Good morning, ladies and gentlemen, and welcome to the CVG’s Fourth Quarter and Full Year 2023 Earnings Conference Call. During today’s presentation, all parties will be in 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. I would now like to turn the conference over to Mr. Andy Cheung, Chief Financial Officer. Please go ahead.

Thank you, operator, and welcome, everyone, to our conference call. Joining me on the call today is James Ray, President and CEO of CVG. This morning, we will provide a brief company update as well as commentary regarding our fourth quarter 2023 results. After which, we will open the call for questions. As a reminder, this conference call is being webcast in the Q3, 2023 earnings call 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 confidence, 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 James to provide a company update.

Thank you, Andy, and good morning everyone. It is an absolute pleasure to be joining you on my first earnings call as President and CEO of CVG. Having served on the Board of Directors since 2020, I’ve had the opportunity to witness the strength of CVG’s business fundamentals, the transformative strategy in place, and the remarkable growth potential in this organization. We have great strategy, great people, and great customers. I was appointed president and CEO December of 2023 and there was a lot of good progress already underway from the leadership of our Chairman and Interim CEO, Bob Griffin. I want to thank Bob for all his efforts in the months prior to my appointment as President and CEO. As this is the first time I’m speaking to the majority of you, I’d like to offer a bit of my perspective on the opportunity I see ahead for CVG. I’m sure you’re curious what will change with me as CEO. And to be clear, my aim is not to change our strategy, but rather to enhance it. In my role as a board member, I saw firsthand the hard work and planning that went into developing our transformation strategy. We think we are seeing the early benefits of that transformation, as our new business wins drive top line growth and margin improvement even as we see a downturn in the Class 8 truck builds and this improved profitability is leading to reduced leverage and a healthier balance sheet. Additionally, we have provided our outlook for the full year 2024 more on this later. My goal is to best equip our teams to continue driving this transformation and to make sure we have the right culture in place to enable our teammates to drive us forward every day. In order…

Thank you, James, and good morning everyone. If you are following along in the presentation, please turn to Slide 6. Consolidated fourth quarter 2023 revenue was $223.1 million as compared to $234.9 million in the prior year period. The decrease in revenues is due primarily to the impacts of a strike at a Vehicle Solutions customer facility, which more than offset an increase in Electrical Systems revenues. Foreign currency translation favorably impacted fourth quarter 2023 revenues by $1.8 million, or 0.7%. Adjusted EBITDA was $10.3 million for the fourth quarter, compared to $13.3 million in the prior year. Adjusted EBITDA margins were 4.6%, down 110 basis points as compared to adjusted EBITDA margins of 5.7% in the fourth quarter of 2022, driven primarily by lower volumes and strike impacts. Interest expense was $2.4 million as compared to $2.9 million in the fourth quarter of 2022. The decrease in interest expense was primarily related to lower average debt balances during the respective periods, partially offset by higher interest rates on variable rate debt. Net income for the quarter was $23.3 million or $0.70 per diluted share as compared to a net loss of $32 million or negative $0.98 per diluted share in the prior year. Adjusted net income for the quarter was $2.9 million or $0.09 per diluted share as compared to $1.4 million or $0.04 per diluted share in the prior year. Consolidated full year 2023 revenue was $994.7 million as compared to $981.6 million in the prior year period. The increase in revenues is due primarily to pricing and an increase in Electrical Systems volume. Foreign currency translation favorably impacted full year 2023 revenues by 2.0 million or 0.2%. Adjusted EBITDA was $67.6 million for the full year, up 26% compared to the prior year. Adjusted EBITDA margins were…

Thank you, Andy. Turning to Slide 12, I’d like to highlight where our team will be focused in 2024. This will be no surprise to hear, but new business wins remain core to our culture at CVG and we continue to add additional customers and platforms. We look to continue our new business wins in 2024 building on the wins we recorded in 2023. Our strategy calls for continued diversification of our revenue stream, which is key in transforming our revenue mix, reducing our cyclical exposure and improving profitability. Next, we will continue the planned ramp up of our new Electrical Systems plants in Mexico and Morocco. These expansions are key to growing our Electrical Systems business globally and are positioned to be cost competitive and provide outstanding service to our customers. Additionally, we are underway with the construction of an additional Moroccan plant, which will further support anticipated growth and supply chain optimization. So, before turning to the fiscal 2024 outlook, I want to emphasize what we are doing with our three key businesses. One, we are focused on making Electrical Systems our largest business by continuing to win new electrical business across multiple end markets and diversifying our product portfolio, including diversifying our vehicle platforms toward higher growth markets while simultaneously reducing our exposure to the cyclical Class 8 truck market. Two, we are optimizing our Vehicle Solutions and Aftermarket businesses as we see multiple levers to improve profitability through operational cost efficiency and making strategic sourcing decisions. We expect all of this to lead to improved working capital management and increased free cash generation. Collectively, this fundamental business transformation is expected to improve our business mix and make CVG a larger, stronger and more profitable company in the coming years. Turning to Slide 13, I’ll share a…

Thank you, sir. [Operator Instructions] And your first question will be from Joe Gomes at Noble Capital. Please go ahead, Joe.

Good morning. Thanks for taking my questions.

Good morning, Joe.

Good morning, Joe.

James, you gave us a quick overview. It’s great to hear your voice here on the call. I was wondering maybe you’ve been there two months. If you give us some more insight into kind of your key findings or thoughts from the CEO position here in the first two months.

Sure, Joe. Yes, it’s very exciting for me to come in. Fortunately, I had the benefit of observing the company on the board from the other side of the table. So, I’ve had the opportunity to get a look closer during the time of our Interim CEO, Bob Griffin, and that really excited me about the possibility of taking on this role. What I’ve seen since I’ve been here is that we have really good products that our customers value. We have a very enthusiastic team and really focused on growth in not just electrical, but other aspects of our business. We have a good approach to finding solutions to help customers solve their problems, and also we are focused on making sure we deliver on commitments. So I think the team is very engaged. I’ve had interaction with several of our top customers and I’ve also had a chance to talk to a few investors as well. And we all see continued improvement in the value of this business and the value proposition it brings to the market.

Thank you for that. And are there any significant contracts that might be coming up for renewal in 2024, rebid in 2024?

Well, as part of our new business win methodology here, and I think what’s happened in our results is that we have a funnel of activities and a funnel of opportunities that we look at and align our product strategy to our customers quoting opportunities. So across our businesses, there’s a number of quoting opportunities that occur every week during the quarter. Some are prioritized higher, some we have a stronger value proposition against our competition. But we do have a focus on making sure that we pursue opportunities that are sustainable, that have the appropriate margin profile, and that fit within our manufacturing and supply chain footprint. We do have some small ones we go after, and we also have some large ones we go after. We don’t disclose our customers specifics as we do book new business, but I would say that we’re gaining a stronger reputation in the market of being able to provide what customers are looking for as well as a differentiated value proposition compared to our competitors, mainly in Electrical Systems. But we also have some strong areas in our plastics and trim business, as well as our seating business and aftermarket. So it’s not just electrical, it’s across the board. But our focus is really accelerating electrical growth beyond market growth.

And what are the goals in 2024 for new business wins? I know historically it’s been at least $100 million. Are we still sticking to that or you get a higher number this year?

Obviously we want to continue the trend we’ve been on, and it depends on the customer program cycles and when opportunities are quoted. So our funnel is larger than our target. We have different win rates in different segments, and different products have different win rates based on the competition that we’re going up against. But generally we expect to be in the $100 million or more range on our bookings going forward. We’ve proven we have a right to play and a right to win. It all comes down to strong execution and making sure we deliver on our commitments, both to customers as well as to our organization, for the financial commitments of the program. So that’s going to continue to be the focus. And the great thing about this is we’ve had a couple of years of building momentum and we’re really starting to accelerate that and our reputation is increasing within our customers.

Great. And one more for me. I get back in queue. So your expectations for 2024, trying to get some of what your thoughts? Obviously the range is about $100 million. I’m assuming some of that deals with where the Class 8 truck builds end up coming in. But on the Electrical Systems side, last year you did a bang up job. Top line was up 27%. Are you looking for that similar number similar rated growth in 2024 in that segment or back, maybe down closer to that 20% range or something other?

Joe, well, let me answer that. So just describe. We’re already seeing the benefit of the new wins that we secure over the last few years. So 2023 is really a strong year. Revenues growth for the Electrical Systems segment. We expect that you’ll continue to see us launching business that we already own [ph]. Right now that’s why we have a range here is sometimes a customer launch schedule is out of our control, and it depends on manufactures, but we expect that you’ll continue to see good growth in our electrical segments.

Great. Thanks for taking my questions.

Thanks, Joe.

Next question will be from John Franzreb at Sidoti. Please go ahead.

Good morning, guys, and thanks for taking the questions. I like to start with the revenue loss at the strike. Can you talk a little bit about maybe the size of the revenue and was it lost or was it deferred into the first quarter? Maybe more color there would be helpful.

Yes. The strike at the customer was actually lasted about six weeks, so it impacted us. We estimated to be about $12 million in revenues for the quarter. As the customer did not change their overall backlog. We expect that eventually they’re going to put those lost vehicle back on the production schedule. The timing is a little unclear right now because they also have their own manufacturing constraint, but we expect that eventually it will come back to the production.

Excellent. And I guess if we start thinking about the Class 8 truck cycle and last quarter I asked you, how is the first quarter shaping up? And you indicated it was looking good. I’ll repeat the question. How’s not only the first quarter looking, but how’s the second quarter looking relative to the current production rates that you finished at?

Yes. So we don’t forecast quarter-by-quarter what our customers do, but as you can see on the market, there’s public information about the ACT forecast, which is one of the more important forecasts you use. So right now, you see ACT is actually expecting some decline from Q2 and beyond in terms of overall market production. But we'll see. We're still not seeing full visibility on our customers own schedule, but the ACT forecast is showing some drop off from Q1 and beyond.

Got it. And just a little bit about the Mexico and Moroccan facilities. When would they be fully operational?

The Mexico facility launched in Q3 and the Morocco facility, the initial Morocco facility, launched in Q4, and they are ramping up, bringing on the new programs that we had won in prior years to those facilities. The new facility that's under construction in Morocco. The additional facility should be online in Q1 next year.

Q1 next year. Got it. And just if I think back to about a year ago, you were rolling out a new aftermarket initiative. Looking back on it, can you talk a bit about the successes and maybe where it's lagging a little bit relative to expectations going in?

Sure, no problem. We did change leadership of the aftermarket business in Q3 last year and kind of reassess the effectiveness of the prior strategy, especially on the ecommerce side. What we have found is ecommerce, you have to have a lot of discipline around your production planning and your inventory strategy and how you're going to market and what you're focusing on. And we believe that there's probably more work that could have been done there. So the new leadership that came in, actually we participated in the heavy duty aftermarket week in January, and we have a pretty large number of field sales reps that we met with that will represent our product with various dealers, retail outlets in various regions of the country. And we recognized from that interaction we needed to do a better job of getting our name and brand out there. And I think the aftermarket truckparts.com, probably mid to late this year, may have a lot more traction based on the work that our field reps are doing out in the field with our brand improvement and brand awareness. So I think going forward, or I expect going forward, we'll see better traction sequentially in our aftermarket business sales opportunities.

That's great to hear. And I guess one last question then. And let's get back into queue. Clearly right size the Industrial Automation business. What's kind of updated thoughts on when the revenue profile kind of turns around there now that you've kind of right sized the business?

That's a really good question. I've been able to take a really good look at what we've done even before coming into the CEO role. The business profile there was primarily more contract manufacturing, lower value add, but we had an opportunity to really gain inputs and access to the local market. And with the takeoff of warehouse automation, that's where the business really popped up. And as that tailed off, it kind of came back to the legacy contract manufacturing box builds. And the leadership in that business intentionally has been focusing on a more highly engineered solution in the market, in various customers in various different configurations. So we're somewhat at the inflection point of where this business could potentially go based on these new products. We do have favorable customer feedback, but there's going to be a Runway to ramp back up to more substantial revenue numbers. And early indications are by mid to late this year, we should start to see more of a bounce back in that business based on orders we have and customer insights. We are actually going to be participating in the MODEX show in mid March, demonstrating one of our new innovative products in that show to get feedback and determine how we need to potentially scale that new product innovation. So that's pretty much an update on that business. It's at an inflection point and trying to pivot it to more value-add.

That's also good to hear. Thanks, guys. I'll get back into queue.

Thanks, John.

Thanks, John.

Next question will be from Gary Prestopino at Barrington. Please go ahead.

Good morning all and welcome, James. A couple of questions here. First of all, James, with you coming on board, I mean, the company had a target of revenue of $1.5 billion, 9% adjusted EBITDA margin by 2027. Is that something that you want to stick to here or can we throw that out with baby out with the bathwater?

That's a good question. I wouldn't say we're throwing the baby out with the bathwater, but I do think we have an opportunity right now to look at the profile more specifically through market segmentation, customer and product segmentation, and have a more intentional profile management as we look at future business. And we're still assessing what that profile might look like and where it could potentially go to ensure that we have an appropriate margin accretion algorithm in front of us. But we're really focused on executing our annual guidance expectations and continuing to book new business. So with these two things, we'll have a better chance to, I think, shape what this looks like longer term, and we're still defining how that's going to be staged out. So at this point, we're not really discussing the long-term targets, we're not throwing a baby out with the bathwater. But I do think there's work that needs to be done on a more disciplined approach to shape the profile of that revenue stream.

Okay. And that's fine. I just wanted to may get that out there because that also, those targets had been out there and we don't want to obviously repeat them if they're not something that you want to adhere to. Well, okay.

Well – let me just, I guess, backtrack a little bit. We did state on the prior question that we expect to book a $100 million [ph] or more new business wins a year. So that is another data point that you can use in determining where we're going longer term. We're not backing off or throwing the baby out with the bathwater. We're sticking to that.

Okay, so in terms of the closing of the facility and then higher cost reduction in organizational costs, can you slap a number on what kind of expense capture you're looking to get from these actions in 2024?

So Gary, let me answer that question, so you can see that this quarter we took a charge of about $0.05 per share, so roughly about $3 million. It's not all the charge that related to the action. So some of the action will continue into Q1 as well. We normally look for about less than two years payback in our spending on right sizing and improving the operations. So we can see – there you will see a multimillion dollars of benefits based on the charge that we take. But that's also roll into our annually the cost reduction that we do. So we'll continue to use those actions to expand our margins as well as offsetting the inflation that we are still seeing in the business.

Okay, and then just something. Well, I got two more questions, but with the Electrical Systems business, a nice percentage of that was going to electrified vehicles, is that correct?

Actually, our largest segment in that business is ConAg construction and agriculture, some of the key industrial customers. The EV portion of that revenue stream is relatively small and we're focused on some of those customers in our growth and business wins. But as you know, based on recent publications, some of the customers, even the non-new OEMs, some of the legacy OEMs that are going to electrification have somewhat backed off of the volume estimates as well as the years of introduction. So because we're more intentional about how we shape the profile of our new business ones in electrical, we didn't have an over reliance on that to hit our longer term growth objectives.

Okay, that's good. That's what I was trying to get at here. Okay. And then, James another question for you. You got a great background here in terms of where you've been and companies you've worked for. Where do you see your strengths and how they match up with the needs of CVGI? I guess what I'm trying to get at here is that in your prior roles at Stanley Black & Decker and that, were you more operationally oriented?

Yes. So that's a great question and I'll try and answer it to the best of my ability. So if I work backwards, the seven years I was at Stanley Black & Decker was focused a lot on transformation, both from a supply chain business model or efficiency, engineering, go-to-market, customer relations management. So truly general management during my time at TE was really focused on operational transformation at the plant four level, and that was during the post 2008, 2009 downturn. So there was a lot of hands on, heavy lifting there. And I see that coming into this role. And after observing some of the needs of the business from a board seat, I felt very comfortable that I could understand what exactly needed to be done, where we needed additional capability, where we needed more capacity, and also improved processes and tools to help us run our operations. So as many of you know, it's a journey in operational transformation. And I would say we're probably in the early phases and we're gaining traction. So the difference in my approach may be that I'm focused on culture change management as well as sustainable process and tool improvement as compared to Brute Force. And just trying to muscle things through sustainability of improvements is very important to me. So I believe that's where I add a lot of value coming into the business. And I would also add on to customer relations management. I think that we have some very strong and exemplar customers in our portfolio and there's opportunities to manage them in a different way. So it's long-term strategic relationships and we keep the comprehensive picture of our relationship in front of us. And it's a win-win, mutually beneficial relationship balance that I'm aspiring to achieve with our large customers and our new customers as well. All of our customers are important, but there's some that really sway your business one way or the other. And we just need to make sure we're very intentional about how we manage them.

Okay. Thank you very much and I wish you well.

Thank you.

Thanks, Gary.

Next question will be from Guillermo Herrera at Gabelli Funds. Please go ahead.

Good morning. Thanks for taking the question.

Good morning.

Thanks, Guillermo.

So we've heard a bit on margins being up from both pricing as well as contribution from the ES business. Curious whether part of the story here is also being more selective in your contracts. So in other words, have you had to walk away from any significant customers based solely on margin profile? You mentioned not disclosing specific contracts, but if you could just provide some color on whether this was part of the margin story over the past year or so, that would be helpful. Thanks.

Yes. So if you remember, we did talk about that in the past, that there is one customer that we didn't like the terms of the contract and we walked away from a seating standpoint. So that was ended, actually this fiscal year. So that helped to streamline our operation and as well as get rid of some of the terms that we didn't like. So that's part of the margin reflection.

Got it. Thank you.

Thank you. Next question will be from Steven Martin at Slater Capital. Please go ahead.

Hi. James you're new, but you've been on the board. So as a shareholder who's been around longer than any of the senior management, I'd like to share a couple of thoughts. I think Harold sold us a bill of goods over the last three or four years. If I look back at his comments about recutting the truck contracts and blaming things on increased costs that couldn't pass through, and now here we are, four years later. You recut the contracts last year, April 1 you recut the last, supposedly the last contract. Freight costs are down. And by the way, I'll point out that if you look at your fourth quarter press release last year, the same time last year, you said ACT was projecting 305 and it ended up being 345. So every quarter this year, ACT got better than you guys anticipated, yet your business didn't, and you underwhelmed when it comes to last year, you made a big deal about a $30 million cost savings program. We don't see it. There was a big deal, and you talked about it. Harold made a big deal about aftermarket and all the money that got spent reorganizing plants, building inventory, hiring new people. We don't see it when we talk about the electrical business. You just pointed out they made a big deal out of all the EV wins we had. And now you're saying EV is not really a big part of it. I won't even go into the acquisition, which has been an unmitigated disaster. So while you weren't the CEO, you were on the board. And I just want to share with you the level of frustration of your long-term shareholders who've watched this stock go nowhere for five years.

Steve, thanks for your feedback, and your observations are very well grounded. So I'm going to let Andy comment on a few things, and then I'll come on the back to Andy’s comments.

Yes, so Steve, well, thank you for the feedback. So we actually look at the business. As you said, there are some areas that we believe is really doing well, some areas that we are falling short a bit, particularly like to your point. And James already mentioned the aftermarket ecommerce. I think we mentioned that it was a experiment and trial for us, that we learned from it, and that initiative didn't pan out as strong as we thought. So we have made some changes to leadership, and we are regrouping and seeing other ways to grow the business, as Zulio [ph] also pointed out. So we have some wins in the electrical business that you mentioned that the previous CEO have also mentioned. And thus those are the wins that we saw over the past couple of years. What James mentioned about EV is not a big part of our business, is if you look at today, our revenues profile, EV has not been a big part of our revenue space. Would that be? And it depends on some of these customers whether they wham up to the expected volume and when would they wham up. So there's something in the backlog in the pipeline in the future yet to see. But as James mentioned, we are not going to count on that one basket. Right. So we continue to diversify our revenues. So in terms of productivities, we did follow through of our cost reduction initiatives. This year we met our own internal targets about the cost reduction. But at the same time, we mentioned that in the past, some of the gross cost reduction will be used to offset some headwinds that we have. Inflation still continue, particularly in labor and others. So yes, we would continue like to see margin expansion as you described. And I think we're on the same boat. And as James mentioned. So this will be again our focus front end center, the Vehicle Solutions business. Optimizing the margin will be our top priority in addition to our Electrical Systems growth. Thanks for your feedback, we appreciate it.

All right, thank you.

Steve. Thanks again. I really appreciate your comments. And I see the business in a similar fashion. There are operational excellence things we can do across our functions to improve the stickiness of our cost reductions. And we also have a lot more structure and process rigor we can put in place to ensure that the cost reductions are sustainable and not necessarily one time. So I see that as an opportunity for margin expansion, both on the material, the operation side, as well as some of our business processes and customer relationships as it relates to debits, delivery, quality, things like that, that don't excite our customers. And that is my priority. So without our customers and without their confidence, we can't continue to grow this top line. So that is a very top priority in my mind.

Yes. But keep in mind, top line with no profitability doesn't do any of us any good.

I totally agree with you. And that's why we're going to focus on the process rigor and operational excellence across all of our functions, not just in the manufacturing.

All right. I hope you succeed.

Thank you, Steve.

Thanks, Steve.

[Operator Instructions] Next is a follow up from John at Sidoti. Please go ahead.

Yes, just in your comments about diversifying the end markets in order to foster growth, can you just talk a little bit about how you expect to do that? You need to add sales personnel. What's the pathway to entering new end markets?

There are a couple of different ways, John. One is to bring sales and engineering people into the organization, to that have experience and contacts and credibility in those segments. There are also opportunities for what I would say is cross selling our white space where we have a major customer in one of our businesses, but we're not penetrating it with all of our product lines. And that's probably a bigger opportunity than doing it organically with hiring. And on the hiring side, we look at this from a talent management perspective and making sure we have the right people with the right skill sets. Some of what we do in restructuring is part of that rotation to make sure we have the right people with the right skill sets and the right experience. So we have seen traction over the past year and some of our sales funnel looking into this year, what we're quoting in these various segments that are new, we also have a value proposition where we're successful in one segment with one OEM that gives us a stronger right to play and right to win in that particular segment. So we are in flight as far as building momentum outside of Class 8 truck segments, as well as continuing to expand outside of construction and agriculture as well.

Okay, got it. And just some updated thoughts on two items, I guess. One, on debt repayment in the year ahead, and two, what's the CapEx budget, especially in light of the continued ramping of the new facilities and the startup of the third.

Yes. So from a CapEx standpoint, we expect $25 million to $30 million in 2024. And you can see long-term we will normally target a range between 2% to 3% of sales. That's kind of been our trend and we expect that going forward when it comes to debt pay down. So we will minimally pay down somewhere around $15 million next year as part of our amortization. And in the past we talk about that, we'll continue to do that. And then when we see excess cash, then our first priority will continue to be funding our organic growth and food, the CapEx and other working capital, et cetera. And then we'll have some options as excess cash becomes available for further debt pay down or potential M&A at that point. We'll share more as we get into closer into the year and we'll share more about our cash flow expectation.

Okay, fair enough. Thank you, Andy. Thank you, James.

Thank you.

Thank you.

Next question is from Steve Emerson at Emerson Investment Group. Please go ahead, Steve.

Thank you, gentlemen. I noticed that admin went from around $22 million to call it $34 million, up 50%. How much of this is a cash expense increase.

For this quarter I would say, you could call it maybe 60 to two-thirds of it is cash. So and I explained in the cost in the past, this year there is a bit higher SG&A increase because if you compare to last year, it was a year that we literally didn't pay our incentive comp from a bonus standpoint. So that's a big part of the SG&A increase this year. And that is actually right now, has not been cash impacted yet because we haven't paid the actual bonus. So a big part of that is due to that. The U.S. will be mostly cash.

In view of the downbeat forecast this year, I find incentive compensation equal to call it 40% bump in G&A highly inappropriate.

And that was, I think we're referring back to a 2023 versus the 2022.

I do hear you. Thank you.

Thank you. Next question will be from Andrew Brickman at Altair. Please go ahead, Andrew.

Yes. Hi, gentlemen. One question I have is if I look at the appendix of the chart you sent out or the slides you sent out, it breaks down the profitability from an operating income standpoint by business unit. And as I look at that, I have some familiarity with the vehicle systems business, and I believe that's still a just in time business. And highly, there's a lot of work that goes into those components. 3.1%, which this is showing as of the end of the year. It just doesn't seem like the right return for a business that requires the infrastructure that, that business requires and the investment in capital and working capital. So I'm just wondering of your thoughts on that.

Yes. So clearly, if you just look at the return on sales in Q4 alone, it's not what we were expecting longer term. Look, there's two reasons. One Q4 historically been a very small revenues quarter. And as you mentioned, with the infrastructure, there is a certain degree of fixed costs in the business. Small revenues quarter always impacting our ROS. And then also, as James mentioned in the call earlier, we were impacted by a customer strike during the quarter. So it impacted almost 10% of the revenues of that segment in the quarter. So and that is obviously difficult for us to adjust fixed costs during the quarter to accommodate for that. So that also impacted the margin of that business. I think longer term, your point is valid. So have a mid to high single digit return on that business from a margin standpoint will be probably more appropriate than a low single digit margin.

Yes, I mean I guess I just follow up by saying I don't know if we ever analyze it from the customer standpoint, but I know for our big customers we save them a lot of money by being just in time right when they need it. Low inventory. I continue to say there could be increasing return. Even the 7.3 isn't as strong relative to some of your other businesses for the year, but point taken. Thank you for taking my question.

Thank you for your feedback. Thank you.

Thank you. And at this time we have no other questions registered. Please proceed.

Thank you all for joining today's call. While 2023 was a strong year for the company, I'm even more excited for the opportunities that lie ahead for CVG. We remain encouraged by our business outlook and we look forward to continuing to execute our long-term growth strategy. Have a great day.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending, and at this time we do ask that you please disconnect.