Q4 2024 PHINIA Inc Earnings Call

February 13, 2025

Please call.

Operator: PHINIA Fourth Quarter 2024 Earnings Call. 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 1 on your telephone keypad. If you would like to withdraw your question, you can press star 1 again. Thank you. I would now like to turn the call over to Kellen Ferris. Kellen, the floor is now yours.

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

After the Speakers' 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 you can press star one again.

Speaker Change: Thank you I would now like to turn the call over to Colin ferrous Kellan. The floor is now yours.

Speaker Change: Thank you good morning, everyone. We appreciate you joining us our conference call materials issued this morning and are available on <unk> Investor Relations website, including a slide deck that we'll be referencing in our remarks. We're also broadcasting this call via webcast joining us today are pretty ericsson's, CEO and Chris <unk> CFO.

Kellen Ferris: Thank you. Good morning, everyone. We appreciate you joining us. Our conference call materials were issued this morning and are available on PHINIA's investor relations website, including the slide deck that we will 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 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. With that, it is my pleasure to turn the call over to Brady.

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.

Speaker Change: Actual results may differ materially from these statements due to a variety of factors, including those described in our SEC filings with that it's my pleasure to turn the call over to Brady.

Christina: Thank you for standing by. My name is Christina and I will be your conference operator today. At this time, I would like to welcome everyone to the FINIA fourth quarter 2024 earnings call.

Brady: Thank you, Kevin and thanks, everyone for joining us this morning, I'll start with some overall comments on the fourth quarter and the full year 2024 highlights and then provide some thoughts on 2025 and beyond.

Brady Ericson: Thank you, Kellen, and thank you, everyone, for joining us this morning. I'll start with some overall comments on the fourth quarter and the full year 2024 highlights, and then provide some thoughts on 2025 and beyond. Chris will then provide additional detail on our financials and discuss our 2025 guidance. We'll then open up the call for questions. Starting on slide 4 of the deck, during the fourth quarter, the macro environment and industry environment were similar to what we experienced in Q3, as the results reflect the soft top line but with good operating margin performance by the segments. Strong aftermarket segment sales were offset by lower fuel system sales. As a result, net sales in the quarter were $833 million, down 5.6% from the same period of the prior year, which included some contract manufacturing revenues.

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

Christina: After the speaker's remarks, there will be a question and answer session. Thank you for standing by. My name is Christina, and I will be your conference operator today. At this time, I would like to welcome everyone to the CINEA Fourth Quarter 2024 Earnings Call. Thank you. I would now like to turn the call over to Kellen Ferris. Kellen, the floor is now yours.

Brady: Chris will then provide additional detail on our financials and discuss our 2025 guidance.

Brady: Well then open up the call for questions.

Brady: Starting on slide four the deck.

Brady: During the fourth quarter, the macro environment and industry environment were similar to what we experienced in Q3 as our results reflect the soft topline, but with good operating margin performance by the segments.

Christina: Thank you. Good morning, everyone. We appreciate you joining us. Our conference commentaries were issued this morning and are available on the News and Doctor Relations website, including the slide deck that we will be referencing in our remarks. We're also broadcasting this all via webcast. Joining us today are Chris Gropp, Chris Ericson, CEO,

Brady: Strong aftermarket segment sales were offset by lower fuel system sales.

Brady: As a result net sales in the quarter were $833 million down five 6% from the same period of the prior year, which included some contract manufacturing revenues.

and Chris Gropp, Kellen Ferris, Unknown Attendee, Michael Heifler.

Brady: Encouragingly, we are winning significant new business and I'm, particularly pleased with our second product wind in the aerospace and defense industry.

Brady Ericson: Encouragingly, we are winning significant new business and are particularly pleased with our second product win in the aerospace and defense industry. We reported Adjusted EBITDA of $110 million with a margin of 13.2%, a 160 basis point year-over-year decrease. The positive benefits of supplier savings were more than offset by sales decreases, higher annual incentive compensation, and added infrastructure to support the business as a standalone entity. Total segment Adjusted operating margins were 12.8%, a 20 basis point improvement when compared with Q4 2023. Our Adjusted Free Cash Flow was healthy at $72 million, while the balance sheet remained strong with cash and cash equivalents of $484 million, up from $365 million at year-end 2023. Our total liquidity is approximately $1 billion when considering our undrawn revolver. This performance enabled us to return $35 million to shareholders via share buybacks and dividends during the fourth quarter.

Brady: We reported adjusted EBITDA of $110 million with a margin of 13, 2% a.

Speaker Change: Thank you, Kellen, and thank you to everyone for joining us this morning. I'll start with some overall comments on our fourth quarter and the full year 2024 highlights, and then provide some thoughts on 2025 and beyond. Chris will then provide additional detail on our financials and discuss our 2025 guidance. Thank you, Kellen, and thank you everyone for joining us this morning.

Brady: 160 basis points year over year decrease.

Brady: Positive benefits of supplier savings were more than offset by sales decreases.

Brady: Higher annual incentive compensation and added infrastructure to support the business as a standalone entity.

Brady: Total segment adjusted operating margins were 12, 8%, a 20 basis point improvement when compared with the fourth quarter 2023.

I'll start with some overall comments for the fourth quarter.

Speaker Change: and the fourth quarter, the backroom environment and industry environment. Similar to what we experienced in Q3, we then provided some more detail on our top line so it's good operating margin performance by the segments. We'll then open up the call for strong aftermarket segment sales or offset by lower deal system sales.

Brady: Our adjusted free cash flow was healthy at $72 million on our balance sheet remains strong with cash and cash equivalents of $484 million up from $365 million at year end 2023.

Brady: Our total liquidity is approximately $1 billion when considering our undrawn revolver.

Speaker Change: As a result, head sales in the quarter were 833 million, down 5.6 in Q3, the same period of the prior year, which included some contracts and evacuating revenues.

Brady: This performance enabled us to return $35 million to shareholders via share buybacks and dividends during the fourth quarter.

Brady Ericson: This performance enabled us to return $35 million to shareholders via share buybacks and dividends during the fourth quarter. Let us now move to slides 5 and 6 for a discussion of new business wins. Our ongoing focus on providing market-leading technology and the continued expansion of our product offering into new verticals is being reflected in significant new business wins across product lines as well as new markets. Let me call out a few.

Brady: Let us now move to slide five and six for a discussion of new business wins.

Speaker Change: We are winning significant new business and I'm particularly pleased with our second product win in the aerospace and defense industry. Net sales in the quarter were $833 million, with an adjusted EBITDA of $106 million in the same period of the prior year, which includes the contract manufacturing revenue. For a $160 basis point year-to-year decrease, we are winning significant new business and I'm particularly pleased with our second product win in the aerospace and defense industry. Higher annual incentive compensation and an imported EBITDA of $106 million, with a margin of 13%.

Brady Ericson: Let us now move to slides 5 and 6 for a discussion of new business wins. Our ongoing focus on providing market-leading technology and the continued expansion of our product offering into new verticals is being reflected in significant new business wins across product lines as well as new markets. Let me call out a few. Our second product win in the aerospace and defense industry with a post-combustion injector system, a key contract extension with a medium-duty engine manufacturer, a light vehicle GDI program extension for the South American market, our aftermarket segment, one new business in Europe with subsidiaries of a major customer, one incremental business at a major customer in Europe, signed a multi-year contract to supply remanufactured products to a major CVOEM in South America, and developed new distributors to support business growth in Southeast Asia.

Brady: Our ongoing focus on providing market, leading technology and the continued expansion of our product offering into new verticals as being reflected in significant new business wins across product lines as well as new markets.

Brady: Let me call out a few.

Brady: Our second product win in the aerospace and defense industry with the post combustion injector system.

Brady Ericson: Our second product win in the aerospace and defense industry with a post-combustion injector system, a key contract extension with a medium-duty engine manufacturer, a light vehicle GDI program extension for the South American market, our aftermarket segment, one new business in Europe with subsidiaries of a major customer, one incremental business at a major customer in Europe, signed a multi-year contract to supply remanufactured products to a major CVOEM in South America, and developed new distributors to support business growth in Southeast Asia.

Brady: A key contract extension with the medium duty engine manufacturer.

Speaker Change: Unknown Attendee, Michael Heifler, Chris Gropp, Kellen Ferris, Unknown Attendee, Michael Heifler,

Brady: Our light vehicle GTI program extension for the South American market.

Brady: Our aftermarket segment when new business in Europe with subsidiaries of a major customer when incremental business at a major customer in Europe.

Brady: Multiyear contract to supply remanufactured products to a major CV OEM in South America.

Brady: And develop new distributor to support business growth in southeast Asia.

Brady: Finally building on our core we introduced over 3600 Skus for aftermarket customers. This year to expand our offering improve our coverage and ultimately better serve more of our customers' needs.

Brady Ericson: Finally, building on our core, we introduced over 3,600 SKUs for aftermarket customers this year to expand our offering, improve our coverage, and ultimately better serve more of our customers' needs. Winning business across product lines in all geographic regions underscores the benefits of the diversity of our end markets, customers, and global footprint. Now moving to slide 7. We've added some more clarity by separating the light vehicle OE end market into light commercial vehicle OE or LCV OE, which includes trucks and vans, and then also into light passenger vehicle OE or LPV OE, which includes passenger cars, minivans, crossovers, and SUVs. Although LCV may have some product overlap with LPV, the usage, buying decisions, and market dynamics are different and closer to commercial vehicle. Our combined commercial vehicle markets total 39% of our revenues. OES and independent aftermarket was 34%, and LPV OE was 27%.

Brady: Winning business across product lines and in all geographic regions underscores the benefits of the diversity of our end markets customers.

Speaker Change: Unknown Attendee, Chris Gropp, Kellen Ferris, Unknown Attendee, Michael Heifler, Unknown Attendee,

Brady: And global footprint.

Brady: Now moving to slide seven.

Brady: We've added some more clarity by separating the light vehicle OE end market into light commercial vehicle OE for LCB.

Speaker Change: Unknown Attendee, Chris Gropp, Kellen Ferris, Unknown Attendee, Michael Heifler, Unknown Attendee,

Brady: Which includes trucks and vans and then also into a light passenger vehicle OE for L. P V.

Brady: Which includes passenger cars mini vans crossovers and Suvs.

Speaker Change: Unknown Attendee, Michael Heifler, Chris Gropp, Kellen Ferris, Unknown Attendee, Michael Heifler,

Brady: Although LCB may have some product overlap with LTV, the usage buying decisions and market dynamics are different and closer to commercial vehicle.

Speaker Change: Unknown Attendee, Chris Gropp, Kellen Ferris, Unknown Attendee, Michael Heifler, Unknown Attendee, Unknown Attendee, Chris Gropp, Kellen Ferris, Unknown Attendee, Michael Heifler, Unknown Attendee, Michael Heifler,

Brady: Our combined commercial vehicle markets totaled 39% of our revenues Oes and independent aftermarket was 34% and LTV OE was 27%.

Brady Ericson: Our combined commercial vehicle markets total 39% of our revenues. OES and independent aftermarket was 34%, and LPV OE was 27%. We also continue to maintain strong regional diversity and limited customer concentration levels. From a footprint perspective, we reduced one site in 2024 as we exited one of our former parent sites in Europe. Moving next to slide 8 for a summary of our 2024 performance and 2025 objectives. On the operations front, we successfully exited all CMAs and TSAs with our former parent, launched innovative new products, entered new markets, won a significant amount of new business, gained efficiencies, and drove supply chain improvements. With respect to our financial position, we've achieved working capital efficiencies and strengthened our balance sheet with two refinancings that lowered our rates, extended maturities, and removed restrictive covenants.

Brady: Yeah.

Brady: We also continue to maintain strong regional diversity and limited customer concentration levels.

Brady Ericson: We also continue to maintain strong regional diversity and limited customer concentration levels. From a footprint perspective, we reduced one site in 2024 as we exited one of our former parent sites in Europe. Moving next to slide 8 for a summary of our 2024 performance and 2025 objectives. On the operations front, we successfully exited all CMAs and TSAs with our former parent, launched innovative new products, entered new markets, won a significant amount of new business, gained efficiencies, and drove supply chain improvements. With respect to our financial position, we've achieved working capital efficiencies and strengthened our balance sheet with two refinancings that lowered our rates, extended maturities, and removed restrictive covenants. Adjusted EBITDA margin closed the year 14.1%. Adjusted free cash flow was $253 million. And lastly, we returned $256 million to our shareholders via dividends and share buybacks in the year.

Brady: From a footprint perspective, we've reduced one site in 2024 as we exited one of our former parent sites in Europe.

Speaker Change: Unknown Attendee, Chris Gropp, Kellen Ferris, Unknown Attendee, Michael Heifler, Unknown Attendee,

Brady: Moving next to slide eight.

Brady: A summary of our 2020 for performance in 'twenty five objectives.

Brady: On the operations front, we successfully exited all CMA and TSA has with their former parent.

Brady: Launch innovative new products enter new markets when a significant amount of new business gained efficiencies and drove supply chain improvements.

With respect to our financial position, we've achieved working capital efficiencies and strengthen our balance sheet with two refinancings that lowered our rates extended maturities and remove restrictive covenants.

Brady: Adjusted EBITDA margin closed the year 2014, 1%.

Brady Ericson: Adjusted EBITDA margin closed the year 14.1%. Adjusted free cash flow was $253 million. And lastly, we returned $256 million to our shareholders via dividends and share buybacks in the year. For 2025, we're focused on continuing our journey, being financially disciplined, focused on growing our aftermarket, commercial, and industrial OE business, and efficiently leveraging our human and manufacturing capital. Now moving on to slide 9. Really no change in direction here. Continue to be financially disciplined and focused on maximizing long-term shareholder value. As evidence, we exit 2024 with a net leverage of 1.2x and plenty of liquidity after having returned $303 million to shareholders through the end of 2024.

Speaker Change: Unknown Attendee, Chris Gropp, Kellen Ferris, Unknown Attendee, Michael Heifler, Unknown Attendee,

Brady: Adjusted free cash flow was $253 million.

Brady: Lastly, we returned $256 million to our shareholders via dividends and share buybacks in the year.

Brady: For 2025, we're focused on continuing our journey being financially discipline focused on growing our aftermarket commercial and industrial OE business and.

Brady Ericson: For 2025, we're focused on continuing our journey, being financially disciplined, focused on growing our aftermarket, commercial, and industrial OE business, and efficiently leveraging our human and manufacturing capital. Now moving on to slide 9. Really no change in direction here. Continue to be financially disciplined and focused on maximizing long-term shareholder value. As evidence, we exit 2024 with a net leverage of 1.2x and plenty of liquidity after having returned $303 million to shareholders through the end of 2024. We are entering 2025 from a position of strength, a position that we've earned through operational and commercial excellence, financial discipline, and with a strong free cash flow generating business.

Brady: And efficiently leveraging our human and manufacturing capital.

Now moving on to slide nine.

27. Moving next to slide eight.

Brady: Really no change in direction here continue to be financially disciplined and focused on maximizing long term shareholder value.

Speaker Change: Chris Gropp, Kellen Ferris, Unknown Attendee, Michael Heifler, Unknown Attendee, Michael Heifler,

Brady: As evidenced we exit 2024 with a net leverage of one two times and plenty of liquidity after having returned $303 million to shareholders through the end of 2024.

Brady: We are entering 2025 from a position of strength.

Speaker Change: We've achieved working capital efficiencies and strengthened our battle with two refinances that lowered our rates, extended priorities, entered new markets, and removed a significant amount of new business, gained efficiency, adjusted EBIT and drove a combined year growth of 8.1%.

Brady Ericson: We are entering 2025 from a position of strength, a position that we've earned through operational and commercial excellence, financial discipline, and with a strong free cash flow generating business. As such, we started 2025 by purchasing over 800,000 shares and announcing today that our board of directors approved an increase in our share repurchase program by another $200 million and declared a quarterly dividend of $0.27 per share, an increase of 8% compared to the dividend paid in the same quarter last year. These actions reflect the board's confidence in the strong cash flow generation of our business and execution of our strategy. We believe successful execution of our strategy coupled with our disciplined capital allocation delivers a compelling investor proposition, a proposition that balances financial strength, disciplined investments to drive profitable growth, and distributing capital to shareholders.

Brady: The position that we've earned through operational and commercial excellence financial discipline, and with a strong free cash flow generating business.

Brady: As such we started 2025 by purchasing over 800000 shares.

Brady Ericson: As such, we started 2025 by purchasing over 800,000 shares and announcing today that our board of directors approved an increase in our share repurchase program by another $200 million and declared a quarterly dividend of $0.27 per share, an increase of 8% compared to the dividend paid in the same quarter last year. These actions reflect the board's confidence in the strong cash flow generation of our business and execution of our strategy. We believe successful execution of our strategy coupled with our disciplined capital allocation delivers a compelling investor proposition, a proposition that balances financial strength, disciplined investments to drive profitable growth, and distributing capital to shareholders. In closing, I would like to note how very proud I am of all of our associates across the company who have worked together this past year to deliver the solid results we've reported today.

Speaker Change: with respect to our financial cash flow was $253 million. And lastly, we returned $556 million to our shareholders through dividends and share buybacks this year.

Brady: And announcing today that our board of directors approved an increase in our share repurchase program by another $200 million.

Brady: And declare the quarterly dividend of <unk> 27 per share an increase of 8% compared to the dividend paid in the same quarter last year.

Speaker Change: For 2025, we're focused on continuing our journey. Being financially disciplined, focused on growing our aftermarket, commercial, and industrial. And lastly, we return to literally leveraging our human and manufacturing capital. Now moving on to slide nine.

Brady: These actions reflect the boards confidence in the strong cash flow generation of our business execution of our strategy.

Brady: We believe successful execution of our strategy, coupled with our disciplined capital allocation delivers a compelling investor proposition.

Michael Heifler: Unknown Attendee, Michael Heifler, Chris Gropp, Kellen Ferris, Unknown Attendee, Michael Heifler,

Brady: A proposition that balanced with financial strength.

Brady: Disciplined investments to drive profitable growth and distributing capital to shareholders.

Brady: In closing I would like to note how very proud I am of all of our associates across the company who have worked together this past year to deliver the solid results we reported today.

Brady Ericson: In closing, I would like to note how very proud I am of all of our associates across the company who have worked together this past year to deliver the solid results we've reported today. With that, I'll hand it over to Chris, who will walk us through our Q4 results and discuss our outlook for the year. Chris?

And with that I'll hand, it over to Chris who will walk us through our Q4 results and discuss our outlook for the year.

Speaker Change: Unknown Attendee, Chris Gropp, Kellen Ferris, Unknown Attendee, Michael Heifler, Unknown

Brady Ericson: With that, I'll hand it over to Chris, who will walk us through our Q4 results and discuss our outlook for the year. Chris?

Brady: Chris.

Brady: Thanks, Randy and thank you all for joining US. This morning, I am pleased to report that during the fourth quarter, we continued to successfully execute and drive our business forward.

Chris Gropp: Thanks, Brady, and thank you all for joining us this morning. I am pleased to report that during Q4, we continued to successfully execute and drive our business forward. I also want to thank our employees across the globe for their efforts in responding quickly and methodically to rapid changes in market conditions, ensuring we were able to report out the solid results we are discussing today. As a reminder, reconciliations of all non-GAAP financial measures that I will discuss can be found in today's press release and in the presentation, both of which are on our website. Moving to page 11 in the deck, revenue in Q4 reflects similar market trends to earlier quarters in 2024, as we generated $833 million in sales, down 5.6% versus a year ago.

Brady: I also want to thank our employees across the globe for their efforts in responding quickly and methodically to rapid changes in market conditions.

Speaker Change: Unknown Attendee, Michael Heifler, Chris Gropp, Kellen Ferris, Unknown Attendee, Michael Heifler, Unknown Attendee, Michael Heifler, Chris Gropp, Unknown Attendee, Michael Heifler,

Brady: During we were able to report solid results we are discussing today.

Brady: As a reminder, reconciliations of all non-GAAP financial measures, but I will discuss can be found in today's press release and in the presentation.

Speaker Change: Unknown Attendee, Michael Heifler, Chris Gropp, Kellen Ferris, Unknown Attendee, Michael Heifler,

Brady: All of which are on our website.

Brady: Moving to page 11 of the deck.

Brady: Revenue in the fourth quarter reflects similar market trends to earlier quarters in 2024, as we generated $833 million in sales down five 6% versus a year ago.

Speaker Change: In closing, I would like to know how very proud I am that all of our associates across the company have been working together this past year to deliver the solutions that balance your financial strength.

Brady: Excluding contract manufacturing sales that ended earlier this year the reduction in sales for Q4 was two 9% year over year.

Chris Gropp: Excluding contract manufacturing sales that ended earlier this year, the reduction in sales for Q4 was 2.9% year over year. Our aftermarket segment benefited from higher volume and pricing for a year-over-year increase of 4.9% as volumes across all regions expanded. Fuel system segment sales, by contrast, were down 11.7%, including prior year contract manufacturing sales, or 7.7% excluding the effect of contract manufacturing. The decline in fuel systems is attributable to lower commercial vehicle or CV revenue in Europe and China, partially offset by growth in the Americas. Adjusted operating income was $78 million, with a 9.4% adjusted operating margin, which represents a year-over-year decrease of $11 million and 100 basis points. Moving to page 13, Adjusted EBITDA was $110 million and a margin of 13.2%, representing a year-over-year decrease of $17 million and 160 basis points. Margins benefited from favorable conditions in fuel systems.

Chris Gropp: And with that I'll hand it over to Chris who will walk us through our Q4 results and discuss our outlook for the year.

Brady: Our aftermarket segment benefited from higher volume and pricing for our year over year increase of four 9%.

In closing,

Chris Gropp: I would like to note how very proud I am of all of our associates across the company who have worked together this past year to deliver the top results we reported today. And with that, I'll hand it over to Chris who will walk us through our team's results and discuss our outlook for the year. Chris?

Brady: And volumes across all regions expansion.

Brady: Fuel systems segment sales by contrast were down 11, 7%, including prior year contract manufacturing sales.

Brady: Or seven 7%, excluding the effect of contract manufacturing.

Brady: The decline in fuel system is attributable to lower commercial vehicle, our CLEC revenue in Europe, and China, partially offset by growth in the Americas.

Brady: Adjusted operating income was $78 million with a nine 4% adjusted operating margin, which represents a year over year decrease of $11 million and 100 basis points.

Brady: Moving to page 13, adjusted EBITDA was $110 million and a margin of 13, 2%.

Chris Gropp: Excluding contract manufacturing sales. They ended earlier this year the reduction in sales for Q4 was two 9% year over year.

Brady: Representing a year over year decrease of $17 million and 160 basis points.

Chris: Revenue in the fourth quarter reflect similar market trends to earlier quarters in 2024, as we generated $833 million in sales down five 6% versus a year ago.

Brady: Margins benefited from favorable conditions and fuel system. However, this was offset by higher corporate costs as we were still reliant upon TSA through the first half of 2024 and full corporate staffing had not been completed by the end of 2023.

Chris Gropp: Our aftermarket segment benefited from higher volume and pricing for a year over year increase of four 9%.

Chris Gropp: Margins benefited from favorable conditions in fuel systems.However, this was offset by higher corporate costs, as we were still reliant upon TSAs through the first half of 2024, and full corporate staffing had not been completed by the end of 2023. We ended 2024 with a disappointing adjusted effective tax rate, or ETR, of 41.5%, above the high end of our guide of 33 to 37%. We have and will continue to pour substantial time and effort into adjusting our legacy structure, which should translate into market-level ETR. Our adjusted net earnings for diluted share in Q4 was $0.71, which excludes non-comparable items which are described in the appendix of our presentation and affected by our high ETR, as noted. From a core business performance standpoint, our segments reported solid overall margins.

Chris Gropp: However, this was offset by higher corporate costs, as we were still reliant upon TSAs through the first half of 2024, and full corporate staffing had not been completed by the end of 2023. We ended 2024 with a disappointing adjusted effective tax rate, or ETR, of 41.5%, above the high end of our guide of 33 to 37%. We have and will continue to pour substantial time and effort into adjusting our legacy structure, which should translate into market-level ETR. Our adjusted net earnings for diluted share in Q4 was $0.71, which excludes non-comparable items which are described in the appendix of our presentation and affected by our high ETR, as noted. From a core business performance standpoint, our segments reported solid overall margins.

Chris: Excluding contract manufacturing sales that ended earlier this year the reduction in sales for Q4 was two 9% year over year.

Chris Gropp: And volumes across all regions expanded.

Chris Gropp: Fuel systems segment sales by contrast were down 11, 7%.

Chris: Our aftermarket segment benefited from higher volume and pricing for our year over year increase of four 9%.

Brady: We ended 2024 with a disappointing adjusted effective tax rate or ETR of 41, 5%.

Chris Gropp: <unk> prior year contract manufacturing sales.

Chris Gropp: Or seven 7%, excluding the effect of contract manufacturing.

Chris: And volumes across all regions expanded.

Brady: About the high end of our guide of 33% to 37%.

Chris Gropp: The decline in fuel system is attributable to lower commercial vehicle, our CV revenue in Europe and China.

Chris: Fuel systems segment sales by contrast were down 11, 7%, including prior year contract manufacturing sales.

Brady: We have and will continue to enforce substantial time and effort into adjusting our legacy structure, which should translate into market level ETR.

Chris Gropp: Really offset by growth in the Americas.

Chris: Or seven 7%, excluding the effect of contract manufacturing.

Chris Gropp: Adjusted operating income was $78 million with a nine 4% adjusted operating margin, which represents a year over year decrease of $11 million and 100 basis points.

Brady: Our adjusted net earnings per diluted share in the fourth quarter was 71.

Chris: The decline in fuel system is attributable to lower commercial vehicle, our CV revenue in Europe, and China, partially offset by growth in the Americas.

Brady: Which exclude non comparable items, which are described in the appendix of our presentation and affected by our high ETR as noted.

Chris Gropp: Moving to page 13.

Chris Gropp: Adjusted EBITDA was $110 million and a margin of 13, 2% rep.

Brady: From a core business performance standpoint, our segments reported solid overall margins.

Chris: Adjusted operating income was $78 million with a nine 4% adjusted operating margin, which represents a year over year decrease of $11 million and 100 basis points.

Chris Gropp: Representing a year over year decrease of $17 million and 160 basis points.

Brady: Q4 segment adjusted operating margin was healthy at 12, 8% an increase of 20 basis points year over year, primarily due to higher margins and fuel systems, partially offset by lower aftermarket margins.

Chris Gropp: Q4 segment Adjusted operating margin was healthy at 12.8%, an increase of 20 basis points year-over-year, primarily due to higher margins in fuel systems, partially offset by lower aftermarket margins. Aftermarket segment margin decreased 140 basis points, ending the quarter at 14.9% due to increased freight and other charges, partially offset by volume increases. Q4 fuel system segment margins were strong at 11.4%, up 110 basis points year-over-year due to favorable price, supplier savings, and customer cost recoveries offset by lower volumes. Let me now bridge our Adjusted revenue and Adjusted EBITDA for the full year, which you can find on pages 15 and 16 in the presentation.

Chris Gropp: Margins benefited from favorable conditions in fuel cells.

Chris: Moving to page 13, adjusted EBITDA was $110 million and a margin of 13, 2%.

Chris Gropp: Hum.

Chris Gropp: Margins benefited from favorable conditions and fuel system. However, this was offset by higher corporate costs as we were still reliant upon TSA through the first half of 2024 and full corporate staffing had not been completed at the end of 2023.

Brady: Aftermarket segment margin decreased 140 basis points ending the quarter at 14, 9% due to increased freight and other charges, partially offset by volume increases.

Chris: Representing a year over year decrease of $17 million and 160 basis points.

Chris: Margins benefited from favorable conditions in fuel cell systems.

Chris: Margins benefited from favorable conditions in fuel system. However, this was offset by higher corporate costs as we were still reliant upon TSA through the first half of 2024 and full corporate staffing had not been completed by the end of 2023.

Chris Gropp: We ended 2024 with a disappointing adjusted effective tax rate or ETR of 41, 5%.

Brady: Q4 fuel systems segment margins were strong at 11, 4% up 110 basis points year over year due to favorable price supplier savings and customer cost recoveries offset by lower volumes.

Chris Gropp: The high end of our guide of 33% to 37%.

Chris Gropp: We have and will continue to pour substantial time and effort into adjusting our legacy structure, which should translate into market level ETR.

Brady: Let me now bridge, our adjusted revenue and adjusted EBITDA for the full year, which you can find on pages 15 and 16 in the presentation.

Chris: We ended 2024 with a disappointing adjusted effective tax rate or ETR of 41, 5% above the high end of our guide of 33% to 37%.

Chris Gropp: Our adjusted net earnings per diluted share in the fourth quarter was 71 cents.

Brady: Our sales performance for the year was impacted by softness in volume, which was a headwind of $104 million on lower CPE sales in Europe, and lower sales in China.

Chris Gropp: Which exclude non comparable items, which are described in the appendix of our presentation and affected by our high ETR as noted.

Chris Gropp: Our sales performance for the year was impacted by softness in volume, which was a headwind of $104 million on lower CV sales in Europe and lower sales in China, partially offset by growth in the Americas and higher aftermarket sales. We ended the year with adjusted sales of $3.38 billion, down 2%, with a decrease in fuel systems of 6.1%, partially offset by an increase in aftermarket sales of 4.5%. Adjusted EBITDA for the year was $478 million, or 14.1%, with no degradation in margin despite the reduction in sales. Volume and mix on the change in sales was a normal 25% contribution margin. Pricing, along with continued strong supplier savings and recoveries, totaled $91 million, which offset increases in employee and other manufacturing costs of $48 million.

Chris: We have and will continue to enforce substantial time and effort into adjusting our legacy structure, which should translate into market level ETR.

Brady: Partially offset by growth in the Americas and higher aftermarket sales.

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

Chris: Okay.

Chris: Our adjusted net earnings per diluted share in the fourth quarter was 71.

Brady: We ended the year with adjusted sales of $3 38 billion down 2% with the decrease in fuel system of six 1%.

Chris Gropp: Q4 segment adjusted operating margin was healthy at 12, 8% an increase of 20 basis points year over year, primarily due to higher margins and she'll systems, partially offset by lower aftermarket margins.

Chris: Which exclude non comparable items, which are described in the appendix of our presentation and affected by our high ETR as noted.

Brady: Really offset by an increase in aftermarket sales of four 5%.

Chris: From a core business performance standpoint, our segments reported solid overall margin Q.

Brady: Adjusted EBITDA for the year with 478 million or 14, 1% with no degradation in margin despite the reduction in sales.

Chris Gropp: Aftermarket segment margin decreased 140 basis points ending the quarter at 14, 9% due to increased freight and other charges, partially offset by volume increases.

Chris: Q4 segment adjusted operating margin was healthy at 12, 8% an increase of 20 basis points year over year, primarily due to higher margins and she'll system.

Brady: Volume and mix on the change in sales with a normal 25% contribution margin.

Chris: Offset by lower aftermarket margins.

Chris Gropp: Q4 fuel systems segment margins were strong at 11, 4% up 110 basis points year over year due to favorable price supplier savings and customer cost recoveries offset by lower volumes.

Brady: Pricing along with continued strong supplier savings and recoveries totaled $91 million, which offset increases in employee and other manufacturing costs of $48 million.

Chris: Aftermarket segment margin decreased 140 basis points ending the quarter at 14, 9% due to increased freight and other charges, partially offset by volume increases.

Brady: Corporate costs as the function was fully built out in 2024 increased by $28 million, along with increased R&D and other spending.

Chris Gropp: Corporate costs, as the function was fully built out in 2024, increased by $28 million, along with increased R&D and other spending. Now, for a quick recap of our balance sheet and cash flow. Strengthening our balance sheet was an important initiative for us throughout the year. We completed two refinancings, resulting in lower interest rates, extending out our debt maturities, and amending our credit facility. As a result, we ended the year with substantial current liquidity, with cash and cash equivalents, and available capacity under our credit facilities of approximately $1 billion. Net cash from operations in Q4 was $73 million and $308 million for the full year.

Chris Gropp: Let me now bridge, our adjusted revenues and adjusted EBITDA for the full year, which you can find on pages 15 and 16 in the presentation.

Chris: Q4 fuel systems segment margins were strong at 11, 4% up 110 basis points year over year due to favorable price supplier savings and customer cost recoveries offset by lower volumes.

Brady: Now for a quick recap of our balance sheet and cash flow.

Chris Gropp: Our sales performance for the year was impacted by softness in volume, which was a headwind of $104 million on lower CPE sales in Europe, and lower sales in China.

Brady: Strengthening our balance sheet was an important initiative for us throughout the year, we completed two refinancing, resulting in lower interest rate and extending out our debt maturities and amending our credit facility.

Chris: Let me now bridge, our adjusted revenue and adjusted EBITDA for the full year, which you can find on pages 15 and 16 in the presentation.

Chris Gropp: Partially offset by growth in the Americas and higher aftermarket sales.

Chris Gropp: We ended the year with adjusted sales of 338 billion down 2% with the decrease in fuel systems up six 1%.

Brady: As a result, we ended the year with substantial current liquidity with cash and cash equivalents and available capacity under our credit facilities of approximately $1 billion.

Chris: Our sales performance for the year was impacted by softness in volume, which was a headwind of $104 million on lower CPE sales in Europe, and lower sales in China.

Chris Gropp: Partially offset by an increase in aftermarket sales of four 5%.

Chris: Partially offset by growth in the Americas and higher aftermarket sales.

Brady: Net cash from operations in Q4 was $73 million.

Chris Gropp: Adjusted EBITDA for the year with 478 million or 14, 1% with no degradation in margin despite the reduction in sales.

Chris: We ended the year with adjusted sales of $3 38 billion down 2% with a decrease in fuel systems up six 1%, partially offset by an increase in aftermarket sales of four 5%.

Brady: And $308 million for the full year.

Brady: During the quarter, we generated adjusted free cash flow of $72 million up from $55 million in the same period of the prior year.

Chris Gropp: During the quarter, we generated Adjusted Free Cash Flow of $72 million, up from $55 million in the same period of the prior year, as we continued to be disciplined in management of our working capital and drive optimization of resources and daily processes. Adjusted Free Cash Flow for the full year was $253 million. On the capital allocation front, we paid dividends of $11 million in the quarter and completed share repurchases, totaling $24 million. Capital spend of $20 million was 2.4% of sales in the quarter and was 3.1% for the full year. Funds were primarily used for investments in new machinery and equipment, and for new program launches. Now, moving to slide 17 for a discussion of overall industry performance. We expect the industry to experience trends in 2025 that are similar to those in 2024.

Chris Gropp: Volume and mix on the change in sales with normal 25% contribution margin.

Brady: As we continue to be disciplined management of our working capital.

Chris Gropp: Pricing along with continued strong supplier savings and recoveries totaled $91 million, which offset increases in employee and other manufacturing costs of 48 million.

Chris: Adjusted EBITDA for the year with 478 million or 14, 1% with no degradation in margin despite the reduction in sales.

Brady: And drive optimization of resources and deploy.

Brady: Daily processes.

Brady: Adjusted free cash flow for the full year was 253 million.

Chris: Volume and mix on the change in sales with a normal 25% contribution margin pricing along with continued strong supplier savings and recoveries totaled 91 million, which offset increases in employee and other manufacturing costs of $48 million.

Chris Gropp: Corporate costs as the function was fully built out in 2024 increased by 28 million along with increased R&D and other spending.

Brady: On the capital allocation front, we paid dividends of $11 million in the quarter.

Brady: <unk> completed share repurchases totaling $24 million.

Chris Gropp: Now for a quick recap of our balance sheet and cash flow.

Brady: Capital spend of $20 million was two 4% of sales in the quarter and was three 1% for the full year fund.

Chris Gropp: Strengthening our balance sheet was an important initiative for us throughout the year, we completed two refinancings, resulting in lower interest rates and extending out our debt maturities and amending our credit facility.

Chris: Corporate costs.

Chris: The function was fully built out in 2024 increased by 28 million along with increased R&D and other spending.

Brady: Tons were primarily used for investments in new machinery and equipment and for new program launches.

Brady: Now moving to slide 17 for a discussion of overall industry performance.

Chris: Now for a quick recap of our balance sheet and cash flow.

Chris Gropp: As a result, we ended the year with substantial current liquidity with cash and cash equivalents and available capacity under our credit facilities of approximately $1 billion.

Chris: Strengthening our balance sheet was an important initiative for us throughout the year, we completed two refinancings, resulting in lower interest rates and extending out our debt maturities and amending our credit facility.

Brady: We expect the industry to experience trends in 2025 that are similar to those in 2024.

Brady: Light vehicle sales are expected to be down in the low single digit range globally.

Chris Gropp: Net cash from operations in Q4 was $73 million.

Chris Gropp: Light vehicle ICE sales are expected to be down in the low single-digit range globally. By contrast, we expect the industry to experience increased CV sales in the low to mid-single-digit range, varying by region. On a consolidated basis, we would therefore expect a flat to a modest increase in sales, excluding the effects of year-over-year exchange rates. We expect the same level of sales in the first half of the year as the last half of 2024, with a modest increase in the last half as CV sales begin to rebound. Going into 2025, we also anticipate headwinds related to exchange rates with the backdrop of a stronger US dollar. As a reminder, more than 60% of our sales are generated outside of the US.

Chris: As a result, we ended the year with substantial current liquidity with cash and cash equivalents and available capacity under our credit facilities of approximately $1 billion.

Brady: Contrast, we expect the industry to experience increased <unk> sales in the low to mid single digit range varying by region.

Chris Gropp: $308 million for the full year.

Chris Gropp: During the quarter, we generated adjusted free cash flow of 72 million up from $55 million in the same period of the prior year as we continue to be disciplined management of our working capital.

Brady: On a consolidated basis, we would therefore expect a flat to a modest increase in sales excluding the effect of year over year exchange rate.

Chris: Net cash from operations in Q4 was $73 million.

Chris Gropp: Drive optimization of resources internally.

Chris: And $308 million for the full year.

Brady: We expect the same level of sales in the first half of the year as the last half of 2024 with a modest increase in the laptop FCB sales begin to rebound.

Chris Gropp: The processes.

Chris: During the quarter, we generated adjusted free cash flow of $72 million up from $55 million in the same period of the prior year as we continue to be disciplined management of our working capital.

Chris Gropp: Adjusted free cash flow for the full year was $253 million.

Chris Gropp: On the capital allocation front, we paid dividends of $11 million in the quarter.

Brady: Going into 2025, we also anticipate headwinds related to exchange rates with the backdrop of a stronger U S. Dollar.

Chris Gropp: Completed share repurchases totaling $24 million.

Chris: And drive optimization of resources and talent.

Chris: Daily processes.

Chris Gropp: Capital spend of 20 million was two 4% of sales in the quarter and was three 1% for the full year.

Brady: As a reminder, more than 60% of our sales are generated outside of <unk>.

Chris: Adjusted free cash flow for the full year was $253 million.

Chris: On the capital allocation front, we paid dividends of $11 million in the quarter.

Brady: Based upon our expectation for overall industry performance and adjusted for a stronger U S. Dollar. The 2025 net sales range is expected to be between $3 3 billion and $3 43 billion, which includes a negative approximately $80 million impact from <unk>.

Chris Gropp: Funds were primarily used for investments in new machinery and equipment and for new program launches.

Chris Gropp: Based upon our expectations for overall industry performance and adjusted for a stronger US dollar, the 2025 net sales range is expected to be between $3.23 billion and 3.43 billion, which includes a negative approximately $80 million impact from foreign exchange. Adjusted EBITDA is projected to be $450 million to 490 million, with an EBITDA margin of 13.7% to 14.5%. Overall, we expect solid earnings and cash generation in 2025 as we continue to drive operational efficiencies and search for new areas of growth for both segments. Note that none of the projections in our outlook include any possible ramifications related to policy changes by the new US administration.

Chris: <unk> completed share repurchases totaling $24 million.

Chris Gropp: Now moving to slide 17 for a discussion of overall industry performance.

Chris Gropp: Yeah.

Chris Gropp: Capital spend of $20 million was two 4% of sales in the quarter and was three 1% for the full year funds.

Chris Gropp: We expect the industry to experience trends in 2025 that are similar to those in 2024.

Chris Gropp: Funds were primarily used for investments in new machinery and equipment and for new program launches.

Brady: Foreign exchange and <unk>.

Brady: Adjusted EBITDA is projected to be 450 million to $490 million with an EBITDA margin of 13, 7% to 14, 5%.

Chris Gropp: Light vehicle sales are expected to be down in the low single digit range globally.

Chris Gropp: Now moving to slide 17 for a discussion of overall industry performance.

Chris Gropp: Contrast, we expect the industry to experience increased <unk> sales in the low to mid single digit range varying by region.

Chris Gropp: We expect the industry to experience trends in 2025 that are similar to that is in 2024.

Brady: Overall, we expect solid earnings and cash generation in 2025, as we continue to drive operational efficiencies and search for new areas of growth for both segments.

Chris Gropp: On a consolidated basis, we would therefore expect a flat to a modest increase in sales excluding the effects of year over year exchange rate.

Chris Gropp: Light vehicle is sales are expected to be down in the low single digit range globally.

Brady: Net that none of the projections and our outlook include any possible ramifications related to policy changes are the new U S administration.

Chris Gropp: Contrast, we expect the industry to experience increased <unk> sales.

Chris Gropp: We expect the same level of sales in the first half of the year as the last half of 2024 with a modest increase in the laptop SCV sales begin to rebound.

Chris Gropp: Mid single digit range varying by region.

Chris Gropp: On a consolidated basis, we would therefore expect a flat to a modest increase in sales excluding the effect of year over year exchange rate.

Brady: This includes tariff tax reform or any other policy that could inflate or deflate revenue or affect our cost base. Although we will continue to monitor and have and will continue to develop plans as appropriate.

Chris Gropp: This includes tariffs, tax reform, or any other policy that could inflate or deflate revenue or affect our cost base, although we will continue to monitor and will continue to develop plans as appropriate, with no additional cost expected to be borne by PHINIA. In closing, the strategic actions that we have undertaken are expected to continue and drive meaningful cash flow generation and solid sustainable growth. Our strong balance sheet provides us with financial flexibility to support our current and future growth initiatives, and we are very focused on creating value for our shareholders, customers, and employees. I want to thank you all for your attention today, and we will now move to the Q&A portion of our call. Operator, could you please open the lines for questions?

Chris Gropp: Going into 2025, we also anticipate headwinds related to exchange rates with the backdrop of a stronger U S. Dollar.

Chris Gropp: We expect the same level of sales in the first half of the year as the last half of 2024 with a modest increase in the laptop SCV sales begin to rebound.

Chris Gropp: As a reminder, more than 60% of our sales are generated outside of the U S.

Brady: Additional costs expected to be more in box anyhow.

Brady: In closing the strategic actions that we have undertaken are expected to continue and drive meaningful cash flow generation and solid sustainable growth.

Chris Gropp: Based upon our expectation for overall industry performance and adjusted for a stronger U S. Dollar. The 2025 net sales range is expected to be between $3 3 billion and $3 43 billion, which includes a negative approximately $80 million impact from <unk>.

Chris Gropp: Going into 2025, we also anticipate headwinds related to exchange rates with the backdrop of a stronger U S. Dollar.

Brady: Our strong balance sheet provides us with financial flexibility to support our current and future growth initiatives and we are very focused on creating value for our shareholders customers and employees.

Chris Gropp: As a reminder, more than 60% of our sales are generated outside of the U S.

Chris Gropp: Foreign exchange and <unk>.

Chris Gropp: Adjusted EBITDA is projected to be 450 million to $490 million with an EBITDA margin of 13, 7% to 14, 5%.

Brady: I want to thank you all for your attention today, and we will now move to the Q&A portion of our call operator could you. Please open the lines for questions.

Brady: Thank you and as a reminder to ask a question. Please press star one on your telephone keypad again, if you do have a question at this time. Please press star one and we'll pause for a moment to compile the Q&A roster.

Chris Gropp: Overall, we expect solid earnings and cash generation in 2025, as we continue to drive operational efficiencies and search for new areas of growth for both segments.

Operator: Thank you. And as a reminder, to ask a question, please press star one on your telephone keypad. Again, if you do have a question at this time, please press star one, and we'll pause for a moment to compile the Q&A roster. Thank you. Your first question comes from the line of Bobby Brooks from Northland Capital Markets. Your line is open.

Chris Gropp: Foreign exchange and <unk>.

Chris Gropp: Adjusted EBITDA is projected to be $450 million to $490 million with an EBITDA margin of 13, 7% to 14, 5%.

Chris Gropp: Note that none of the projections and our outlook include any possible ramifications related to policy changes are the new U S administration.

Brady: Yeah.

Brady: Thank you. Your first question comes from the line of Bobby Brooks from Northland Capital markets. Your line is open.

Chris Gropp: Overall, we expect solid earnings and cash generation in 2025, as we continue to drive operational efficiencies and search for new areas of growth for both segments.

Chris Gropp: This includes tariff tax reform or any other policy that could inflate or deflate revenue reflect our cost base. Although we will continue to monitor and have and will continue to develop plans as appropriate.

Brady: Yeah.

Bobby Brooks: Hey, good morning, guys. Thank you for taking my question so.

Chris Gropp: Note that none of the projections and our outlook include any possible ramification related to policy changes are the new U S administration.

[Analyst] (Northland Capital Markets): Hey, good morning, guys. Thank you for taking my question. So first thing I wanted to ask, you guys did $105 million of CapEx in the quarter, mentioned it was mostly for investments in new machinery, for new program launches. Could you just give us a bit more color on that? What programs are they associated with, and could we expect these new machines maybe help lift margins going forward?

Bobby Brooks: Hey, good morning, guys. Thank you for taking my question. So first thing I wanted to ask, you guys did $105 million of CapEx in the quarter, mentioned it was mostly for investments in new machinery, for new program launches. Could you just give us a bit more color on that? What programs are they associated with, and could we expect these new machines maybe help lift margins going forward?

Brady: So first thing I wanted to ask.

Brady: Yes at $105 million of Capex in the quarter mentioned it was mostly for investments in new machinery for new program launches could you just give us a bit more color on that what programs are they associated with could and could we expect these new machines, maybe help lift margins going forward.

Chris Gropp: Additional costs expected to be borne by Cynthia.

Chris Gropp: This includes tariff tax reform or any other policy that could inflate or deflate revenue or affect our cost base. Although we will continue to monitor and have and will continue to develop plans as appropriate.

Chris Gropp: In closing the strategic actions that we have undertaken are expected to continue and drive meaningful cash flow generation and solid sustainable growth.

Chris Gropp: Our strong balance sheet provides us with financial flexibility to support our current and future growth initiatives and we are very focused on creating value for our shareholders customers and employees.

Speaker Change: Additional costs expected to be borne by Cynthia.

Brady: Yes, I think one just to clarify the $105 million was for the year not for the quarter I think the quarter was about $20 million.

Brady Ericson: Yeah. I think, one, just to clarify, the $105 million was for the year, not for the quarter. I think the quarter was about $20 million. I think the full year came in at just.

Speaker Change: In closing the strategic actions that we have undertaken are expected to continue and drive meaningful cash flow generation and solid sustainable growth.

Brady: It came in at just.

Chris Gropp: I want to thank you all for your attention today, and we will now move to the Q&A portion of our call operator could you. Please open the lines for questions.

Brady: Yes full year came in at just over 3%.

[Analyst] (Northland Capital Markets): All that.

Bobby Brooks: All that.

Brady Ericson: Yeah, yeah. Full year came in at just over 3%. And again, it's really spread out around the world. There's really not one major program. I think the team did a nice job cutting back on some of the CapEx and being as efficient as possible. But these are all going to primarily be supporting new launches that are coming in the coming year as well. So most of it is going to be for new product launches and expansion.

Brady: Again, it's really spread out around the world, There's really not one major program.

Brady: I think the team did a nice job cut.

Chris Gropp: Thank you and as a reminder to ask a question. Please press star one on your telephone keypad again, if you do have a question at this time. Please press star one and we'll pause for a moment to compile the Q&A roster.

Brady: Cutting back on some of the Capex and being as efficient as possible, but these are all going to primarily be supporting new launches that are coming in.

Chris Gropp: I want to thank you all for your attention today, and we will now move to the Q&A portion of our call operator could you. Please open the lines for questions.

Brady: In the coming year as well so most of it is going to be for new product launches and expansion.

Chris Gropp: Yeah.

Brady: Material amount of expansion going on related to C V for the upcoming.

Speaker Change: Thank you. Your first question comes from the line of Bobby Brooks from Northland Capital markets. Your line is open.

Chris Gropp: There's a material amount of expansion going on related to CV for the upcoming.

Brady: Pre buys so it's also for existing programs that are being improved it's like the next generation and it's also expansion of that capacity over the next couple of years. So.

Brady Ericson: Prebuy.

Chris Gropp: Pre-buy. So it's also for existing programs that are being improved. It's like the next generation, and it's also expansion of that capacity over the next couple of years, so.

Bobby Brooks: Hey, good morning, guys. Thank you for taking my question. So first thing I wanted to ask.

Bobby Brooks: You guys did $105 million of Capex in the quarter mentioned it was mostly for investments in new machinery for new program launches could you just give us a bit more color on that.

Chris Gropp: Okay.

Speaker Change: Thank you. Your first question comes from the line of Bobby Brooks from Northland Capital markets. Your line is open.

Brady: Got it yes am I mistaken on that.

[Analyst] (Northland Capital Markets): Got it. Yeah, my mistake on that. But so then kind of transitioning to you guys mentioned the second win within the aerospace and defense market. So I was just wondering, is this a completely new customer from the first one? Also, I was just wondering, are these products going to come off that same line that you've previously mentioned was upfitted to serve the aerospace and defense markets?

Bobby Brooks: Got it. Yeah, my mistake on that. But so then kind of transitioning to you guys mentioned the second win within the aerospace and defense market. So I was just wondering, is this a completely new customer from the first one? Also, I was just wondering, are these products going to come off that same line that you've previously mentioned was upfitted to serve the aerospace and defense markets?

Brady: But so then kind of transitioning to you guys had you guys mentioned the second win within the aerospace and defense market.

Chris Gropp: Okay.

Speaker Change: What programs are they associated with could and could we expect these new machines, maybe help lift margins going forward.

Chris Gropp: Hey, good morning, guys. Thank you for taking my question. So first thing I wanted to ask.

Brady: So I was just wondering is this is this is a completely new customer from the first one also I was just wondering are these products going to come off that same line that you've previously mentioned was upset it to serve the aerospace and defense markets.

Chris Gropp: Yes at $105 million of Capex in the quarter mentioned it was mostly for investments in new machinery for new program launches could you just give us a bit more color on that.

Speaker Change: Yes, I think one just to clarify the 105 million was for the year not for the quarter I think the quarter was about $20 million.

Speaker Change: Hey, Matt.

Chris Gropp: What programs are there associated with could and could we expect these new machines, maybe help lift margins going forward.

Speaker Change: Yes full year came in at just over 3%.

Brady: Yes, right now it's been saying, it's the same customer.

Speaker Change: And again, it's really spread out around the world, There's really not one major program.

Brady Ericson: Yeah. Right now, it's the same customer, and it will be kind of in that same facility using those same type of equipment. I think the one thing of note is just to remind folks, we're actually on pace to getting our quality certification, our aerospace quality certification here, end of Q1, early Q2, in support of our first SOP in that aerospace in Q4 of this year.

Brady: And it will be tenant in that same facility used in those same same type of equipment.

Chris Gropp: Yes, I think one just to clarify the $105 million was for the year not for the quarter I think the quarter was about $20 million.

Speaker Change: I think the team did a nice job.

Brady: The one thing of note just to remind folks we're actually on pace to getting our quality certification our aerospace quality certification here end of Q1 early Q2 in support of our first.

Speaker Change: Cutting back on some of the Capex and being as efficient as possible, but these are all going to primarily be supporting new launches that are coming.

Chris Gropp: It came in at <unk>.

Chris Gropp: Yes full year came in at just over 3%.

Speaker Change: In the coming year as well so most of it is going to be for new product launches and expansion.

Chris Gropp: And again, it's really spread out around the world, There's really not one major program.

Brady: <unk>.

Brady: And that aerospace in Q4 of this year.

Speaker Change: There is a material amount of expansion going on related to C V for the upcoming.

Chris Gropp: I think the team did a nice job.

Brady: That's great and then just kind of following up on this I know you've talked about it previously, but I think it would be good to just to give a reminder to the market.

Chris Gropp: Cutting back on some of the Capex and being as efficient as possible, but these are all going to primarily be supporting new launches that are coming.

[Analyst] (Northland Capital Markets): That's great. Then just kind of following up on this, I know you've talked about it previously, but I think it would be good just to give a reminder to the market. Just stepping back a bit, it's like, why was aerospace and defense kind of one of the end markets that you guys really kind of honed in on and like, "Hey, let's diversify our revenues to getting into that"? And maybe just discuss why you've won these first two projects or programs and why you think you can continue to win new programs in aerospace and defense going forward.

Bobby Brooks: That's great. Then just kind of following up on this, I know you've talked about it previously, but I think it would be good just to give a reminder to the market. Just stepping back a bit, it's like, why was aerospace and defense kind of one of the end markets that you guys really kind of honed in on and like, "Hey, let's diversify our revenues to getting into that"? And maybe just discuss why you've won these first two projects or programs and why you think you can continue to win new programs in aerospace and defense going forward.

Speaker Change: Pre buys.

Speaker Change: It's also for existing programs that are being approved it's like the next generation and it's also expansion of that capacity over the next couple of years. So.

Brady: Just stepping back a bit is like why do you guys why was like aerospace and defense kind of one of the end markets that you guys really kind of honed in on like Hey, let's let's diversify our revenues to getting into that and maybe just discuss like why you've won these first two projects or programs and why you think you could get.

Chris Gropp: In the coming years as well so most of it is going to be for new product launches and expansion.

Chris Gropp: Material amount of expansion going on related to C V for the upcoming.

Speaker Change: Got it yes am I mistaken.

Speaker Change: But so then kind of transitioning to you guys had you guys mentioned the second win within the aerospace and defense market.

Chris Gropp: Pre buys so it's also for existing programs that are being improved as like the next generation and it's also expansion of that capacity over the next couple of years. So.

Brady: Turning to win new programs in aerospace and defense going forward.

Speaker Change: So I was just wondering is this is this is a completely new customer from the first one.

Brady: Yeah.

Brady: Again, we were looking for opportunities that can leverage our existing core competencies in our both our human capital and our manufacturing capital and so these are opportunities leveraging precision fuel management and controls and aerospace in off highway and industrial and marine are all of those opportunities leveraging our core.

Speaker Change: Also I was just wondering are these products going to come off that same line that you've previously mentioned was up fitted to serve the aerospace and defense markets.

Chris Gropp: Got it yeah am I mistaken on that.

Brady Ericson: Again, we were looking for opportunities that can leverage our existing core competencies, both our human capital and our manufacturing capital. So these are opportunities that's leveraging precision fuel management and controls in aerospace, off-highway, industrial, and marine, or all of those opportunities that's leveraging our core competencies and capabilities. So that's kind of one of the reasons why we're looking to expand into those new markets, and we see those as a long-term, profitable, steady opportunity for us. I think why we're winning, I think, is, as they came in and some of the aerospace companies came in and looked at some of our capabilities, they were absolutely kind of blown away that we're holding tolerances that are ± half a micron in high volume, the inspection capabilities that we have for some of our products. And it's been very, very positive.

Chris Gropp: But so then kind of transitioning to you guys had you guys mentioned the second win within the aerospace and defense market.

Speaker Change: Yes, right now, it's just saying it's the same customer.

Speaker Change: So I was just wondering is this is this is a completely new customer from the first one also I was just wondering are these products going to come off that same line that you've previously mentioned was up fitted to serve the aerospace and defense markets.

Speaker Change: And it will be kind of in that same facility using those same same type of equipment.

Brady: Competencies and capabilities. So that's kind of one of the reasons why we are looking to expand into those new markets and we see those as a loss.

Speaker Change: The one thing of note just to remind folks we're actually on pace to getting our quality certification our aerospace quality certification here end of Q1 early Q2 in support of our first.

Brady: Long term profitable.

Chris Gropp: Yes, right now it's been saying, it's the same customer.

Brady: Steady steady opportunity for us.

Chris Gropp: And it will be kind of in that same facility using those same same type of equipment.

Speaker Change: In that aerospace in Q4 of this year.

Brady: I think why we're winning I think as they came in and some of the aerospace companies came in and looked at some of our capabilities.

Speaker Change: Yeah.

Chris Gropp: The one thing of note just to remind folks we're actually on pace to getting our quality certification our aerospace quality certification here end of Q1 early Q2 in support of our first.

Speaker Change: That's great and then just kind of following up on this I know you've talked about it previously, but I think it would be good to just to give a reminder to the market.

Brady: They were absolutely kind of blown away that were holding tolerances that are plus or minus half of micron.

Brady: In high volume the inspection capabilities that we have for some of our products.

Speaker Change: Just stepping back a bit is like why do you guys why was like aerospace and defense kind of one of the end markets that you guys really kind of honed in on like Hey, let's let's diversify our revenues to getting into that and maybe just discuss like why you've won these first two projects or programs and why you think you could get.

Chris Gropp: Sop.

Chris Gropp: And that aerospace in Q4 of this year.

Brady: And it's been very very positive I'm expecting a lot more we have a lot more skus coming through now I think getting our quality certification here into Q1 and that is really going to open up a lot more doors for us and again similar.

Brady Ericson: And it's been very, very positive. I'm expecting a lot more. We have a lot more RFQs coming through now. I think getting our quality certification here end of Q1 and that SOP is really going to open up a lot more doors for us. And again, similar, the aerospace side, they've got a fragmented supply base that had challenges. They've had volume challenges and quality issues for a lot of years. And they see us, again, as a stable, reliable supplier that has great capabilities, a global footprint to support them. And in many ways, we have the manufacturing, design, and validation capability they're looking for.

Chris Gropp: Yeah.

Chris Gropp: That's great and then just kind of following up on this I know you've talked about it previously, but I think it would be good to just to give a reminder to the market.

Brady Ericson: I'm expecting a lot more. We have a lot more RFQs coming through now. I think getting our quality certification here end of Q1 and that SOP is really going to open up a lot more doors for us. And again, similar, the aerospace side, they've got a fragmented supply base that had challenges. They've had volume challenges and quality issues for a lot of years. And they see us, again, as a stable, reliable supplier that has great capabilities, a global footprint to support them. And in many ways, we have the manufacturing, design, and validation capability they're looking for.

Just stepping back a bit is like why do you guys why was like aerospace and defense kind of one of the end markets that you guys really kind of honed in on like Hey, let's let's diversify our revenues to getting into that and maybe just discuss like why you've won these first two projects or programs and why you think you could get.

Speaker Change: Pay you to win new programs in aerospace and defense going forward.

Aerospace side is they've got a fragmented supply base that had had challenges they've had volume challenges and quality issues for a lot of years.

Speaker Change: Again, we were looking for opportunities that can leverage our existing core competencies in our both our human capital and our manufacturing capital and so these are opportunities that leveraging precision fuel management and controls and aerospace in off highway and industrial and marine are all of those opportunities.

Brady: And they see us again as a stable reliable supplier.

Brady: That has great capabilities, our global footprint to support them.

Chris Gropp: Turning to win new programs in aerospace and defense going forward.

Brady: In many ways, we have the manufacturing and design and validation capabilities Theyre looking for.

Chris Gropp: Yeah.

Chris Gropp: Again, we were looking for opportunities that can leverage our existing core competencies in our both our human capital and our manufacturing capital and so these are opportunities that leveraging precision fuel management and controls and aerospace in off highway and industrial and marine are all of those opportunities leveraging our core.

Speaker Change: It's leveraging our core competencies and capabilities. So that's kind of one of the reasons why we are looking to expand into those new markets and we see those as long.

Brady: It allows us also to use existing capital and because of the volume profiles are very different if you're talking about a pass car even see the volumes are much higher than you take that same capital and dedicate it to an aerospace much smaller volume base.

Chris Gropp: It allows us also to use existing capital. Because the volume profiles are very different, if you're talking about a PASCAR or even CV, the volumes are much higher. Then you take that same capital and dedicate it to an aerospace, much smaller volume base. You're able to produce it on the same capital, but much higher revenue on the overall. So it's sort of, it's very complementary, and it helps us utilize that capital that's already sitting on the production floor.

Speaker Change: Long term profitable.

Speaker Change: Steady steady opportunity for us.

Speaker Change: I think why we're winning I think as they came in and some of the aerospace companies came in and looked at some of our capabilities.

Brady: We're able to produce at all the same capital, but much higher revenue overall, so it's sort of a it's very complementary and it helps us utilize that capital that's already sitting on the production floor.

Chris Gropp: Competencies and capabilities. So that's kind of one of the reasons why we are looking to expand into those new markets and we see those as a law.

Speaker Change: We're absolutely kind of blown away that were holding tolerances that are plus or minus half of micron.

Chris Gropp: Long term profitable.

Speaker Change: In high volume the inspection capabilities that we have for some of our products.

Chris Gropp: Steady steady opportunity for us.

Brady: Fair enough fair enough.

Chris Gropp: I think why we're winning I think as they came in and some of the aerospace companies came in and looked at some of our capabilities.

Brady: Overview of that I appreciate it.

Speaker Change: And it's been very very positive I'm expecting a lot more we have a lot more accused coming through now I think getting our quality certification here into Q1 and that he is really going to open up a lot more doors for us and again similar.

[Analyst] (Northland Capital Markets): Fair enough. Fair enough. Yeah, that's a great overview of that. I appreciate it. And I'll turn back to the queue and let some other guys jump on. Thank you, guys, and congrats on the good quarter.

Bobby Brooks: Fair enough. Fair enough. Yeah, that's a great overview of that. I appreciate it. And I'll turn back to the queue and let some other guys jump on. Thank you, guys, and congrats on the good quarter.

Brady: I'll turn it back to the queue and let some other guys jump on thank you guys and congrats on the good quarter.

Chris Gropp: They were absolutely kind of blown away that were holding tolerances that are plus or minus half of micron.

Brady: Thank you.

Speaker Change: Your next question comes from the line of Jake <unk> from BNP Paribas asset management. Your line is open.

Brady Ericson: Thank you.

Chris Gropp: In high volume the inspection capabilities that we have for some of our products.

Operator: Your next question comes from the line of Jake Scholl from BNP Paribas Asset Management. Your line is open.

Speaker Change: Aerospace side, they've they've got a fragmented supply base that had had challenges they've had volume challenges and quality issues for a lot of years.

Chris Gropp: And it's been very very positive I'm expecting a lot more we have a lot more skus coming through now I think getting our quality certification here into Q1 and that he is really going to open up a lot more doors for us and again similar.

Speaker Change: Hey, guys congrats on a strong finish to the year.

[Analyst] (BNP Paribas Asset Management): Hi, guys. Congrats on a strong finish to the year. So I just wanted to dig in a little more on taxes. I wanted to understand if you can help me understand just why the tax rate remains so high in 2025. If my math is right, it looks like about a $35 million headwind versus the targeted kind of long-term tax rate of 27%. And is there any impact from the global minimum tax in here? Thank you.

Jake Scholl: Hi, guys. Congrats on a strong finish to the year. So I just wanted to dig in a little more on taxes. I wanted to understand if you can help me understand just why the tax rate remains so high in 2025. If my math is right, it looks like about a $35 million headwind versus the targeted kind of long-term tax rate of 27%. And is there any impact from the global minimum tax in here? Thank you.

Speaker Change: So I just wanted to dig in a little more on taxes.

Speaker Change: And they see us again as a stable reliable supplier.

Speaker Change: I Wonder if you could help me understand.

Speaker Change: Why.

Speaker Change: That has great capabilities, our global footprint to support them.

Speaker Change: The tax rate remains so high in slide 25.

Chris Gropp: The aerospace side, they've maybe been a fragmented supply base that had had challenges they've had volume challenges and quality issues for a lot of years.

Speaker Change: And in many ways, we have the manufacturing and design and validation capabilities Theyre looking for it.

Speaker Change: If my math is right it looks like about $35 million headwind versus the targeted long term tax rate of 27%.

Speaker Change: It allows us also to use existing capital and because of the volume profiles are very different if you're talking about a pass car even see the volumes are much higher than you take that same capital and dedicate it to an aerospace much smaller volume base.

Chris Gropp: And they see us again as a stable reliable supplier.

Speaker Change: And is there any impact from the global bank taxes. Thank you.

Chris Gropp: That has great capabilities, our global footprint to support them.

Speaker Change: Okay, Jamie I'll take that one yes, it was pretty disappointing I mean, we've worked on it you would think that we haven't done anything but actually my team has worked quite hard on it. We finished phase one and it is it was trying to eliminate some of the.

Chris Gropp: In many ways, we have the manufacturing and design and validation capabilities. They are looking for.

Chris Gropp: Hi, Jake. I'll take that one. Yeah, it was pretty disappointing. I mean, we've worked on it. You would think that we hadn't done anything, but actually, my team has worked quite hard on it. We finished phase one, and it was trying to eliminate some of the inefficiencies out there that exist in the overall structure. But it's going to take us longer, and we're now finishing phase one. We had a little bit of a carryover from the old structure that existed in 2023 as the local units settle overseas their taxes locally. It ended up with a little bit more of a carryover than we expected. That cleans out. We're not showing a major reduction next year. I'm trying to be very conservative and give my guys some space. But now we start phase two and sort of concurrently at phase three.

Speaker Change: We're able to produce at all the same capital, but much higher revenue overall, so it's sort of a it's very complementary and it helps us utilize that capital that's already sitting on the production floor.

Chris Gropp: It allows us also to use existing capital and because of the volume profiles are very different if you're talking about a pass car even see the volumes are much higher than you take that same capital and dedicate it to an aerospace much smaller volume days.

Speaker Change: Inefficiencies out there that exist in that overall structure.

Speaker Change: Fair enough fair enough.

Speaker Change: But it's going to take us longer and where we are now finishing phase one if we had a little bit of a carryover from the old structure that existed in 'twenty three as a local unit subtle overseas there taxes locally it ended up with a little bit more of a carryover than we expected that cleans out.

Speaker Change: Great overview of that I appreciate it.

Chris Gropp: We're able to produce at all the same capital, but much higher revenue.

Speaker Change: I'll turn it back to the queue and let some other guys jump on thank you guys and congrats on the good quarter.

Chris Gropp: Overall, so it's sort of a it's very complementary and it helps us utilize that capital that's already sitting on the production floor.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Jake <unk> from BNP Paribas asset management. Your line is open.

Chris Gropp: Fair enough fair enough.

Chris Gropp: Great overview of that I appreciate it.

Speaker Change: We're not showing a major reduction next year I'm trying to be very conservative and give my guy had some space, but now we start phase III in sort of concurrently phase three.

Jake: Hi, guys congrats on a strong finish to the year.

Chris Gropp: I'll turn it back to the queue and let some other guys jump on thank you guys and congrats on the good quarter.

Speaker Change: So I just wanted to dig in a little more on taxes.

Chris Gropp: Thank you.

Chris Gropp: But now we start phase two and sort of concurrently at phase three. This is going to be a long-term project because we have two particular regions and areas that are very difficult structurally, and it's taking a lot of heavy lifting. So we're going to work through it. It's just not a short-term thing you can do overnight.

Jake: I Wonder if you can help me understand.

Speaker Change: Your next question comes from the line of Jake <unk> from BNP Paribas asset management. Your line is open.

Speaker Change: This is going to be a long term project because we have two particular regions and areas that are very difficult.

Speaker Change: Just why the.

Chris Gropp: This is going to be a long-term project because we have two particular regions and areas that are very difficult structurally, and it's taking a lot of heavy lifting. So we're going to work through it. It's just not a short-term thing you can do overnight.

Speaker Change: The tax rate remains so high in the 2025.

Speaker Change: If my math is right it looks like about $35 million headwind versus the targeted long term tax rate of 27%.

Jake: Hi, guys congrats on a strong finish to the year.

Structurally.

Speaker Change: And it's taking a lot of heavy lifting so we're going to work through it. It's just not a short term thing you can do overnight.

Speaker Change: So I just wanted to dig in a little more on taxes.

Speaker Change: And is there any impact from the global minimum tax thank you.

Jake: I Wonder if you can help me understand.

Speaker Change: Why.

Speaker Change: The tax rate remains so high in the slide 25.

Jamie I'll take that one yes, it was pretty disappointing I mean, we've worked on it you would think that we hadn't done anything but actually my team has worked quite hard on it we finished phase one.

Speaker Change: Thanks, Chris and did.

[Analyst] (BNP Paribas Asset Management): Thanks, Chris. And could you guys also just give us a little bit of color on your expectations by segment? Thank you.

Jake Scholl: Thanks, Chris. And could you guys also just give us a little bit of color on your expectations by segment? Thank you.

Speaker Change: Could you guys just give us a little bit of color on your expectations by segment.

Chris Gropp: If my math is right it looks like about $35 million headwind versus the targeted long term tax rate of 27%.

Speaker Change: Yes.

Bobby Brooks: And is there any impact from the global minimum tax.

Speaker Change: It is it was trying to eliminate some of the.

Speaker Change: From an overall segment standpoint have you seen from the overall market, we still see softness in light vehicle or maybe a little bit of global upside on CV, but primarily second half of the year.

Brady Ericson: Yeah. And I think from an overall segment standpoint, if you've seen from the overall market, we still see softness in light vehicle and maybe a little bit of global upside on CV, but primarily second half of the year. So I think FS is going to our fuel system segment is going to continue to have volume and revenue pressures, and we see that being more than offset with our aftermarket segment. And so we see our aftermarket continuing to kind of chunk away and progress. And I think this will be another year of a tough OE market with kind of, as Chris mentioned, the second half of 2024 were soft. We expect that continuing to be soft on the OE side through at least the first half, with some recovery in the second half primarily driven from the commercial vehicle side.

Bobby Brooks: Thank you.

Speaker Change: Inefficiencies out there that exist in that overall structure.

Bobby Brooks: Hi, Jamie I'll take that one yes, it was pretty disappointing I mean, we've worked on it you would think that we hadn't done anything but actually my team has worked quite hard on it. We finished phase one and it is it was trying to eliminate some of the inefficiencies.

Speaker Change: But it's going to take us longer and where were now finishing phase one we had a little bit of a carryover from the old structure that existed in 'twenty three as the local unit subtle overseas there taxes locally it ended up with a little bit more of a carryover than we expected that cleans out.

Speaker Change: So I think <unk> is going to fuel systems segment is going to continue to have.

Speaker Change: Volume and revenue pressures and we see that being be more than offset.

Speaker Change: With our aftermarket segment.

Speaker Change: Inefficiencies out there that exist in that overall structure.

Speaker Change: And so we see our aftermarket continuing to kind of chunk away.

Speaker Change: But it's going to take us longer and where were now finishing phase one if we had a little bit of a carryover from the old structure that existed in 'twenty three as a local units subtle overseas there taxes locally it ended up with a little bit more of a carryover than we expected that cleans out.

Speaker Change: We're not showing a major reduction next year I'm, just trying to be very conservative and give my guys. Some space, but now we start phase III in sort of concurrently or phase three.

Speaker Change: And progress and I think this will be another year of a tough OE market.

Speaker Change: With the kind of as good as Chris mentioned, the second half of 'twenty four were soft we expect that continuing to be soft on the OE side can you at least the first half with some recovery in the second half primarily driven from the commercial vehicle side.

Speaker Change: This is going to be a long term project because we have two particular regions and areas that are very difficult.

Speaker Change: We're not showing a major reduction next year I'm trying to be very conservative and give my guys. Some space, but now we start phase two in sort of concurrently phase three.

Speaker Change: Surely.

Speaker Change: And it's taking a lot of heavy lifting so we're going to work through it. It's just not a short term thing you can do overnight.

Speaker Change: With that said I mean, our aftermarket folks or are excited when the OE side is down because they know that gives them additional opportunity and that's what we've kind of seen even last year, the OE is down or aftermarket.

Brady Ericson: With that said, I mean, our aftermarket folks are excited when the OE side is down because they know that gives them additional opportunity. And that's what we've kind of seen even last year. The OE is down. Our aftermarket kind of offsets a good chunk of that. And that's one of the things that we continue to highlight to folks is that nice balance between and the large size of our aftermarket business gives us a lot of cushion even when the OE market is down and volatile.

Speaker Change: This is going to be a long term project, because we had two particular regions or areas that are very difficult.

Speaker Change: Thanks, Chris and did.

Speaker Change: Could you guys also just give us a little bit of color on your expectations by segment.

Speaker Change: To offset a good chunk of that so and.

Speaker Change: Surely.

Speaker Change: And it's taking a lot of heavy lifting so we're going to work through it. It's just not a short term thing you can do overnight.

Speaker Change: And that's one of the things that we continue to highlight the folks is that does that nice balance between that and the large size of our aftermarket business gives us a lot of cushion even when the OE market is down and volatile.

Speaker Change: Yes.

Speaker Change: Thanks, Chris and did you guys also just give us a little bit of color on your expectations by segment.

Speaker Change: And from a quality of earnings perspective, if you look at that despite the reduction sales actually held up higher quality earnings and we also improved on the aftermarket side for the full year. If you look at the quality of earnings for age. So all in all even with the soft.

Chris Gropp: From a quality of earnings perspective, if you look, FS, despite the reduction in sales, actually held up higher quality earnings. We also improved on the aftermarket side for the full year if you look at the quality of earnings for each. All in all, even with the soft top line, the bottom line held up quite well, and the units did a really good job managing.

Speaker Change: So I think <unk> is going to fuel systems segment is going to continue to have.

Speaker Change: Thank you.

Speaker Change: Volume and revenue pressures and we see that being be more than offset.

Speaker Change: Yes.

Speaker Change: With our aftermarket segment.

Speaker Change: And so we see our aftermarket continuing to kind of chunk away.

Speaker Change: Top line the bottom line held up quite well and the units did a really good job managing.

Speaker Change: So I think FX is going to fuel systems segment is going to continue to add.

Speaker Change: And progress and I think this will be another year of a tough OE market.

Speaker Change: Yeah.

Speaker Change: Volume and revenue pressures and we see that being be more than offset.

Speaker Change: With the kind of as good as Chris mentioned, the second half of 'twenty four were soft and we expect that continuing to be soft on the OE side to at least the first half with some recovery in the second half primarily driven from the commercial vehicle side.

Speaker Change: Thanks, that's very helpful and congrats again on a great first full years.

[Analyst] (BNP Paribas Asset Management): Thanks. It's very helpful. Congrats again on a great first full year as an independent company.

Jake Scholl: Thanks. It's very helpful. Congrats again on a great first full year as an independent company.

Speaker Change: With our aftermarket segment.

Speaker Change: And so we see our aftermarket continuing to that kind of chunk away.

Speaker Change: Great. Thank you.

Brady Ericson: Great. Thank you.

Joseph Spak: Your next question comes from the line of Joseph Spak from UBS. Your line is open.

Speaker Change: And progress and I think this will be another year of a tough OE market.

Operator: Your next question comes from the line of Joseph Spak from UBS. Your line is open.

Joseph Spak: Hey, this is Dave on for Joe Thanks for taking my question. So.

With kind of Sci as Chris mentioned, the second half of 'twenty four were soft we expect that continuing to be soft on the OE side can you at least the first half with some recovery in the second half primarily driven from the commercial vehicle side.

Joseph Spak: Hey, this is Gabon for Joe. Thanks for taking my questions. So I saw that you raised the dividend this quarter alongside an increase in the buyback program. So that's encouraging, but there's still some excess cash on the balance sheet. I know you'll probably remain balanced in how you allocate capital going forward, but you've talked about wanting to grow CV and aftermarket inorganically. So as you look at potential M&A, how should we think about the potential opportunities you're sizing up in the market?

Speaker Change: Saw that you've raised the dividend this quarter alongside an increase in the buyback program. So that's encouraging.

Speaker Change: But there's still some excess cash on the balance sheet I know youll, probably remains balanced and how you allocate capital going forward, but you've talked about wanting to grow CV and aftermarket inorganically. So how do you look at potential M&A how.

Speaker Change: To offset a good chunk of that so.

Speaker Change: And that's one of the things that we continue to highlight to folks is that does that nice balance between that and the large size of our aftermarket business gives us a lot of cushion even when the OE market is down and volatile.

Speaker Change: How should we think about the potential opportunities you're sizing up the market.

Speaker Change: And from a quality of earnings perspective, if you look at that despite the reduction sales actually held up higher quality earnings.

Speaker Change: Sure Yeah Kash.

Speaker Change: Offset a good chunk of that so and.

Brady Ericson: Sure. Yeah. It's hard to say cash coming in higher is a bad thing, but yeah, it's probably higher than our target level, which is why we've primarily increased some of the buybacks. From an acquisition standpoint, as we've communicated, we're going to continually be financially disciplined. We're looking for specific assets that are going to expand our commercial vehicle, industrial, and aftermarket exposures, but we're also going to be disciplined in ensuring that there are companies that are profitable, making money, going to add EPS to our bottom line, and have valuations that are at or below our current valuation that we have as a company. We feel that we're still undervalued, and that's why we continue to buy back our shares.

Speaker Change: It's always it's hard to think cash coming in higher as a bad thing but.

Speaker Change: Yes, it's probably higher than our target level, which is why we.

Speaker Change: We also improved on the aftermarket side for the full year. If you look at the quality of earnings for each so all in all even with the soft.

Speaker Change: Primarily increased some of the buybacks from our from an acquisition standpoint, we've communicated we're going to continue to be financially disciplined.

Speaker Change: And from a quality of earnings perspective, if you look at that despite the reduction in sales actually held up higher quality earnings and we also improved on the aftermarket side for the full year. If you look at the quality of earnings for each so all in all even with the soft.

Speaker Change: Top line the bottom line held up quite well and the units did a really good job managing.

Speaker Change: We're looking for specific assets that are going to expand our commercial vehicle and industrial and aftermarket exposures.

Speaker Change: Thanks, that's very helpful and congrats again on a great first four years at the company.

Speaker Change: But we're also going to be disciplined in ensuring that there are companies that are that are profitable, making money you're going to add EPS to our bottomline and have valuations that are at or below our current current valuation that we have in the company.

Speaker Change: Great. Thank you.

Speaker Change: Your next.

Speaker Change: Top line the bottom line held up quite well and the units did a really good job managing.

Joseph Spak: Question comes from the line of Joseph Spak from UBS. Your line is open.

Speaker Change: We feel that we're still undervalued, but and Thats why we continue to buyback our shares.

Speaker Change: Yeah.

Joseph Spak: Hey, this is David on for Joe Thanks for taking my question. So.

Speaker Change: Thanks, that's very helpful and congrats again on a great first full year.

Speaker Change: Thought that you've raised the dividend this quarter alongside an increase in the buyback program. So that's encouraging.

Speaker Change: As we find assets and I think we're.

Speaker Change: Great. Thank you.

Brady Ericson: As we find assets, and I think we're getting more confidence that I think there may be some good opportunities that meet that criteria that hopefully we'll be able to close on those deals and announce some deals in the next few quarters.

Speaker Change: We're getting more confidence that I think we're there may be some good opportunities that meet that criteria.

Speaker Change: Your next question comes from the line of Joseph Spak from UBS. Your line is open.

Speaker Change: Hopefully, we'll be able to close on those deals and announce some deals in the next few quarters.

David: Hey, this is David on for Joe Thanks for taking my question. So.

Speaker Change: Yeah.

Speaker Change: Saw that you've raised the dividend this quarter alongside an increase in the buyback program. So that's encouraging.

Speaker Change: Okay. That's some helpful color and then my follow up is just on offsetting the tougher industry outlook with Judy I think you mentioned in the past about.

Joseph Spak: That's some helpful color. And then my follow-up is just on offsetting the tougher industry outlook with GDi. I think you mentioned in the past about half of the combustion market is GDi, and that you have a mid-teens share in that market. What's the current level of penetration in the market today? How has your position strengthened over the past year? And as we move from 350 bar to more efficient 500 bar, what sort of content uplift comes with that? Thanks, guys.

Speaker Change: But there is still some excess cash on the balance sheet I know youll, probably remains balanced and how you allocate capital going forward, but you've talked about wanting to grow CV and aftermarket inorganically. So how do you look at potential M&A how.

Speaker Change: Sure Yeah Kash.

Speaker Change: It's always it's hard to say cash coming in higher is a bad thing but.

Speaker Change: Half of the combustion market.

Speaker Change: Mid teens share in that market.

Speaker Change: Yes, it's probably higher than our target level, which is why we.

Speaker Change: What's the current level of penetration in the market today, how is your position strengthened over the past year and as we move from 350 bar to more efficient 500 bar, but sort of content uplift that comes with that.

Speaker Change: Primarily increased some of the buybacks from a from an acquisition standpoint, we've communicated we're going to continue to be financially disciplined.

Speaker Change: How should we think about the potential opportunities you're sizing up the market.

Speaker Change: Sure Yeah Kash.

Speaker Change: We're looking for specific assets that are going to expand our commercial vehicle and industrial and aftermarket exposures, but we're also going to be disciplined in ensuring that there are companies that are that are profitable and making money going to add EPS to our bottomline and have valuations that are at or below our current current valuation.

Speaker Change: It's always it's hard to say cash coming in higher is a bad thing but.

Speaker Change: Yes.

Speaker Change: Yes, I mean, GTI global penetration rates.

Speaker Change: Yeah, it's probably higher than our target level, which is why we.

Brady Ericson: Yeah. I mean, GDi global penetration rates, we're still in the 60-65% range. We think that's kind of a steady number right now, may increase a bit, but not a whole lot. From a market share perspective on GDi, we're still in the mid-teens and have continued to kind of gain market share. I think we'll see some more launches, especially on the 500 bar. We've won a number of new programs that'll be launching in the coming year and next year. And we think that will allow us to support our continued market share gains because it adds a lot of value to our customers. Now, from a content increase, there's not a whole lot. And that's one of the advantages of why we're winning market share, is because the product itself, it's a drop-in replacement to the 350 bar.

Speaker Change: Primarily increased some of the buybacks from a from an acquisition standpoint, we've communicated we're going to continue to be financially disciplined.

Speaker Change: The 60% to 65% range, we think that's kind of a it's kind of a steady number right now may increase a bit but not a whole lot from a market share perspective on <unk>, we're still in the mid teens.

Speaker Change: We're looking for specific assets that are going to expand our commercial vehicle and industrial and aftermarket exposures.

Speaker Change: That we have as a company.

Speaker Change: We feel that we're still undervalued, but and that's why we continue to buyback our shares.

Speaker Change: And have continued to gain market share I think.

Speaker Change: We will see some more launches, especially on the 500 bar we've won a number of new programs that'll be launching.

Speaker Change: As we find assets and I think we're.

Speaker Change: We're getting more confidence that I think where there may be some good opportunities that meet that criteria.

Speaker Change: In the coming year and next year, and we think that will allow us to support our continued market share gains because it adds a lot of value to our customers now from a from a content increase but not a whole lot and that's one of the advantages of why we're winning market share is because.

Speaker Change: We will be able to close.

Speaker Change: We feel that we're still undervalued, but and Thats why we continue to buyback our shares.

Speaker Change: To close on those deals and announce some deals in the next few quarters.

Brady Ericson: Now, from a content increase, there's not a whole lot. And that's one of the advantages of why we're winning market share, is because the product itself, it's a drop-in replacement to the 350 bar. Just a few changes are needed in order to get that additional performance. And so there's a little bit of a content increase for us, but the value it's providing for the customer is really good, which is why we're picking up some of the market share.

Speaker Change: Okay. That's some helpful color and then my follow up is just on offsetting.

Speaker Change: As we find assets and I think we're.

Speaker Change: We're getting more confidence that I think we're there may be some good opportunities that meet that criteria.

Speaker Change: Offsetting the copper industry outlook with Judy I think you mentioned in the past about half of the combustion market.

Speaker Change: The product itself, it's a drop in replacement to the 350 bar.

Speaker Change: Hopefully, we'll be able to close on those deals and announce some deals in the next few quarters.

Speaker Change: Just a few changes are needed in order to get that additional performance and so there is there is a little bit.

Speaker Change: And that you have mid teens share in that market.

Brady Ericson: Just a few changes are needed in order to get that additional performance. And so there's a little bit of a content increase for us, but the value it's providing for the customer is really good, which is why we're picking up some of the market share.

Speaker Change: Hum.

Speaker Change: Yeah.

Speaker Change: The current level of penetration in the market today, how is your position strengthened over the past year and as we move from 350 bar to a more efficient 500 bar, what sort of content uplift comes with that.

Speaker Change: Of a content increase for us, but the value it's providing for the customer is really good which is why we're picking up some of those some of the market share.

Speaker Change: Okay. That's some helpful color and then my follow up is just on offsetting the tougher industry outlook with Judy I think you mentioned in the past about.

Speaker Change: Yes.

Speaker Change: I appreciate it congrats.

Speaker Change: For the combustion market.

Speaker Change: Yes.

Speaker Change: Mid teens share in that market.

Joseph Spak: Appreciate it, Brady. Congrats.

Speaker Change: Thank you.

Speaker Change: Yes, I mean, DDI global penetration rates are still in that 60% to 65% range. We think that's kind of a it's kind of a steady number right now may increase a bit but not a whole lot.

Yeah.

Brady Ericson: Great. Thank you.

Jake: What's the current level of penetration in the market today, how is your position strengthened over the past year and as we move from 350 bar to more efficient 500 bar, but sort of content uplift that comes with that.

Speaker Change: And once again, if he would like to ask a question. Please press star one on your telephone keypad at this time your.

Operator: And once again, if you would like to ask a question, please press star one on your telephone keypad at this time. Your next question comes from the line of David Silver from CL King & Associates. Your line is open.

Speaker Change: Your next question comes from the line of David Silver from CL, King and Associates. Your line is open.

Speaker Change: From a market share perspective on <unk>, we're still in the mid teens.

Speaker Change: That's.

Speaker Change: We have continued to kind of gain market share I think.

Speaker Change: Yes, I mean, Judy I global penetration rates.

David Silver: Yeah, Hi, thank you.

Speaker Change: We will see some more launches, especially on the 500 bar we've won a number of new programs that'll be launching.

[Analyst] (C.L. King & Associates): Yeah. Hi. Thank you. I just had a question maybe about your overall guidance for the coming year. And I know there's a number of assumptions and judgments you have to make. Maybe if you could, if you wouldn't mind, where do you think if you were to fall a little short, where might the most likely source of that weakness be? And alternatively, if you were to exceed, let's say, on the top line, is it greater GDI adoption, which you just discussed, but where do you think there might be upside to your overall forecast? Thanks.

David Silver: Yeah. Hi. Thank you. I just had a question maybe about your overall guidance for the coming year. And I know there's a number of assumptions and judgments you have to make. Maybe if you could, if you wouldn't mind, where do you think if you were to fall a little short, where might the most likely source of that weakness be? And alternatively, if you were to exceed, let's say, on the top line, is it greater GDI adoption, which you just discussed, but where do you think there might be upside to your overall forecast? Thanks.

David Silver: I just had a question maybe about your overall guidance for the coming year.

Speaker Change: At 60% to 65% range, we think that's kind of a it's kind of a steady number right now may increase a bit but not a whole lot from a market share perspective on <unk>, we're still in the mid teens.

Speaker Change: In the coming year and next year, and we think that will allow us to support our continued market share gains because it adds a lot of value to our customers now from a from a content increase does not a whole lot and that's one of the advantages of why we're winning market share.

David Silver: And I know Theres, a number of assumptions and judgments you have to make.

David Silver: Maybe if you could if you wouldn't mind.

Speaker Change: And have continued to kind of gain market share I think.

David Silver: Where do you think if you were to fall a little short where might the.

Speaker Change: We will see some more launches, especially on the 500 bar. We've won a number of new programs that we'll be launching.

David Silver: The most likely source so that we can see and alternatively, if you were to exceed let's say on the top line.

In the coming year, and then next year and we think that will allow us to support our continued market share gains because it adds a lot of value to our customers now from a from a content increase theres not a whole lot and that's one of the advantages of why we're winning market share is because.

Speaker Change: The the product itself, it's a drop in replacement to the 350 bar.

David Silver: Is it greater GTI adoption, which you just discussed here, but where do you think there might be.

Speaker Change: Just a few changes are needed in order to get that additional performance and so there is there's a little bit.

David Silver: To your overall forecast thanks.

Speaker Change: Of a content increase for us, but the value it's providing for the customer is really good which is why we're picking up some of those some of the market share.

David Silver: Yes, I mean from a <unk>.

<unk> standpoint, one of the big assumptions as commercial vehicle rebounding and coming in stronger in the second half.

Brady Ericson: Yeah. I mean, from a guide standpoint, one of the big assumptions is commercial vehicle rebounding and coming in stronger in the second half. If that doesn't occur, that's probably the biggest concern that we have as far as on the downside. On the upside, it's kind of if it comes in even stronger and if the global markets on the light vehicle side continue to kind of solidify and aren't affected by a lot of the trade wars that are going on. So I think if interest rates kind of come down a little bit, inflation stays down, and some of the overall global markets start picking up, I think that's going to be some of the upside because the current forecast still has light vehicle OE down on a year-over-year basis in total, which means light vehicle OE combustion volume is down even more.

Speaker Change: The product itself, it's a drop in replacement to the 350 bar.

Speaker Change: I appreciate it congrats.

Speaker Change: Just a few changes are needed in order to get that additional performance and so there is there is a little bit.

David Silver: If that doesn't occur thats, probably the biggest biggest concern that we have as far as.

Speaker Change: Okay. Thank you.

Speaker Change: And once again, if he would like to ask a question. Please press star one on your telephone keypad at this time.

Speaker Change: Of a content increase for us, but the value is providing for the customer is really good which is why we're picking up some of those some of the market share.

David Silver: The downside.

David Silver: On the on the upside it's kind of if it comes in even stronger and if the global markets on the light vehicle side, continuing to kind of solidify and arent affected by a lot of the trade wars that.

Speaker Change: Your next question comes from the line of David Silver from CL, King and Associates. Your line is open.

Speaker Change: Yeah.

Speaker Change: I appreciate it congrats.

Speaker Change: Thank you.

David Silver: Yeah, Hi, thank you.

Speaker Change: Yeah.

Speaker Change: And once again, if he would like to ask a question. Please press star one on your telephone keypad at this time.

David Silver: I just had a question maybe about your overall guidance for the coming year.

David Silver: That are going on so I think if interest rates kind of come down a little bit.

Brady Ericson: So I think if interest rates kind of come down a little bit, inflation stays down, and some of the overall global markets start picking up, I think that's going to be some of the upside because the current forecast still has light vehicle OE down on a year-over-year basis in total, which means light vehicle OE combustion volume is down even more. So if people continue to buy more hybrids and combustion and there's weakness on the EV adoption in the year, that's a little bit of upside as well. I still think there's always potential upside in our aftermarket business. They always seem to be chasing new opportunities that can materialize relatively quickly in our numbers this year.

David Silver: <unk> stayed down in some of the over global markets start picking up.

Speaker Change: Your next question comes from the line of David Silver from CL, King and Associates. Your line is open.

David Silver: And I know, there's a number of assumptions and judgments you have to make.

David Silver: I think that's going to be some of the upside because the current forecast still has light vehicle.

David Silver: Maybe if you could if you wouldn't mind.

Speaker Change: Yeah, Hi, thank you.

David Silver: But we down on a year over year basis in total which means light vehicle OE combustion volume is down even more.

David Silver: And so if.

David Silver: People continue to buy more hybrids in combustion and theres weakness on the EV adoption in the year, that's a little bit of upside as well.

Brady Ericson: So if people continue to buy more hybrids and combustion and there's weakness on the EV adoption in the year, that's a little bit of upside as well. I still think there's always potential upside in our aftermarket business. They always seem to be chasing new opportunities that can materialize relatively quickly in our numbers this year. I think on the OE side, it's not going to be adoption or anything else. It's going to be the markets coming in stronger than we expected. Then as Chris kind of highlighted, because of the translational effect of all of our business that we have abroad, a weakening of the US dollar is going to translate over to our numbers in a very positive way.

David Silver: I don't think there is always potential upside in our aftermarket business they always seem to be.

David Silver: Are you seeing new opportunities that can that can materialize relatively quickly in our numbers. This year I think on the OE side, it's not going to be adoption or anything else, that's going to be the market's coming in stronger than we expected.

Brady Ericson: I think on the OE side, it's not going to be adoption or anything else. It's going to be the markets coming in stronger than we expected. Then as Chris kind of highlighted, because of the translational effect of all of our business that we have abroad, a weakening of the US dollar is going to translate over to our numbers in a very positive way. Right now, the current forecast has that as a headwind of $80 million, basically at the exchange rates that we've noted in the deck. That's kind of where they are right now. If the dollar gets weaker versus global currencies, that'll give us some upside as well.

David Silver: And then as Chris kind of highlighted because we.

David Silver: Because of the translational effect of all of our business that we have abroad.

David Silver: A weakening of the U S dollar is going to going to translate over to our numbers in a very positive way and right now the current forecast has that as a headwind of $80 million.

Brady Ericson: Right now, the current forecast has that as a headwind of $80 million, basically at the exchange rates that we've noted in the deck. That's kind of where they are right now. If the dollar gets weaker versus global currencies, that'll give us some upside as well.

David Silver: Basically at the exchange rates that we've noted in the in the deck.

David Silver: That's kind of where they are right now at the door.

David Silver: It gets weaker versus global currencies that will give us some upside as well the other item I mean chaos in the market is never good for the it could stay where they get squirrelly and don't necessarily want to go out and buy now the flip side to that is if they dropped the incentives for evs.

Chris Gropp: The other item, I mean, chaos in the market is never good for the end consumer. They get squirrely and don't necessarily want to go out and buy. Now, the flip side to that is if they drop the incentives for EVs, I don't think that's built into outlook numbers. Could that help GDi and PASCAR possibly? The big CV players are signaling they're doing mixed signals in terms of, "Do they think the pre-buy is coming?" The pre-numbers out there are looking pretty good, but I think they're still being a little careful on this. Most of them don't see any changes in regulations as a negative because they've built in this next generation, which is actually it has efficiency. So they think that that's going to actually help sales, pushing those out there, and it's going to be more attractive to the end users.

David Silver: Think thats built into outlet numbers could that helped GTI and pass car, possibly.

David Silver: The big CD players are signaling they're doing mixed signals in terms of did I think the pre bias can make the numbers out the pre numbers out there are looking pretty good but I think they are still being a little careful on this.

David Silver: Most of them don't see any changes in regulations is a negative because they've built in this next generation.

David Silver: It is actually.

David Silver: It has efficiency. So they think that that's going to actually help sales pushing that's out there and it's going to be more attractive to the end users.

Chris Gropp: So they think that that's going to actually help sales, pushing those out there, and it's going to be more attractive to the end users. I mean, all of this is predicated on the market as in a little bit of worry. So that's never helpful at all.

David Silver: I mean, all of this is predicated on the market is in a little bit of worry that's never helpful. At all.

Chris Gropp: I mean, all of this is predicated on the market as in a little bit of worry. So that's never helpful at all.

David Silver: Okay.

Speaker Change: That's a great answer thanks, a lot of color there. Thank you.

[Analyst] (C.L. King & Associates): That's a great answer. A lot of color there. Thank you. And I think I may be overlapping with this, but I did want to ask you a tariff-related question, and you could probably talk about it for a couple of hours. But I guess I would just ask you, amongst some of your key customers, what is their thinking about this current phase where they're in? I mean, I view the last year or two as a period of slowdown in timelines and slowdown in decision-making on moving forward with different programs. Does the tariff overhang push out that decision-making or stretch out the timelines further? Just what do you hear from your major customers in the current environment there?

David Silver: That's a great answer. A lot of color there. Thank you. And I think I may be overlapping with this, but I did want to ask you a tariff-related question, and you could probably talk about it for a couple of hours. But I guess I would just ask you, amongst some of your key customers, what is their thinking about this current phase where they're in? I mean, I view the last year or two as a period of slowdown in timelines and slowdown in decision-making on moving forward with different programs. Does the tariff overhang push out that decision-making or stretch out the timelines further? Just what do you hear from your major customers in the current environment there?

Speaker Change: And I think I may be overlapping with this but I did want to ask you a tariff related question and you could probably talk about it for a couple of hours but.

Speaker Change: I guess I would just say ask you amongst some of your key customers what is their thinking about.

Speaker Change: This current phase, where they are and could this.

Speaker Change: I view, the last year or two as a period of slowdown and timelines and slowdown in decision, making on moving forward with different programs.

Speaker Change: Does the tariff overhang.

Speaker Change: Shout that decision, making or stretch out the timelines further just what do you what do you hear from your major customers.

Speaker Change: In the current environment there.

Speaker Change: I mean, I think a lot of them were already in.

Brady Ericson: I mean, I think a lot of them were already in the plan of regionalizing more and more of the supply base, becoming less reliant on China for the North American production numbers. And I think that's still there. I think, obviously, the blowup potentially of the USMCA and the tariffs with Canada and Mexico, I think, is a bit of a shock, I think, for a lot of folks. And the hope is that we'll work through that in a rational way and kind of move forward. Biggest risk there, obviously, is it's going to it can't be absorbed by the suppliers, and it's probably going to be difficult to be 100% absorbed by the OEMs. So it's going to have an effect on the consumers, which then, obviously, is going to have an effect on volumes. And so that's probably the best thing that we can prepare for.

Speaker Change: In the in the plan of regionalized in more and more of the supply base be becoming less reliant on China for the North American production numbers and I think thats still there I think.

Speaker Change: Obviously the the.

Speaker Change: The blowout potentially of the U S MCA and the tears with Canada, and Mexico, I think is a bit of a shock I think for a lot of folks in the hope is that.

Speaker Change: We will work through that in a in a rational way.

Speaker Change: And kind of move forward.

Speaker Change: Biggest risk there obviously is going to.

Speaker Change: It can be absorbed by the suppliers.

Speaker Change: Probably going to be difficult to be 100% absorbed by the Oems. So it's going to have an effect on the consumers, which then obviously is going to have an effect on volumes and so that's probably the best thing that we can prepare for and I know Theres a couple of public announcements out there can you move.

Brady Ericson: So it's going to have an effect on the consumers, which then, obviously, is going to have an effect on volumes. And so that's probably the best thing that we can prepare for. I know there's a couple of public announcements that's out there. Can you shift some production if you have plants in both Mexico and North America? Can you move a little bit? Maybe a little bit, but it's not going to be, in my view, substantial enough to offset the tremendous amount of cost increases that would come from the currently proposed 25% tariffs.

Brady Ericson: I know there's a couple of public announcements that's out there. Can you shift some production if you have plants in both Mexico and North America? Can you move a little bit? Maybe a little bit, but it's not going to be, in my view, substantial enough to offset the tremendous amount of cost increases that would come from the currently proposed 25% tariffs.

Speaker Change: Shift some production if you have plans in both in both Mexico and North America can you move a little bit maybe a little bit, but it's not going to be in my view substantial enough to.

Speaker Change:

Speaker Change: Offset the tremendous amount of of cost increases that would come from the currently proposed 25% tariffs on so it's not a short term thing that you can do.

Chris Gropp: Plus, it's not a short-term thing that you can do in any way.

Speaker Change: It takes a while.

Speaker Change: Yes, yes, yes.

Brady Ericson: Right. It's going to take a while. And that's a challenge.

Speaker Change: Now from a China point of view, we have very little exposure to China.

Chris Gropp: Now, from a China point of view, we have very little exposure on the China tariffs at all. And what we do, it's only a couple of million dollars in revenue total. And 80% of that is aftermarket, which means that we can immediately push through a price increase. Of course, again, that hurts the end customer. Or we can try to resource, which, again, would have cost involved in it that we would push through. But it's a minimal exposure from the China side, for sure.

Speaker Change: For us at all and what we do it's only a couple of million dollars in revenue total.

Speaker Change: And 80% of that is aftermarket, which means that we can immediately push through a price increase of course again that hurts the cusp.

Speaker Change: Customer.

Speaker Change: Or we can try to resource, which again would have cost involved in it that we would push through but it's it's a minimal exposure from the China side for sure.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Thanks for all the detail I appreciate it.

[Analyst] (C.L. King & Associates): Thanks for all the detail. I appreciate it.

David Silver: Thanks for all the detail. I appreciate it.

Speaker Change: Your next question comes.

Speaker Change: Thank you. Your next question comes from the line of Bobby Brooks from Northland Capital markets. Your line is open.

Operator: Your next question comes from the line of Bobby Brooks from Northland Capital Markets. Your line is open.

Speaker Change: Hey, guys just wanted to jump back on and ask one more question. So the PR mentioned.

[Partner & Portfolio Manager] (Banyan Capital Management): Hey, guys. Just wanted to jump back on and ask one more question. So the PR mentioned some nice wins for the commercial vehicle market. And I was just hoping if we could get a bit more granular on that. But specifically, I was wondering, were any of these commercial vehicle wins, were they really more on-highway stuff, or was any of it off-highway? Because I know expanding the off-highways is kind of a key for you guys going forward.

Bobby Brooks: Hey, guys. Just wanted to jump back on and ask one more question. So the PR mentioned some nice wins for the commercial vehicle market. And I was just hoping if we could get a bit more granular on that. But specifically, I was wondering, were any of these commercial vehicle wins, were they really more on-highway stuff, or was any of it off-highway? Because I know expanding the off-highways is kind of a key for you guys going forward.

Speaker Change: Some nice wins for the commercial vehicle market and I was just hoping if we could get a bit more greens granular on that but.

Speaker Change: But specifically I was wondering where any of these.

Speaker Change: Commercial vehicle wins for or where are they really more on highway stuff or was any of it like off highway because I know it's been in the off highway is kind of a key for you guys going forward.

Speaker Change: Yes, I mean, a lot of those were on highway both medium duty.

Brady Ericson: Yeah. I mean, a lot of those were on-highway, both medium-duty and some off-highway as well. I mean, the one that we highlighted there, I think, was off-highway application for the contract extension.

Speaker Change:

Speaker Change: And some off highway as well.

Speaker Change: I mean, the one thing we highlighted there was a.

Speaker Change: Off highway application for the contract extension.

Speaker Change: Yeah.

Speaker Change: Got it.

[Partner & Portfolio Manager] (Banyan Capital Management): Got it. That's all for me. I'll turn back to the queue. Thanks.

Bobby Brooks: Got it. That's all for me. I'll turn back to the queue. Thanks.

Speaker Change: That's all for me ill turn it back to the queue. Thanks.

Speaker Change: Yeah.

Speaker Change: Okay. Thank you.

Speaker Change: Okay.

Brady Ericson: Okay. Thank you.

Speaker Change: Your next question comes from the line of true Estes from Banyan Capital Management. Your line is open.

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

True Estes: Hey, Brady and Chris Thanks for taking the question.

[Partner & Portfolio Manager] (Banyan Capital Management): Hey, Brady and Chris. Thanks for taking the question. Just to follow up on taxes, you called out two regions that are stuck with a legacy difficult to fix. Can you elaborate? Does that mean that you need to adjust the manufacturing footprint, or what exactly is required? Thank you.

Drew Estes: Hey, Brady and Chris. Thanks for taking the question. Just to follow up on taxes, you called out two regions that are stuck with a legacy difficult to fix. Can you elaborate? Does that mean that you need to adjust the manufacturing footprint, or what exactly is required? Thank you.

Speaker Change: To follow up on taxes, you said that you called out two regions that are structurally difficult to fix.

Speaker Change: Can you elaborate does that mean that you need to adjust the manufacturing footprint or what exactly why.

Speaker Change: Hope, it's holding company structures that are difficult. So really it's not a whole lot of manufacturing. The issue is that once you start getting into it it can be quite expensive to back out of that but we're going back I mean, we've got high.

Chris Gropp: No. It's holding company structures that are difficult. So really, it's not a whole lot of manufacturing. The issue is that once you start getting into it, it can be quite expensive to back out of them. But we're going back, I mean, we've got highly paid, very expensive people looking at trying to break it down. And we're literally examining now, trying to get my tax people into a payback on if I break this down and pull it out, what are the short-term implications compared to the longer-term implications?

Speaker Change: Highly paid very expensive people looking at trying to break it down and we're literally examinee now I'm trying to get my tax people into a pay back on if I break this down and pull it out what are the short term implications at compared to the longer term implications, yes. Its primary legal structure I mean again, when we got spun.

Brady Ericson: Yeah. Primary legal structure. I mean, again, when we got spun, we got spun with the structure that made sense for the total, but it didn't make sense for us. And so that's what we're having to try to look to unwind. And areas that made sense for kind of primarily the prior Delphi organization doesn't make sense for the makeup of our operational footprint. And so to highlight Chris's, it's not moving plants. It's more just moving some of the legal entities, shutting them down, removing IP to more appropriate locations that makes sense for us. And so right now, a lot of what we're doing is we're continuing to generate NOLs in countries that we can't take advantage while we continue to pay taxes and other areas that we're making money.

Speaker Change: <unk>.

Speaker Change: We got spun with the structure that made sense for the total but it didn't make sense for us and so that's what we're having to try to look to unwind.

Speaker Change: And we are area that made sense for kind of primarily the prior Delphi organization correct.

Speaker Change: Does it make sense for the makeup of our operational footprint and so.

Speaker Change: Highlight Chris it's not moving plants, it's more just moving from the legal entity shutting them down removing IP.

Speaker Change: A more appropriate locations that make sense for us and so right now a lot of what we're doing is we're continuing to generate Nols in country that we can't take advantage, while we continue to pay taxes in other areas that where we're making money and so we've got to get to a point that it starts balancing out and that's going to require some.

Brady Ericson: And so we've got to get to a point that it starts balancing out, and that's going to require some kind of heavy lifting to shut down some of those entities and kind of move some of the IP and kind of the flow of financials.

Speaker Change: Some kind of heavy lifting to shutdown some of those entities and kind of move some of the IP and kind of.

Speaker Change: Flow of financials.

Speaker Change: Okay. That's very helpful. Thank you and just second.

[Partner & Portfolio Manager] (Banyan Capital Management): Okay. That's very helpful. Thank you. Just a second, you spoke about CapEx and how most of it was attributable to the new programs. Just curious, if you didn't have the new programs and it was just the legacy business and we assume kind of steady-state unit volume, what do you think CapEx would be roughly? And that's it. Thank you.

Drew Estes: Okay. That's very helpful. Thank you. Just a second, you spoke about CapEx and how most of it was attributable to the new programs. Just curious, if you didn't have the new programs and it was just the legacy business and we assume kind of steady-state unit volume, what do you think CapEx would be roughly? And that's it. Thank you.

Speaker Change: You spoke about Capex and how most of it was.

Speaker Change: Attributable to the new programs.

Speaker Change: Curious if.

Speaker Change: If you didn't have the new programs and it was just the legacy business and we assume kind of a steady state unit volume.

Speaker Change: Do you think capex would be roughly.

Speaker Change: That's it thank you.

Speaker Change: Yes, I mean in general we expect that to be right around I guess are currently and with some of those new program launches is that 4%.

Brady Ericson: Yeah. I mean, in general, we expect that to be right around, I guess, our current plan with some of those new program launches is that 4%. If we're not launching any new programs, it's probably going to be in the 1% range as far as maintaining the equipment, maintenance, and facilities. Now, just to kind of remember and highlight, most of our programs are always kind of refreshing every two to four years. They're going to need some type of upgrade. They want some improvement. It requires some new supplier tooling, some adjustment to our capital equipment. And so if you're not spending some of that money, you're going to see revenues declining. So I don't think it's possible for you not to spend CapEx and maintain revenues because they're always going to need some type of improvement and/or upgrade on those vehicle programs.

If we're not launching any new programs.

Speaker Change: Probably going to be in the 1%, 1% range as far as maintaining.

Speaker Change: Equipment and maintenance and facilities now.

Speaker Change: Just to kind of remember and highlight most of our programs are always kind of refreshing every two to four years, they're going to need some type of upgrade they want some improvement could require some new supplier tooling some adjustments to our capital equipment.

Speaker Change: And so if you're not if you're not spending some of that money.

Speaker Change: Youre going to see revenues declining so I don't think it's possible for you not to spend capex and maintain revenue because they're always going to need some type of improvement <unk> upgrade.

Brady Ericson: So I don't think it's possible for you not to spend CapEx and maintain revenues because they're always going to need some type of improvement and/or upgrade on those vehicle programs.

Speaker Change: On those on those vehicle programs.

Speaker Change: Sure.

Speaker Change: Okay, that's very helpful. Thanks.

[Partner & Portfolio Manager] (Banyan Capital Management): Okay. That's very helpful. Thanks.

Drew Estes: Okay. That's very helpful. Thanks.

And once again, if you'd like to ask a question. Please press star followed by the number one on your telephone keypad.

Operator: And once again, if you'd like to ask a question, please press star followed by the number 1 on your telephone keypad. Thank you. And with no further questions, I'd like to turn the call back over to Brady Ericson.

Speaker Change: Thank you and with no further questions I would like to turn the call back over to Brady Erickson.

Speaker Change: Great. Thank you very much again really proud of all of our employees on a great full calendar year.

Brady Ericson: Great. Thank you very much. Again, really proud of all of our employees on a great full calendar year as a standalone company. We'll continue to stay focused on adapting to this dynamic market as well as continuing to make good financially disciplined decisions to maximize shareholder value. Appreciate all your support and all your questions. Have a great day.

Speaker Change: Hand alone company, we will continue to stay focused on.

Speaker Change: Adapting to this dynamic market as well as continuing to make good financial financially disciplined decisions to maximize shareholder value.

Speaker Change: I appreciate all your support and all your questions have a great day.

Speaker Change: Thank you and this does conclude today's conference call you may now disconnect.

Operator: Thank you. This does conclude today's conference call. You may now disconnect. Have a great day.

Speaker Change: Have a great day.

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