On a year-to-date basis, sales in this segment were $354 million, an increase of 23% year-over-year and adjusted operating income increased to $20 million, 15% higher than the prior year. We continue to win new business in this segment in support of the increased production of electrical steel used in battery technologies and certain munitions used in defense end markets. This year, we have reached — received over $50 million of new equipment orders directly related to these market trends and believe this part of our business will continue to benefit. And finally, with respect to our full year 2023 sales guidance, we are maintaining our sales growth range of 10% to 15% year-over-year. Our fourth quarter revenues will be negatively impacted by the United Auto Workers strike, which affected several OEM customer plans.
Although there appears to be tentative agreements between the OEMs and the UAW, it’s difficult to estimate the full impact of the strikes on our fourth quarter revenues as production ramps back up to normal levels. Our current revenue levels from the OEM plants impacted by the strikes total approximately $25 million to $30 million per month across our Assembly Components and Supply Technologies segments. We continue to expect year-over-year improvement in adjusted operating income, EBITDA as defined free cash flow and adjusted earnings per share for the full year. Now I’ll turn the call back over to Matt.
Matthew Crawford: Great. Thank you very much, Pat. We’ll now open the line for questions.
Operator: [Operator Instructions] Our first questions come from the line of Dave Storms with Stonegate Capital Markets.
David Storms: Good morning. Just wanted to kind of start. You mentioned in the call that your strong revenues was a product of half volume and half pricing. How do you see that going forward? Is there still room to push pricing? Or do you think volumes are going to kind of be the driver through the remainder of ’23 and into ’24?
Matthew Crawford: Yes, it’s a great question. I would love to know the answer. No, I made a joke. There’s no question that pricing during what’s been a very challenging inflationary market in the industrial space over the last couple of years, migrating from supply chain issues to — or raw material issues to supply chain issues to now labor has provided the opportunity for us to push pricing. It has been a strategic priority, as I mentioned, and one that has been an incredible amount of focus over the last couple of years. Clearly, as inflation subdues, particularly in those first 2 areas, not so much in labor yet, the opportunity is lesser. So — we have not entered our business planning process yet, so it’s really difficult to comment really into next year.
But I would say that our ability and our efforts around pricing will become less significant as we close out what has been a very challenging period with a lot of robust and difficult conversations. So — and they’re not complete yet, and we’re still dealing with inflation and labor. So I don’t want to suggest it’s over. I just think that the opportunities will get smaller and smaller moving forward. And we have to anticipate that we can manage the additional inflation. And if we can’t, then that’s a different issue.
David Storms: Understood. Very helpful. And then just switching to cash flows for a second. It looks like you had a nice bump in cash flows in Q3. Obviously, you have your stated goal of the $20 million to $25 million for 2023. Kind of what levers do you expect to pull to close out the end of the year and hit those goals?
Patrick Fogarty: David, this is Pat. As I mentioned, we’ve said very aggressive working capital reduction targets in terms of the days of working capital to manage the business. The progress has been — is being made throughout the first 3 quarters, and we expect that to continue in the fourth quarter. So it’s really driven off of reduced working capital. The investments that we made in 2022 when supply chain restrictions required us to really carry more inventory, we’re starting to see that reduce. And as you look at the sales growth that we’ve seen in the current year, we’ve invested very little in working capital, which is a tremendous achievement by our business units, and we expect that to continue in the fourth quarter.
Matthew Crawford: I would just comment, and this is unrelated to your question. But as we think through our business, we do anticipate our business model, particularly around continuing operations as a less capital-intensive business. So as we think about cash flows — and I talk about in my comments about being a stronger, more focused business, that is part of the story, our ability to generate cash flow through the business cycle.
Operator: Our next questions come from the line of Steve Barger with KeyBanc Capital Markets.
Christian Zyla: Good morning, everyone. It’s actually Christian Zyla on for Steve Barger. Thank you for taking my questions. First question, with your guidance held that implies about a 6% year-over-year growth rate in 4Q on a pretty nice 17% comp. During a time where customers are — and suppliers continue to talk about destocking and broad macro uncertainty, which end markets do you see that strength continuing? And are you hearing any slowdowns from your customers?
Matthew Crawford: I’ll give Pat a minute to answer that question. I try to beat the drum on diversity full time. There’s no doubt that unit volume year-over-year has softened in terms of from a growth perspective. Our numbers and our forecasts incorporate some of the pricing work that I alluded to earlier. So no, I think we agree. We’ve seen some of the unit slowdown that you mentioned. But again, I think our diversity is strong. And I would highlight a couple of different areas. One is I mentioned the rotation and, I guess, leadership, for lack of a better word, to aerospace and defense. Again, an important part of our business. Not one we spend a lot of time on. But that is not slowing down. It’s increasing. So that diversity continues, I think, to support.
The other thing I will mention is while Supply Technologies, in particular, is affected, I think, by consumption and demand rates at our customers on a daily, weekly, monthly basis, we also have an equipment business and a forging business that have backlogs that extend, in some cases, beyond 2024. So this is our diversity at play. Pat, does that give you — .
Patrick Fogarty: Yes. I mean Matt touched on the topics that will show increases in revenue year-over-year in the fourth quarter, but we have tremendous backlogs right now in our Engineered Products segment and the diversity of our Supply Technologies segment that stretches beyond one particular part of the — whether it be bus and truck, aerospace, agricultural, we see strength year-over-year in each of those markets. And Matt highlighted aerospace and defense, where we expect that to continue to be strong for us. The last 2 years have been quite sluggish in that end market. So the increases are going to be seen not only on the commercial aerospace side, but on the defense side as well.
