NN (NNBR) 10 Mar 232022 Q4 Earnings call transcript

Good morning, everyone, and welcome to the NN, Inc. Fourth Quarter and Full Year '22 Earnings Conference Call. [Operator Instructions]. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Jeff Tryka, Investor Relations with NN. ahead. go Please

business Good I'm Jamie. Inc., and for attending thanks I'd a we December our presentation, ended which Thank Tryka, morning, Relations posted the XXXX, release have full announcing Investor fourth section us. and today's for as Investor you website. Jeff results been to financial press as of NN, Yesterday the Relations well for quarter joining afternoon, like issued you, thank everyone, update. year contact and XX, supplemental our a for to

a or needs Lambert you anyone & copy supplemental contact If of the release may the press Company XXX-XXX-XXXX. at presentation,

Chief call Executive Andrew Wall, Financial Our the this presenters Chief Chief will Senior Vice President Officer; President be on Officer. Senior Warren and Felcher, and and Officer; Veltman, Mike Commercial and morning President Vice

Before the note I'd XX-K the contained presentation take report December section the Form XX, Risk ask when of forward-looking company's for Form you today's on filed, report Factors XXXX, the X XXXX, and company's press we to statements like on Form regarding supplemental annual report release, the in September for language December XX, begin, to in the company's the cautionary XXXX. annual fiscal quarterly XX-Q months for and ended the XX-K ended year fiscal ended year XX, on of

made conference live including call, comments today's the as on applies webcast. the to well session The as same language Q&A

the the future -- and rates, performance pandemic constraints, Russia-Ukraine condition synergies, flow, our Ukranian will acquisitions, operating semiconductor today other tax statements topics. financial Our presentation savings, and impact the conflict markets, exchange and the of supply sales, contain forward-looking cash results, cost on of worldwide cash including inflation, company's coronavirus regarding chips, foreign margins, chain rate,

and SEC A final measures of release includes such to are section of reconciliation the defined caution by in non-GAAP measures The press subject These risks company's presentation. many in uncertainties, which rules. the the as with also the certain the are various non-GAAP in supplemental outside of is contained and be control. used statements should presentation and of tables

will NN provide the update actions position of Andrew for with open will for to the call, Reviewing market the success. is new company today's update and taking then agenda on opportunities. a business discussion Warren an

Mike remarks. before Finally, I provide turning and a financial Q&A back will conclusion over full results fourth There time, over turn be a and Veltman, will the to year XXXX. detailed At call the Warren? this discuss to Warren of CEO. the session update Warren outlook following the the prepared quarter call for will of President our for to

and and you, you morning, this morning. for Thank thank everyone, Jeff, us joining good

our Let inflationary by environment that fluctuating improving pressures, constraints me interruptions, my continued and very culture on have labor every start supplier indicating responding teams predicated a and characterized possesses to requirements. comments challenging customer volumes. to customer swiftly NN day adapt to action-oriented by cost an

meet by strong have challenge environment. this rise will I current teams the to to faith So our presented continue that

some of summarized results quarter. to of the have the turn presentation, our you If from X we Page fourth

despite the interruptions reversal did results comments fourth policy in due by our expected Reported of to sales in not me during its meet that key production China expectations. than zero-tolerance volumes, fourth our by were my driven government's start the on lower COVID-XX initiatives, we Let lower quarter. our partially prior progress due that significant quarter saying outlook our made fact to the

our operating expectations, and Additionally, X performance facilities. below reflect unrecovered particularly inflation operating at results our

million our pricing. sales volume driven prior The from Sales XXXX. up driven Mobile on fourth for by continues year, X.X% cost adversely Cost quarter. Mobile Solutions were XX.X%, $XXX the higher customer January approximately due quarter to that of the pricing component not the customers electric were becoming Solutions We inflation $X by Solutions inflation Solutions structure to responded our with million, up Mobile quarter XXXX. most price recovered by adversely pricing. impacted by were our the impact X.X% aggressively nonmaterial-related and from sales impact effective with during negotiating X, increases Power profit. increases were of by up

a Power long-term the purchase million higher and to implementing fourth inflation proactively a for These quarter supply Solutions On on X% of of net adjusted tied million. agreement. we have incoming XXXX side, addressed the contributed $X.X a not or increase factors a orders by expected to non-GAAP loss $XX loss price

XXXX. sales X.X% for Non-GAAP of of was million EBITDA quarter the fourth $X.X adjusted or

$XX.X We cash liquidity $X.X free was flow which continue XXXX $X.X with quarter, despite our fourth in outlook QX lower as line of from strong million in to generated being than of of profitability the million at maintain expected. million, increase an we

provide If will I you X turn to update the Page an key presentation, initiatives. of several on

costs, inflationary in During will subsequent XXXX we address able and a increase on detail which pricing to XXXX, more to slide. I address were

improving focused are continuously We our structure. cost on

As discussed, initiative our a been of footprint the efficiency optimize the with operating we X of has have closure facilities. previously major to

closed adjusted all quarter the XXXX of results. XXXX. expect improvement million to second expected versus the We that $XX of $XX these facilities EBITDA to by will These in closures million generate be end are our

duration growth driving broader inflation given surrounding and risk strategy focus compliance new continued the the our leverage amendments agreements stability uncertainty reduction financial the in will change will the to announced to ratio allow This supply with economy, for term and executing the and to our improved loan the ABL also provide a the an chain loan. ability term remaining of provide leadership, requirement increase This performance. and us week, we in on our

committed with CEO the candidate appropriate NN. time an takes Selecting on time, search. of Ferry Speaking drive, the update me to right leadership, and is candidates The focus person particularly of interview qualified identify a relevant success the company's to status with of but new A environment, a the ensure values current industry current our this long-term in effort. investing to the person Korn to experience, the our let has Board finding Board in commitment vision. right with worked lead and provide to

share more will concludes. search CEO process We the as

currently expect the groups that our XX. retire operating We of Buchan, EVP March on John will

to strong Campos teams, management and built bench talent to up affect leadership. with of Gunars and to fortunate lead have respectively. stepping successful Solutions working our Gunars a early are Vinkels Solutions We Mobile the since have transfer team of been John Douglas within Power November Douglas closely with and

million in the to review of onset of you Page and through turn environment. inflationary X we address current recovery inflation XXXX, $XX pricing increases to XXXX have offset the If material we in The annualized the secured for secured the the of inflation. actions increases we price and some material were presentation, to inflation. the have of to of Since pursued price prior will nonmaterial of XXXX February significant majority

to to impact purchase long-term million of expected supply XXXX, expected However, prices have inflation within Mobile not increases a incoming Solutions we annualized during tied XXXX and million. are over in recover $XX from have nonmaterial price inflation increase agreement. increased our X% enacted to to and an incremental price XXXX will Solutions These on of a orders recover revenue plus we XXXX, Power generate $XX

The and our cumulative groups. roughly XX-XX increases Mobile and Power are between price XXXX of split XXXX

primarily in diligent taking to teams Solutions. unusually and will in for the over within necessary negotiations And in Mobile high with recover steps remain customers are additional increases proactive in price inflation current those We our XXXX, environment. the already secured

Page detail X. will additional closures. to facility I provide Turning now our on

the Irvine majority other these Taunton We of a closures. closures. tax, come and regarding reduction to benefit such is negative savings rent, of and our with elimination facility facilities, maintenance from the are The in facilities' EBITDA confident costs we associated as vast estimated facility from the utilities have property and from

and Solutions, XXXX. by closure Taunton the Irvine April track are Within on facilities Power for

We respective remaining combined the will have term for agreed our and of on to the full in lease both will remaining our sublease subleases a full The are obligation finalizing and for principle facilities process encompass provide facilities in agreements. basis. on the of leases recovery of subleases both terms

to EBITDA adjusted includes in the by location XXXX XXXX will in sequential a $X to These also the second closures risk provide The Mexico, which be in of of in sequential EBITDA of subject in facility the Mobile versus execution approximately compared and XXXX associated XXXX. relocation. X our adjusted are provide This certain of expected improvement to in relocating XXXX. closures a $X is million some production benefit $X to improvement United manufacturing million completed States Solutions quarter the will with million to improvement

turn it over update. market who will Andrew? now to a will provide I Andrew,

everyone. as into updates morning, be good happy call business on move and wins today's I'm review conditions new Warren, to on XXXX. you joining we to in and XXXX our market Thanks,

quarter, estimated through of review continued will some new in Now Page business have we team turn if we Year-to-date the the generate revitalized I our sales million fourth growth to XXXX. as achieved to wins business results. X, have you with XXXX efforts total of of through new secured $XXX the

large I would for pursuits. have delays several award strategic note in timing we that seen

and However, we in positioned strongly business. securing are remain confident this

our approach. alignment auto segments, the the like the would achieved disciplined were team's strategy. and note our fourth to universal electrical, vehicle continue in focused through and highlighting quarter of electric wins business We I new that long-term And with XX% approximately our

universal may auto be of new some term to The you.

the by as the agnostic a NN we supplied the where to of For define vehicle. auto universal clarity, market subsegment powertrain are solutions

solutions can ICE as seat are For characterized and example, on electric systems, and power legacy all in auto electric airbag as and universal be found door our safety braking hybrid EVs steering, systems vehicles. assemblies they

our we We or expenditures million, in incremental to are opportunity our capital approach $X on new is disciplined ratio equipment our business of knowing return improve opportunities just existing what the with base. us participation forgo we the declined nonstrategic $X require to million a to strong as financial also of achieved as opportunities. capital-intensive allowing pleased low Part wins capital

plant suppliers applications China team recognition valuable customers. awarded EUR Award, major built and XX, is of some we XX.X China more billion significant that aerospace than Best the bearings highlighting Schaeffler highlight global we for customers Schaeffler Page news value Wuxi, a manufacturing in the work by have in XXXX for and of with with XXX automotive, by in solid totaling our relationships the Supplier XXXX. revenue China, provides. the with performed element our and rolling industrial manufacturer NN Out On

the of global X with Sourcing manufacturer, revenue them. suppliers awards XX Global we filtration from significant To production testimony X is X NN recent these awards the are, deliver serving event, awards dedication X idea thousands Performance their contribute of highlight and in received team products our an a with awarded systems, engines, fuel only distributor we Supplier Direct - to Recognition the $XX.X both billion to and XX, these broad the amazing how categories. This work of XXXX. emissions give energy-efficient powertrains to Best of won injectors, for and Cummins Cummins, American hard North Delivery global an you awards power Cummins, company leading generation of of the of and more components and a industrial for Cummins' globally designer Slide On demanding range At of in which the turbochargers of Cummins, for NN applications. precision dosing and engineered in

you Turning to executive XX, positive production to of update, regions. update. with the expected outlook outlook vehicle the a X.X% market supply year. by chain of for have LMC light will offset find quarter, provided forecasted In remainder impacts COVID a in all stronger has that first to January macro increase we a are production affect and Lingering Slide global their automotive

forecast is broader the of global economy. the risks positive, subject to While macro

mixed a also in NN of on evolves, views But the position the range regardless decade. market due over strong our LMC how evolution of process automotive and technology and competitive experience. unique stands the powertrains noted to

shows grid Slide and electrical update key XX drivers. the market

market scale battery power grow the through the $X.X grid to XX% XXXX. size grid in energy more market decade, become will a sun prominent storage reaching battery CAGR forecast and we and energy order The the in to of As distribute global is billion consider of evolution the total store renewables, grid approximately from at capture, wind. towards

runway the for segment in grid significant any market. and be addressable end, growth market battery important $XXX for million total the We a strategically scale million, will between this estimate $XXX that of providing

many will Finally, group from familiar well as players you in at market, aspire the key names clients you we to NN prospective current as see look as customer reach. the the

and pipeline strategy. we longer-term XX, with our Page aligns On will sales our review how it growth

electric with vehicles. ICE-dependent several pleased with in with the cell in in targeted pipeline grid the and electric Those development a along by a opportunities position fuel We associated sales teams OEMs by to opportunities EV resulted space And and our generated programs are opportunities. and delivered reductions This have a teams. decline in of our pursuing electrical markets expansion and currently growth business we in has market. approach, significant strengthen expansion each focused dramatic pursuits are

core for XXXX, revenue growth we on process our targets. new incremental streams growth customer the we continue to that leverage We plan on return our through to cross-selling market will enhance XXXX. technologies existing long-term In Power capital, leveraging on areas To business Solutions a base. focus define strategic our will by existing capital unlock to plan our with invested focus

through will resulting in take cash a we Finally, sales improved profitable approach, in and flow disciplined growth XXXX.

financial results. who update will now provide the I quarter an year and fourth will turn to full Mike? call on over the Mike,

Andrew. you, Thank

quarter. some of $X approximately X.X% incentive was million to financial primarily our volume partially approximately XXXX to stronger the by dollar. prior the of year $X Overhead absorption driven offset net price fourth and inflation approximately pricing settlement comprised in $XXX price From highlights by of fourth million year million, and a Now $X by compensation of customer impacted the to million period, given favorable. negatively review current headwinds impact the unrecovered the of to million. while the $X was relative Page the year-over-year unfavorable quarter if $X prior year, inflation of results you standpoint, million in a for sales will I exchange increased profitability foreign Compared the XX, increases, turn U.S.

the Turning XX, from was increase lower from will offset with The Solutions throughout to exchange China the chip the by chain Russia-Ukraine increased Total $XX.X to the taken impact million stronger by shortage, volume year. foreign the sales semiconductor the actions Europe. as was year COVID-XX sales or our decreased The in in million. a pricing XXXX Slide review volume highlights disruptions, financial partially full dollar. X.X% the I and Mobile in $XXX.X and by conflict sales driven the of of impact of supply decline result of resurgence driven

volume The for overhead EBITDA million, $XX.X were was unfavorable million for down the in reduced Adjusted inflation by full lower and the partially drivers decrease incentive absorption, $XX.X main for from year the unrecovered compensation XXXX. expense offset and year.

turns the previous supply improve of in decrease Turning to third normal capital impact initiatives. a seasonality, the saw Due quarter utilization programs reduction to to to million meet from continue of levels to to our the We receivable X.X $XX.X Slide terms improved and prolonged to in our needs. ability to quarter higher-than-usual customer fourth Working inventory capital by X.X challenges, XX. ensure result as turns quarter. inventory working we chain compared hold the of of

further of working that will we While in inventory continue to reduce in expect the mitigate levels capital we our usually first some inventory, quarter. will elevated, initiatives seasonal increase occurs remain which the

we expenditures over past taken that continued approach a disciplined to have provides the year. our XX Slide at look capital

million to to $XX.X This guidance full million previously XXXX. We end slightly CapEx year announced million. the decreased our from low $XX the $XX is for in at $XX of of million have

maintain our to we continue strategy. focus look of growth disciplined as CapEx allocate we on capital have take we expenditures to to cash, As a long-term part that and to approach markets higher growth identified will

quarter. our JV. $X.X by million in dividend the payments loss, This outflow final as by was cash from closure facility items approximately call. Fourth primarily free tax during $X.X flow in year was costs the for XXXX. slide year. full for was from fourth of decline the and our cash partially with $X.X repayment turn cash million for cash offset an and driven XXXX quarter increase our sales cost to deferral million for the cash litigation an compared approximately payment Life full free free severance, well of cash in consistent illustrates XXXX. the was Sciences XX. Full China total Slide flow in prior during quarter operating for $X.X million as of and and with FICA quarter full net the This year an year outflow flow conference settlement, these million The quarter brings We year. Free outlook our Please to flow $X.X in the incurred costs flow third

million. XX. to Net $XXX.X quarter debt Turning versus the in million decrease Slide XXXX, end fourth the of at third a $X.X the of of was $XXX.X million quarter

end on cash third at of at had XX. debt $XX.X end of the stood to availability ratio the and fourth net compared of including Our as quarter X.XXx We our the adjusted to EBITDA at liquidity, quarter. December million X.XXx of revolver the

drawn million. and million, our Our $X $XX.X was was by domestic ABL liquidity

we Page and ABL key agreement. you XX, On have amendment term terms outlined will our to see our the to loan that recent

broader continued inflationary proactively Given negotiated a reducing liquidity improve economy and current uncertainty the the while as amendments surrounding violation. covenant protect as well risk of the supply chain that concerns and would we

process highlights our term of allow terms results This detail on terms have additional the on loan and commitment the I our lenders comment included team our improving will confidence and key the strategy. the in ABL the focus on long-term and amendments. and the of will also some to of note, Please amendment executing appendix. management we

has these free loan. structured programs programs further to amendment been amendment qualifying the to leverage cash. lieu flow. allowing utilization the a million, in loan June additional receivable having liquidity improve interest by on $XX through liquidity of and improve basis cash would existing amendment having million The to paid-in-kind term relief provide The equity $XX penny increased of The paid raise of liquidity. completion term or loan provides by The of incremental fee financing the the by term a XX on preserve ratio and of customer of warrants duration structured cap cost the issuance was from

believe new to us a allow compliance risk. the execute flexibility domestic liquidity covenant Finally, our changes introduced. Overall, we will was reducing while these strategy

With will Warren. it over that, I turn back to

Thank you, Mike.

presented operating XX.X% Power electrical Page XX. more each with Solutions groups, We increased on product information components. our of in recover primarily from to have variable sales and driven gained component efficiencies sales by an the starting for of customer favorable increased Profitability Power to year-over-year driven with of year Solutions additional improved increased higher-margin increase generated compared and by pricing period inflationary and cost mix fixed pricing volume, prior improved sales costs.

our closures completed proceeding the to facilities be expect of and and Taunton forward, are Looking quarter. schedule, the we Irvine on them second in

We shutdown new wins dynamics business offset expect customers aerospace complete our market will the of defense as loss that and those facilities. and the of we

On The a prior primarily foreign of Solutions exchange settlement increased increase period. increased operational in pricing, the year by price recorded as recovering to the Profitability in fourth in increases Mexico customer due the stronger sales with Mobile as XX, and settlement the to in Page volumes. group not our driven year facility, lower our and offset compared Mobile headwinds versus Solutions prior inflation, partially fourth new associated received X.X% dollar. XXXX by quarter in of reduced business the quarter well absorption XXXX fully pricing decreased inefficiencies launches due with was to overhead

in customer the sales expect Looking positive first ahead, we are quarter. trends compared the demand fourth improved in with quarter seeing and

inflation, are pricing XXXX, which XXXX most to We recover in X, finalized nonmaterial January have effective cases. negotiations numerous

which expected provide closures will cost second completed efficiencies. facility of quarter incremental in be savings to X have and XXXX, We the

positive our wins are and to showing non-ICE Finally, secure efforts new markets business results.

XX. to Turning Page

in $XX Adjusted of EBITDA $XX $XX.X compared million from adjusted free of to the $X.X XXXX, million million, net compared range to million million an of We compared to are to XX% outflow million XXXX cash in million of our in to range EBITDA which up increase to XX% $XXX and range $XXX $XXX.X the of to a outlook $XX to XXXX. for $XX sales million reflects free sales of million. X% XX% introducing the following: cash the flow up XXXX of

chip ongoing significant disruption or COVID-XX production to impact chain no conflict, assume due the We supply semiconductor shortage. Russia-Ukraine from or the

limited due industry, the in outlook on auto While to of higher-than-expected does we the the impact the of more recessionary not impact demand demand. that a impact or recession believe potential auto pent-up likely severe and mild interest housing will consider be our a

$X volume the and Our sales driven and aerospace by sales foreign improved Taunton offset closure of exchange defense our in with an will increased decrease million pricing, and both growth Irvine by and facilities. be includes expected partially

XXXX Our adjusted from million EBITDA closures. includes facility to from a improvement of sequential $XX outlook $XX million our

moderating of reduced expect We impact and already non-recovered from actions pricing underway. inflation taken are inflation

compensation, approximately was includes outlook eliminated in costs $X in the for incremental million which XXXX. incentive Finally,

reflects $XX to taxes Our outlook capital expenditures million, to $XX of of the free and $X million million. million interest cash of flow range million $XX million net in cash $X $XX to cash

refund an million estimated that in $XX note also flow cash uncertain closures. include does Act to million facility include approximately for timing. our not outlook CARES cash free of We $X Also tax outlays due

be I conclude how our to year. a turned am pleased I during noting challenging focus my would and out commitment like very team's with to consistent what remarks

working make expenditures continue position growth of success on our to effectively capital. for to on a pipeline capital And our company discipline and We return focusing of by in the focused we invested higher line our managing are flow cost free cash business capital operations. every and long-term maintaining and on and drive to area new while top expansion progress improved

We value. expect shareholder these result the ultimate drive efforts will improved of

I turn you. call back will the Thank questions. now operator the for to

comes Capital from today Barger [Operator Steve from question Instructions]. our And first Markets. KeyBanc

And congratulations retirement, Warren. your pending on

Thank you, Steve.

equity The liquidity have Question you potential for the of raise. on million. $XX global an say slides

what might And -- be trigger that? suggests or be seeing the we for that what events that So necessary? watching what on should are you

is Mike. This this. Yes, I'll take

negotiated is introduced term $XX there. in we in $XX liquidity we million particular, at the looking liquidity covenant domestic Oaktree million, So which they the loan, our with were domestic on as amendments the particular,

covenant. they the of I think domestic some via for ratios liquidity exchange relief that in the introduced we additional the significant leverage got on protection

amendment both terms or in cost look slide, pursue and incentivize the fee amendment us at the to the interest raise. structured the And evaluate they the equity if of to an also -- you appendix

more I of the think capital structure participation to the in just have company.

So we're raise, amendment differential cost evaluate we'll of evaluating. it's we on If Obviously, that's be would cost something beneficial. something whether us. that relevant -- considering beneficial a the pursue there's equity that that for that's the

million, the we're that And about is, cost cost XXX% now really $XX lender. almost the have talking of as our Steve, said, And with right? Mike in right that is Yes. structure primary we covered

cost over us dry, So I the introducing not think, the that equity, additional we us by positively some additional where it customer supplier neutral to will viewed, only liquidity be certainly are provide be today, but will and both that communities.

you're we be than should on that that? not likely So based thinking describing just that's more how

through and the certainly, go parties. Well, have we to talk to process

I sense. wouldn't something likely get our as in we characterize makes But economically certainly frankly. done, that So until it's it view, it

Understood.

place? you next so would in that you execute sense for the that -- it and is And if CEO made through could you you before went process,

depend I I the that will -- it Yes, mean, X think on streams. work

say to it's hard So kind of that.

XX, was want that. the June until us unlimited of to an do They to didn't time have agreement amount We which give with Oaktree.

it's has now going given on we're we're -- cost in as trade-off, options announced, trying process that in our going obviously, standpoint, interest through to are So place. to our our to work there From to working what certainly be the the that get be that actively as amendment possible. quickly and been

primary are the for? what Board is sets the search, that to And the skill looking Understood. CEO

is important. has Well, leadership past the been certainly, extremely position a in in somebody that

record primarily has someone and the side of exposure our to business growing business historically. track strategic that growth Someone targeted industry of a areas, who has the electrical a

would the tenants they looking I think main of that those are for. X be

Mobile now? Or talk however which that. can low, loss-making right unacceptably the And in you are returns, percentage programs about it. have which just are Got of you that define

of facility. We've difficulty -- down frankly, I the issues I struggling issues aspects we we're program programs. if We're broken have technical we're don't one a some it launching if out programs of by of percentage launches know we have on some of couple know right Certainly, now. that with in down specific some Mexico the of our of the don't focused X -- there. look, that had the

we've in some to global and teams that parts tight of relatively bit on struggling help some participate because that of to have some little process process order our some a So tolerances. to there. be going some capabilities the we're problems of right engaged It's longer-term fix with down some now solve

we're through So working that.

you, tell you look are successful operations as profitable. and globe, around at would and I large, Mobile by Chinese very the our

Brazilian profitable. Our and successful are operations

Our the those and Poland operations as profitable are historically successful have several and primarily American-based been Michigan well. in facilities very of North profitable

in with the that launching Mexico. we're of launches So assist in we're power some one, struggling our electric right than and program have we'll now think issues Mexico facility, we in struggling that with program Ohio our we're sooner out hands one of program particular, facility, that out that around much certainly

mentioned source you're issue tight Historically, you've right good of holding the areas at where Is the tolerances. the this been is profitable and What or the machines themselves? tooling of some Historically, you now. problem? a

the turnover where them, they and someplace to time, they're we facility that then getting opportunity an then period much process-layout we've stay what's had a as of a this, us, Juarez, consistent frankly, at issue anything. a bonus for okay? look and would and alone basis, that signing going we we're as Yes. in tolerances. that for issue leave It's personnel they there and a Steve, I it's in some not else. When tell And you a in on get for really on employees stack-up train

per think, site turnover Mexican I in today Our in month per our is, the XX% month. range

other types through suffering the benchmarked We've some that suppliers with So region same all in ourselves difficulty we're issues. having against that are retention. of

the Brazil. different difficult So cost opportunities operations we're sites to to machine in sites Poland -- either in looking or in potentially Poland more some labor low of at move

fixes be bit those of a some term. longer will again, But little

with technical our working some Kentwood, of help well us Juarez out as teams we're some of facility. our primarily and So out support Brazil of to Wellington out

Markets. Rob Lake comes next Street from from question Capital Our Brown

now? done And you've On taken, sort much terms and have the in of pricing how left how activity? you do actions is of negotiations much

Yes.

Andrew way engaging I'll So having. to single every Wall. continue about it that. think is day, that the this take uncontrolled it to we're The address customers inflation we I is do

I think look I'd we've slides. in continuing we're today, And a results in to that year, earlier made his some at do significant Warren the pretty you last bit even say, right? this progression, if shared that quarter over

we're with working don't So customers. think the done. through still job that I is

but work small continuing to bit pushback We to starting things it. deflating or certain a pockets, see are are some inflation we're as in not bad where is

to forward, it's quarter, hard a to to along the kind first close So far of able of that answer be and continue question, we. say the report more of right? bit to to We're going your it move little after how are

going able move. it were back. we as the piece side Power our -- Mobile, pretty able non-material we -- but my able talked say to but Mobile material-related area you is on get But in pricing slide us we on saw the actions for talked look let about look just we were last cost affect taken, right? as structure this that and get the were because more this, year, some pricing Rob, that, predominant we we've that they the comments, the at pricing that at when already presented million Solutions about what's we you we when So look to you noninflationary the pushed me consistently of pricing was I'll in to reiterate $XX of at When on

that increases think $X.X quarter on of team the side. an far, we've are annualized million working. -- so American-based. of million, this Mobile Most closed And was through And year out annualized Andrew on and I domestic, rate, price North the of $X.X $X.X his first

very where some side now hasn't Europe in and So on his the as right China, in been we're teams hard the there well. China in great working international hard as of Andrew pushing inflation but are and

of through And through XX% probably what way population. relates probably we're working I you, We're total it from would our the we've the issue. tell worked to XX%, as of

what So we -- only was What put closed Mobile. Andrew still slide and have opportunity on his have we the we out. team with

outlook. is the question second then And Great. on Okay.

offsetting the an out visibility this sort the pieces I'm think some you and not your what some in great. of sort are think at how think I on of visibility there, point -- pent-up the with indications through demand. of But say? of customer it's recession, of how about kind issues But you sure given 'XX do do talked you moving

Yes.

automotive because got that from when you some they're Andrew said, the at demand, think of expectation. that stability that look is update I is as right, of IHS form pent-up currently we it, our piece projecting at least of latest the projecting

then side modest some, I the expecting you pricing top we're the automotive that. adjustments call we've So on of on have would that it, made growth

during see some mortgage -- through rates could those impact moves on on year side electrical from And Andrew some a new that things the Anything, positive thing. impact do on add to and we markets that. there? If want type longer growth of Andrew, the we stay of with starts higher, housing the term, business is went direction. have to see electrical. and you rates or how in the that the continue interest But Certainly, moving to seeing that that of that an a we're we standpoint have high going

Yes.

the color. only think mention just for I bit more a little thing I'd

the the we're projection XXXX, is looking X.X% on the slide in that, of you on jump certainly that the -- of short year-over-year. at pre-pandemic, still automotive some If were I demand. it where So think right? there's pent-up we side, a context I still had but look at

massive of potential risk wildcard well, is you at. Of I we're outlined the think one predict, course, I think right? it but the to thing that where is the for all recession, hard that's it a

So thanks.

next comes from Investment Tom from Our Research. Kerr question Zacks

or on that questions update as to business been China operations? back news Any of have my most the Is covered. just usual think any I there?

XX% fourth quickly I relatively zero-tolerance aspect Yes. in of I back out tell significant kind of for XX first back would you, I end -- away. were have think back. the had we But near employees week of were would snapped it interruption At had, of week the Look, And and they to pretty between in they then point characterize our a business owned. a time, the our work. you, what days they our tell or snapped after think we I when our right wholly the you is a out January. as interesting interesting what to quarter and were COVID of the week, I that JV went would with policy the one

Or recoveries? then Okay. this during it on throughout is And at That's we I if Is situation? quarter-by-quarter good. sort progression how do the type of look -- sorry out steady margin a it later-half-of-the-year year? but gross missed this, year, margin looking

in the completed primary I quarter run going second Yes, sequential One, for of fully I go and see accelerating the will have closures mean, in half, be X the then improvement certainly the in be in QX you're in will second X year, that. and I'll benefit as our QX. we think through think QX the rate encompassed that that take and facility we'll I to reasons.

And particularly the of year. Warren half in the some then and that first in facilities, second the still we Mexico to mentioned, anticipate the facilities X the impact year those of half improving

So as be and those sequential the growth would year. then also X go through volume drivers we some the

expect be So sequentially the year. to we would margins quarter-to-quarter improving through

question from Markets. follow-up And Barger a Steve our Capital KeyBanc is from next

another question. Just pricing

POs price you not What LTAs? expect on You in tied percentage agreements. about And into future? build to to the tied X% in the do you'll increases escalators revenue new LTAs talked is of long-term

again. Yes. Wall Andrew Steve,

that half under business other business, formal So is is and if agreement Solutions, the Power of you half of roughly the look kind about some at not.

$XXX is of under it, $XXX in the half X%, agreement. of call million term range. So some And business the million, that that then other

Yes.

last inflation nonmaterial second way contracts We've the think and of question that material and inside by inflationary I incorporated of provisions things year going of nature. of the forward. both your

those what have we exercise do that's we events to and So happen do mechanisms when forward. going to plan

term have don't escalators What's average in? the built LTAs of the that

term you mean? average The

those How build run can escalators? you long contracts in before do

year provision before power is or years, contracts a better at are it. -- probably into our but maybe have and the contracts X our that's Yes. we've significant average, -- not a again, X been particular, to Most are customers of and side, the on gone in engaged they're renewed. that we But of built proportion back looked some kind of there a some doesn't all and

whole just Got step you more have you what holistically, and at on become to changing to your business basis? more model, input more flexible? if change real-time it. to And would costs adapt where Or you back -- a look how can

is I talked said, we we when And Solutions been side. timely side, an the way that the for -- think as a where Power what flexibility to do have Mobile just more you us the has if it when and the life to think the on the running typically contracts long have our is to X years, see X X which -- to period outside like the is left over you contracts inflation time. had of about average do issue that. you about, Steve, primary Solutions is on look maybe too X past we years, we've you not maybe on that But right,

material we've thing the a key that cases, building that. the certain in in for we quarter. material that of historically, year, amount the resets material sort do And or would because to a the the on at every And material started going X.X moving the take a because taking resets us. X And forward -- first end mechanism contracts. were months contracts is X side, some risk of some risk chasing our it been in is years or beginning of we're So today, into on our we

you're So right? in still But seen inflationary over that the quarter, still last an we've the environment, behind, next year. you're if

retroactive So things the more that types we're frequent at having looking be are customers. maybe semiannual, the reset of than quarterly maybe or resets times with

piece And the only material we source have to you it's to pretty compromising very I in they're customers and for where them a of going person situations know business directed would have have it, where been to, take our side, one can especially say well, we on customers, not material the that. argue from we on difficult go that the

of sure talked the has been piece non-material the But area automotive to us supply other companies. you've it where for I'm

shipments struggled our on face we've to to team or has okay, a on order had something increases that instances of have the have This we We that and and conclude with with been customers, relationships it. our management that numerous getting where customers, side. some the period but like cost in either nonmaterial we've had good Andrew stop let's finally our need his through and team combative

we've solid. We'd forward. of couple as to And some So the see inflation as next accomplished I go over we've pricing to monitor the need if something months, closures of in negotiated far here continue inflation like think efforts been that Look, additional this so been back we you have absorb. type X, with ourselves we the summer then we've of summer going January And because can on it's our at to position customers. guys this we're seeing as we're to through January not pricing trying we still that to be months. the

Right.

expect get versus we How actions just launch fair of to it X.X% is somewhere? segment bridge how volume think margin that and up a programs the in pricing you back can challenges about you this in do XXXX your that Mobile So middle on too far? thinking think as you with be think and that to? the -- and put is incurred year, costs the level the that those in what Like of to you roll in to line you the do you Should -- terms have what out sight XXXX?

taken. you tell those some some I with our margins? definitely think would businesses I types Look, talked pricing of that the of some that the to profitable, get I of -- that of in we can actions that are in we've about back

margin corrective the standpoint. outlined term an it want it's a little that maybe to the in longer Juarez is of talking facilities that the action impact don't have understand of launches from going that that the something just do that It's our out We be, future, more standpoint a I product X a that's Mobile, the stuff, of so I some the facilities where but on business whole bit about adverse to it's get the -- facility, about have from in the into on some you high-performing breaking can will we're facilities these within having that weeds not suffering X group. nature that case a we margins. in are could think too

some to other puts say aspect is would pass-through pressure you're the inflationary standpoint, some from on in EBITDA right? all the So is maintaining it material dollars environment, Yes. that to one And dollars start that that a an deflation one, margin I Steve, additional your pricing margin. correct And a or and stabilizes, lower at can will maybe some margins. operating your see hopefully, inflation profit we of but as the via benefit

the ladies question-and-answer that, conclude today's remarks. closing and any turn over for team with to like to gentlemen, to the I'd management back session. floor going And we're

NN thank Yes. call. our analysts operator. participating team, today. be for thank, my last Thank I Especially call to I again, you, concluding, earnings potentially the want in greater the this want in to could

been So to dedication certainly that over the I'd Chief and the years last Executive for I've like the they've to the support them thank Officer. this that X.X company given

time had very that you John today. thank parting in Also the retirement. like and well the to to in his much for for service company past Thank wish him the over Buchan years he's XX-plus your

today's call and presentation. for with conclude We gentlemen, we'll you joining. that, thank and conference Ladies

You disconnect may your lines. now