Commercial Vehicle Group, Inc. (NASDAQ:CVGI) Q2 2023 Earnings Call Transcript

Commercial Vehicle Group, Inc. (NASDAQ:CVGI) Q2 2023 Earnings Call Transcript August 5, 2023

Operator: Good morning, ladies and gentlemen, and welcome to CVG Second Quarter 2023 Earnings Conference Call. During today’s presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be open for questions with instructions to follow at that time. As a reminder, this conference is being recorded. And I would now like to turn the call over to Mr. Andy Cheung, Chief Financial Officer. Please go ahead.

Andy Cheung: Thank you, operator, and welcome, everyone, to our conference call. Joining me on the call today is Bob Griffin, Chairman of the Board and Interim President and CEO of CVG. This morning, we will provide a brief company update as well as complementary — commentary regarding our second quarter 2023 results. After which, we will open the call for questions. As a reminder, this conference call is being webcast and a supplemental earnings presentation, which we will refer to during this call is available on our website. Both may contain forward-looking statements, including, but not limited to, expectations for future periods regarding market trends, cost-saving initiatives and new product initiatives, among others.

Actual results may differ from anticipated results because of certain risks and uncertainties. These risks and uncertainties may include, but are not limited to, economic conditions in the markets in which CVG operates, fluctuations in the production volumes of vehicles for which CVG is a supplier, financial covenant compliance and liquidity, risks associated with conducting business in foreign countries and currencies and other risks as detailed in our SEC filings. I will now turn the call over to Bob to provide a company update.

Bob Griffin: Thank you, Andy, and good morning, everyone. I would like to begin today’s call by thanking and celebrating our CVG team members across the company for their commitment to delivering our strategic initiatives during the quarter. These efforts have helped grow and diversify our revenue streams, optimize our cost structure through process automation and cost reduction and increase our margins to become a bigger, more profitable company. As we enter the next chapter for CVG, I know I can speak for myself and the Board when I say that we are excited about CVG’s future, supported by the strength and depth of our organization and leadership teams. Our team successfully accelerated our commitment to the company’s strategic goals, which drove significantly improved financial results year-over-year.

We will continue to focus on price and cost and believe our strong revenue and margin performance will continue to show meaningful expansion versus the prior year for the second half of 2023 based on the current market outlook. Andy and I will cover this in more detail. We have a solid balance sheet, winning new business is fully embedded in our company’s culture, and we have a strong leadership team, positioning us well to achieve our longer-term 2027 revenue and margin targets. Before turning to our second quarter results, I’d like to provide a brief update on our ongoing CEO search. The Board is following a very thorough vetting and selection process. And currently, we have retained a leading independent search firm to assist with this work.

We’re eager to find the right leader who will continue to drive our business strategy and culture. The Board and I look forward to sharing more with you as the search process evolves, and we will continue working with the management team to ensure a seamless transition with no disruption to our accelerating momentum. Now I’d like to turn your attention to the supplemental earnings presentation, starting on Slide 3. Once again, our team delivered strong results in the second quarter, highlighted by net sales of $262 million, which is up 4.5% year-over-year and adjusted EBITDA of approximately $21 million, which is up 68% year-over-year. This results in an adjusted EBITDA margin of 7.9%, again, putting us on track to hit our long-term target of 9% as we continue to win new business, optimize costs and improve profitability.

The strong revenue and margin performance helped drive $0.32 of adjusted earnings per share in the quarter, a substantial improvement over the prior year. We are also pleased with CVG’s addition to the Russell 2000 Index in June as we look to expand our reach within the investment community. Turning to Slide 4. As I already alluded to in my opening comments, our team continued our profitable growth strategy during the quarter. We continue to win new business with year-to-date new business awards totaling $124 million. These wins tend to be lumpy throughout the year due to customer demand. However, based on our progress this year, we remain confident in achieving our goal of $150 million of new business wins in 2023. These wins continue driving the transformation in our revenue mix toward new customers and platforms.

As you’ve heard from us many times, Electrical Systems is a key growth focus area for CVG. And throughout this transformation process, we’ve remained focused on delivering best-in-class quality and service to our customers. We continue to drive price realization and cost reduction efforts, which have placed us firmly on track to deliver improved profitability this year. We are also heavily focused on optimizing working capital, increasing cash flows and paying down our debt, and we expect our debt leverage to decrease further in the coming quarters. Turning to Slide 5. In line with our comments from last quarter, our demand and market outlook remain positive for the balance of this year, supported by forecasts across our key markets. ACT and FTR continue to project a strong build year for both Class 8 truck builds, up between 3% and 8% in 2023, forecasts that have been echoed recently by the OEMs. For the North American Class 8 truck market, the second half of 2023 is projected to be softer year-over-year, namely in Q4 based on current forecasts.

As new business wins continue to shift our mix away from the heavy-duty truck market, we expect the cyclicality of this market to have less of an impact on our future financial results. For medium-duty trucks, forecasts call for a 7% increase in 2023, but still see backlog to build ratios at 2 times historical rates. We also see a long runway for continued growth in connectivity systems and electric vehicles, a key driver to our new business wins outlook. We also see attractive commercial vehicle aftermarket growth of 4% per year in the near future. And after a slight retracement in 2023, we see strong growth for the global earthmoving market as well. Turning to Slide 6. We continue to drive new business wins and their cumulative contribution increases by year.

This chart shows the increase in expected annual contribution from our new wins in hand. Year-to-date, we’ve added $124 million in new wins with approximately 80% of these wins within our Electrical Systems business, and more specifically tied to electric vehicle production. We continue to win business globally across both ICE and EV markets, adding new customers and product types to our mix. We recently achieved several important wins in Europe with both ICE and EV auto manufacturers and new wins continue to remain a key component of our culture here at CVG. Turning to Slide 7. As we highlighted last quarter, CVG’s global capacity expansion program continues to support our Electrical Systems business in multiple geographic markets, led by the three projects highlighted on this slide.

We are excited to report that we held our grand opening at our Mexico facility in July and production is now underway. Our expansion project in Tangier, Morocco just completed customer audits and will ramp up production in Q3. These expansions greatly benefit our effort to further grow our Electrical Systems business globally. As highlighted on Slide 8, our efforts to strategically reposition the business are paying off. We have continued to reduce our exposure to Class 8 trucks, grow our revenue share of electrical systems and reduce the weight of large customers in our mix. Given the acceleration of our strategy, we expect this mix will further transform in our favor as we approach 2027, directly benefiting our profitability and ROIC profile.

At our current win and ramp-up rate, we expect Electrical Systems to increase to approximately 40% of revenue by 2027. This business transformation will make CVG a bigger, stronger, more profitable company in the coming years. Turning to Slide 9. We believe we have the right strategy in place to continue driving shareholder value creation. CVG remains fully committed to our strategy to increase profits, increase free cash flow and ultimately expand and invest in our capabilities going forward. While we are committed to growing our exposure to the secular electrification trend, we have a strong portfolio of businesses, highlighted by a diverse customer base and decreasing cyclicality. We expect this portfolio to generate strong cash flow over the coming years, and we expect to maintain a balanced capital allocation approach to reinvest in our business to drive growth, pay down debt and pursue attractive inorganic growth opportunities with the goal of driving increased shareholder value.

On Slide 10, we reiterate our long-term revenue and profitability targets. The first half of 2023 has been a very solid, and we continue to expect a year of record revenue, higher EBITDA and continued free cash flow and debt paydown. Given this year’s expected performance, we have even more confidence in our ability to achieve our long-term targets. Winning new business is part of our culture here at CVG and will be the key driver of hitting our 2027 targets. These new wins continue to diversify our product portfolio and our customer base while simultaneously improving our growth and profitability. The progress we have made thus far on wins puts us on pace to hit $1.5 billion in revenue in 2027. And as you can see, our first half EBITDA margin run rate of 7.7% continues to close in on our 9% target for 2027.

We expect strong cash flow over the next few years, which combined with our disciplined approach to working capital will be prioritized to fund both organic growth and additional debt paydown and to potentially fund bolt-on M&A. Turning to Slide 11. Before I turn the call back over to Andy, I’ll just provide a few thoughts on the rest of 2023. Similar to our comments last quarter, we continue to expect 2023 to be our third record revenue year in a row even when factoring in a modest slowdown in second half truck builds forecast by ACT and FTR. We expect to continue to show significant expansion year-over-year with pricing benefits, new business ramps and cost outs. We’re pleased with margins in the first half. And as we move to the second half of the year, we believe that there will be a limited impact on margins as a result of the slightly lower volumes.

The cash flow generated will drive down leverage ratios through further debt pay down in addition to the higher EBITDA levels. We continue to generate strong new business wins, focused primarily in electrical systems, which will continue to drive future growth in revenue and profits. Our cost reduction program remains on target for the year. We’re on track to exit 2023 in a solid financial position with a strong future outlook and balance sheet that provides us the optionality to drive additional growth. And with that, I’d like to turn the call back to Andy for a more detailed review of our financial results.

Andy Cheung: Thank you, Bob, and good morning, everyone. If you are following along in the presentation, please turn to Slide 13. Second quarter 2023 revenue was $262.2 million as compared to $250.8 million in the prior year period. The increase in revenues were primarily driven by increased pricing and new electrical system business, which was partially offset by lower volume in the Industrial Automation segment. Foreign currency translation also favorably impacted second quarter of 2023 revenues by $0.7 million or 0.3%. The company reported consolidated operating income of $15.9 million for the second quarter of 2023 compared to income of $6.2 million in the prior year period. The increase was driven by higher margins, partially offset by higher SG&A.

The second quarter of 2023 adjusted operating income was $16.7 million. Adjusted EBITDA was $20.8 million for the second quarter, up 68% year-over-year compared to $12.4 million in the prior year. Adjusted EBITDA margin was 7.9%, an expansion of 300 basis points as compared to adjusted EBITDA margin of 4.9% in the second quarter of 2022. Interest expense was $2.8 million as compared to $2.1 million in the second quarter of 2022. The increase in interest expense was primarily related to high interest rates on variable rate debt. However, it was partially offset by lower average debt balances during the respective periods. Net income for the quarter was $10.1 million or $0.30 per diluted share as compared to net income of $2.5 million or $0.08 per diluted share in the prior year period.

Turning to the segment results on this slide. You can see the performance of our three vehicle-related segments on a combined basis. The combined revenues increased 14% to $253.2 million compared to $222.3 million in the year-ago quarter. Combined adjusted operating income was $27.7 million, an increase of 186% compared to $9.7 million in the prior year period. The growth in adjusted operating profit again demonstrates the positive impact that our profitable growth strategy has on our bottom line. In our Vehicle Solutions segment, second quarter revenues increased 7% to $152.7 million compared to the year-ago quarter, primarily due to increased pricing. Operating income for the second quarter increased 837% to $14.1 million compared to operating income of $1.5 million in the prior year period.

Second quarter 2023 adjusted operating income, which excludes special costs, was $14.5 million, primarily driven by increased pricing, lower freight cost and overhead reduction. Our Electrical Systems segment achieved revenues of $63.6 million, an increase of 34% as compared to the year ago second quarter, resulting from increased sales volume and increased pricing. Operating income was $7.7 million, an increase of $1.8 million compared to the second quarter of 2022 due to increased volume and pricing. Our Aftermarket & Accessories segment revenues increased 14.5% to $36.8 million compared to the year-ago quarter, primarily resulting from increased pricing. Operating income was $5.5 million, an increase of 388% compared to operating income of $1.1 million in the prior year period.

The increase was primarily attributable to strong price realization. Our Industrial Automation segment produced second quarter revenues of $9 million, a decrease of 68% as compared to $28.5 million in the second quarter of 2022 due to lower demand levels. Operating loss was $2.1 million, a decrease compared to the operating income of $1.3 million in the year ago quarter, primarily attributable to volume reduction and an inventory charge of $1.6 million. Adjusted operating loss was $1.7 million over the second quarter. As we have highlighted in the previous calls, our restructuring efforts are expected to improve performance in this segment in the second half of 2023. Highlighted on Slide 14 are key financial trends and metrics for our business.

During the quarter, we were able to sustain the strong financial performance we delivered last quarter with improved EBITDA and margin on a sequential basis. The sequential improvements were again driven by a strong focus on price realization and cost reduction. As highlighted on the bottom right chart, we continued to pay down debt during the quarter, and our net leverage is trending down due to improving profitability and EBITDA generation. We expect that our net leverage will decline further in 2023 as our strategy continues to deliver strong financial results. We remain committed to our financial priorities for fiscal 2023, which are to drive additional cost savings to generate higher profitability, generate free cash flow and invest in our growing business platforms.

These efforts, combined with improving line of sight into our production schedule, give us comfort in our 2023 year-term financial targets, as Bob already alluded to. Specifically, we believe we are well on track to deliver record revenues in 2023, along with significant year-over-year margin expansion. That concludes my financial overview, and I will now turn the call back over to the operator to open the line up for questions.

Q&A Session

Operator: Thank you. Ladies and gentlemen we will now begin the question and ask session. [Operator Instructions] Your first question comes from the line of Joe Gomes from NOBLE Capital. Please go ahead.

Joe Gomes: Good morning. Congrats on the quarter.

Bob Griffin: Hi, Joe. Good morning.

Andy Cheung: Thank you very much.

Joe Gomes: I just wanted to start on the CEO search. Thanks for giving us some insight on that. I’m wondering if maybe you can just kind of give us a little more thought on timing for this? And when you guys are hoping to have this all wrapped up and concluded?

Bob Griffin: Yeah. I think, that obviously is a question that’s top of mind for many people. And we have — there’s a process to these searches. We have a search committee of the Board that’s comprised of four of our independent directors. They’re working with a leading search firm, a global search firm. And like all searches, it starts with a pretty large funnel at the top and then comes down to first interviewing a smaller number of people and then winnowing that down to an even smaller number and moving through quite consistent process. We’re — I would describe, in the middle of that process at this point. I think we’re excited to see people who are interested in becoming the next CEO of CVG. It’s hard to pinpoint the exact timing of any of this.

It — all the — most of the people we talk to have jobs already. And as a result, just doing it as quickly as the Board might and the company management might prefer is not always possible. But I think it will be timely and ultimately, I would go on to say that although I’m an interim, I’ve been a very active interim. I’m here every week and working every day when I’m not here. And I don’t think that the company and its management have lost a beat in pursuing its strategy or its short-term quarterly operating goals or goals for 2023, while I’ve been sitting in the chair. So more on that later. I wish I could give you a definite date, but we’ll certainly keep you posted and let you know when the search is completed, and we’re able to introduce our next CEO.

Joe Gomes: Thank you for that. And Andy, I’ve got all my numbers correct here, just looking. Operating margin percentage looks like it [Technical Diffculty] let me skip that one because I think my numbers are incorrect. I apologize for that.

Andy Cheung: No problem.

Joe Gomes: On the Industrial Automation segment, it’s had a difficult, let’s call it, past 12 to 18 months. You were hoping that it bottomed out last quarter, continued to decline modestly, but revenues didn’t continue to decline. I mean what do we see as the future of that business?

Andy Cheung: Yeah, Joe, good question. So as we mentioned in the past quarters, we’re seeing the bottoming of that business unit’s revenues. I think this quarter is relatively close to what we have last quarter. You can see year-over-year, it’s still a very large decline as we expected. What we have done there is we have restructured the business. We removed the fixed costs so that we can scale it at the current revenue level. We have talked about that in the past. Longer term, we expect that the warehouse industry is still growing longer term, maybe in the double-digit 15% range. But for now, we’ll have to wait for a few quarters to see some meaningful rebound. Just one look to highlight this quarter, you can see the business had a write-off of inventory.

So it’s embedded in the result. But as we move that right off, you can see the business is operating at a breakeven level as we mentioned last quarter. So we’re hopeful that we’ll see some good news from a revenue standpoint. It will be a couple of quarters. The team is working really well, driving additional pipeline. Our leadership is really focusing on generating new business for that segment. So I think it’s running as expected. So hopefully, to see some good news in a couple of quarters down the road.

Joe Gomes: Great. And one more for me, if I may. On the aftermarket parts business, obviously, we had a new launch of the website. Maybe give us a little more detail on how that is unfolding? How — is it meeting expectations? How is that all going for that segment of the business?

Andy Cheung: Yeah. So yeah, we mentioned that the website has been operational since last quarter. We’re still working through — continue to drive traffic to the website. I’ll be frank that the revenue is not ramping up as fast as we expected. We’re still learning how to operate that. The good news is that we’re seeing some really good mix and profitability coming through that channel. We’ll continue to work to see how we can drive momentum to that channel. So more to come.

Joe Gomes: Great. Thanks. I’ll get back in queue. Thanks again.

Andy Cheung: Thanks, Joe.

Bob Griffin: Thank you.

Operator: Thank you. And your next question comes from the line of John Franzreb from Sidoti & Company. Please go ahead.

John Franzreb: Good morning, guys. And thanks for taking the questions. I’d like to start with the pricing actions. It’s been an important part of the story over the past year and change. I wonder if you could just parcel out of the 14% year-over-year change in vehicle-related revenue growth, how much of that is attributed to price versus volume? And if you could even drop that down the line, similarly on the gross margin overall probably then.

Andy Cheung: Yeah. So John, let me give you a little bit highlights. Different segments have a little bit different flavor there. When you look at the Vehicle Solutions segment, the increase in revenues is mostly driven by price. And if you look at the Electrical Systems segment, that is mostly driven by volume, as you can see, that our expansion of that business, our new launches is working. There’s some price to it, but the majority of that is in price — in volume. And then your aftermarket business, the majority of that is in price. So it’s a little business — different business have different situation overall. So overall, you can see it’s a combination of both price and volume driven by our electrical systems.

John Franzreb: Got it. And you talked in your presentation about a slowdown in the second half in the truck market relative to the first half. And that’s kind of been transmitted by other people also. I’m curious about two things. There’s some aggressive estimates about 2024 being weaker than 2023. I’m curious by, a, your thoughts about that, and b, these new program wins, do they start to accelerate the point that it kind of at least offset some, if not all, that potential weakness?

Andy Cheung: Yeah, you are absolutely right. So this is exactly what we see. Second half will be a slight decline from an overall vehicle volume standpoint. It’s a little bit too early for us to talk about 2024 at this point. But as Bob also alluded to, you’re exactly why that we are seeing some good news in terms of our mix, because of our strategy and the new wins is actually helping us to soften the impact of the Class 8 cyclicality. So we’re actually very happy seeing the strategy and playing out the way that we wanted to. And as we mentioned, second half will be a small decline in revenues, but the impact on the margin will be rather limited. And then I believe we will have better line of sight next quarter. Maybe at that time, we can talk a little bit more about 2024.

John Franzreb: Fair enough. Fair enough. And lastly, last quarter, I believe, when the discussion came around to cost savings initiatives, I think that you were able to capture about $9 million of targeted $30 million for this year. I may have missed it. How much have you been able to realize in the second quarter and is still on target for that $30 million for this year?

Andy Cheung: Right. Yes. We are still on track. We are actually slightly higher than our midpoint for the full year execution of that target. So you can see that our margin expansion and other components of financials that you can see the execution of the cost reduction is really helping us in terms of delivering our financial results. We’re happy with the progress. We’re slightly ahead of schedule. We believe that we’ll continue the momentum.

John Franzreb: Okay, Andy. Thanks for taking my questions and, Bob. I’ll get back into queue. Thank you.

Bob Griffin: Thank you.

Operator: Thank you. [Operator Instructions] And your next question comes from the line of Gary Prestopino from Barrington Research. Please go ahead.

Gary Prestopino: Hey, good morning, everyone.

Bob Griffin: Good morning.

Gary Prestopino: Couple of questions. I mean, already the costs were addressed. So that was one thing I wanted to ask. But if I look at my math, it looks like you did about $39 million of new business wins in the quarter. Is that correct?

Andy Cheung: Yeah. That’s about right around $40 million, yeah.

Gary Prestopino: Okay. So just some other things here. Your tax rate was down year-over-year. What kind of tax rate are you looking at for the back end of the year?

Andy Cheung: Yeah. So this year, we’re expecting around 24% tax rate, which is a little bit of an improvement from last quarter as well as last year. As we mentioned at the end of last year, we were having some unfavorable mix because of our US business wasn’t making enough money last year. So that situation turned around, and it’s actually helping us. So that’s why we’re seeing some good news there. Longer term, I’ll continue to expect that the rate will be around 25% plus/minus. So we’ll have more line of sight as we continue to build the growth and see the mix of the company. But overall, we’re seeing some good news as compared to last year.

Gary Prestopino: Okay. And then just — I’m not looking for any exact numbers, but looks like your adjusted EBITDA margin was 7.5%, jumped to 7.9% in Q2. Are your expectations that on a sequential basis, the back half of the year, we will continue to see improvement? Or is it more of we will see an improvement year-over-year, but you may be at somewhat of a little bit of a high watermark in Q2 here?

Andy Cheung: Yeah, you’re right, Gary. As we mentioned, year-over-year, we definitely see a very meaningful margin expansion. As we mentioned, second half we’ll see a little slower revenue. So it puts some pressure on our margin, but as we mentioned the impact will be limited. So we’re happy with the one way first half. We expect that we’ll have limited exposure due to the downturn of the slowdown on the revenues. So I think we’re rounding up in a consistent manner as we originally expected.

Gary Prestopino: Okay. And then two more quick questions. You said you’re on target at $150 million of new business. As I look at my notes, you — in Q1, you said you were targeting at least $100 million in new wins in 2024 and 2025. Is that still a good number as you see it?

Andy Cheung: Yeah. So these are good numbers. These are number we gave. So I think about a quarter or two ago, we said that on an ongoing basis, we expect about $100 million of new win longer term. As you can see, Q1, Q2, the team is really running strong, and we are expecting this year to be around $150 million. We’ll have to see. These new wins are very lumpy as you can see, it depends on the customer’s launch schedule, their model change schedule. So I think we are very happy with the current momentum. So hopefully that we’ll continue to see good news in the next couple of quarters.

Gary Prestopino: And then just the last one for me, and I’ll jump off and this is for Bob. In terms of, what are the qualities you’re looking for in a new CEO as well as, do you feel that the background has to be tangential to the businesses that you’re in right now?

Bob Griffin: Well, that’s a good question. I think, optimally, we’d like to have somebody who has some successful managerial experience in the current business suite that we have. Obviously, the Electrical Systems business is a growth business for the company, a primary — is really a focused growth area. And so having somebody who has that experience is important. But equally as important is somebody who’s got the gravitas and the cultural instincts that are going to keep this — we’ve got a very good leadership team right now. And we want somebody who’s going to come in and meld with that leadership team and his strategic minded and pushes our strategy together forward. So one of the things that we’re not looking to is to, as might typically happen, is to have a CEO come in and then do a complete strategy review and a potential strategy reset.

The Board feels that the strategy we have, although it might be modified in certain small ways is a very solid strategy for the company. And so one of the attributes is somebody who can identify with the strategy and is anxious to pursue the strong growth that we’re currently experiencing.

Gary Prestopino: Would this individual have to come from a public markets background? Or would you look at somebody who has run private companies as well?

Bob Griffin: I think, as you do with all searches, you try to create as broad a cross-section of people as possible. And so we’ve been looking at public market people, private marketing people, someone who has a previous CEO experience, somebody who has run a large piece of a larger company. I think experience attributes are very important to us, operational attributes. We certainly want somebody who’s got a manufacturing or operational background at some point in their career and who has experienced P&L responsibility. So all these things go into a long laundry list. And then you end up defaulting in many ways to the person the Board sees who is going to be able to come on to the CEO position and drive the strategy forward. And I think we’ll be able to — based on what I’ve seen so far, I think we’ll be successful in finding somebody like that in a timely fashion.

Gary Prestopino: Okay. Thank you.

Operator: Thank you. And we have a follow-up question that comes from the line of John Franzreb from Sidoti & Company. Please go ahead.

John Franzreb: Thanks for taking the follow-up. I’m just looking for a little point of clarity here. You’re talking about sustainability of the margin profile. Are you talking about it as a starting point in the second quarter? Or are you talking about the first half as far as the sustainability of the margin into the second half?

Andy Cheung: I would say probably closer to the first half. So again, second half, we have margin pressure due to the volume, but we believe that’s limited based on what we are doing in terms of driving execution. So I would say first half is probably closer to the Q2.

John Franzreb: Okay, Andy. And in regards to debt repayment, can you just give us an update on your thoughts on how quickly can repay debt?

Andy Cheung: Well, every quarter, we’re paying down our debt at this point. We are not necessarily trying to aggressively paying down all the debt. As you can see, there’s still some uncertainties around future recessions and the truck market. So I want to make sure that we have ample liquidity on hand. So we’re managing it right now. We’re generating cash flow. Our first priority is use it to fund our growth internally and then deduce it to pay down debt as we see fit. So we’re happy with the current liquidity and also the allocation strategy.

John Franzreb: Perfect. Thank you very much. I appreciate the clarity.

Bob Griffin: All right. Thanks, John.

Operator: Thank you. Mr. Griffin, there are no further questions at this time. Please proceed.

Bob Griffin: Well, thank you, operator, and thanks, everyone, for joining today’s call. I want to emphasize that fueled by a strong focus on our strategy, a clear prioritization of initiatives, depth of our leadership team, we remain encouraged by CVG’s business outlook, and we continue to believe we are on track to achieve our short-term and long-term financial targets. I wish everybody a great day.

Operator: Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you all for participating. You may all disconnect.