 2022 levels, we still would have exceeded the low end of our 2023 free cash flow outlook of $150 to $200 million, which is better than what we were expecting at the time of our last call. I'm extremely proud of the hard work our team has done to make this happen. Looking at our performance on a year-over-year basis, fourth quarter adjusted operating income of $56.6 million was down 19.7% over Q4 of 2022 on production sales that were about flat. And our adjusted operating income margin of 4.4% was down 110 basis points from the 5.5% we generated in Q4 of last year. Again, the Tier 2 supplier disruption accounted for 70 base points of the impact, with the remainder mainly reflecting our geographic sales mix.

And we expect that to normalize this year.

Putting it all together, we expect total sales between five to $5 3 billion in 2024.

Looking at our adjusted operating income margin and I understand that Q4 was a bit of an anomaly.

We have stated on previous calls that given the fact that our operations are performing at a high level future margin expansion will primarily be a function of volumes.

Since we expect minimal volume growth in 'twenty for margin expansion is likely to be similar.

With that in mind, we expect adjusted operating income margin to increase year over year and fall in the range of five 7% to six 2% for 2024.

Moving on we expect free cash flow of $100 million to $150 million. This year. This.

This reflects our sales and margin expectations as well as projected capex of approximately $340 million.

This is expected to be generally in line with depreciation and amortization expense for the year.

The projected free cash flow is obviously lower than we had generated in 23, reflecting a higher capex in part to the timing of certain capital expenditures that were planned for 23 falling into 2024.

And then assume reduction in positive tooling related working capital flows given that we expect a more normal level of activity this year.

Fred Di Tosto: That is the impact of decremental margins on lost sales in our higher-margin North American business, which is due to the strike, along with higher sales in our lower-margin European segment. Turning to our balance sheet, strong free cash will enable us to reduce our net debt, excluding IFRS 16 lease liabilities, by $107 million quarter over quarter. $782 million. We continue to make great progress on deleveraging, and this includes spending roughly $8 million buying back approximately 650,000 shares during the quarter through our normal course issuer bid. Our net debt-to-adjusted EBITDA ratio continued its downward trend and in the quarter 1.4 times, down from 1.56 times at the end of Q3 of 23, and 1.71 times at the end of Q2 2023. Our leverage ratio now sits comfortably within our long-term target range of 1.5 times or better. Subsequent to the fourth quarter, we amended our lending agreements, extending the maturity of both our Canadian and U.S. dollar banking facilities out to 2027, and obtained an additional $100 million in borrowing capacity.

Notwithstanding this represents a very healthy level of free cash flow for our business.

Also expect a free cash flow quarterly pattern 2024, it would be similar to 2023.

Or generate the bulk of our free cash flow during the second half of the year.

Looking forward, we expect to hold our own both financially and operationally in a production environment, while not growing is expected to remain stable.

We continued to perform at a high level our balance sheet is in great shape.

We are delivering on our free cash flow promises and executing on our capital allocation priorities.

To our shareholders and all of our stakeholders. Thank you for your continued support.

With that I'll now turn it back over to Pat.

Thanks, Brad.

On a final note related to capital allocation. Our views are provided in an investor note on our website. However, we intend to talk about it on each call.

In Q4, we generated approximately $193 million in cash from operations and here's how we allocated it.

Capital expenditures were about $73 million as we've always said, we invest in the business first we need a strong core and as we've discussed our investments have to meet certain hurdle rates on new or replacement business.

We also paid down debt as Fred noted with a net debt of $107 million lower quarter over quarter. So we strengthened our balance sheet, our strong balance sheet or as an advantage in this industry, where we have seen a lot of supplier distress over the years.

Fred Di Tosto: Pricing terms are generally similar to the previous agreements, which is a noticeable achievement given the current interest rate and credit market environment. This is a testament to the strong relationships we have with our lenders. We can't thank them enough for their ongoing support. Turning to our 2024 outlook, as Pat noted, we expect our results to improve in the fourth quarter as the disruptions that affected us in Q4, namely the UAW strike and supplier disruption, are behind us. Having said that, most industry forecasters are currently calling for a relatively flat production volume environment in 2024 in both North America and Europe, the two main operating regions.

Customers don't want to worry about the credit worthiness of our supply base.

This is especially important given the combination of geopolitical events strikes interest rate pressures and other factors that have increased stress on our supply base as a whole.

We paid our usual dividend to our shareholders approximately $4 million or $16 million over an annualized basis.

Providing our shareholders with positive return on their investment finally, we purchased 650000 shares for cancellation under our normal course issuer bid total cash spent was approximately $8 million.

At our enterprise value to EBITDA, multiple which is near historic low we believe an investment in our own company's good investment.

It also rewards our supportive shareholders with a greater piece of the company without having to write a check.

Fred Di Tosto: Explore and expect the ramp-up in electric vehicle programs, and higher market interest rates are likely contributing to this view. As such, it stands to reason that our production sales are also likely to be relatively flat in 2024. As noted, our tooling sales are elevated in 2023, and we expect that to normalize this year. Putting it all together, we expect total sales between $5 to $5.3 billion in 2024.

Note that in the last five years since the beginning of 2018, we have bought back over 9 million shares which is more than 10% of the company.

We all recall there was a pandemic and a few other negative things that occurred during this timeframe.

We paused repurchases when the UAW strike hit which.

Which we felt was prudent.

Repurchases under our normal course issuer bid continued in Q4 after ratification of the UAW agreement, we intend to buyback more stock in the next month and renew our NCI D.

For another year.

We also continue to look at some investment opportunities that would benefit us having said that we continue to believe that buybacks are a good use of capital given where our stock is trading.

Fred Di Tosto: Looking at our adjusted operating income margin and understanding that Q4 was a bit of an anomaly, we have stated on previous calls that given the fact that our operations are performing at a high level, future margin expansion will primarily be a function of volumes. Since we expect minimum volume growth in 2024, margin expansion is likely to be similar. With that in mind, we expect the adjusted operating income margin to increase year-over-year and fall in the range of 5.7 to 6.2 percent in 2024. Moving on, we expect free cash flow of $100 to $150 million this year. This reflects our sales and margin expectations, as well as projected CapEx of approximately $340 million, which is expected to be generally in line with depreciation and amortization expense for the year. The projected free cash flow is obviously lower than we generated in 23, reflecting higher capex, in part due to the timing of certain capital expenditures that were planned for 23 falling into 2024, and an assumed reduction in positive tooling-related working capital flows, given that we expect a more normal level of activity this year.

And we anticipate with our positive free cash flow profile, which we believe will occur on a regular basis. Each year, we will have greater flexibility to deploy cash in the best interest of the company <unk>.

Finally, once again, a big thank you to our people.

This is a challenging business in a challenging world and we continue to deliver.

For your dedication every day.

So now it's time for questions, we see we have shareholders analysts employees and even some competitors on the phone.

So we may have to be a little careful with our answers, but we'll answer what we can.

And thank you for calling in.

Thank you we will now take questions from the telephone lines. If you have a question that using a speaker phone. Please lift your handset before making a selection.

You may cancel your question at any time by pressing Star two please press star one at this time. If you have a question there will be a pause while participants register for questions. Thank you for your patience.

Yeah.

First question is from David Ocampo from Cormack Securities. Your line is open go ahead.

Thanks, Good evening gentlemen.

Good evening.

Just on your margin guidance for 2024.

Fred Di Tosto: Notwithstanding, this represents a very healthy level of free cash flow for our business. Also, we expect the free cash flow quarterly pattern in 2024 to be similar to 2023, which generated the bulk of our free cash flow during the second half of the year. Looking forward, we expect to hold our own both financially and operationally in a production environment that, while not growing, is expected to remain stable. We will continue to perform at a high level. Our balance sheet is in great shape.

Still quite a ways from your pre pandemic levels and you guys are marching on eight plus percent.

There is inflationary factors that kind of impacted number but just curious where do you think margins go over the medium to long term and what are the factors that are going to get you there.

And a return of light vehicle production of $17 million in North America, and Europe normalizing just any color on that would be great.

Obviously volume wood.

Fred Di Tosto: We are delivering on our free cash flow promises and executing on our cap allocation priority. To our shareholders and all of our stakeholders, thank you for your continued support. With that, I'll now turn you back over to Pat.

B.

It would be beneficial.

At these levels are doing pretty well, but we're obviously not back at those levels pre pandemic and so forth so long as a factor.

We've made it clear on these inflationary cost pressures are not recovering 100% and in most cases right. So that's a drag and it will continue to be a drag for a period of time until we kind of get into nextgen programs.

Pat DiRemo: Thanks, Fred. On a final note related to capital allocation, our views are provided in an investor note on our website. However, we intend to talk about it on each call. In Q4, we generated approximately $193 million in cash from operations.

And then operationally I think Pat noted were performing well generally.

Our plant portfolio, there's always opportunities there. So we're continuing to push the minor operating system and to drive more efficiencies in the operations.

Pat DiRemo: And here's how we allocated it. First, capital expenditures were about $73 million. As we've always said, we invest in the business first. We need a strong core, and as we've discussed, our investments have to meet certain hurdle rates on new or replacement business. We also paid down debt, as Fred noted, with a net debt of $107 million lower quarter over quarter, so we strengthened our balance sheet. A strong balance sheet is an advantage in this industry, where we have seen a lot of supplier distress over the years. Customers don't want to worry about the credit worthiness of a supply base. This is especially important given the combination of geopolitical events, strikes, interest rate pressures, and other factors that have increased stress on the supply base as a whole. We've paid our usual dividend to our shareholders, approximately $4 million or $16 million on an annualized basis, providing our shareholders a positive return on their investment. Finally, we purchased 650,000 shares for cancellation under our normal course issuer bid. The total cash spent was approximately $8 million.

One major headwind that I think the industry is going to face in the short to medium term right. Now is this EV transition and what's going to happen with volumes and mix and so forth.

Clearly volumes arent meeting expectations on the EV front in a moment and I don't think thats going to change in the short term and longer term, but that transition will happen in the volume will come.

But.

The impact on margins and how industry is going to deal with that or the next couple of years is a bit of a question Mark.

You kind of weigh on margins I think for a period of time until that gets resolved.

And then I think the inflationary costs.

It takes some time some of those adjustments won't be made until we launch new products, we will improve on them of course, but it's not going to happen overnight.

Bryan talked about I.

I do think there's still a lot of opportunity in our operation we made.

Mendes progress but.

Theres still more there and we're going to focus a lot of attention on it in the meantime.

And Pat I think you called out trying to seek some commercial renegotiations, maybe maybe for the <unk> side of it in 2024, I'm curious, if you're including that in any of your margin guidance for 2024 or should we view, we view that as upside.

Pat DiRemo: At our enterprise value, the EBITDA multiple, which is near a historic low, we believe an investment in our own company is a good investment. It also rewards our supportive shareholders with a greater piece of the company without having to write a check. Note that in the last five years, since the beginning of 2018, we have bought back over nine million shares, which is more than 10% of the company. We all recall there was a pandemic and a few other negative things that occurred during this time frame. We paused repurchases when the UAW strike hit, which we felt was prudent. Repurchases under our normal course issuer bid continued in Q4 after ratification of the UAW agreement.

So we've factored that in the.

The last couple of years commercial activity has been a big.

A big priority for us at the forefront of.

Activity and so forth and we just see that continuing and it's a necessity.

Fortunately some of the deals are not baked into peace prices. So the Oems are forced us to come back and renegotiate on quarterly semiannual basis, so for it to.

And to get that in.

So those discussions will continue and it's factored into our numbers.

Got it and then last one just the restructuring that you guys did in the quarter, what kind of payback should we expect on that $27 million. It sounds like there's going to be a little bit more in Q1, and just the timing of that payback is it 24, where you guys start to reap the benefits or maybe you get to 27 million back in over two years.

Pat DiRemo: We intend to buy back more stock in the next month and renew our NCIB for another year. We also continue to look at some investment opportunities that would benefit us. Having said that, we continue to believe that buybacks are a good use of capital, given where our stock is traded.

The bulk of that in the fourth quarter was in Germany and.

Pat DiRemo: And we anticipate with our positive free cash flow profile, which we believe will occur on a regular basis each year, we will have greater flexibility to deploy cash in the best interest of the company. Finally, once again, a big thank you to our people. This is a challenging business in a challenging world, and we continue to deliver. Thank you for your dedication every day.

The workforce there for the most part.

The head count will be reduced by the end.

The first quarter. So we're going to go into the remainder of the year and with a lower cost base.

It's a pretty expensive.

To let go people in Western Europe, and Germany in particular.

So the paybacks are probably a little higher than we normally see in North America, but one to one five years is generally a rule of thumb.

Operator: So now it's time for questions. We see we have shareholders, analysts, employees, and even some competitors on the phone. So we may have to be a little careful with our answers, but we'll answer what we can. And thank you for calling in. Thank you. We will now take questions from the telephone line. If you have a question using a speakerphone, please lift your handset before making your selection. You may cancel your question at any time by pressing start.

And.

The numbers kind of suggests that in this case as well.

Okay, that's perfect I'll hop back in the queue. Thanks, guys.

Thank you.

The next question is from Tami Chen from BMO capital markets. Your line is open go ahead.

Hi, Thanks for the question.

I wanted to go back to your margin guidance for this year.

Coming out of a different way.

With industrial production currently expected to be flattish and <unk>.

Operator: Please press star 1 at this time if you have a question. There will be a pause while participants register for questions. The next question is from David Ocampo from Cormac Securities. Your line is open, go ahead. Thanks. Good evening. Just on your margin guidance for 2024, I mean, it's still quite a ways from your pre-pandemic levels when you guys were, you know, marching on eight plus percent. I know there are inflationary factors that kind of impact the number, but just curious where you think margins will go over the medium to long term. And what are the factors that are going to get you there? Is it, you know, a return to light vehicle production of 17 million in North America and Europe normalizing? Just any color on that would be great.

Headwind.

What is baked into your expectations what.

What would have been four four.

To achieve that higher end of the margin guide that would be 60 basis points of improvement, which could be seen as a bit high given the industry backdrop, we're in right now.

Yeah.

Well.

The way I would maybe answer that is it's.

Somewhat up from from 'twenty, three and 'twenty three.

We had the UAW strike, which would I expect a similar event will occur.

Outside in the fourth quarter of supplier, then which is behind us right. So.

David Ocampo: Yeah, obviously, volume would be beneficial, pretty well. We're always united. BOM is a factor.

That out I think youre baseline at somewhat higher so I'm not sure you're too far off from the high end of the range, but there is a bit of a band there and obviously.

Fred Di Tosto: We've made it clear as well in these inflationary cost pressures; we're not recovering, drag, www.globalonenessproject.org. And then operationally, you know, I think Pat noted, we're performing well, generally. I think the one major headwind that, you know, I think the industry is going to face, short-to-medium term right now. Clearly, volumes aren't meeting expectations at the moment, and I don't think that's going to change in the short or longer term, but you know, that transition will happen in the long run. But, you know, the impact on margins and how they impact margins in a different kind of way on Mar- And I think the inflationary costs, you know, that's going to take some time until we launch a new product. Thank Thanks, everyone.

Mix in the EV versus ice volume portfolio over the next little while as low uncertain. So we kind of.

Some room, there and some.

Some.

Range there in terms of where we can land.

But overall I don't see the high end of the range is too much of a stretch to assume the volume is there alright.

We are in February.

End of February.

And a lot of things can happen in the year, but they are all negative so some good things there.

Pat talked about the improvement in operations.

The operations of those opportunities.

Still on our material costs, we're not going to rely 100% on recovery, we're doing things on our own to reduce those costs as well. So it's a combination of things coming into play that can certainly affect.

A better number if you will.

That will take.

Time to put in place.

Right, Okay ask a cleanup item.

Fred Di Tosto: Thank you. Thank you. Thank you. But it's not going to happen.

Okay.

<unk>.

And when you talk about volume is below plan.

Fred Di Tosto: I do think there's still a lot of opportunity in our operation. Thank you. Thank you, a lot of attention.

In China.

Industry in Europe.

Pat DiRemo: And Pat, I think you called up trying to seek some commercial renegotiations, maybe maybe for the EV side of it in 2024. Curious if you're including that in any of your margin guidance for 2024, or should we treat that as upside? No, we've factored that in.

<unk> is growing is it a mix issue for you I'm just curious how you think about these two segments.

Going forward then.

Mr strategy here or is it something to do with your exposure Tvs, there, that's causing the volume being below plan.

Yes, certainly we moved quicker like many others in Europe on Evs.

Pat DiRemo: I mean, the last couple of years, commercial activities. Priorities, www.globalonenessproject.org David Ocampo, Michael Glen, Robert Wildeboer, Ben Jekic, Fred Tosto, Krista Friesen, Tamy. Unfortunately, some of the deals we've cut have not been baked into peace prices, so the OEMs are forcing us to come back. So, those are the discussions, www.theworldofwine.com www.theworldofwine.com, And then last one, just the restructuring that you guys did in the quarter, what kind of payback should we expect on that $27 million, it sounds like there's going to be a little bit more in Q1, and just the timing of that payback, is it 24 where you guys start to reap the benefits? Where maybe you get the 27 The bulk of that came in the fourth quarter.

Theyre not theyre not hitting your numbers either.

Similar to North America, some of that is due to that exposure.

So definitely mix mix is playing a role in it.

Sample in Germany is one program runs out and some of the programs are waiting on volume of some of the Evs.

It definitely is having an impact and just with respect to China, we have a very.

Modest footprint, there, where you had four plants to closed as expected to metallic glass. So we acquired from the Tulsa and the acquisition that came with the acquisition.

We're going to run out of work I ran our work in 2023, so we're down to two plants the fluids plant, where it's quite small.

And an aluminum plant so China overall volumes is not really a big factor in our revenues, one way or the other where it goes up or down or stays sideways.

Got it. Thank also we're also.

Okay.

Thank you.

The next question is from Christopher freezing from CIBC. Your line is open go ahead.

Pat DiRemo: Thank you. Thank you. Thank you, at that lower cost. You know, it's pretty expensive in Western Europe and Germany, in particular, so the paybacks there are probably a little higher. America. 1 to 1 12.

Alright, Thanks for taking my question.

Maybe just a follow up on your comment on the free cash flow priorities.

Can you speak to.

If youre seeing anything kind of in the M&A environment, and if thats, becoming more attractive for you given where your leverage ratio is now.

I think the short answer is yes.

Thank you.

David Ocampo: Okay, that's perfect. I'll hop back in the queue. Thanks, guys. The next question is from Tamy Chen from BMO Capital Markets. Your line is open. Hi, thanks for the questions.

In the context of how.

We look at things.

A few things the strategic investments, we see some opportunities in some new technologies.

Explorer was an example of that we still believe in graphene and we're seeing some of those and one of the interesting things and also in our mind initiative is the number of people approach us because of our operational expertise and our strategic.

Tamy Chen: I wanted to go back to your margin guidance for this year and come at it from a different way. With industry production currently expected to be flattish and the, what is baked into your expectations? I would love to hear your thoughts on how you would like to achieve that higher end of the margin guide because that would be 60 basis points, I think, of your rear improvement, which could be seen as a bit high if the industry backdrop were, Well, I think the way I would maybe answer that.

Strategic partner expertise.

We're seeing opportunities too.

Effectively deploy our capital, but also our people and improve our technology partnerships in that sense back to your real focus in the context of M&A.

There are a number of suppliers under pressure.

Over the last three years and the pandemic.

Them too.

You have weaker balance sheets in some ways.

Fred Di Tosto: Some more options. We had the UW strike, and it will occur again. Then we'll also add in the fourth quarter a supplier. Right. So, you know, you take that out, the baseline is somewhat higher. I'm not sure you're too far off from the high end of the range.

A lot of people have more debt a lot of people are a little more stretched it's a tough market out there we thrive in tough markets. Because there are opportunities now some of those opportunities may come from just quoted work in saying.

Fred Di Tosto: Now, there is a bit of a ban there, and, uh..., www.globalonenessproject.org versus ICE's volume portfolio over the next little while is low and certain, www.verbalink.com www.globalonenessproject.org, But overall, I don't see the high end of it. www.globalonenessproject.org Yeah, we're in. We're in February. They aren't all negative. Plus, Pat talked about the improvement in operations. The right side is operating.

Supplier with a strong balance sheet has a tremendous opportunity to ensure that we can provide product on time and all that type of stuff and customers do look at that they do look at the stability of the supply base and we're very strong supplier in all the markets that we are.

But at the same time, we do get a lot of teasers inquiries are youre looking at and so forth.

We have powder on the balance sheet and that's not a bad thing.

We also have a very good banking relationship. We're also very good banking relationship.

Today's date.

Environment in order to extend extend a.

Syndicate, which is quite large at $1 $3 billion in capacity.

With good terms with strong banks gives you flexibility there too so we like that.

Fred Di Tosto: We're not sitting still on our material costs; we're not going to rely 100% on recovery, things on our own. All right. Thanks, guys. A combination of things coming into play. I'm, Right. Sign up at Domestika.org Create.

Is there a particular geographic area that you would look to focus in on or are you kind of open to all opportunities.

Probably not China, probably not Antarctica.

Africa I don't know we have a plant in Africa I think.

Tamy Chen: Share. Learn. And when you talk about volume being below plan in Europe and China, I think the industry in Europe is flat. China is growing. Is it a mixed issue for you? I'm just curious how you think about these two sides. I'm going to be talking about the strategy here. Or is it something to do with your exposure to EVs there that's causing the volume being so low?

North of North America is a good place for US we were like the U S. MCA, we like our positioning.

Europe has its challenges we think it's got its broad geopolitical challenges in Russia, Ukraine, or EV turnover, and all that type of stuff or challenges.

Thanks.

I think we think.

Europe less likely unless it's unless it's compelling.

Pat DiRemo: Yeah, certainly, you know, we're quicker than many others in Europe on, and they're not, they're not. The Bulletproof Executive 2013, Some of that is due to that. Sample in Germany. The program runs out. Boeing, www.globalonenessproject.org Just with respect to China, we have a very, modest footprint there.

And it's going to be the right type of situation.

Including what can it add to our story relative to light weighting and so forth does it makes sense from a product point of view.

And from a footprint point of view so.

Something we certainly would study a lot more before we jump in.

Sure and then maybe Jeff.

Im wondering if youre kind of seeing anything on any of your programs, obviously inventory is still historically low.

There appears to be still a bit of a mix issue with that.

With inventory kind of closer to more normalized levels.

On pickups for example.

Pat DiRemo: We had four plants, two closed as expected, www.globalonenessproject.org. We're going to run out of work. I work in 2023, so we're down to two plants of fluids. China's overall volumes are not really a big factor.

Right.

Normal levels on.

In other words are you hearing anything from the Oems in terms of kind of slowing down on certain programs and ramping up on others.

We haven't we actually.

That would have expected some things to slow a little bit but they haven't.

Tamy Chen: And our revenue is one way or the other, where it goes up or down. Thank you. The next question is from Krista Friesen from CIBC. Your line is open. All right, thank you. I think the short answer is yes, in the context of how we look at things.

Others had as you know, especially when it comes to two again evs.

Right.

You're also seeing some of the some of the customers are starting to get ready to throw some money on the hood, which could actually spur production somewhat.

Krista Friesen: Thank you. Strategic Investments see some opportunities in some new technology. NanoExplorer was an example of that.

But the volume has been pretty steady.

Our ice vehicles in particular and trucks have done well.

Robert P. Wildeboer: We still believe in gravity. And we're seeing some of that. And one of the interesting things, and also in our MIND Initiative, is that a number of people approach us, together with our operational experts, and say, you know, we're going to do this. We're going to do this. We're going to do this. We're going to do this. We're going to do this.

Funny enough in Europe.

Some of the products are actually doing very well our engine blocks.

Which is a surprise.

The game, but.

No.

We're not seeing again other than <unk> not seen anything that that we see as a signal of a slowdown at all.

And some of the vehicles that frankly hadn't been selling or I should say have been produced.

Robert P. Wildeboer: Back to your real focus in the context of M&A. There are a number of suppliers under pressure. The last three years of the pandemic probably have weaker balance sheets in some ways. A lot of people have more debt, a lot of people are a little more stretched, tough market out there.

A couple of years ago, we're actually in pretty high production and a lot of that was due to chip shortages and moving to chip shortages.

Chips to higher profitable vehicles now that they are more plentiful youre seeing some of the smaller vehicles and so forth start to pick up the pace again.

From a broad perspective.

We think North America is a pretty healthy shape.

If you look at the past 12 calls or whatever.

Robert P. Wildeboer: We thrive in tough markets because there are opportunities, which may come from just quoting work. You know. Supplier with a strong balance. Thank you for this opportunity. Customers do look. Thank you very much. At the same time, we do get a lot of teasers and inquiries and, you know, are you looking, and so forth. We have powder on the balance. We also have a very good banking relationship. Um, you know, today's Thank you. Syndicate, which is quite large, $1.3 billion in capacity, with good terms, and strong veins, gives. Thanks a lot. Thanks a lot. Thanks a lot. Is there? Probably not China, and probably not Antarctica.

Said, we thought the U S with strong economics.

It wasn't going to have a recession.

We think we're right on that.

We would say that a potential tailwind for later in the areas as interest rates.

We do think they are at a level that they are probably tempering sales to some extent.

Not a lot but.

I think the number of people are perhaps waiting with their purchases until the weather is better.

Pricing, maybe better too because of interest rates, so I think.

We're like everyone else thinking that rates will come down at some point not sure when they'll start and how fast will come down.

And my experience once one OEM starts putting.

I would say significant amounts of money on the hood in that because it's end of year, but because they want to sell more.

There tends to be others that follow so I think it can be very interesting.

Robert P. Wildeboer: Africa, I don't know if we have a plant in Africa. I think North America is a good place for us. We really like the USMCA. We like our position. Europe has its challenges. We think it's got its broad challenges in the Russia-Ukraine war and EV turnout and all that type of stuff are challenging. I. Europe, unless it's, unless it's got to be the right type, including, you know, what can it add to our story relative to light?

Okay, great. Thank you for the color I'll jump back in the queue.

Thank you.

The next question is from Michael Glen from Raymond James Your line is open go ahead.

Hey.

Just on the on the supplier disruption that you guys had so.

I know you probably can't give all the details, but I'm just curious like why did why did the expense of this disruption follow onto your P&L and not the OEM.

Robert P. Wildeboer: product. We certainly would study it. I'm... There appears to be no audio, a little bit of a mixing issue, on other platforms.

Well it was our supplier first off.

Robert P. Wildeboer: Are you? We haven't. We actually, to some extent, would have expected some things to slow a little bit, but they haven't. The Bulletproof Executive 2013, But, you know, you're also seeing some of the customers are starting to get ready to throw some money at us. www.globalonenessproject.org for a presentation. Thanks for joining us. Thanks for joining us. But the volume's been pretty steady. I learned that trucks have done well. Funny enough, in Europe...

And.

Theres directed suppliers and suppliers that are.

Joyce and this was one of our longtime suppliers.

They actually had a sub supplier issue with material.

And so there was a stretch of time, where the material wasn't available which caused downtime and internal to our supplier.

And we had logistics issues due to weather and so forth that compounded it.

We're not talking about.

Weeks and weeks of not having material, but it was.

High level, a material that is pretty high volume.

Robert P. Wildeboer: Some of the products are actually doing very well, or people are enjoying them. So I, we're not seeing, again, other than EVs, not seeing any dead ones. And some of the vehicles that frankly hadn't been.

Significant by a few days to have a week can be pretty significant in our business.

The end result is we fell behind.

Expedite internal premium costs and so forth we.

Robert P. Wildeboer: A couple of years ago, we were actually moving the chip short, now that they're more plentiful. From a broad perspective, we think North America is pretty healthy.

We did protect the customer.

Although it did come at a cost.

But as we noted in our opening remarks, an issue is behind us.

Kind of move on from it.

That's not always the customer's fault.

Yes.

Hey, Mike.

Like I said in my.

In my speech.

Robert P. Wildeboer: Look at the past 12 calls, said. Thank you for joining us. We're going to have a recession, www.thevenusproject.com, we would say. A POTENTIAL TAILWIND.

These disruptions had been happening in the supply base for three years continuously and we.

We've been particularly fortunate.

Our Seo team has done an excellent job of.

Assuring we didn't have this type of disruptions. This really is the first one of any significance.

Robert P. Wildeboer: Thank you. We do think they're at a level that they're probably. So, not a lot, but I. Perhaps we, until the weather's better. For more information, visit www.fema.gov. We're like everyone else.

That we dealt with which frankly given.

Given the supply base and the issues that have been out there is pretty damn. Good my book, its just unfortunate and it's behind us.

Behind being it ended in Q. This was all contained in Q4 to be clear, yes, yes, yes. It was all good.

Robert P. Wildeboer: Thank you, down at some point, not sure. In my experience, once one OEM starts putting them out, there tends to be others that follow. Great, thank you for the question. Thank you. The next question is from Michael Glen from Raymond James. Your line is open, go ahead.

Yes, all contained.

Okay and with the outlook.

Rob you you've talked about there being a number of suppliers being under pressure.

Is there is there potential like this type of situation.

Michael W. Glen: Hey, just on the supplier disruption that you guys had, so I know you probably can't give all the details, but I'm just curious, like, why did the expense of this disruption fall on your P&L and not the OEM? Well, it was; it's our supplier. And. You know, there are directed suppliers and then there are other suppliers. The Ultimate Parody Site-Limited, LLC. This is one of our longtime suppliers. They actually had a sub supplier, https://www.kenhub.com. There was a stretch of time where the material wasn't available, which caused downtime, weather, and so forth that compounded.

Of a supplier.

Being unable to give you the material that you need is this something that is of increasing risk as we think about 2024.

Okay.

It's a two sided coin.

<unk>.

And if you look at say auto news or whatever there is a view that a number of suppliers going to use this year to strengthen their balance sheets right youre going to.

With consistent volumes and everything else there aren't going to be some suppliers that have some challenges our focus typically is on our competitors.

And.

Our discussions with our customers are we're here we can do this we can effectively put up new lines for you et cetera.

Pat DiRemo: We're not talking about it. Thanks for joining us. Thank you. You know, it has a pretty high volume.

And we're not going to come back for a price increase because we've got real financial challenges. This is something.

We always try to show you, how we think but.

Pat DiRemo: And missing it by, you know, a few days to half a month. And I'll be, I mean, the end result is we fell behind, expedite. We did protect the customers, although it did come at a cost.

Since we started.

Two years ago, 'twenty through 'twenty, two and a half years ago now.

This has been consistently one of our modus operandi, which is basically understand where your competitors are and so forth and if you can provide a customer solution and win the work because of your situation location abilities.

Pat DiRemo: In order to, Not all of the customers. Thank you. Thank you. Thank you. And, like I said, like I said in my.

The balance sheet great.

Pat DiRemo: These disruptions have been happening in the supply. All right, assuring, type of disruptions. This really is the first.

But sometimes the customers look to you to actually actually health.

In a context of what sometimes the best health is taking over a supplier or some business or even in certain cases that were finding helping other potential suppliers.

Michael W. Glen: Frankly, given that And it's behind... Behind being it ended in Q, this was all contained in Q4, to be clear? Yeah, yeah, it was all contained. Okay, and with the outlook and, Rob, you talk about there being a number of suppliers being under pressure. Is there potential for this type of situation?

So.

We tend to look more toward other tier one.

And our interest not so much the tier two so our supply base in particular I am not going to say there is any significant interest out there there might be at some point.

Robert P. Wildeboer: of a supplier. You know, being unable to give you the material that you need, is this something that is of increasing risk as we think about 2024? It is. It's a two-sided...

But.

The financial concerns of our suppliers, especially our big ones.

Robert P. Wildeboer: So, if you look at, say, auto news or whatever, there is a view of the view, a number of suppliers. Thank you. Thank you. There are going to be some suppliers that have.

When we were talking about earlier.

Their volumes are good.

Concern.

But as Rob said.

Robert P. Wildeboer: Our focus typically is on our competitors. Our discussions with our customers are, we're here, we can do this, effectively put up new lines for you, et cetera. And, you know, we're not gonna come back for a price.

In the tier one side, sometimes the customer and we have been approached over the last three years by customers asking us to take a look at different assets.

That are in trouble that we could take over but it's got to be it's got to make sense for us at the end of the day and last few years. It Hasnt made sense. So we didn't approach it.

Robert P. Wildeboer: Ciao. This is something we always try to show you how we think, but since we started,

I will say this.

Robert P. Wildeboer: ®MD-BO The Bulletproof Executive 2013, This has consistently been one of our motus operandi, basically understanding where your competitors are and so, and if you can provide a customer, work. Thank you, Val. Great. But sometimes the customers look to you to actually help. Contacts are sometimes the best help.

We talk about culture, a lot you guys never right about it.

Which is but we have other people on the.

It is it is a difference.

We've taken over.

Quarterly performing suppliers, when we bring a different way of doing things operationally or on the floor and that is something that.

<unk> provides opportunity for our customers know that customers know it.

Robert P. Wildeboer: Thank you for joining us. Thank you. ®MD-BO Helping other potential suppliers tend to look more toward other Tier 1. So our supply base, in particular. Bye. Financial Concerns of Our Suppliers. Bye. On the one side. Sometimes the customer, and we have been approached over the last few weeks... www.globalonenessproject.org that are in trouble, goes over. It's got to make sense. I would say this. We talk about culture a lot; you guys never write about it.

Rely on us and and and and some of these situations, we get we get asked to come in.

Often by the owner of our some of the owners of the competitors and so forth and I'm not just talking about public competitors as private competitors as well.

And some of which you at all.

That's the nature of our business I would say we are extremely well poised.

Out of 2023 with the strength of our balance sheet free cash flow all the things that we're talking about to take advantage of those types of opportunities to help our customers and if we can help our customers a lot of good things happening that also translates on the commercial discussions that we may have the winning of new work the tradeoffs and everything else. These are all.

Robert P. Wildeboer: Which is, but we have other priorities. It is a different world. We've taken over. The company provides our. Customers know that. In some of these situations, we get asked... Often by www.martinrea.com.

Robert P. Wildeboer: I'm not just talking. Well, I wish you the best of luck. That's the nature of our business. I would say we are doing extremely well.

Arrows in our quiver that we.

US really well.

Okay.

If I think of M&A it's.

Robert P. Wildeboer: Coming out of the strength of our balance sheet, free cash flow, all the things we're talking about, take advantage of those types of opportunities to ALPARC. We can help our customers a lot, and that also translates into a commercial discussion. Thank you all for joining us today. Okay, and, you know, if I think of M&A, it's, I can't, you know, for me, M&A and auto parts are... Like the history of M&A and auto parts is there are a lot of situations that have struggled. Like, if you do something now, will the level of guarantees that you get from your customers going to be different than they were in the past? Rob.

I can't.

For me M&A in auto parts.

The history of M&A in auto parts is theres a lot of situations that have struggled.

If you do something now.

Or the <unk>.

Level of guarantees that you get from your customer going to be different than they were in the past.

Okay.

For us to do it they would need to be probably to some extent and Rob touched on it very well.

Partial settlements work.

Future business growth all those things would be key.

Certainly with the way the supply basis today versus 20 years ago.

The deal you wouldn't want to make would be different certainly than it was 20 years ago, there's less suppliers out there and there is less places for the Oems to go to to get people to take over Frank.

Michael W. Glen: Thank you. Thank you. Certainly. I'm going to go. The deal you would want to make would be different. Thank you. There are fewer places for the OEM.

It might be a little more picky and just on the M&A.

Robert P. Wildeboer: The Epoch Times. Just on the M&A, you know, just so people don't say, hey, we're. We're really in the hunt or whatever. You know, we've been pretty good at it, pretty good at getting distressed and turning them around, better than most at that, but, of the 10, or 11, or 12 acres we've turned down in the last few years, we're pretty particular. And it's got

So people I'll say, where we are.

We're really at the hunter or whatever.

We've been pretty good at M&A, we've been pretty good at getting distressed situations and turning them around.

It takes time, we think we're better than most of that but.

Of the 10 or 11 or 12 acquisitions, we've got in 'twenty two years, we've turned out.

So we're pretty particular and its got it.

Robert P. Wildeboer: In the meantime, as we said, we've got some cash, and we think a good investment is ourselves. We want to buy back. Thanks for tuning in. We'll see you next time. Applying back 10%, more than 10% of our economy in the last five. It's kind of a write-off because of the pandemic, anyway.

Got it fit so in.

In the meantime, as we said.

We've got some cash we think a good investment as ourselves buybacks some more stock.

I think buying back 10% or 10% of our coming last five years with three years kind of a write off because of the pandemic has been.

Pretty good as well so.

Operator: We're just, we're just, we're just here to run a business in the right way. Deploy our capital in the best way we talk about today. That's why we're just..., illustrate for you how we are. Okay, thank you. Thank you. Once again, please press star 1 on your device's keypad if you have any questions.

We're just we're just we're just here to run a business in the right way to deploy our capital in the best way and what we talk about today could change a week from now and.

And Thats why were just basically.

Illustrates our how we approach these things.

Okay. Thank you.

Okay.

Thank you.

Once again, please press star one on your devices keypad, if you have a question.

Brian Morrison: The next question is from Brian Morrison from TD Securities. Your line is open. Thanks very much. Hey, Fred, can you just talk to me about how you view the cadence of your margins that you go through? Thank you. That's a good question. And we model it out, obviously, based on IHS bonds and so forth, that's how we budget. And what that suggestion is, to get back. Better on the front end

The next question is from Brian Morrison from TD Securities. Your line is open go ahead.

Thanks, very much Fred can you just talk to me about how you view the cadence of that.

Margins as you go throughout the year.

Okay.

Okay.

That's a good question.

We model it out obviously based on.

IHS volumes of silver Thats, how we budget.

And what that's suggesting is as youre going to get back to maybe a more typical seasonality in the industry alright, so better than the front half maybe weaker in the back half.

But I.

Fred Di Tosto: But I'm somewhat skeptical about whether that happens, decreasing later in the year, and so forth. So I'm not convinced it'll necessarily play out that way, but forecasters out there. That's kind of how their model works. They may not have. Front out, maybe stronger than the back.

Somewhat skeptical and whether that happens or not because I think theres still some volatility.

Mix and so forth if interest rates.

Sorry, decreasing later in the year and incentives at the Oems and so forth, so not committed or necessarily play out that way, but.

If you.

Review of the <unk>.

<unk> forecast there is out there that's kind of how they are modeling it.

But.

It may not happen that way, but front out may be stronger than the back half, but the seasonality may not play out as expected.

Fred Di Tosto: Now, let me not play out. And what is the North American production volume assumed in your forecast? So we rely on IHS with their forecast. So, relatively flat.

And what is.

Yes.

What is the North American production volume forecast.

So we rely on IHS, so theyre forecasting 15, seven I think at this point okay.

Fred Di Tosto: And I'm sure... I'm sorry; I missed what you said. They'll be awar- pressure on your margin. Can you just give us some sort of impact it could have because I look at your margin guide and you start at 5.6, and you got, And I'm going to be talking about the 2025 basis points from tooling. You get 15 to 20 from your tier 2 improvement. You get 15 to 20 from your strike. So you're at the high end. What are your options?

A relatively flat year over year.

I'm sorry.

Got you I am sorry, I missed what you said about the EV costs.

On the <unk>.

Yeah.

Pressure on your on your margin can you just give us some sort of.

I'll Park heavy.

What's that.

The impact could be because I look at your margin guidance you start at $5 six and you get sort of a 2025 basis points from $2 you get 15% to 20 from your tier two improvement at $50 <unk> restrict some of you at the high end of.

On your margin guide what are the offsets that bring you back down.

Fred Di Tosto: Well, we have, and this is again, an industry thing. So, 2014 University of Georgia College of Agricultural and Environmental Sciences UGA Extension Office of Communications and Creative Services The Bulletproof Executive 2013, So those assets are coming online. That's appreciation. And now that we're, you know, in production, those volumes are now renewed. Tomorrow's the day. So you got that extra cost, plan level. We're not unique in that.

Well, we have and this is again an industry thing so suppliers have made investments in EV platforms.

So those assets are coming online that depreciations coming online that overhead is coming online now that we're in.

<unk> production volumes in our near but with what we modeled expectation that right. So you got that extra cost without the extra sales.

Until you start hitting those.

Planned levels right. So.

We're not unique in that I think youre going to see that in a number of different suppliers and peers.

So youre going to see an higher depreciation rates from us going forward, because these assets coming online and unfortunately, the bonds aren't hitting it alright.

Fred Di Tosto: I think you're going to see that, fire, you know, you're going to see in higher depreciation. Thank you. And then not just depreciation, I also got an overhead type.

And then not just depreciation now Scott overhead type of these platforms.

Fred Di Tosto: So, here's a simple way, a simple guideline. So let's say you got a fax. 50%. And the ice volume comes along just fine, so that's half of the factor.

Here's a simple a simple guy like I understand so let's say you got a factory is 50%.

<unk>, 50% ice.

And the ice volume comes along just fine so that half of the factories running at optimal levels on the on the EV, let's say the sell 40% of what the planned volume is and so that half of the plant is running at below capacity, what the overheads and stuff that Fred said.

Fred Di Tosto: EV, let's say they sell 40% of what the plan involves. So that half, at below capacity with the overheads and stuff. And let's say even you have higher ice, can't take the product, to a certain extent, the EV line production, put it over. Right, so you have a plant that's not running. We have 56 plants, and a lot of them have that problem.

And let's say, even you have higher ice production you can't take for the products we make.

To a certain extent the EV line production and put it over to ice right. So you have a plant that's not running optimally and we have 56 plants and a lot of them.

Some EV production in their plants and so the reality is that a lot of plants aren't running as optimally as we would like to be.

Fred Di Tosto: The reality is that a lot of plants aren't running as optimally as we would like. That is. Part of the complexity is that, you know, TV launched at a lower level.

That is the industry issue.

<unk> everybody.

Part of the part of the complexity is that.

The EV launched at a lower level.

Fred Di Tosto: Week after week, day after day, week after week, be helpful. We would still have the issue that Fred described, but it would be better. The problem is what we're seeing in the moment. The Ultimate Parody Site! The customer plan will go down for a month or two and then come back. You have to have some semblance of a workforce there. You can't have them all there. So those costs are very high.

State steady.

Week after week day after day it would be helpful. We would still have the issue that Fred described but it would be better the problem is what we're seeing in the moment.

As the.

Customer plant will go down for a month or two and then come back up.

And so you have to have some semblance of a workforce there to produce you can have them all there so.

Those costs are very hard to flex.

Brian Morrison: We're getting better at it, outside. So I understand and I appreciate the concept, but I'm wondering how much margin pressure you've baked into your forecast. I'm not going to tell you. Thank you. Nice try. It's very difficult to say, given the fluctuation. Well, I asked because it's going to be wide.

We're getting better at it as these things smooth out, but with the lack of volume it's compounded the problem.

So I understand and I appreciate the concept, but I'm wondering how much margin pressure you baked into your forecast from this.

Okay that's valuable.

Hi, Jeremy.

Jeremy it's very it's very difficult to say.

Given the fluctuation.

Well I asked because there's going to be a wide range of estimates.

Fred Di Tosto: So, just lastly, on your free cash flow, we talked about how strong it is and how cheap you are instead of the M&A discussion. Excuse me. Why are we not... or even? Well, I, you know, someone mentions M&A, and everyone, it's like, you know, a fountain. M&A, as we've said, we're very selective in M&A. It's nice to have powder. I think that we said we'd be buying on our NCIB. Buying 10% over five years is actually pretty good when you're not buying for three of those years.

Tomorrow based on that so.

So just lastly on the free cash flow you're talking about.

How strong it is and how cheap you are instead of the M&A discussion excuse me. The M&A discussion why are we not looking at an aggressive in CIB or even potentially in SMB.

Paul.

Someone mentioned M&A and everyone is like.

Fountain.

M&A as we've said, we're very selective on M&A, it's nice to have powder and so forth I think that we said, we'll be buying on her and CIB in oil renew our NCI.

Buying 10% over five years is actually pretty good one in three of those years not buying so.

Brian Morrison: I think that's important. I think a strong balance sheet is important in our charge, 1.5 to 1 or better.

I think.

That's important I think a strong balance sheet is important and our target was one five to one or better and we are there but that doesn't mean is around 140 to jump up to.

Robert P. Wildeboer: But that doesn't mean as soon as you're at 1.4, you jump up to 1.5. And I think it's a cowardly trial. There's not something that we're ready to select on the menu. And I'm. Let's just... If the menu's there, and it lets you track.

One fire again.

And I think it's a gathering barrel.

I think it's important.

There is not something that we're ready to select on the menu at the moment and M&A.

If the menu there and it looks attractive.

Brian Morrison: We're in a position now where we are, but we're not in that spot. The only reason I ask is you mentioned that you're free cash. Thank you. Thank you. Yeah, you're right. You're right. You're right. Some guys are in higher multiples because they've managed to lower their...

In a position now where we could look.

But we're not in that spot at the moment.

Yes, the only reason I ask because you mentioned that your free cash flow to be $100 million to $150 million this year and you're trading at three times EBITDA.

Okay.

Yes, Youre right Youre right Youre right.

Some guys are higher multiples because they managed to lower their EBITDA. So.

Robert P. Wildeboer: Thank you very much. Thank you. There are no further questions registered at this time. I would like now to turn the meeting back over to Mr. Wildeboer. Thanks, everyone. I really appreciate you taking some time this evening. If any of you have further questions or would like to discuss, www.tastyandeasy.com. Please feel free to contact any of us or Neil Forrester on the press release and have a great evening. Thank you. The conference is now over. Please disconnect your lines at this time. And thank you for your...

Alright, Thank you very much.

Thank you.

There are no further questions registered at this time I would like now to turn the meeting back over to Mr. <unk>.

Well thanks, everyone really appreciate you taking some time. This evening if any of you have further questions or would like to discuss any issues concerning our company.

Please feel free to contact any of US are Neil Foresters on the press release and have a great evening.

Thank you. The conference has now ended please disconnect your lines at this time and thank you for your participation.