Commercial Vehicle Group, Inc. (CVGI) Q4 2021 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to CVG's Fourth Quarter and Full Year 2021 Earnings Conference Call. . As a reminder, this conference is being recorded. I would now like to turn the call over to Mr. Chris Bohnert, Chief Financial Officer. Please go ahead, sir.

Thank you, operator, and welcome to our conference call. Joining me on the call today is Harold Bevis, President and CEO of CVG. We will provide a brief company update as well as commentary regarding our fourth quarter and full year 2021 results, after which, we will open the call for questions. This conference call is being webcast and a supplemental earnings presentation is available on our website. Both may contain forward-looking statements, including but not limited to, expectations for future periods regarding market trends, cost savings 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'll now turn the call over to Harold Bevis to provide a company update. Harold?

Thank you, Chris, and good morning, everyone. On today's call I will be referring to a presentation in the investor section of our website. It's the March 1 earnings call presentation. I'll be providing an overview of our fourth quarter and full year 2021 results followed by an update on our three point strategy designed to achieve higher growth and higher profits by leveraging our strengths and entrepreneurially pursuing new areas. As we execute on our strategy, we are positioning CVG to deliver more stable results as we strive to expand our breadth and competitiveness. During the fourth quarter our operations were impacted by our past mainly by several legacy classic supply contracts, where our profitability has been impacted by cost inflation, combined with a shortfall in truck production due to the challenges impacting their global supply chains. While our results have been impacted by these transitory factors, we believe they will improve in the first half of 2022 and we will be successful expanding into new end markets, which will open CVG to improve growth and profitability in the second half of this year and in the coming years. And following my remarks Chris will then discuss our financial results in more detail and we will conclude by opening the call and answering your questions. Turning to our financial results. On slide 4 of our earnings presentation. We delivered fourth quarter sales of $228.9 million, an increase of 6% as compared to the year ago fourth quarter. This increase was driven primarily by increased pricing to offset material cost inflation pass through. Our operating income increased 30% to $6.5 million in the fourth quarter as compared to $5 million in the year ago fourth quarter. The improvement was largely result of lower SG&A related to reduction special costs. Excluding these special costs adjusted operating income for the 2021 fourth quarter rose 2.4% to $8.5 million compared to last year. Our operating income remains compressed due to a lag in price costs offsets in these legacy contracts and higher than expected new business wins with resulting startup costs. Adjusted EBITDA was $12.9 million in the fourth quarter as compared to $13 million in the fourth quarter of 2020 and $0.13 of adjusted earnings per diluted share in the fourth quarter as compared to a loss of $0.05 per diluted share in the year ago fourth quarter. We had over $200 million of new business awards secured in 2021 adding to the more than 200 million won in 2020 and another 75 plus million of new business in the first two months of this year. We also terminated over 90 million of business due to inability to achieve mutually satisfactory terms with some of our customers. We are committed to a transformative organic growth platform to diversify our customer roster, add new market entrants improve our profitability and lessen our cyclicality and customer dependence. Turning to page 5. We delivered record revenues for the full year of 2021 with revenues growing 35% and $972 million as compared to $718 million in 2020, and up 7.9% compared to the 901 million of 2019. Our revenue growth as compared to 2020 was driven by strong growth in warehouse automation new business wins, and modest recovery in the global vehicle markets and material cost pass throughs. Likewise, our operating income margin expanded to 5.5% in 2021 as compared to 3.3% in 2020 and 4.9% in 2019. Over the last two years, we've made strong progress diversifying our end market participation. Signs of our progress can be seen on the right side of the slide as we grew the warehouse automation business to be $188 million and delivered $24.5 million in adjusted operating income. As I will touch on in a moment, we've made strong progress winning new business and end markets with new growth factors such as warehouse automation and electric vehicles. Turning to slide 6. While we have been successfully diversifying our business, which points to accelerating growth and profitability, our fourth quarter and full year results were impacted somewhat by our past, by challenging global supply chain and cost inflation, price lag offsets that were persistent over the near term. Product shortages most notably chips impacted class eight truck production during the quarter and full year while the cost of raw materials freight and labor continue to climb in the second half of 2021. We expect inflation and supply chain challenges to persist in the first half of 2022. A key pillar of our strategy to transform CVG is focused on optimizing our legacy business as we work to renegotiate our contracts and unlock the truck profit that resides within that portion of our business. Our legacy agreements were not designed to accommodate the rapid inflation that we've been experienced, which has pressured our results. To solve this and unlock the profit potential of this business we have been renegotiating our legacy contracts that are diluted to the company's operating income and EBITDA. So far, we have reworked many of these customer contracts and expect the majority of the remaining contracts to be resolved during 2022. Turning to slide 7. We believe we are becoming an emerging leader in the electric vehicle industry for both low voltage and high voltage electrical systems which positions CVG well for the coming conversion to electric vehicles and fuel cell vehicles. We are seeing an increase in truck miles given the continued growth in e-commerce and which looks set to continue and on a go forward basis we expect electric vehicles will be our biggest and fastest growing business. Currently our largest end market remains North America classic truck market. And due to the continued supply chain challenges, we've taken a conservative stance towards production outlooks for 2022. We're estimating the industry will be able to make approximately 270,000 trucks, which is roughly flat year-over-year. The industry continues to be experiencing a backlog due to global supply chain shortages. Hence, the projections show a continued increase in classic truck built in the coming years and as a reminder for CVG every 10,000 trucks built equates to approximately 13 million of sales for us. While production has been impacted, the North American fleet continues to age, which sets the industry up for several years of strong growth given the large backlog that has been built. This will likely create several years of steady production as the industry attempts to catch up and we will be in a strong tailwind situation for our results. Turning to page 8, and as Chris will discuss in more detail, we resegmented our financial reporting into four segments, which are vehicle solutions, electrical systems, warehouse automation, and aftermarket and accessories. At year end our four segments were more balanced as compared to our previous segments and highlights the areas where we intend to strengthen our revenue and profit profiles with accretive new business. As we expand it to new growth markets and reinvigorate our aftermarket business, we will experience improve profitability and accelerating earnings growth. Likewise, a key mandate is to improve our legacy business, renegotiate our contracts, enable inflation pass through and improve our profitability, as I mentioned previously. Turning to slide 9. A second pillar of our transformation is driving new profitable business In growth markets with higher value added products. We have now secured over $500 million of new business in the last 26 months with over 100 new products and this includes an additional 75 million of new wards so far in this early part of 2022. As previously mentioned, we offset $90 million of business we terminated due to inability to achieve mutually acceptable economic terms and we expect to continue this mindset as we negotiate terms on the remaining portions of our legacy contracts. In 2021, we're really happy to say that roughly 79% of our new business wins were in the electric vehicle industry. Overall, we are pleased with the success our team has achieved as our new business momentum continues to build and points to strong growth over time as we gain new business awards in electric vehicles, last mile vehicles, power sports equipment and other areas. Given that a majority of our new business awards are in the electric and fuel cell vehicle markets, they will take a few years to ramp up fully before delivering the full impact of that business on our P&L. Electric vehicles represent a $7 trillion market opportunity by 2030 and by 2050. Government regulations combined with global environmental initiatives are driving this significant transition. We're well-positioned to partner with new market entrants who are looking for technical expertise to launch electric vehicles. Likewise, we are an ideal partner with existing market entrants and are growing with that segment of the industry also. Our competitive advantage resides in the fact that we are natural value added product offering that makes it convenient to design and produce new vehicles and partner and deliver on time. We can design prototype and build a bundle of products for partners and we have over 40 years of global experience doing it. We've made strong progress expanding in the electric vehicle markets, as evidenced by the new business wins over the last 26 months which includes both existing manufacturers that are expanding into the EV market as well as new EV market entrants. On slide 10, another area that we are excited about is our aftermarket business where we have formed a business unit and hired an experienced leader to reinvigorate this profitable business segment. Our new business leader who has put a plan in place to create dedicated manufacturing capacity launching e-commerce site to penetrate the independent trucking channel, as well as develop new products to add to our portfolio while expanding our addressable market. We're very happy with the progress we're making and expect this business to grow 10% CAGR annually over the next five years while delivering margins that are accretive to our business. Turning to page 11. We have a broad set of initiatives that are focused and designed to expand our business into fast growing in markets that carry improved profitability. As we expand our business, we're working aggressively to reduce our dependence on complex supply chains while driving improved pricing terms with legacy business as we strive to unlock the trapped profits and be able to pass through inflation more readily. As we do this, our cash flows will continue to improve providing capacity to pay down debt, while further investing in the business for growth and new product development. And lastly, we're working on our first corporate sustainability report as we increase our focus on ESG. Moving to page 12. The CVG leadership team is successfully transforming the business with a three point strategy. First, we want to strengthen the company's revenue profile with accretive new business that increases our company's value proposition and decreases our legacy customer dependencies. As I mentioned, we secured over $500 million of new annualized business in the last 26 months. Approximately 80% of this is in the electric vehicle industry. Secondly, we're improving the company's legacy business by renegotiating contracts to improve their profitability. And finally, we want to improve the company's balance sheet, increase our cash flow and pay down debt. As we execute these initiatives, we see a path to $1.9 billion in sales by 2025 and we see a path to 8.5% operating income margins by 2025. These are long term goals, and we believe they're achievable as we execute against the opportunities in front of us. Now, I would like to turn the call over to Chris for a more detailed review of our financial results.

Thank you, Harold. If you're following along in the presentation, please turn to slide 14. Fourth quarter 2021 revenues were $228 .9 million, about 6% higher as compared to $216 million in the prior year period, primarily due to material cost inflation pass through. Foreign currency translation favorably impacted our fourth quarter revenues by about $800,000 or 0.4% compared to the prior year. Gross margins decreased slightly to 10.2% as compared to the fourth quarter of 2020 driven primarily by cost inflation and 1.7 million in new business startup costs in the quarter which primarily impacted gross margins as compared to prior year. The company reported consolidated operating income of $6.5 million for the fourth quarter of 2021, compared to $5 million in the prior year period, an increase of 30%. On an adjusted basis, operating income was 8.5 million, an increase of 2.4% compared to the fourth quarter of 2020. Adjusted EBITDA was $12.9 million for the fourth quarter as compared to $13 million in the prior year. Adjusted EBITDA margins were 5.6%, reflecting a decrease of approximately 40 basis points as compared to the adjusted EBITDA margin of 6% in the fourth quarter of 2020. This margin contraction was caused by legacy contracts, which have impeded margin expansion, and higher the new wins which drove higher new business startup costs. Interest expense was $1.7 million, as compared to $5.2 million in the fourth quarter of 2020. The significant decrease in interest expense was primarily due to refinancing the company's debt on April 30, 2021. Net income for the quarter was $2.6 million or $0.08 per diluted share, as compared to a loss of $4.1 million last year or $0.13 per diluted share. As Harold mentioned, we aligned our business into four segments, which are vehicle solutions, electrical systems, warehouse automation and aftermarket accessories. Turning to slide 15 for our vehicle solution segment, which sells seats and seating systems, plastic components and assemblies, cab structures and interior parts predominantly to the class eight truck market as well as to bus construction, Ag, military and the recreational vehicle markets. For the fourth quarter of '21 the vehicle solution segment revenues were $126.4 million, an increase of 13.9% as compared to the year ago fourth quarter, primarily due to material costs pass through and a modest increase in truck builds. Operating income for the fourth quarter was 5 million, an increase of 122% as compared to the fourth quarter a year ago. Excluding special costs fourth quarter of 21 adjusted operating income in this segment was 5.5 million, an increase of 42.7%. Turn into slide 16. Our warehouse automation segment sells a wide range of material handling equipment, electrical distribution systems, and related assemblies primarily for the e-commerce, warehouse integration, transportation, and the military defense markets. For the fourth quarter of '21, our warehouse automation segment revenues were $37.6 million, an increase of 0.7% as compared to the fourth quarter of 2020 due to slightly higher sales volumes. Operating income was $3.1 million up $2.3 million, or 262% as compared to the quarter a year ago. The increase in operating income was primarily attributable to product mix, and operational improvements. Adjusted operating income increased to 3.6 million an increase of 94.4%. Turning to slide 17. Our electrical system segments sells wire harness and cable harness assemblies into several end markets including construction, agriculture, e-commerce, traditional automotive, and most recently the electric vehicle industry. For the fourth quarter of '21 our electrical system segment revenues were 38.5 million, a decrease of 6.7% as compared to the fourth quarter, due to lower shipping volumes caused by supply chain constraints and semiconductor chip shortages. Operating income was $1.7 million, a decrease of $2.2 million that's compared to the 2020 fourth quarter due to restructuring costs, lower volumes and inflation impacts. Overall adjusted operating income was $2.7 million excluding these special costs. Now turning to slide 18. Our aftermarket accessory segment primarily sells seats, mirrors, wipers and wiper systems into the class eight truck market, especially recreational vehicles and home and office markets. For the fourth quarter of '21 our aftermarket segment revenues were $26.3 million, essentially flat with a year ago quarter caused by supply chain constraints and labor shortages. Adjusted operating income was 1.9 million, representing about a $900,000 decrease. Finally, turning to slide 19, reducing our leverages as Harold mentioned is a key priority for 2022 and we're targeting to pay down between $25 million and $40 million of our debt, which we would reduce our leverage to below two times on a TTM basis. Despite the headwinds that we have experienced the business was cash generative, having invested over 100 million the past year 86 million invested in working capital alone, to support the more than 250 million of sales growth we experienced in 2021. Inventory for the new program launches and COVID based supply disruptions. We have also made significant strides improving our operations to align with our transformation agenda, reducing expenses and working to offset the severe cost inflation has impacted our business. We expect the cost inflation, the impact of certain legacy contracts and supply chain challenges to be headwinds to our results during the first half of 2022 before showing improvement in the second half of the year. As we mentioned in the third quarter, we implemented a restructuring program to continue to transform and right size our legacy costs. We expect these activities to occur over the next several quarters, with program costs in the range of $4 million to $6 million with roughly equivalent savings on an annualized basis. We believe these actions we're taking to proactively manage the current environment will help us in the short term and long term as well as better position CVG for margin expansion as the environment normalizes. This concludes our prepared remarks. I'll now turn the call over the operator to open up the line for Q&A. Thank you.

Your first question comes from the line of John Franzreb with Sidoti & Company.

Good morning, How are you Chris? How are you doing today?

Good. Good morning, John.

Good morning, John.

I guess I want to start with your expectations in the class A truck market. What gives you this measure of conservatism? Have you seen January February's? or does not materialize as you expected? Or is this something that's behind that?

We're not seeing an improvement. We're not seeing relative improvement due to run right that we had in the fourth quarter. So similar problems gone. The chip shortages being the biggest one. And so we're assuming that that's going to continue. It's not what our customers are saying in their public remarks but we're seeing that they're having difficulty with part shortages. So we're being conservative about it. What does it mean to us? It means what level of inventories we buy and hold and how we staff our plants. So right now we see activity sort of flat to the fourth quarter of last year, on a per day basis, it's going to be more on a quarterly basis, because there's less production days in Q4 chat.

If you recall, the third quarter of last year, the projections were about 25% below what they thought. Fourth quarter not quite finalized and we are estimating that maybe on a lower as well and we are monitoring our EDI fees or sales fees as well and we are seeing so continued variation there. Hoping that this elevates as soon as possible or still think some variation there.

Got it. Now if I look at your 2025 road map back in the envelop I got it wrong. It looks like you are looking at a legacy or organic growth rate of just under the 10% and augmented by the $500 million of new business win--- business, the aftermarket business a 10% CAGR what other business of the three segments do you think would be the primary driver behind getting to that kind of a number?

Yes. So the 1.4 million is the current outlook with business that we have in hand. So we've already won around a little over $500 million of annualized new business in a little over two years. And so we're assuming over the next four years we will equal that. So that's kind of a conservative outlook of new business, like vintage year '22, vintage year '23, vintage year '24. If you look at winning 500 million in two years, what should you expect to win over four years? So we're actually being conservative on that, and we've started off pretty strong this year. Knock on wood, and it does have a conservative truck built into it. And that's how we got to the 1.9. John.

That makes a lot more sense. And in regards to the 90 million of business that you walked away from. When did you do that? What the timing of that? Is it or he'd been realized, or there's going to be some spillage into 2022.

It's out. So it drained out during 2021.

Okay. I guess one last question on the higher input costs. For you how much is it material versus labor that you're not recapturing?

Yes. So the big two for us are steel and freight. So if you just break it down, and then labor behind it. So we have all materials, freight and labor, and the legacy contracts that stung us all year long and now, don't allow us to pass through the majority of our cost inflation. In fact, we have some contracts that don't allow us to pass through any inflation. So we're down to less than 30% of our revenue under these ugly contracts. And we're renegotiating all of them now. And that's why Chris kind of gave the guidance that this is going to last for the first half of this year, and discontinue and we did publicly announce our biggest contract, and it's in our 10-K, you can see that we have announced we wanted to renegotiate that contract at the end of last year, you can guess that we are but all these conversations are private, but we had a big chunk of our income trapped at not making any money for us while the rest of business kind of healthy and spending money to onboard the new business that we've won. So we have to ramp up the additional $500 million and we're going through ramp up trials, tests, prototyping, and initial production on these projects now.

Got it. Alright. Thanks for taking my questions. I'll get back into queue.

Thanks, John.

Thank you.

Your next question comes from the line of Chris Howe with Barrington Research.

Good morning Harold. Good morning, Chris.

Hey Chris.

Good morning.

Hi. I guess I'll start with a broader question first and then get into a more specific follow up question. As we look at the electric vehicle opportunity you mentioned it will be the largest, fastest growing portion of the business as we move forward. A lot of development here with new wins and continuing to win business here. Can you place the timeline around this electric vehicle opportunity? You mentioned it in the past as development had to occur before revenue realization. What are you seeing around the timeline for realizing these wins and having them hit the revenue line?

Yes. The first few big wins are going to ramp up this year heavily in the second half, I was just in Mexico last week, approving the final designs and the production readiness at our big plant Agua Prieta which is on the border of Arizona, which is going to be the predominant place we make the electrical backbones for North American market. And we're ready. We're already have vehicles on the road going through our testing. So the first big ones will be in the second half of this year Chris.

Okay. And following up on some of John's questions about the 2025 initial outlook. Can you place some more granular detail on this, specifically, what I'm getting at the 8.5% operating margin based on what you're seeing in electric vehicles, warehouse, automation, and also the initial stages of putting your plan in place for the aftermarket business? Can you talk about how operating margin shakes out to get you to that 8.5%? I would think there are some double digit margin segments that comprise this target?

That's good point. So we've been conservative with the guidance here Chris and I did that on purpose. So we have internal goals that are higher than this. The new business ones are all very accretive for us. The conservative outlook is due to the fact that we still have big legacy contracts even though we're allowed now to pass through. We're negotiating the pass through our inflation so that we don't have this compressed situation. It's really hard to get profit expansion on that business without innovation or new platform. So taking a conservative look on the legacy business. The accretive business is quite different. If we had two buckets here it's more than 50% better. And so it's a conservative outlook on the OI margin. On the revenue side the build is gradual I guess I'll say. It's a gradual build the extra 500 that we have as we've watched it in time, there's like a two year offset to when the revenue happened. So we started winning in 2020 and so those wins are coming into production. The wins we just had last week, we had two big ones last week for North American electric delivery vans. They now start their development process that lasts a while and it is part of the whole vehicle development. So it's gradual built. We already have the 41.4 million billion. We have that and that goes on top of our legacy agreements. And then we're assuming we'll have similar wins with similar offsets during the time period and graduate to the 1.9 billion number. Aftermarket, you touched on that. The big aftermarket thing is we've never set aside dedicated inventory of production. And we put that in the second half of last year. Dedicated production capacity to the aftermarket and so we've never before stock the items. So we have big competitor named Seats Inc. in the aftermarket and they stock all the items. So you can look on your phone, you can say I want a black seat and it ships. With us, we custom make it because it's been in our custom plants. Now we're going to be like the rest of the crowd. And we have an e-commerce platform. We're putting out there as well. So we're going to go head to head in the aftermarket with a shift from inventory program.

One last one, I'll just hop back in the queue. On the aftermarket business, what's your sort of internal timeline on some of these initiatives? Are they one to three years to kind of get things running? I would assume that this business spins off to cash. How do you level set expectations here?

Yes, the aftermarket is this year, yes. We intend to get our inventory profile. In order this year. We're underway with it. The aftermarket plant by the ways in Piedmont, Alabama. And it used to be a seat production plant. It had a retired powder coating line. We upgraded it. We put in robotic seat frame welding. So we automated it, lowered our costs. And we have a big facility there. Several 100,000 square feet. So we can inventory there. And that build is underway. We've moved four of the six lines there already. So it'll be this year.

Yes. Chris, we started this work. Just late last year. We hired the leader. So all this is underway right now. And so 2022 will be big years we implement this aftermarket strategy.

Great.

We have a decent side backlog to Chris. So that's the first thing we're going to clear out and then go compete head to head for the daily business.

Sounds good. Thanks.

Thank you.

Thank you.

Your next question comes from the line of with Colliers.

Thank. When you look at the '25 roadmap, if you consider vehicles where vehicle solutions are 51% in '21, how will that segment representation look in '25. I don't know if you want to give any specifics, but just kind of a flavor of how that pie is going to be split down.?

Yes. So the vast majority of our wins are electrical systems. So the way we will report is that revenue will be in the electrical system segments. So the reporting sets in the seating, excuse me, in the vehicle solution segment is seating, interior trim, and cap structures. So electrical because it's going to, its pro forma, rd is our biggest business. But because it's going to be the big grower, we wanted to desegregate it and report it separately. So some of those electrical systems are on classic trucks. But they're mainly not. They are mainly on delivery vans and medium duty vehicles. Does that answer your question .

Yes. That's good. So on the 90 million that you walked away from purged in '21. Was any of that with Volvo with your second largest customer or is that are those decisions yet to come?

The 90 million was mainly low in no profit seating. And it was mainly in Asia-Pacific. None of it was with Volvo. We were hopeful to have a mutually agreement, mutually satisfactory agreement with them sooner rather than later. We'd love to be partners with them because they're a global leader and they understand that we have bad contracts right now that are unprofitable. It's very transparent discussions. And they've desired us as a partner, because we have very good quality and on time delivery. So I'm hopeful that we'll put out an announcement soon on a new agreement has been reached that's mutually satisfactory.

Okay, great. Chris one last one for me. I know you don't give specific guidance, but can you give us just a sense of what we should be thinking about from a gross margin perspective moving through ‘22? And even maybe on the SG&A side?

Yes. So as I mentioned in the call, we've got some headwinds on supply chains and these legacy contracts that we're working through. So I think things, as we noted, in the slide deck, things got worse in the second half. I don't foresee that trend changing yet. But I think as the supply chain and other things open up, we're going to improve throughout the year. And as I mentioned in the discussion earlier, that, I think the second half will be much more favorable. But I think we've got a little bit of headwind here going in the next quarter so.

Okay, great. Thank you. And thanks for giving us the segmentation here. I think that's very helpful.

Thank you.

You are welcome.

Your next question comes from the line of Barry Haimes with Sage Asset Management.

Thanks very much. I had a couple of questions. One is the new EVs that are ramping up something more in the second half of this year. Just to give us a feel, can you give us any sort of a bracket of revenues this year from that new business? And then my second question was the aftermarket operating income being down in the fourth quarter. Could you talk about that a little bit more because I tend to think of aftermarket is going through distribution, where your ability to raise price can often happen more quickly than with the OE contracts as you have noted. So what was going on there that I'm really depressed the operating income in the fourth quarter? Thanks.

Yes. So I will answer the second one first. The operating margins for aftermarket so if you look at the segments of our aftermarket business, its seating and wipers as our big two, the aftermarket seat business shared a plant in North America with our OEC business. And that plant was unprofitable primarily due to these legacy contracts that I'm referring to that we are trying to make part of our history. So we spread variances in the plant and so they were stung by the sharing a plant. And just like in the rest of our business, we are increasing our prices in that segment. And we do have flexibility to increase our prices. So with a dedicated plant, I don't expect that to happen again. We do have a big backlog and we separated out, dedicated production. So the wipers business was pretty steady. It was mainly the seeding business sharing a plant with OEC business. On the amount of electrical systems business this year. Basically, that you want guidance for one of our segments. And I will just, we're not ready for that. We're not trying to be acute. We had the request here to give some sort of guidance. So we gave our five year guidance, if you will. We're not yet comfortable. It's new for us, too. So we're going through ramp ups and we don't want to overstate this within three or four quarters but it's significant. You can see the wins. I mean 80% of 500 it's a large amount of wins we have in this business. And it's a steady build. I have the number. It's material. A significant.

Got it. Okay, great. Thanks very much. Appreciate it.

You're welcome. Thank you.

Thank you.

At this time, I would like to turn the call back over to management for any closing remarks.

Thank you. Appreciate it. Thank you for calling in. As you can digest and see that we're being impacted a little bit by our past still on these legacy contracts. The vast majority of that business is being renegotiated right now. I believe this is going to get behind us here pretty quick. We have one little contract that goes into ‘23. But this is mainly going to be a beginning of this year issue. And we will not suffer from those types of contracts going forward. Much bigger than that we have won a lot of new business. That's accretive. And we are fast emerging as a leader in electrical architecture, electrical system development. We have a big electrical engineering team was put together and have become a desired partner. Our customers really don't let us say their names. So we don't get to say their names much. You can see that the only two names we've been allowed to say in the past that we've shown up with Nikola and XOS. We're going to have a big announcement a couple of weeks at the North American work truck show in Indianapolis on March 9. So we'll be able to say another customer name. I wish I could say them, but it's a lot of wins. The wins are around $15 million to $20 million each. So it's a lot of different names. And we still have a very large pipeline we're working on of over $1 billion of additional business. And so what's happened with us is we've had a higher than expected hit rate, conversion rate. And so our startup costs have been a little more than we expected. But it's all good news. And we're beginning our ramp this year with some of our new business. We look forward to reporting to you with these new segments which are clearly aligned with what we're trying to do. And look forward to speaking with you next time. With that operator, we'll close the call for today.

This does conclude today's conference calls. Thank you for participating. You may now disconnect.