James Ray: Yes, for the year we’re still expecting $100 million. The $45 million is tracking well. When you look at our pending awards that we’ve quoted as well as our funnel of opportunities that we’re pursuing, not just within electrical but also in our vehicle solutions group and aftermarket and accessories and also in industrial automation, we have a good funnel in each one of those businesses. We just need to bring home the awards that are pending and then on the pursuit opportunities, we have ample capacity in our outlook to be aggressive on winning those opportunities in the pursuit funnel too. So we feel confident at this point that we will achieve that $100 million on an annualized basis that we have mentioned before in prior calls.
Operator: Thank you. Our next question comes from the line of Steven Martin from Slater. Go ahead, please.
Steven Martin: Hi, guys.
James Ray: Hi, Steve.
Andy Cheung: Hi, Steve.
Steven Martin: You said the second Moroccan plant would be completed by the end of the first quarter. Well, that was 40 days ago. So I guess my question is, was it completed and is it producing?
James Ray: So we have an initial Morocco facility that we’re currently producing in that was completed in Q4. The second facility was started in Q1 this year. It will be complete by the end of Q4 this year with beneficial occupancy Q1 of 2025.
Steven Martin: Got it. I misheard that. And how is the new Moroccan plant and the new Mexican plant doing?
James Ray: They’re both ramping up very well. We are able to actually improve our funnel of opportunities with the North African Morocco footprint for the European market. So we’re seeing good customer response from our expansion of our European footprint. As you may know, we have facilities in the Ukraine as well as Czech Republic for the electrical systems business. So this expansion in the North Africa is positioning us well from a value proposition on new opportunities in Europe. And for Mexico, the Aldama facility, which is outside of Chihuahua, is ramping up very well. Our main facility in Mexico was in Agua Prieta. So the team that’s managing those facilities is based in Chihuahua and Agua Prieta, and we’re somewhat running those two in parallel. And we have a ramp schedule that will continue to ramp throughout the year and early next year with some of the North American new business wins that we’ve booked over the past 12 to 18 months.
Steven Martin: Okay. And to follow-up someone’s earlier question about your guidance, if I were to choose the midpoint of this year’s guidance, and given how you’ve done in the first quarter, that would imply that the first, I’m sorry, the back half would have to be up 10% to 12% to make the mid, maybe 10% to 15% percent to make the midpoint of your guidance. What gives you that level of comfort? All four businesses were down this first quarter. What businesses are going to swing enough to make that midpoint?
Andy Cheung: Yes. So, Steve, if you look at our guidance, you clearly see there’s a little bit of a wider range that we communicated. James already mentioned, so there’s the upside of potentially the ACT truck bill, and depends on how the contract market goes, or maybe the decline is not as severe, so there’s some upside opportunity. But at the same time, there’s also the downside risk that we mentioned about supply chain and logistics and the continued depressed in the demand on the customer side. So I think right now it’s hard to say where the final year is going to land. We believe that our range is pretty well covered in case of those scenarios. But we probably have more confidence in our ability to manage our earnings. So as we mentioned that we’ve been taking proactive actions about right-sizing the business, anticipating the customer demand changes.
So there’s a few more levers for us to pull. So we’re pretty confident in terms of our EBITDA guidance that the range that we produce.
James Ray: Yes. An additional point, too, Steve, is the restructuring benefits will start to ramp higher in the second half after some of the efforts we took in the first. In addition to that, as we have mentioned in prior calls, our cost out program, some of those savings items will kick in higher as volume ramps up on new projects that were implemented in Q4 and Q1, and we continue to implement in Q2. So on the cost side, we see opportunities to help mitigate some of the downside of lost top line or lower top line through the cost out process that we’re doing. And that, to Andy’s point, it helps us manage the earnings a little better, especially in the second half. And we’re hopeful that the ACT and the Class 8 market will continue to strengthen in the outlook.
We’re not banking on it, but we’re hoping that that happens. And then Con Ag, I do think that it’s volatile right now. I’m not really sure where it’s going to end up, but I don’t have any indication it’s going to get much worse than flat to down 10%. So we’re planning for the worst and putting things in place to try and mitigate pressure on the EBITDA outlook.
Steven Martin: Okay. Follow up to that. ACT expects that 2025 — so first of all, as I said on the last call, 2023 ACT was not as bad as everybody expected at the beginning of the year. 2024 ACT looks to be plus or minus, as you said, maybe a little better. 2025 is supposed to be a new cycle. When do you expect that you’re going to see or we will start to see the benefits of that new cycle?
James Ray: Yes, so that’s a very good question, Steve. It’s interesting because, as you know, the 27 calendar year are new federal emissions for Class 8 vehicles. And I’ve seen ranges and estimates of potentially 30% higher engine costs than all of the emissions. So the 2025 and 2026 outlook from ACT is pretty much factoring in a pre-buy. So you’ll see a larger drop in 2027 because the buy was pulled ahead. And we would expect to see — a 2025 model year would start the summer of — or to the latter part of 2024, okay, as the new models come on and they ramp up new production. A lot of the vehicle manufacturers have a model change mid to late prior year of the stated year model. So that’s given us some indication that — I think to another question earlier, what gives us a little more confidence in the back half of the year?
Even though ACT’s forecast is showing a decline in Q4 compared to the prior quarters, we still see – depends on when those customers start their next model and how fast they ramp up. So we have to be somewhat flexible and agile so that we can respond to those ramps both on the high side and the low side.
