Q2 2024 PHINIA Inc Earnings Call

Thank you for standing by. My name is Ian, and I will be your conference operator today.

Unknown Attendee: At this time, I would like to welcome everyone to the FINIA Q2 2024 earnings call. All lines who are placed on mute to prevent any background noise.

Operator: At this time, I would like to welcome everyone to the FINIA Q2 2024 earnings. All lines have been placed on mute to prevent any background noise.

At this time, I would like to welcome everyone to the FINIA Q2 2024 earnings call.

Unknown Attendee: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. I will now hand the call over to Kellan Farris, Vice President of Investor Relations. Kellan, you may begin your conversation.

All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you.

Kellen Ferris: If you would call over to Kellen Ferris, vice president of investor relations.

I will now hand the call over to Kellan Farris, Vice President of Investor Relations. Kellan, you may begin your conference.

Kellen Ferris: Kellen, you may begin your conference. Thank you. Good morning, everyone. We appreciate you joining us.

Kellan Farris: Thank you. Good morning, everyone.

Kellen Ferris: Our conference comments are issued this morning and are available on FINIA's Investor Relations website, including a slide deck we will be referencing in our remarks. We are also broadcasting this call via webcast.

Kellan Farris: Thank you. Good morning, everyone. We appreciate you joining us. Our conference call materials were issued this morning and are available on FINIA's Investor Relations website. Including a slide deck we'll be referencing in our remarks.

Kellen Ferris: Joining us today are Brady Ericson, CEO, and Chris Gropp, CFO. During this call, we will make four looking statements which are based on admins current expectations in our subject to risks and uncertainties. Actual results made different materially from these statements due to a variety of factors, including those described in our SEC filings.

Speaker Change: We are also broadcasting this call via webcast. Joining us today are Brady Ericson, CEO , and Chris Gropp, CFO .

Kellan Farris: We appreciate you joining us. Our conference call materials were issued this morning and are available on Finio's Investor Relations website, including a slide deck we'll be referencing in our remarks. We're also broadcasting this call via webcast. Joining us today are Brady Ericson, CEO, and Chris Gropp, CFO. During this call, we will make forward-looking statements that are based on management's current expectations and are subject to risks and uncertainties. Actual results may differ materially from these statements due to a variety of factors, including those described in our SEC filings.

Speaker Change: During this call we will make forward-looking statements which are based on management's current expectations and are subject to risks and uncertainties. Actual results may differ materially from these statements due to a variety of factors, including those described in our SEC filings. And with that, it is my pleasure to turn the call over to Brady.

Kellan Farris: And with that, it is my pleasure to turn the call over to Brady.

Brady Ericson: And with that, it is my pleasure to turn the call over to Brady. Thank you, Kellen, and thank you everyone for joining us this morning. We'll start with some overall comments on what we've accomplished during our first year as a standalone entity. And then discuss our second quarter performance at Outlook.

Brady D. Ericson: Thank you, Colin, and thank you everyone for joining us this morning. We'll start with some overall comments on what we've accomplished during our first year as a standalone entity and then discuss our second quarter performance and outlook. Chris will provide additional detail and our financial review before we open up the call for questions. This month, we celebrate our first anniversary as a standalone publicly traded entity. Throughout the past year, we rigorously applied financial discipline in everything we did, from day-to-day operations, to business development, to capital allocation.

Brady D. Ericson: Thank you, Colin, and thank you, everyone, for joining us this morning.

Brady D. Ericson: And we'll start with some overall comments on what we've accomplished during our first year as a standalone entity, and then discuss our second quarter performance and outlook.

Brady Ericson: Chris will provide additional detail in our financial reviews before we'll open up to call for questions. This month, we celebrate our first anniversary as a standalone public-betrayed entity. Throughout the past year, we recently applied financial discipline, and everything we did from day-to-day operations to business development and capital allocation. In turn, we successfully executed our financial, operational, and capital allocation strategies, many of these ahead of plan. Some highlights include consistent operational performance, strong cash flow generation, successful refinancing of high-cost debt, and returning over $180 million to shareholders via dividends and share repurchases. Coupled with a long list of new business wins, the pipeline of new product launches, you can understand why we are confident in our long-term future.

Brady D. Ericson: Chris will provide additional detail in our financial review before we will open up the call for questions.

Brady D. Ericson: This month we celebrate our first anniversary as a stand-alone publicly traded entity.

Brady D. Ericson: Throughout the past year, we rigorously applied financial discipline in everything we did, from day-to-day operations, to business development, to capital allocation.

Brady D. Ericson: In turn, we successfully executed our financial, operational, and capital allocation strategies, many of these ahead of plan. Some highlights include consistent operational performance and strong cash flow generation. Unknown Attendee, Chris Gropp, Douglas Dethy, Colin Langan, Brady Ericson, Thomas Scholl, coupled with a long list of new business wins and a pipeline of new product launches, you can understand why we are confident in our long-term future. We have also been active on the corporate governance front, having appointed a new independent member of the Board of Directors.

Chris P. Gropp: In turn, we successfully executed our financial, operational, and capital allocation strategies, many of these ahead of plan.

Chris P. Gropp: Some highlights include consistent operational performance, strong cash flow generation, successful refinancing of high-cost debt, and returning over $180 million to shareholders via dividends and share repurchases.

Chris P. Gropp: Coupled with a long list of new business wins and a pipeline of new product launches, you can understand why we are confident in our long-term future.

Brady Ericson: We have also been active on the corporate governance front, having appointed a new independent member of the Board of Directors, adding investor perspective, financial expertise, and diversity. Additionally, we're wrapping up our first sustainability report with an expected release date in August. From an overall market perspective, we see both the commercial and light vehicle markets globally coming in softer than our expectations. This is partially offset by the slowing real threat of EVs as they are clearly not for every application, market, or region. The software OE markets are mitigated by complementary OES and independent after-market business. There's still a large market for internal combustion engines or ICE, as it appears that they will play a key role in our road to carbon neutrality.

Chris P. Gropp: We have also been active on the corporate governance front, having appointed a new independent member of the Board of Directors, adding investor perspective, financial expertise, and diversity.

Brady D. Ericson: Bringing investor perspective, financial expertise, and diversity. Additionally, we're wrapping up our first sustainability report with an expected release date in August. From an overall market perspective, we see both the commercial and light vehicle markets globally coming in softer than our expectations.

Chris P. Gropp: Additionally we're wrapping up our first sustainability report with an expected release date in August .

Chris P. Gropp: From an overall market perspective, we see both the commercial and light vehicle markets globally coming in softer than our expectations.

Brady D. Ericson: This is partially offset by the slowing growth rate of EVs, as they are clearly not for every application, market, or region. However, software OE markets are mitigated by a complementary OES and independent aftermarket business. There's still a large market for internal combustion engines, or ICE, and it appears that they will play a key role in our road to carbon neutrality. First, by driving efficiency improvements for today and then moving to carbon neutral and carbon free fuels of tomorrow.

Chris P. Gropp: This is partially offset by the slowing growth rate of EBs as they are clearly not for every application, market, or region.

Chris P. Gropp: The software OE markets are mitigated by a complementary OES and independent aftermarket business.

Chris P. Gropp: There's still a large market for internal combustion engines, or ICE, as it appears that they will play a key role on our road to carbon neutrality.

Brady Ericson: First, by driving efficiency improvements for today, and then moving the carbon neutral and carbon free fields of tomorrow. Solutions such as ethanol, biofuels, e-fuels, and hydrogen will become important growth drivers for us over time. We are prudently investing in a wide range of alternative fuel products, including hydrogen, by leveraging our core technologies and resources. Our performance this past year clearly validates our long-term strategic plan and demonstrates the progress we continue to make in executing that plan. Additionally, accomplishments from the past year of being recognized as evidenced by Phineas' recent addition to the Russell 2000 index.

Chris P. Gropp: First, by driving efficiency improvements for today, and then moving to carbon neutral and carbon-free fuels of tomorrow.

Brady D. Ericson: Unknown Attendee, Chris Gropp, We are prudently investing in a wide range of alternative fuel products, including hydrogen, by leveraging our core technologies and resources. Our performance this past year clearly validates our long-term strategic plan and demonstrates the progress we continue to make in executing that plan. Additionally, accomplishments from the past year are being recognized, as evidenced by CINIA's recent addition to the Russell 2000 Index. I want to congratulate and say a special thank you to all of our colleagues across the business, many of whom listened to this call. Unknown Attendee, Chris Gropp, Now moving on to our second quarter results, starting on slide four.

Chris P. Gropp: Solutions such as ethanol, biofuels, e-fuels, and hydrogen will become important growth drivers for us over time.

Chris P. Gropp: We are prudently investing in a wide range of alternative fuel products, including hydrogen, by leveraging our core technologies and resources.

Chris P. Gropp: Our performance this past year clearly validates our long-term strategic plan and demonstrates the progress we continue to make in executing that plan.

CINIA: Additionally, accomplishments from the past year are being recognized as evidenced by CINIA's recent addition to the Russell 2000 Index.

Brady Ericson: I want to congratulate and say a special thank you to all of our colleagues across the business, many of whom listen in to this call.

Speaker Change: I want to congratulate and say a special thank you to all of our colleagues across the business, many of whom listened in to this call.

Brady Ericson: It's their passion and dedication, along with our strong grants, that contribute to and will continue to contribute to our long-term success.

Speaker Change: If there are passion and dedication along with our strong brands that contributed to and will continue to contribute to our long-term success.

Brady Ericson: Now moving on to our second quarter results, starting on slide four. One item of note before we dive in is this will be the last time we are comparing standalone quarterly financials with pre-spin car about quarterly financials. Our performance highlights on leadership's team's commitment to the execution of our long-term strategic plan with the operational and financial discipline we expect. Our top line reflects the resilient and consistent performance of our aftermarket business, particularly in Europe, while fuel systems segment adapted to weaker than expected CV sales in Europe and lower light vehicle sales in China. Adjusted sales in the quarter were 863 million, down slightly from the same period of the prior year.

Speaker Change: Now moving on to our second quarter results, starting on slide four.

Brady D. Ericson: One item of note before we dive in is this will be the last time we compare standalone quarterly financials with pre-spin carve out quarterly financials. Our performance highlights our leadership team's commitment to the execution of our long-term strategic plan with the operational and financial discipline we expect. Our top line reflects the resilient and consistent performance of our aftermarket business, particularly in Europe, while our fuel system segment adapted to weaker than expected CV sales in Europe and lower light vehicle sales in China. Adjusted sales in the quarter were $863 million, down slightly from the same period of the prior year.

Speaker Change: One item of note before we dive in is this will be the last time we are comparing stand-alone quarterly financials with pre-spent carve-out quarterly financials.

Speaker Change: Our performance highlights our leadership team's commitment to the execution of our long-term strategic plan with the operational and financial discipline we expect.

Speaker Change: Our top line reflects the resilient and consistent performance of our aftermarket business, particularly in Europe , while our fuel system segment adapted to weaker-than-expected CV sales in Europe and lower light vehicle sales in China.

Speaker Change: Adjusted sales in the quarter were $863 million, down slightly from the same period of the prior year.

Brady Ericson: We reported adjusted EBITDAB 117 million and an adjusted EBITDA margin of 13.6%. Decreases are 139 and 110 basis points, due to an increase in standalone company costs, transactional currency losses, and lower sales. Margins were strong in our two business segments, aftermarket and fuel systems, at 15.1% and 10.1% respectively. Total segment adjusted operating margins at 12.2%. This was 30 basis points lower than the previous year, as the Q2 2023 fuel systems margins benefited from some retroactive customer recoveries. We continue to make good progress on the transition from our former parent and have exited all transition service agreements or TSAs, and all material contract manufacturing agreements or CMAs.

Brady D. Ericson: We've reported adjusted EBITDA of $117 million and an adjusted EBITDA margin of 13.6%, an increase of 13,910 basis points due to an increase in standalone company costs, transactional currency losses, and lower sales. However, margins were strong in our two business segments, aftermarket, and fuel systems, at 15.1% and 10.1%, respectively. Total segment adjusted operating margins of 12.2%. This was 30 basis points lower than the previous year as the Q2 2023 fuel systems margins benefited from some retroactive customer recovery.

Speaker Change: We've reported adjusted EBITDA of $117 million and an adjusted EBITDA margin of 13.6%. Decreases of $13,110 basis points due to an increase in standalone company costs, transactional currency losses, and lower sales.

Speaker Change: Margins were strong in our two business segments, aftermarket and fuel systems at 15.1% and 10.1% respectively.

Speaker Change: Total segment adjusted operating margins of 12.2%.

Speaker Change: This was 30 basis points lower than the previous year, as the Q2 2023 fuel systems margins benefited from some retroactive customer recoveries.

Brady D. Ericson: We continue to make good progress on the transition from our former parent and have exited all Transition Service Agreements, or TSAs, and all Material Contract Manufacturer Agreements, or CMAs. We're now operating completely independent of our former parent, including all IT systems.

Speaker Change: We continue to make good progress on the transition from our former parent and have exited all Transition Service Agreements, or TSAs, and all Material Contract Manufacturer Agreements, or CMAs.

Brady Ericson: We're now operating completely independent of our former parent, including all IT systems. Furthermore, our balance sheet remains strong with 339 million of cash on hand. That was supported by adjusted free cash flow of $108 million in the quarter, and we returned $101 million to shareholders doing this quarter as well.

Speaker Change: We're now operating completely independent of our former parents, including all IT systems.

Brady D. Ericson: Furthermore, our balance sheet remained strong with $339 million of cash on hand. That was supported by adjusted free cash flow of $108 million in the quarter. And we've returned $101 million to shareholders during this quarter as well. Now, let's move on to slide five.

Speaker Change: Furthermore, our balance sheet remains strong with $339 million of cash on hand that was supported by adjusted free cash flow of $108 million in the quarter, and we've returned $101 million to shareholders during this quarter as well.

Brady Ericson: Now let's move on to slide five. On the product and market share fronts, we continue our efforts to identify both near-term and long-term organic growth opportunities that leverage our engineering expertise and reputation for high-quality products. This is, once again, evidenced by our recent wins across product lines and geographies. First, the contract extension for gasoline fuel delivery modules for a two-wheeler with a leading global OEM supporting the customer mostly in the Indian market. A conquest business win to supply fuel delivery modules to a leading luxury global OEM for three of its light vehicle platforms in the Asian, North American, and European markets.

Brady D. Ericson: On the product and market share fronts, we continue our efforts to identify both near-term and long-term organic growth opportunities that leverage our engineering expertise and reputation for high quality products. This is, once again, evidenced by our recent wins across product lines and geography. First, a contract extension for gasoline fuel delivery modules for a two-wheeler with a leading global OEM supporting the customer, mostly in the Indian market. Conquest Business Wind to supply fuel delivery modules to a leading luxury global OEM for three of its light vehicle platforms in the Asian, North American, and European markets. And an ECU conquest win that augments the previously awarded GDI fuel system. A major win as this is the first full system package utilizing Finneas complete hardware, software, and calibration.

Speaker Change: Now let's move on to slide 5.

Speaker Change: On the product and market share front, we continue our efforts to identify both near-term and long-term organic growth opportunities that leverage our engineering expertise and reputation for high quality products.

Speaker Change: This is, once again, evidence by our recent wins across product lines and geographies.

Speaker Change: First, a contract extension for gasoline fuel delivery modules for a two-wheeler with a leading global OEM supporting the customer mostly in the Indian market.

Speaker Change: A Conquest business win to supply fuel delivery modules to a leading luxury global OEM for three of its light vehicle platforms in the Asian, North American, and European markets.

Brady Ericson: In an ECU conquest win, the augments have previously awarded GDI fuel system of major win as this is the first full system pack in utilizing finance complete hardware, software and calibration. This is a great example of the increasing content for vehicle opportunities we have moving forward. This is for a leading domestic Chinese OEM in the light vehicle segment, supporting both the Chinese and export markets. We look at differentiator sales when we can through value, quality of service, efficiency, and innovation. These recent business wins, particularly the conquest wins, are further proof that we are successfully diversifying and growing by leveraging our product leadership, global footprint, improvement, and abilities.

Speaker Change: and an ECU Conquest win that augments a previously awarded GDI fuel system. A major win as this is the first full system package utilizing Finia's complete hardware, software, and calibration.

Brady D. Ericson: This is a great example of the increasing content per vehicle opportunities we have moving forward. This is for a leading domestic Chinese OEM in the light vehicle segment, supporting both the Chinese and export markets. Quality of Service, Efficiency, and Innovation. Now, let's move to slide six.

Speaker Change: This is a great example of the increasing content for vehicle opportunities we have moving forward.

Speaker Change: This is for a leading domestic Chinese OEM in the light vehicle segment, supporting both the Chinese and export markets.

Speaker Change: We look to differentiate ourselves, what we can, through value, quality of service, efficiency, and innovation.

Speaker Change: These recent business wins, particularly the conquest wins, are further proof that we are successfully diversifying and growing by leveraging our product leadership, global footprint, and proven capabilities.

Brady Ericson: Now let's move to slide six. Strengthening our financial position, Hope Spin has been a priority. As previously disclosed, in early April, we paid off our terminal fee and the drawn balance on a revolving line of credit with the issuance of new senior secured notes. This transaction significantly reduced our run rate interest expense, re-mounts the majority of our long term debt to fix trade and improve our overall liquidity position by restoring funds around capacity on a revolver. We also amended our credit agreement to modify numerous restrictive covenants, which provides more flexibility to execute on our strategic priorities.

Speaker Change: Now let's move to slide 6.

Speaker Change: Strengthening our financial position post-spin has been a priority. As previously disclosed, in early April we paid off our Term Loan meeting and then drawn balance on a revolving line of credit with the issuance of new senior secured notes.

Speaker Change: This transaction significantly reduced our run rate interest expense, rebalanced the majority of our long-term debt to fixed rate, and improved our overall liquidity position by restoring fund-drawn capacity on our revolver.

Speaker Change: We also amended our credit agreement to modify numerous restrictive covenants, which provides more flexibility to execute on our strategic priorities.

Brady Ericson: Given the stability and lower rates, we feel it's proven to increase our target net leverage from one time to 1.5 times. If we increase our leverage to 1.5 times, we expect our interest in debt service costs to be similar to what they were prior to the refinancing. Obviously, we will only add new debt if the cash is utilized to enhance shareholder value. During the quarter, we opportunistically repurchased over $90 million of our outstanding shares. We have nearly completed the $150 million authorized by the Board. With only 13 million remaining, we plan to review next steps for the board in the coming days.

Speaker Change: Given the stability and lower rates, we feel it's prudent to increase our target net leverage from one time to 1.5 times.

Brady D. Ericson: If we increase our leverage to 1.5 times, we expect our interest and debt service costs to be similar to what they were prior to the refinancing. Obviously, we will only add new debt if the cash is utilized to enhance shareholder value. During the quarter, we opportunistically repurchased over $90 million of our outstanding shares and have nearly completed the $150 million authorized by the board. With only $13 million remaining, we plan to review next steps for the board in the coming days.

Speaker Change: If we increase our leverage to 1.5 times, we expect our interest and debt service costs to be similar to what they were prior to the refinancing.

Speaker Change: Obviously, we will only add new debt if the cash is utilized to enhance shareholder value.

Speaker Change: During the quarter, we opportunistically repurchased over $90 million of our outstanding shares, and have nearly completed the $150 million authorized by the Board.

Speaker Change: With only $13 million remaining, we plan to review next steps for the board in the coming days.

Brady Ericson: This most recent share repurchase further demonstrates the company's commitment to returning value to shareholders and our confidence in our long term growth potential. Our healthy cash generation coupled with our solid balance sheet provides us with the flexibility to support our growth initiatives both organic and inorganic, as well as continue to return capital to shareholders, be a dividends and opportunistic share by max. In summary, we remain confident in our strategies and the long term growth of our business despite the current market conditions. We are well positioned today and for the future as we have many opportunities to leverage our globally recognized brands, our capabilities, and our scale.

Brady D. Ericson: This most recent share repurchase further demonstrates the company's commitment to returning value to shareholders and our confidence in our long-term growth potential. Our healthy cash generation, coupled with our solid balance sheet, provides us with the flexibility to support our growth initiatives, both organic and inorganic, as well as continue to return capital to shareholders via dividends and opportunistic share buybacks. In summary, we remain confident in our strategies and the long-term growth of our business despite the current market conditions.

Speaker Change: This most recent share repurchase further demonstrates the company's commitment to returning value to shareholders and our confidence in our long-term growth potential.

Speaker Change: Our healthy cash generation coupled with our solid balance sheet provides us with the flexibility to support our growth initiatives, both organic and inorganic, as well as continue to return capital to shareholders via dividends and opportunistic share buybacks.

Speaker Change: In summary, we remain confident in our strategies and the long-term growth of our business despite the current market conditions.

Brady D. Ericson: We are well positioned today and for the future as we have many opportunities to leverage our globally recognized brands, our capabilities, and our scale. With that, I'd like to hand it over to Chris, who will walk us through our Q2 results and discuss our outlook for the year.

Speaker Change: We are well positioned today and for the future as we have many opportunities to leverage our globally recognized brands, our capabilities, and our scale. With that, I'd like to hand it over to Chris who will walk us through our Q2 results and discuss our outlook for the year. Chris?

Chris Gropp: With that, I'd like to hand it over to Chris, who will walk us through our Q2 results and discuss our outlook for the year. Chris. Thanks, Brady. And thank you all for joining this morning.

Chris P. Gropp: Thanks, Brady, and thank you all for joining this morning. As a reminder, as we discuss our results and outlook, please keep in mind there were TSAs and CMAs with our former parent in Q2, which are coming to material and or full completion at the end of this period. In addition, reconciliations of all non-GAAP financial measures that I will discuss can be found in today's press release. Moving to page eight in the deck.

Chris Gropp: As a reminder, as we discuss our results and outlook, please keep in mind there were TSAs and CMAs with our form of parent in Q2, which are coming to material and or full completion at the end of this period. In addition, reconciliation of all on gap financial measures that I will discuss can be found in today's press release. Moving to page 8 in the deck, in Q2 we generated 863 million in adjusted total sales, down slightly versus a year ago. Our aftermarket business benefited from higher pricing and volume for an increase of 4.1%, whereas fuel system was impacted by a lower commercial vehicle or CV revenue in Europe and light vehicle or LV sales in China and reduced inflationary price pass through, as Q2 2023 benefited from some out of period customer recoveries. Our adjusted diluted earnings for share or 88 cents for share and impacted by ongoing structural tax issues.

Chris P. Gropp: Thanks, Brady. And thank you all for joining this morning.

Chris P. Gropp: As a reminder, as we discuss our results and outlook, please keep in mind there were TSAs and CMAs with our former parent in Q2, which are coming to material and or full completion at the end of this period.

Chris P. Gropp: In addition, reconciliations of all non-GAAP financial measures that I will discuss can be found in today's press release.

Chris P. Gropp: In Q2, we generated $863 million in adjusted total sales, down slightly versus a year ago. Our aftermarket business benefitted from higher pricing and volume for an increase of 4.1%, whereas fuel systems were impacted by lower commercial vehicle, or CB, revenue in Europe and Light Vehicle, or LV, cells in China, and reduced inflationary price pass through as Q2 2023 benefited from some out of period customer recovery. Our adjusted diluted earnings per share are $0.88 per share and are impacted by ongoing structural tax issues.

Chris P. Gropp: Moving to page 8 in the deck, in Q2 we generated $863 million in adjusted total sales, down slightly versus a year ago.

Chris P. Gropp: Our aftermarket business benefited from higher pricing and volume for an increase of 4.1%, whereas fuel systems was impacted by lower commercial vehicle, or CB, revenue in Europe , and light vehicle, or LV, sales in China.

Chris P. Gropp: and reduced inflationary price pass-through as Q2 2023 benefited from some out-of-period customer recoveries. Our adjusted diluted earnings per share are $0.88 per share and impacted by ongoing structural tax issues.

Chris Gropp: We earned 84 million in adjusted operating income and 117 million of adjusted EBITDA, resulting in an adjusted operating margin of 9.7%, which represents a year-over-year decrease of 90 basis points, while the adjusted EBITDA margin of 13.6% represented a year-over-year decrease of 110 basis points. Year-over-year conversions were affected by standalone corporate costs, which we will break down shortly. Of note, net income was partially impacted by higher interest expense, which includes the one-time non-cash impact from the loss on the extinguishment of debt. From a core business performance standpoint, our segments reported strong overall margins. Q2 segment adjusted operating margins were healthy at 12.2%, as our aftermarket segment ended at 15.1%.

Chris P. Gropp: We earned $84 million in Adjusted Operating Income and $117 million of Adjusted EBITDA, resulting in an adjusted operating margin of 9.7%, which represents a year-over-year decrease of 90 basis points, while the adjusted EBITDA margin of 13.6% represented a year-over-year decrease of 110 basis points. Year-over-year conversions were affected by standalone corporate costs, which we will break down shortly. Of note, net income was partially impacted by higher interest expense, which includes the one-time, non-cash impact from the loss on the extinguishment of debt.

Chris P. Gropp: We earned $84 million in adjusted operating income and $117 million of adjusted EBITDA, resulting in an adjusted operating margin of 9.7%, which represents a year-over-year decrease of 90 basis points.

Chris P. Gropp: While the adjusted EBITDA margin of 13.6% represented a year-over-year decrease of 110 basis points.

Chris P. Gropp: Year-over-year conversions were affected by stand-alone corporate costs, which we will break down shortly.

Chris P. Gropp: Of note, net income was partially impacted by higher interest expense, which includes the one-time, non-cash impact from the loss on the extinguishment of debt.

Chris P. Gropp: From a core business performance standpoint, our segments reported strong overall margins. Q2 segment adjusted operating margins were healthy at 12.2% as our aftermarket segment ended at 15.1% on the back of inflationary price pass-through and positive product sales mix. Q2 fuel systems margins were strong at 10.1%, down 120 basis points, mainly due to some retroactive customer recovery. Equalized for this, fuel systems downside conversion on sales would be less than 15%.

Chris P. Gropp: From a core business performance standpoint, our segments reported strong overall margins.

Chris P. Gropp: Q2 segment adjusted operating margins were healthy at 12.2%, as our aftermarket segment ended at 15.1% on the back of inflationary price pass-throughs and positive product-sales mix.

Chris Gropp: On the back of inflationary price pass-through and positive product sale mix. Q2 fuel system margins were strong at 10.1%, down 120 basis points, mainly due to some retroactive customer recoveries. Equalized for this fuel system downside conversion, sales would be less than 15%. Corporate costs were 21 million in the quarter compared with 17 million in the same period of the prior year. The largest driver this year was the build up of our standalone corporate function as we separated from our former parent.

Chris P. Gropp: Q2 fuel systems margins were strong at 10.1%, down 120 basis points, mainly due to some retroactive customer recovery. Equalized for this, fuel systems downside conversion on sales would be less than 15%.

Chris P. Gropp: Corporate costs were 21 million in the quarter compared with 17 million in the same period of the prior year. The largest driver this year was the buildup of our standalone corporate function as we separated from our former parents. Now let me bridge our revenue and EBITDA, which you can find on pages 9 and 10 in the presentation. Our adjusted sales performance in the quarter was affected by softness in volume and VIX, which was a headwind of $18 million due to lower CV sales in Europe and LV softness in China, partially offset by ongoing strength in aftermarket sales in Europe.

Chris P. Gropp: Corporate costs were $21 million in the quarter, compared with $17 million in the same period of the prior year. The largest driver this year was the build-up of our stand-alone corporate function as we separated from our former parent.

Chris Gropp: Now let me bridge our revenues and EBITDA, which you can find on pages 9 and 10 in the presentation. Our adjusted sales performance in the quarter was affected by softness and volume and mix, which was ahead one of 18 million due to lower CV sales in Europe. LV softness in China partially offset by ongoing strength and aftermarket sales in Europe. By contrast, we saw offbiting inflationary increases in aftermarket sales against the noted one-time lump sum prior period non-commodity inflationary recovery for fuel systems. We saw offbiting inflationary increases in Q2 2023. Negotiations of customer recovery to peace price was finalized in Q2 2023 versus one sum and results in program and segment profitability moving in line with expectation on a more consistent basis after this period.

Chris P. Gropp: Now, let me bridge our revenue and EBITDA, which you can find on pages 9 and 10 in the presentation.

Speaker Change: Our adjusted sales performance in the quarter was affected by softness in volume and VIX, which was a headwind of $18 million due to lower CV sales in Europe , LV softness in China, partially offset by ongoing strength in aftermarket sales in Europe .

Chris P. Gropp: By contrast, we saw offsetting inflationary increases in aftermarket sales against the noted one-time lump sum prior period non-commodity inflationary recovery for fuel systems in Q2 2023. Negotiation of customer recovery to piece price was finalized in Q2 2023 versus one sum and results in program and segment profitability, moving in line with expectation on a more consistent basis after this period. Finally, the weakening of the euro in the Chinese Yuan reduced sales by another 6 million for the quarter.

Speaker Change: By contrast, we saw offsetting inflationary increases in aftermarket sales against the noted one-time lump-sum prior period non-commodity inflationary recovery for fuel systems in Q2 2023.

Speaker Change: Negotiation of customer recovery to piece price was finalized in Q2 2023 versus lump sum and results in program and segment profitability moving in line with expectation on a more consistent basis after this period.

Chris Gropp: Finally, weakening of the Euro in Chinese 1 reduced sale by another 6 million for the quarter. Turning to page 10, the quarter saw negative volume and mix on sale to 4 million, or a 22% contribution margin. Strong supplier savings and recoveries of 13 million were a tailwind for the quarter, offset by increases in an employee and other manufacturing cost to 4 million. Employee costs increased by 11 million, including 4 million in corporate costs, as expected. R&D costs were up to 2 million, mainly due to increased spending. Transactual FX was a negative impact to 5 million in quarter-over-quarter, as the basket of currencies used in our operations was a headwind.

Speaker Change: Finally, weakening of the Euro in Chinese Yuan reduced sales by another 6 million for the quarter.

Chris P. Gropp: Turning to page 10, the quarter saw negative volume and mix on sales of $4 million, or a 22% contribution margin. Strong supplier savings and recoveries of $13 million were a tailwind for the offset by increases in employee and other manufacturing costs of $4 million. Employee costs increased by $11 million, including $4 million in corporate costs, as expected. R&D costs were up $2 million, mainly due to increased spending. Transactional FX had a negative impact of $5 million quarter over quarter as the basket of currencies used in our operations with a head. Net cash from operations in Q2 was $109 million.

Speaker Change: Turning to page 10, the quarter saw negative volume and mix on sales of $4 million, or a 22% contribution margin.

Speaker Change: Strong supplier savings and recoveries of $13 million were a tailwind for the quarter.

Speaker Change: offset by increases in employee and other manufacturing costs of $4 million.

Speaker Change: Employee costs increased by $11 million, including $4 million in corporate costs, as expected.

Speaker Change: R&D costs were up $2 million, mainly due to increased spending.

Speaker Change: Transactional FX has a negative impact of five million quarter over quarter as the basket of currencies used in our operations was a headwind.

Chris Gropp: Net cash from operations in Q2 was 109 million. During the quarter, we generated adjusted free cash flow of 108 million, as we continue to be disciplined in management of our working capital and drive optimization of resources and processes on a daily basis. Capital spend was less than 2% of sales in the quarter and 3% year to date, but still projected to come in for full year at guidance of approximately 4% of revenue.

Speaker Change: Net cash from operations in Q2 was $109 million. During the quarter we generated adjusted free cash flow of $108 million as we continue to be disciplined in management of our working capital and drive optimization of resources and processes on a daily basis.

Chris P. Gropp: As we continue to be disciplined in management of our working capital and drive optimization of resources and processes on a daily basis, capital spend was less than 2% of sales in the quarter and 3% year-to-date, but still projected to come in for a full year at guidance of approximately 4% of revenue, with respect to 2024 guidance. As Brady and I both mentioned, our second quarter results are trending in line with our full year guidance, but we expect softness in the second half of the year, with full year revenue trending closer to the lower end of the range.

Speaker Change: Capital spend was less than 2% of sales in the quarter and 3% year-to-date, but still projected to come in for full year at guidance of approximately 4% of revenue.

Chris Gropp: Moving to slide 11, with respect to 2024 guidance, as Brady and I both mentioned, our second quarter results are trending in line with our full year guidance, but expect softness in the second half of the year, with full year revenue trending closer to the lower end of the range. We have also refined our full year effective tax rate assumption and expect it to be between 33% to 37%. The expected changes to our legacy legal entity and tax structure that are required to reduce the company's effect of tax rate are pretty much to be more time and resource-consuming and anticipated.

Speaker Change: Now moving to slide 11.

Speaker Change: With respect to 2024 guidance, as Brady and I both mentioned, our second quarter results are trending in line with our full-year guidance, but expect softness in the second half of the year, with full-year revenue trending closer to the lower end of the range.

Chris P. Gropp: We have also refined our full year effective tax rate assumption and expect it to be between 33% and 37%. However, the expected changes to our legacy legal entity and tax structure that are required to reduce the company's effective tax rate are proven to be more time and resource consuming than anticipated. More efforts and analysis are required, but we are committed to an effective tax rate more in line with our peers. Overall, we expect solid earnings and cash generation in 2024 as we continue to drive operational efficiencies and grow our aftermarket segment. In closing, we remain financially disciplined and focused on generating strong shareholder returns. And with that, we'll now move to the Q&A portion of our call.

Speaker Change: We have also refined our full year effective tax rate assumption and expect it to be between 33% to 37%.

Speaker Change: The expected changes to our legacy, legal, entity, and tax structure that are required to reduce the company's effective tax rate are proving to be more time and resource consuming than anticipated.

Chris Gropp: These efforts are complicated by the adoption of OECD Pillar 2 global minimum tax rules in some jurisdictions that we do business, resulting in much of our team's efforts early this year being focused on mitigating further rate increases. That could have had an immediate negative effect, and rules have been introduced. More efforts and analysis are required that we are committed to an effective tax rate more in line with our peers. Overall, we expect solid earnings in cash generation in 2024 as we continue to drive operational efficiencies and grow our aftermarket segments.

Speaker Change: These efforts are complicated by the adoption of OECD Pillar 2 Global Minimum Tax Rules in some jurisdictions that we do business, resulting in much of our team's efforts early this year being focused on mitigating further rate increases.

Speaker Change: that could have had an immediate negative effect as rules have been introduced.

Speaker Change: More efforts and analysis are required that we are committed to an effective tax rate more in line with our peers.

Speaker Change: Overall, we expect solid earnings and cash generation in 2024 as we continue to drive operational efficiencies and grow our aftermarket segment.

Unknown Attendee: In closing, we remain financially disciplined and focused on generating strong shareholder returns. And with that, we'll now move to the Q&A portion of our call.

Speaker Change: In closing, we remain financially disciplined and focused on generating strong shareholder returns. With that, we'll now move to the Q&A portion of our call.

Unknown Attendee: At this time, I would like to remind everyone that in order to ask a question, press star, followed by the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster.

Operator: At this time, I would like to remind everyone in order to ask a question, press star, followed by the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster.

Speaker Change: At this time, I would like to remind everyone in order to ask a question, press star, follow the number one on your telephone keypad.

Speaker Change: We'll pause for just a moment to compile the Q&A roster.

Jake Schall: Our first question comes from the line of Jake Schall with the N.P. Parivas. Your line is opened.

Speaker Change: Our first question comes from the line of Jake Scholl with BNP Paribas. Your line is opened.

Unknown Attendee: Hey guys, congrats on a great quarter. So first question for me, now your sales are pointing towards the low end, but it looks like your EBITDA cash flow ranges are pretty much intact and tracking a little bit towards the midpoint. So can you just talk about the cadence of the second half, especially in the fuel system segment? Thank you.

Jake Schall: Hey guys, congrats on the great quarter. So first question from me. So you're now your sales are pointing towards the low end of it. Looks like you're even on cash low range. who are pretty much intact and tracking a little bit towards the midpoint.

Unknown Attendee: Hey guys, congrats on a great quarter. So first question for me, so now your sales are pointing towards the low end, but it looks like your EBITDA and cash flow ranges are pretty much intact and tracking a little bit towards the midpoint.

Brady Ericson: So can you just talk about the cadence in the second half, especially on the fuel for some second. Thank you.

Speaker Change: So if you just talk about the cadence in the second half, especially in the fuel system segment. Thank you

Brady Ericson: Yeah, thanks. Thanks for the question. What we're seeing, obviously, we see the CV side and the light vehicle side coming in softer in the second half. I think all the forecasts we see on CV are going to be softer. And so we do see continued pressure on that side. Light vehicle side is also a little bit softer in Asia. We're seeing some customers here this summer, kind of take longer shutdowns and Europe and make some inventory adjustments. And so it's a little bit noisy. It always kind of gets noisy around the summer months of how long they're going to take off and, you know, where they come back as far as run rates.

Brady D. Ericson: yet. Thanks. Thanks for the question.

Brady D. Ericson: What we're seeing, obviously, is that the CV side and the light vehicle side coming in softer in the second half. I think all the forecasts we see on CV are going to be softer. And so we do see continued pressure on that side. The light vehicle side is, you know, also a little bit softer in Asia. We're seeing some customers here this summer kind of take longer shutdowns in Europe and make some inventory adjustments.

Speaker Change: Yeah, thanks. Thanks for the question.

Speaker Change: What we're seeing obviously is we see the CV side and the light vehicle side coming in softer in the second half. I think all the forecasts we see on CV.

Speaker Change: are going to be softer. And so we do see continued pressure on that side.

Speaker Change: Light vehicle side is, you know, also a little bit softer in Asia. We're seeing some customers.

Speaker Change: Here this summer going to take longer shutdowns in Europe and make some inventory adjustments.

Brady D. Ericson: And so it's a little bit noisy; it always kind of gets noisy around the summer months as far as how long they're going to take off and, you know, where they come back as far as run rates. And so we do see our fuel system segment softer in the second half. And we're taking, you know, adjustments, I think, with our downside conversions, and we're making sure those stay within reason. But then, as we kind of highlighted in this call, we also see upside potential in the aftermarket as customers keep their vehicles longer.

Speaker Change: And so it's a little bit noisy. It always kind of gets noisy around the summer months of how long they're going to take off.

Brady Ericson: And so we do see our fuel system segment softer in the second half, and we're taking. You know, adjustments, I think with our downside conversions, you know, we're making sure those stay within, within reason, but then as we kind of highlighted in this call, we also, with that, we also see upside potential in the aftermarket as customers keep their vehicles longer. And that's why we like the aftermarket so much, as it kind of counter bounces when the always side is a little bit softer. So we're going to continue to keep a monitor on that. And as I said, we think, you know, the second half is going to be a little softer in the first half.

Speaker Change: and you know where they come back as far as run rates and so we do see our fuel system segment softer in the second half and we're taking you know adjustments I think with our downside conversions and we're making sure those stay within reason.

Speaker Change: But then, as we kind of highlighted in this call, we also, with that, we also see upside potential in the aftermarket as customers keep their vehicles longer, and that's why we like the aftermarket so much, is it kind of counterbalances when the OE side is a little bit softer.

Brady D. Ericson: And that's why we like the aftermarket so much, as it kind of counterbalances when the OE side is a little bit softer. So we're going to continue to keep a monitor on that, and as I said, we think the second half is going to be a little bit different.

Speaker Change: We're going to continue to keep a monitor on that and as I said, we think the second half is going to be a little bit softer than the first half. From the cash point of view, even with the hit on the tax rate, we continue to hold. Our cash is coming in well, the units are doing really well.

Brady D. Ericson: Unknown Attendee, Chris Gropp, Douglas Dethy, Colin Langan, Brady Ericson, Thomas Scholl, A really good job. We've been working on working capital, which was a bit of a problem at the end of last year, but it improved, and we continue to see improvement. So that's going to more than make up for any hits on the tax rate and any softness in any of the top line sales.

Brady Ericson: And from the cash point of view, even with the hit on the tax rate, we continue to hold our cash. Is coming in well; units are doing a really good job. We've been working on working capital, which was a bit of a problem at the end of last year that improved, and we continue to see improvements. So that's going to more than make up for any hits on the tax rate and any softness in any of the top line sales. Thank you.

Speaker Change: A really good job. We've been working on working capital, which was a bit of a problem at the end of last year. That's improved and we continue to see improvement. So that's going to more than make up for any hits on the tax rate and any softness in any of the top line sales.

Brady D. Ericson: And then I think we're all impressed by the 90 million buybacks in the quarter. So what opportunity do you see for future buybacks going forward and maybe some other uses of cash? Thank you.

Unknown Attendee: And then I think we're all impressed by the 90 million of five acts in the quarter.

Speaker Change: Thank you. And then I think we're all impressed by the 90 million of buybacks in the quarter. So what opportunity do you see for future buybacks going forward and maybe some other uses of cash? Thank you.

Brady Ericson: So what opportunity do you see for future five acts going forward and maybe some other use cash. Thank you. Yeah, I mean, you see our cash balance remains really strong. You know, even with 100 million return to shareholders, our net cash balance went up. And so that just kind of reaffirms the cash generating potential of the business. And again, from our capital allocation strategies, we're looking to maximize shareholder value. And right now, you know, the opportunities in our shares, and that's what we're doing. I do think we still have a little bit of, you know, excess cash than we need.

Brady D. Ericson: Yeah, I mean, as you see, our cash balance remains really strong, you know, even with 100 million dollars in return to shareholders, our net cash balance went up. And so that just kind of reaffirms the cash generating potential of the business.

Speaker Change: Yeah, I mean, as you see, our cash balance remains really strong, you know, even even with 100 million return to shareholders, our net cash balance went up. And so that just kind of reaffirms the cash generating potential of the business.

Brady D. Ericson: And again, from our capital allocation strategies, we're looking to maximize shareholder value. And right now, you know, the opportunity is in our shares, and that's what we're doing. I do think we still have a little bit of, you know, excess cash that we need. And so we'll continue to kind of allocate, you know, both our cash flow that we generate each quarter, as well as kind of bring our cash balances maybe down a little bit, you know, over time.

Speaker Change: And again, from our capital allocation strategies is we're looking to maximize shareholder value.

Speaker Change: And right now, you know, the opportunity is in our in our shares, and that's what we're doing.

Brady Ericson: And so we'll continue to kind of allocate, you know, both our cash flow that we generate each quarter as well as kind of bring our cash balances maybe down a little bit. You know, over time, and we're going to continue to apply that to where we think it's going to generate the most value. We do continue to look at MNA opportunities. But again, those need to add more value than buying back our own shares, or paying down debt, or increasing our dividends. So we're going to continue to review that with the board on kind of next steps, and we'll hopefully have some more news after that discussion here.

Speaker Change: I do think we still have a little bit of, you know, excess cash that we need. And so we'll continue to kind of...

Speaker Change: Allocate, you know, both our cash flow that we generate each quarter as well as kind of bring our cash balances maybe down a little bit.

Brady D. Ericson: And we're going to continue to apply that to where we think it's going to generate the most value. We do continue to look at M&A opportunities. But again, those need to add more value than buying back our own shares or paying down debt or increasing our dividends. So we're going to continue to review that with the board on what kind of next steps. And we'll hopefully have some more news after that discussion here in the next week or so.

Speaker Change: you know over time and we're going to continue to apply that to where we think it's going to generate the most value.

Speaker Change: We do continue to look at M&A opportunities.

Speaker Change: But again, those need to add more value than buying back our own shares or paying down debt or increasing our dividends. So we're going to continue to review that with the board on kind of next steps, and we'll hopefully have some more news after that discussion here in the next week or so.

Unknown Attendee: And then next week, we can show you.

Unknown Attendee: Joe.

William Tackett: Your next question comes from the line of Adam Jonas with Morgan Stanley. Your line is opened. Hi, this is William Tackett on for Adam Jonas. I was curious with the new admission standards for heavy duty vehicles that came out, I think back in March and went into effect in June. Obviously, that increases the need for more advanced injection systems. I guess with the final rule now out, are you seeing any indications of increased demand for GDI or diesel direct injection systems from your OEM customers? Thanks. Yeah, I mean, both, I guess you mentioned kind of CV, and then the GDI is more for the light vehicle, but on CV, as you know, with the admissions regulations, there's a the performance of those injection systems in order to mean the requirements.

Operator: Your next question comes from the line of Adam Jonas with Morgan Stanley. Your line is open.

Speaker Change: Your next question comes from the line of Adam Jonas with Morgan Stanley . Your line is opened.

Unknown Attendee: Hi, this is William Sackett on behalf of Adam Jonas. I was curious about the new emission standards for heavy-duty vehicles that came out, I think back in March and went into effect in June. Obviously, that increases the need for more advanced injection systems. I guess with the final rule now out, are you seeing any indications of increased demand?

Speaker Change: Hi, this is William Sackett on for Adam Jonas. I was curious with the new emission standards for heavy-duty vehicles that came out I think back in March and went into effect in June

Speaker Change: Obviously that increases the need for more advanced injection systems. I guess with the final rule now out, are you seeing any indications of increased demand for GDI or diesel direct injection systems from your OEM customers? Thanks.

Speaker Change: Yeah, I mean, both, I guess you mentioned kind of CV and then the GDI is more for the light vehicle, but on on CV.

Brady D. Ericson: Yeah, I mean, both, I guess you mentioned CV and then the GDI is more for the light vehicle, but on CV, as you know, with the emissions regulations, there's a model year 27 is kind of now defined, and that's going to be another significant upgrade in the performance of those injection systems in order to meet the requirements. And so, you know, we're launching, you know, as it seems like on the CV side, about every three years, with customers kind of a significant upgrade in our fuel systems or a model year 21, we've got another one in 24. And now, in 27, with the new EPA regulations, those are going to be relatively significant increases in performance requirements for injection systems.

Speaker Change: As you know, with the emissions regulations, there's a model year 27 are kind of.

Speaker Change: Now defined, and that's going to be another significant upgrade.

Brady Ericson: And so, you know, we're launching, you know, as it seems like on the CV side, about every three years, with customers, kind of a significant upgrade in our fuel system. So, I'm all here, 21. We've got another one, 24 and now in 27 with the new EPA regulations. And those are going to be relatively significant increases in performance requirements for our injection systems. So, I guess the answer is yes, we are seeing a significant increase in demand, and we've announced a number of those new business wins for those applications, you know, over the last year.

Speaker Change: In the performance of those injection systems in order to meet the requirements. And so, you know, we're launching, you know, as it seems like on the CV side about every three years.

Speaker Change: with customers, kind of a significant upgrade in our fuel system. So our emollier 21, we've got another one in 24.

Speaker Change: And now in 27 with the new EPA regulations, and those are going to be relatively significant.

Brady D. Ericson: So I guess the answer is yes, we are seeing a significant increase in demand. And we've announced a number of those new business wins for those applications, you know, over the last year. From a GDI perspective, as we kind of announced today as well for the Chinese OEM, not only was that on a GDI system, but now it includes our ECU, our software, and our calibration services that we're providing. So we are seeing an uptick in GDI kind of requests and demand as people see GDI as a key technology to help them towards their carbon neutrality and just overall efficiency improvement goals.

Speaker Change: increases in performance requirements for our injection system, so.

Speaker Change: I guess the answer is yes, we are seeing significant increase in demand and we've announced a number of those new business wins.

Brady Ericson: From a GDI perspective, as we kind of announced today as well for the Chinese OEM, not only was that on a GDI system, but now it includes our ECU, our software, and our calibration services that we're providing. So, we are seeing an uptick in GDI kind of request and demand as people see GDI, you know, being a key technology to help them towards their carbon neutrality and just overall efficiency improvement goals. And so, we're seeing a lot of increased demand or opportunities that we've been announcing, as well as programs that were originally planned to kind of phase out being extended as well.

Speaker Change: for those applications, you know, over the last year.

Speaker Change: from a GDI perspective as we kind of announced today as well for the Chinese OEM. Not only was that on a GDI system but now it includes our ECU, our software and our calibration services that we're providing. So we are seeing an uptick.

Speaker Change: in GDI kind of requests and demand as people see GDI, you know, being a key technology to help them towards their carbon neutrality and just overall efficiency improvement goals.

Brady D. Ericson: And so we're seeing a lot of a lot of increased demand or opportunities that we've been announcing, as well as programs that were originally planned to kind of phase out being extended as well. So we do see some positives there on the GDI side as well.

Speaker Change: and so we're seeing a lot of a lot of increased demand or opportunities that we've been announcing as well as programs that were originally planned to kind of phase out being extended as well so we do see some some positives there on the GDI side as well.

Brady Ericson: So, we do see some positives there on the GDI side as well. In last quarter, we announced 500 bar, which is also going to add to that. Yeah, from a technology perspective.

Brady D. Ericson: And last quarter, we announced 500 bars, which is also going to get my tech.

Speaker Change: And last quarter, we announced 500 bar, which is also going to from a technology perspective.

Brady D. Ericson: Yes, from a technology perspective, yes.

Unknown Attendee: God, that's that's all really helpful.

Unknown Attendee: Got it. That's all really helpful.

Brady Ericson: Maybe just kind of going off of that, I guess, how is competition evolving in the GDI space? I mean, with the rapid shift of hybrids, have any competitors moved to take advantage of the increase in demand, or is this a space where you feel confident you can retain, share and have some price and power in the coming years? Thanks. Yeah, I mean, I think the folks that have been exiting, you know, a lot of combustion products are still exiting. There's still a number of key competitors still in the marketplace, some significant players. And so, they're still supporting customer demands.

Brady D. Ericson: Maybe just kind of going off of that, I guess, how's competition evolving in the GDI space? I mean, with the rapid shift to hybrids, have any competitors moved to take advantage of the increase in demand? Or is this a space where you feel confident you can retain share and have some pricing power in the coming years? Thanks. E.M.

Speaker Change: Got it. That's all really helpful. Maybe just kind of going off of that, I guess, how's competition evolving in the GDI space? I mean, with the rapid shift to hybrids, have any competitors moved to take advantage of the increase in demand? Or is this a space where you feel confident you can retain share and have some pricing power in the coming years? Thanks.

Brady D. Ericson: Yeah, I mean, I think the folks that have been exiting, you know, a lot of combustion products are still exiting. There's still a number of key competitors in the marketplace. Some significant players are still supporting customers' demands, and I think over time as they've cut back on some of their R&D spend and investments, that's going to come into play. And that's where our 500 bar technology is giving us some competitive advantages and has allowed us to get some conquest wins.

Speaker Change: Yeah, I mean, I think the folks that have been exiting, you know, a lot of combustion products are still exiting. There's still a number of key competitors still in the marketplace.

Speaker Change: Some some significant players and so they're still supporting customers demands I think over time as they've cut back on some of their R&D spend and investments

Brady Ericson: I think over time, as they've cut back on some of their R&D spend and investments, that's kind of coming to play. And that's where our 500 bar technology is giving us some competitive advantages, and it's allowed us to get some conquest ones. I think when we also take a look at, you know, there's a number of competitors that have already exited and those that have reduced their R&D spend, they're not doing it about-face and saying they're going to now reinvest in combustion. I think that’s that path has already been set. And so, you know, from our perspective, we think it's a good positive to where we're still going to have, you know, a few competitors, you know, say 2030 and beyond.

Speaker Change: That's going to kind of come into play and that's and that's where our 500 bar technology Is giving us some competitive advantages and it's allowed us to get some conquest conquest wins

Brady D. Ericson: I think when we also take a look at, you know, there's a number of competitors that have already exited and those that have reduced their R and D spend, they're not doing an about face and saying they're going to now reinvest in combustion. I think, I think that path has already been set.

Speaker Change: I think we may also take a look at, you know, there's a number of competitors that have already exited and those that have reduced their R&D spend.

Speaker Change: They're not doing an about face and saying they're gonna now reinvest in combustion. I think that path has already been set. And so, from our perspective, we think it's a good positive to where we're still gonna have a few competitors.

Brady D. Ericson: And so, you know, from our perspective, we think it's, it's a good positive situation where we're still going to have a few competitors, uh, you know, say 20, 30 and beyond, um, but it's a better situation than having six or eight competitors in the space. And so we're just trying to be a, you know, a reliable partner for a lot of our customers. And that's why I think we've been gaining, you know, a lot of share on the GDI side that's allowed us to kind of keep our light vehicle, you know, revenues flat despite declining engine production volume.

Brady Ericson: But it's a better situation than having six or eight competitors in the space. And so we're just trying to be, you know, a reliable partner for a lot of our customers. And that's why I think we've been gaining, you know, a lot of a lot of share on the GDI side. That's allowed us to kind of keep our light vehicle, you know, revenues flat, despite declining engine production volume. B.

Speaker Change: Unknown Attendee, Brady Ericson, Michael Heifler

Speaker Change: And so, we're just trying to be a you know a reliable partner for a lot of our customers and that's why I think we've been gaining, you know, a lot of a lot of share on the GDI side that's allowed us to kind of keep our light vehicle revenues.

Unknown Attendee: Perfect, thank you.

Speaker Change: flat despite declining engine production volumes.

Federico Marendi: Your next question comes from the line of Federico Marendi with Bank of America. Your line is opened. Good morning, everyone.

Operator: Your next question comes from the line of Federico Marendi with Bank of America.

Speaker Change: Perfect. Thank you.

Speaker Change: Your next question comes from the line of Federico Marendi with Bank of America. Your line is open.

Unknown Attendee: Good morning, everyone. Just a quick question on the outlook beyond 2024. So a lot of the other suppliers mentioned that EV demand is, I mean, EV production volumes are. Unknown Attendee, Chris Gropp, Douglas Dethy, Colin Langan, Brady Ericson, Thomas Scholl, popularity. So what I'm wondering is your growth expectation for 2025 plus, and if you could also touch upon the growth opportunities from consolidation in the fuel system industry. Thank you.

Brady Ericson: Just a big question on the outlook beyond 2024. So the other suppliers mentioned that EV demand is, I mean, EV production volumes are slower to ramp, and it seems that I'm going to stay around for longer, also even the hybrid popularity. So what I'm wondering is what your growth expectation for 2025 last, and if you could also touch upon the growth opportunities from consolidation in the fuel system industry. Thank you. We haven't given, we haven't given specific guide for 2025, but we have given, you know, what our expectation is through the decade of averaging that two to four percent.

Federico Marendi: Good morning, everyone. Just a quick question on the outlook beyond 2024. So a lot of the other suppliers mentioned that

Speaker Change: EV demand is... I mean, EV production volumes are...

Speaker Change: Unknown Attendee, Brady Ericson, Michael Heifler

Speaker Change: Popularity. So what I'm wondering is what your growth expectation for 2025 plus

Speaker Change: and if you could also touch upon the growth opportunities from consolidation in the fuel system industry.

Brady D. Ericson: Sure. We haven't given, we haven't given specific guidance for 2025, but we have given, you know, what our expectation is through the decade of averaging that two to 4%, and that's, you know, what we expect to continue going forward. Um, we're running kind of a down cycle right now, which is why we're seeing kind of a flat, but we see that, you know, rebounding in 25 and 26 as light vehicle and GDI penetration rates and hybrids increased in the later years, as well as with the CV segment kind of rebounding, uh, in 25 and 26, um, with some of the new emissions regulations coming out in 27.

Speaker Change: Thank you.

Speaker Change: We haven't given a specific guide for 2025, but we have given what our expectation is through the decade of averaging that 2-4%.

Brady Ericson: And that's, you know, what we expect continuing going forward.

Brady Ericson: We're reading kind of a down cycle right now, which is why we're seeing kind of flat, but we see that, you know, rebounding in 25 and 26 as light vehicle and in GDI penetration rates and hybrids, you know, increase in the outer years, as well as with the CV segment, kind of rebounding in 25 and 26 with some of the new emissions regulations coming out in 27. So the, you know, the EV slowing, does that give us an opportunity on the light vehicle side? You know, longer term, that may help. But again, our main focus is on maintaining, you know, our light vehicle revenues in GDI, you know, throughout the decade.

Speaker Change: And that's, you know, what we expect continuing going forward.

Speaker Change: We're in kind of a down cycle right now, which is why we're seeing kind of flat, but we see that, you know, rebounding in 25 and 26 as light vehicle and

Speaker Change: and GDI penetration rates in hybrids, you know, increase in the outer years.

Speaker Change: As well as with the CV segment kind of rebounding in 2025 and 2026 with some of the new emissions regulations coming out in 2027.

Brady D. Ericson: So, you know, the EV, EV slowing, does that give us an opportunity on the light vehicle side? Longer term, that may help. Um, but again, our main focus is, is on maintaining, um, you know, our, our light vehicle revenues in GDI, uh, you know, throughout the decade. Uh, and we've been doing that by picking up additional market share. Um, even with the slowing, uh, EV penetration rates, EV penetration rates are still going up.

Speaker Change: So the, you know, the EV slowing, does that give us an opportunity on the light vehicle side, you know, longer term that may help?

Speaker Change: But again, our main focus is on maintaining, you know, our light vehicle revenues in GDI.

Brady Ericson: And we've been doing that by picking up additional market share. Even with the slowing EV penetration rates, EV penetration rates are still going up. And so that means engine production is still going to be going down. So rather than going down maybe three or four percent a year, it may be only going down one, two, or three percent a year throughout the decade. And so our goal is to ensure that we offset that ice decline with some market share gains and content improvements. I think our original outlook for 2030 for EV penetration on light vehicle was, I think, close to about 40 percent EV penetration rates.

Speaker Change: throughout the decade. And we've been doing that by picking up additional market share. Even with the slowing EV penetration rates,

Brady D. Ericson: Um, and so that means engine production is still going to be going down, so rather than going down maybe three or 4% a year, it may be only going down one or two or 3% a year, uh, throughout the decade. And so our goal is to ensure that we offset that decline with some market share gains in content improvements. I think our original outlook for 2030 for EV penetrations on light vehicles was, I think, close to about 40% EV penetration rates.

Speaker Change: EV penetration rates are still going up. And so that means engine production is still going to be going down. So rather than going down maybe 3 or 4% a year,

Speaker Change: It may be only going down 1 or 2 or 3% a year throughout the decade. And so our goal is to ensure that we offset that ice decline with some market share gains and content improvements.

Speaker Change: I think our original outlook for 2030 for EV penetrations on light vehicle was I think close to about 40% EV penetration rates.

Brady Ericson: And so if that obviously is only 30 percent penetration out there, that, you know, does give us an opportunity. And with the, you know, declining competitive environment, that's allowing us to continue to gain share. And that may give us some opportunity in 2030 and beyond.

Brady D. Ericson: And so that obviously is only 30% penetration out there, and that does give us an opportunity. And with the, uh, you know, declining competitive environment, that's allowing us to continue to gain share, and that may give us some opportunities in 2030 and beyond, but I think it's, I think it's a little bit too early to kind of, kind of bake that in at this point.

Speaker Change: And so that obviously is only 30% penetration out there that, you know, does give us an opportunity.

Speaker Change: And with the, you know, declining competitive environment, that's allowing us to continue to gain share and that may give us some opportunity in 2030 and beyond, but I think it's, I think it's a little bit too early to kind of kind of bake that in at this point.

Brady Ericson: But I think it's, I think it's a little bit too early to kind of kind of bake that in at this point.

Unknown Attendee: Thank you.

Speaker Change: Thank you.

Unknown Attendee: As a reminder to ask the question, please press star, followed by the number one on your telephone keypad.

Operator: As a reminder to ask a question, please press star followed by the number one on your telephone keypad. Our next question comes from the line of Daniel Lye with Barclays. Your line is open.

Speaker Change: As a reminder, to ask a question, please press star followed by the number one on your telephone keypad. Our next question comes from the line of Daniel Lye with Barclays. Your line is open.

Daniel Lie: Our next question comes from the line of Daniel Lie with Barclays.

Daniel Lie: Your line is over.

Daniel Lie: But this is Daniel on. for Dan. Thanks for taking my question. First, I wanted to double-click on your prior comments on an organic growth opportunities. Would you be able to share any specific products or areas that you're evaluating currently, and just more broadly, how has the MNA landscape shifted over time? Thanks. Yeah, as we've kind of mentioned in the past, our focus on the organic is going to be items that are going to enhance our commercial vehicle industrial off-highway OE business as well as our aftermarket. Those are going to be kind of the key areas.

Unknown Attendee: Hi, this is Daniel speaking on behalf of Dan. Thanks for taking my question. First, I wanted to double-click on your prior comments on inorganic growth opportunities. Would you be able to share any specific products or areas that you're evaluating currently? Just more broadly, how has the MNA landscape shifted over time?

Daniel Lye: Hi this is Daniel on for Dan. Thanks for taking my question. First I wanted to double-click on your prior comments on inorganic growth opportunities.

Daniel Lye: Would you be able to share any specific products or areas that you're evaluating currently and just more broadly, how has the M&A landscape shifted over time? Thanks.

Brady D. Ericson: Yeah, I mean, as we've kind of mentioned in the past, our focus on the inorganic is going to be items that are going to enhance our commercial vehicle, industrial off-highway, OE business, as well as our aftermarket. Those are going to be kind of the key areas. We like product lines that are going to also have significant exposure in the aftermarket. We like that balance of having both the OE and a growing aftermarket.

Speaker Change: Yeah, I mean, as we've kind of mentioned in the past, our focus on the inorganic are going to be items that are going to enhance our commercial vehicle, industrial, off-highway.

Speaker Change: OE business, as well as our aftermarket. Those are going to be kind of the key areas. We like product lines that are going to also have a significant exposure in the aftermarket. We like that balance of having both the OE and a growing aftermarket.

Brady Ericson: We like product lines that are going to also have a significant exposure in the aftermarket. We like that balance of having both the OE and growing aftermarket. There may be some opportunities for us to continue to consolidate in our current product portfolio, as well as adding additional product lines that are synergistic with our core. But again, they're going to be heavily weighted towards commercial vehicle, industrial, and aftermarket. Other ones that we're kind of targeting, but we are going to be, you know, financially prudent in those acquisitions. From our perspective, we think we have a good business right now in, you know, we're not desperate to go out and make acquisitions if they're not going to enhance shareholder value.

Brady D. Ericson: Unknown Attendee, Chris Gropp, Douglas Dethy, Colin Langan, Brady Ericson, Thomas Scholl, are the ones that we're kind of targeting. But we are going to be, you know, financially prudent in making those acquisitions. Chris Gropp, Douglas Dethy, Colin Langan, Brady Ericson, Thomas Scholl is growing our CV industrial and aftermarket businesses for the long term.

Speaker Change: There may be some opportunities for us to continue to consolidate in our current product portfolio, as well as adding additional product lines that are synergistic with our core. But again, they're going to be heavily weighted towards commercial, vehicle, industrial, and aftermarket.

Speaker Change: are the ones that we're kind of targeting, but we are going to be, you know, financially prudent in those acquisitions.

Speaker Change: And so from our perspective, we think we have a good business right now.

Speaker Change: We're not desperate to go out and make acquisitions if they're not going to enhance shareholder value.

Brady Ericson: And they're not, you know, better than, you know, maybe re-investing in share repurchases or in ourselves from an organic standpoint. So we're going to continue to be financially disciplined when we look at those, but obviously our focus is growing our CV industrial and aftermarket businesses for the long term.

Speaker Change: and they're not, you know, better than, you know, maybe reinvesting in share repurchases or in our

Speaker Change: and ourselves from an organic standpoint. So we're going to continue to be financially disciplined when we look at those, but obviously our focus is growing our CV industrial and aftermarket businesses for the long term.

Unknown Attendee: Got it. That's helpful.

Brady D. Ericson: Got it. That's helpful. And as a follow-up, could you provide an update on how your new product launches have been progressing over the years, through 2Q, and from a timing perspective, when should we expect these benefits to begin flowing through your financial system?

Brady Ericson: And as a follow-up, could you provide an update on how your new product launches have been progressing through the years, through to Q, and from a timing perspective, when should we expect these benefits to be canceled through your financial? Thanks. I mean, there's, there's, they're happening all the time. I mean, the nice thing about our businesses, we're pretty diversified, you know, regionally, by platform, by customer. So there's not like one program that's going to add, you know, $200 million in be a big take. There's, there's always a constant stream of new product launches that are happening.

Speaker Change: Got it, that's helpful. And as a follow-up, could you provide an update on how your new product launches have been progressing through the years, through 2Q, and from a timing perspective, when should we expect these benefits to begin flowing through your financials?

Brady D. Ericson: Yeah, I mean, there's a lot.

Brady D. Ericson: Yeah, I mean, there's, there's, they're happening all the time. And I think the, the nice thing about our business is we're pretty diversified, you know, regionally, by platform, by customer.

Speaker Change: Yeah, I mean there's, there's, they're happening all the time and I think the the nice thing about our business is we're pretty diversified, you know, regionally, by platform, by customer.

Brady D. Ericson: So there's not like one program that's going to add, you know, $200 million and be a big tick. There's, there's always a constant stream of new product launches that are happening. I think we've already, you know, launched a couple dozen this year. We've got more in the pipeline, and it's more of a consistent cadence of launches. And so we do see a number of, you know, additional GDI hybrid applications in China that will be launched towards the end of this year and the beginning part of next year.

Speaker Change: So there's not like one program that's going to add, you know, $200 million and be a big tick. There's always a constant stream.

Brady Ericson: I think we've already, you know, launched a couple dozen yet this year. We've got more in the pipeline, and it's more of a consistent cadence of launches. And so we do see a number of, you know, additional GDI hybrid applications in China that'll be launching towards the end of this year, beginning part of next year. But again, we, I think we just have a number of programs that are consistently, you know, coming on or being replaced that should continue to have a, you know, that average growth rate of two to four percent over the decade.

Speaker Change: New Product Launches that are happening. I think we've already, you know, launched a couple dozen yet this year. We've got more in the pipeline and it's more of a consistent cadence.

Speaker Change: of launches. And so we do see a number of, you know, additional GDI hybrid applications in China that will be launching towards the end of this year, beginning part of next year.

Brady D. Ericson: But again, we think we just have a number of programs that are consistently coming on or being replaced that should continue to have an average growth rate of two to four percent over the decades. So there's nothing that's going to be some

Speaker Change: But again, we I think we just have a number of programs that are consistently, you know coming on or being replaced That should continue to have a you know, that average growth rate of two to four percent over the decades. So

Unknown Attendee: So there's nothing that's going to be some step function than I would expect. Great, and it's very helpful.

Speaker Change: There's nothing that's going to be some step function that I would expect.

Unknown Attendee: Great, that's very helpful. Thanks again.

Unknown Attendee: Thanks again.

Drew S. Justice: Your next question comes from the wide of Drew S.

Operator: Your next question comes from the line of Drew Estes with Banyan Capital Market. Your line is open.

Speaker Change: Great, that's very helpful. Thanks again.

Drew S. Justice: Justice with Banyan Capital Market. Your wine is opened.

Speaker Change: Your next question comes from the line of Drew Estes with Banyan Capital Market. Your line is open.

Brady Ericson: Hey, Brady and Chris, this is Drew. Thanks for taking the question. Congrats on getting through the first year as an independent company. That's a big accomplishment. So my question is with regard to the ECU business. I know you all talked quite a bit about it and are very optimistic about its prospects. Could you elaborate on the margin and capital returns on this business? As well as how it helps you win more fuel systems of business, if at all. Thank you.

Unknown Attendee: Hey, Brady and Chris, this is Drew. Thanks for taking the question. Congratulations on getting through your first year as an independent company. That's a big accomplishment.

Drew Estes: Hey Brady and Chris, this is Drew. Thanks for taking the question. Congrats on getting through the first year as an independent company. That's a big accomplishment.

Unknown Attendee: So my question is with regard to the ECU business. I know you have talked quite a bit about it and are very optimistic about its prospects. Could you elaborate on the margin and capital returns on this business, as well as how it helps you win more fuel systems business, if at all? Thank you.

Drew Estes: So my question is with regard to the ECU business, I know y'all have talked quite a bit about it and are very optimistic about its prospects. Could you elaborate?

Drew Estes: On the margin and capital returns on this business, as well as how it helps you win more fuel systems business, if at all. Thank you.

Brady Ericson: Sure. Yeah, we don't disclose; I guess margins are hardly seen for any particular product line, but it is an example that it will always have to meet our minimum guidelines for all businesses, which is our hurdle rate that we use: 15%. And so we do see it as a nice business that's going to meet or exceed our internal rights from an overall market perspective. We see more and more customers that are moving from just buying components to wanting to buy the complete system, and we're one of only, you know, a couple that can provide the complete system.

Speaker Change: Sure. Yeah, we don't disclose, I guess, margins or...

Speaker Change: I see for any particular product line.

Speaker Change: But it is an example that it'll always have to meet our minimum guidelines for all businesses, which is our hurdle rate that we use is 15%.

Brady D. Ericson: And so we do see it as a, as a nice business that's going to meet or exceed our, you know, internal hurdle rates from an overall market perspective. We see more and more customers that are moving from just buying components to wanting to buy the complete system. And we're one of only a couple that can provide the complete system. I think if you go back and take a look at our Investor Day deck from June of 2023, you'll see kind of a chart there of where we see customers going from the left to the right, from buying individual components, where we have a lot of competition.

Speaker Change: and so we do see it as a as a nice business that's going to meet or exceed our you know internal hurdle rates.

Speaker Change: from an overall market perspective.

Speaker Change: We see more and more customers.

Speaker Change: that are moving from just buying components to wanting to buy the complete system. And we're one of only a couple that can provide the complete system. I think if you go back and take a look at our investor day.

Brady Ericson: I think if you go back and take a look at our Investor Day deck from June of 2023, you'll see kind of a chart there of where we see customers going from the left, the right from buying individual components, where we have a lot of competition. There's a lot of different players out there that can do one component that we're competing against, but once you go to the complete system, there's only, you know, maybe two or three that we see as significant competitors. And so, as we kind of highlighted in today's, I guess, announcements, is we have the GDI system in now; we're getting added the ECUs that's giving us additional content.

Speaker Change: deck from June of 2023. You'll see kind of a chart there of where we see customers going from the left, the right from buying, you know, individual components.

Brady D. Ericson: There are a lot of different players out there that can do one component that we're competing against, but once you go to the complete system, there's only maybe two or three that we see as significant competitors. And so, as we kind of highlighted in today's, I guess, announcements,

Speaker Change: Where we have a lot of competition, there's a lot of different players out there that can do one component that we're competing against, but once you go to the complete system, there's only, you know, maybe two or three that we see as significant competitors.

Speaker Change: And so, as we kind of highlighted in today's, I guess, announcements,

Speaker Change: is we had the GDI system and now we're getting added the ECUs that's giving us additional content.

Brady Ericson: And that's also going to make it a lot more difficult and make it stickier with that customer because now they're relying on us for all of those components. So it gives us a content addition, and it makes us, you know, more integrated into our customers' engineering and development side of things. And so that's where we see it's going to not only, you know, add another product line for us. It's going to add a content at content for us, but it also allows us to win additional business and keep customers longer. Also, on the ECUs, we were already doing the software.

Speaker Change: And that's also going to make it a lot more difficult and make it stickier with that customer because now they're relying on us for all of those, all those components, so it gives us that content.

Speaker Change: addition, and it makes us, you know, more integrated into our customers.

Speaker Change: Engineering and Development side of things. And so that's where we see it's going to not only, you know, add another product line for us, it's going to add a content, add content for us, but it also allows us to win additional business and keep customers longer.

Brady D. Ericson: Also of note on the ECUs, we were already doing the software, so we already have the investment in the R&D and the know-how and the knowledge of that, and to me, the brains of the ECU are the more difficult part. That's already embedded in the business, so we're not adding for that. It is really just the hardware side of it that comes into play.

Brady Ericson: So we already have the investment in the R&D and then know how in the knowledge of that. And to me, the brains of the EC was the more difficult part. That's already embedded in the business. So we're not adding for that. It is really just the hardware side of it that comes into play. Right. And also from the investment, you know, we're still using our former parent to supply some of those ECUs, but this is an ECU that was designed by us and we'll have some more flexibility anywhere to source the PCBA or some of the components as well.

Speaker Change: Also of note on the ECUs, we were already doing the software, so we already have the investment in the R&D and the know-how and the knowledge of that. And to me, the brains of the ECU is the more difficult part. That's already embedded in the business, so we're not adding for that. It is really just the hardware side of it that comes into play.

Brady D. Ericson: Right, and also from the investment, you know; we're still using our former parent to supply some of those ECUs, but this is an ECU that was designed by us, and we'll have some more flexibility on where to source the PCBA or some of the components as well.

Speaker Change: Right and also from the investment you know the we're still we're still using our our former parent to supply some of those ECUs but this is an ECU that was designed by us and we'll have some more flexibility on where to where to source the PCBA or some of the components as well.

Unknown Attendee: There are no further questions at this time.

Operator: There are no further questions at this time. I will hand things back over to Brady Ericson for some closing remarks. Unknown Attendee

Brady Ericson: I will hand things back over to Brady Erickson for some closing remarks. Great. Thanks, everybody, for your questions. We really look forward to building on the achievement to the past quarter and to the last year. And we really think we have a clear line of sight on our long-term goals. Really want to again say thank you to our entire team, you know, around the world on delivering, you know, a great year. I think we've accomplished a lot in this first year and really couldn't be more proud of our team. And so I just want to say thank you again to them.

Speaker Change: There are no further questions at this time. I will hand things back over to Brady Ericson for some closing remarks.

Brady D. Ericson: Great. Thanks, everybody, for your questions. We really look forward to building on the achievements of the past quarter and of the last year, and we really think we have a clear line of sight on our long-term goals. I really want to again say thank you to our entire team around the world for delivering a great year. I think we've accomplished a lot in this first year and really couldn't be more proud of our team. And so, I just want to say thank you again to them. Thanks to everybody for joining us on this busy morning, and have a nice day.

Brady D. Ericson: Great, thanks everybody for your questions.

Brady D. Ericson: We really look forward to building on the achievements of the past quarter and of the last year. And we really think we have a clear line of sight on our long-term goals.

Brady D. Ericson: Really want to again say thank you to our entire team, you know, around the world on delivering, you know, a great year. I think we've accomplished a lot in this first year and really couldn't be more proud of our team. And so I just want to say thank you again to them. Thanks for everybody for joining us on this busy morning and have a nice day.

Brady Ericson: Thanks to everybody for joining us on this busy morning, and have a nice day.

Unknown Attendee: Just concludes today's conference call.

Operator: This concludes today's conference call. You may now disconnect.

Unknown Attendee: You may now disconnect.

Speaker Change: This concludes today's conference call. You may now disconnect.

Speaker Change: Unknown Attendee, Chris Gropp, Unknown Attendee, Chris Gropp, Unknown Attendee, Chris Gropp,