Kieran O’Sullivan: Yes. Justin, our Board, and we feel we’ve got good cash flow generation, a strong balance sheet. And as Ashish already touched on, we’re not backing off on strategic acquisitions. That’s something that’s very important for us as we go forward as well. And we feel like we’ve got the balance sheet to do both.
Justin Long: Okay. Understood. Thank you for the time.
Kieran O’Sullivan: Thank you.
Ashish Agrawal: Thanks, Justin.
Operator: Thank you. Our next question is from John Franzreb from Sidoti & Company. John, please go ahead. Your line is open.
John Franzreb: Good morning, guy, and thanks for taking the questions.
Kieran O’Sullivan: Good morning, John
John Franzreb: I’d like to go back to the pricing pressure that you mentioned. Is that limited to the commercial vehicle market? Or does it extend into the light vehicle market?
Kieran O’Sullivan: John, we see it across all transportation markets, so commercial and light vehicle. We think there’s been enough things going on with the OEMs. There are just going to be pressure on the supply base. But that’s something we’re prepared for in terms of managing our own cost and supply base as well.
John Franzreb: So the contracts you have with the light vehicle market, they’re not fixed price for the duration of the platform? They adjusted somehow?
Kieran O’Sullivan: No, John, they’re fixed price, but it’s a competitive environment out there as it has — this is nothing new for us in the transportation. What I’d say to you is when it comes to getting new business awards, sometimes you’ll get negotiated on existing business. So you got to make sure you’re balancing and protecting your portfolio profitability overall.
Ashish Agrawal: And John, in the transportation contracts, there’s generally a price reduction built in on an annual basis. And if you look at the last couple of years, we have seen an opposite trend where we have been able to get price increases. So that dynamic was very different in the last couple of years due to the supply chain challenges and cost pressures on the material side, on the labor side. So — and that’s improved quite a bit, and the OEMs are feeling pressure from many other fronts like Kieran highlighted. So we believe that, that will drive increased focus on those contractual price obligations that we have in those contracts.
Kieran O’Sullivan: And John, just to add to that in terms of just profitability, we will not lose our focus as we haven’t in the past in terms of driving operational efficiency, material costs to compensate for that.
Ashish Agrawal: It’s a little bit of a return to normal, I would say, on this side of the market.
John Franzreb: Fair enough. I mean, certainly, there’s an affordability issue out there with the light vehicle market that has to be rectified. As far as driving improved profitability, as far as the restructuring actions that you said would be completed in the first half of the year, where do we stand in kind of incremental operating improvements we should be thinking about as those moves become completed?
Ashish Agrawal: Yes. So John, in the past, we’ve talked about — it’s a move within two sites in Mexico. So we are not expecting a huge amount of improvement. There will be some improvements that we’ll benefit from. The primary reason for us to do this move is to improve our capabilities on the delivery front, on the quality front with our customer base and make sure we can be a good partner as we move forward. The move is pretty much on schedule. The production there in Juarez was completed at the end of last year, and we are in the process of gradually ramping up production in the first half of 2024.
John Franzreb: Okay. And you had been highlighting over the past year that the transition from ICE to EV was a net positive, saying the content was something, I believe, like 2x on EV versus ICE. It seems like you backed off that a bit. I know 95% of this content is transferable. But is there a difference between hybrid, EV and ICE? Can you kind of walk us through what you’re thinking now versus, say, six months ago?
Kieran O’Sullivan: Yes, John, we haven’t backed off at all. Actually, if you go back to my earlier remarks, we said we’re well on track for the 25% of electrified revenues coming from light vehicle platforms by 2025. So we feel good about that. And the other thing we’ve highlighted in the transcript today as well is the progress we’re making on the electrified platforms with eBrake, with motor position sensing, especially now with current sensing, where we’ve had multiple wins, and we’ve got a really strong pipeline, which goes across the hybrid and the BEV platforms as well. So we feel very good about that increase in content going forward. We said it’s worth a sum to us of about 1 billion.
Ashish Agrawal: Yes. John, the other thing Kieran highlighted is that the adoption rate of EVs can be a little bit different than what the market was expecting in the short term. We still feel good about the long term, and the slower transition in the short term doesn’t have a material impact on us because of our portfolio, which mostly transitions between ICE and EV.
John Franzreb: Okay. And just one last question. And it references back to an earlier question. The second half of the year for that revenue number to hit your midpoint, what sectors have to come back the strongest or outperform compared to what they did in the first half?
