Good morning, ladies and gentlemen, and welcome to the Commercial Vehicle Group, Inc S econd Quarter 2022 Earnings Call Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Friday, August 5, 2022. I would now like to turn the conference over to Mr. Christopher Bohnert. Please go ahead. Thank you, operator, and welcome to our conference call. Joining me on the call today is Harold Bevis, President and CEO of CVG. This morning, we'll provide a brief company update as well as commentary regarding our second quarter 2022 results. After which, we'll open the call for questions. As a reminder, 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, 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 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 to provide a company update. Harold? Thank you, Chris, and good morning, everyone. I will be referring to our earnings presentation on our website, if you could locate that for a minute. On today's call, I'll provide an overview of our second quarter 2022 results and the strides that our team has made positioning CVG as a leading electrical system supplier across the globe. We expect this transformation to drive improved growth and profitability while reducing our cyclicality, which we believe will greatly enhance shareholder value. Importantly, our accomplishments through the second quarter have removed many of the headwinds that have been impacting our financial performance, thus clearing a path for improved results in the second half of this year. Then following my remarks, Chris will then discuss our financial results in a little more detail, and we will conclude by opening the call and answering any questions that you may have. Please turn to slide three of the earnings presentation, and you will see that our second quarter results continued to be impacted by a fixed pricing environment from our customers, which we attacked, and I'll give some more information on that in a minute. A challenging global supply chain, continued cost inflation, COVID lockdown in China, and the Russia-Ukraine conflict, and a near-term disruption in the Warehouse Automation sector. We had quite a few events, unfolding in our business, through the first half of this year, and we're going to give you an update on how we've attacked them. That said, and as we'll discuss through this call, we substantially worked through these challenges, and we believe we're firmly set for an improved second half. For the second quarter of 2022, we delivered sales of $250.8 million compared to $257.9 million in the year ago second quarter. The decline was primarily driven by a temporary industry slowdown in Warehouse Automation building and the COVID lockdowns in China. Our operating income was impacted and was $6.2 million compared to $16.3 million in the year ago second quarter. This decline was primarily a result of a contractual lag in price cost, lower volumes during the quarter, and start-up costs associated with new business wins. Excluding the impact of our restructuring costs, adjusted operating income for the second quarter was $8.1 million. Importantly, we expect the lag in price cost offsets and the peak in the investment and start-up costs that we incur to ramp up new business are now behind us and as we have begun the third quarter. Of note, we have repriced the majority of our customer contracts, which we will expect will add more than $15 million to our profits in the second half of this year and more than $30 million on a full year basis, depending on subsequent inflationary or other pressures. Additionally, we have been experiencing high one-time start-up costs associated with a few of our new business wins, and we believe this has peaked and is behind us. Looking forward, our new business has ramped up to a level whereby we expect to absorb and offset our investments in new business start-up costs. These are two significant hurdles that we have cleared and we believe are now behind us. Adjusted EBITDA was $12.4 million in the second quarter, compared to $21.6 million in the second quarter of 2021. We delivered $0.13 per adjusted diluted share in the second quarter, as compared to $0.33 per diluted share in the year ago second quarter. Of note, our new business development continued to gain momentum as we've now secured an additional $104 million of annualized new business this year when fully ramped up. Our new business wins are primarily in electrification across electric vehicles, industrial equipment, and recreational vehicles. Additionally, we are winning larger mandates that include our intellectual property and custom design work, which are higher value, higher margin, and stickier business. In fact, we have recently been awarded four new full system development awards for electric vehicles, where we are supplying the entire design and procurement for the electrical wiring systems. These are truly exciting wins for CVG and demonstrate our position as a leading supplier of electrification systems. We also continue to invest in technology to expand our position, expand our product offering, and we're excited to open a new engineering center in Phoenix, Arizona for electrical system R&D. The center will be focused on our continuing development of high voltage distribution systems and distribution boxes for the electric vehicle market, as well as providing fast prototyping services and testing for new electric vehicles. As we exited the second quarter, we remain firmly on track to meet or exceed last year's record of more than $200 million of new business awards. While our new business momentum is strong, we're also seeing improved cash flow generation, and we generated and delivered $11.9 million of free cash flow in the second quarter, which we used to pay down debt. We firmly remain focused on improving our cash flow and paying down debt, which we believe will also translate to improved shareholder value over time. For the full year, we're reconfirming our target of $25 million-$40 million of debt pay down over the full year. Turning to page four in the earnings presentation. We've made significant progress so far this year on many transformational fronts, and we wanted to highlight just a few. We've significantly improved our pricing across our customer base to ensure that we are earning an appropriate margin on our products, given the severe cost inflation that we've experienced over the past year or so. We continue the execution of our cost restructuring plan, including vertical integration of certain production, regionalization of certain supply, and targeted headcount reductions to manage our cost structure. The China lockdown is now behind us, and we have seen our operations in Ukraine markedly improve during the ongoing war. Class 8 truck production appears to be on firm footing as the OEMs are reporting being fully booked out for the remainder of 2022. The extra margin on new business is now offsetting our one-time start-up costs, so we believe we've cleared the bar now, and will benefit net from our new business endeavors. Lastly, our cash flow improved in the second quarter, and we expect that trend to continue through the end of the year. While we have more to do, and as we continue to fight inflation and battle supply chain challenges and ramp up over 100 new programs that we've recently won, we expect the second half to show improved performance in our business. Turning to page five, I wanted to give a few comments about our three main end markets. Our largest end market remains the North America Class 8 truck business, where production has been constrained due to supply chain challenges and the resultant product shortages. That said, second quarter Class 8 truck builds were up sequentially from the first quarter of 2022, while the outlook for builds continues to improve. In fact, many of our major OEM customers are taking their production rates higher, which has led us to increase our forecast for full year 2022 Class 8 builds to be a range of 290,000-305,000 Class 8 tractors as compared to our prior full year forecast of 275,000-290,000 that we discussed in the first quarter. Our forecast compares to ACT's current forecast of 305,000 trucks. While a recession would impact build rates and the production outlook, the industry has been producing below replacement levels for several years, which has resulted in a further aging of the North American fleet, which will add strength to our aftermarket business. Additionally, and as discussed, we have negotiated pricing with our two largest customers and many others. These two customers alone represent 30% of our company's total annual revenues and had previously carried negative margins. This bodes well for both our profitability and revenues as volumes pick up combined with cost inflation, which has peaked and starting to come back down. Just as a reminder, every 10,000 trucks equates to about $13 million of sales for CVG, while our contribution margin should trend above historical levels given our recently enacted price increases. Next big market for us is the electric vehicle market, and it's set to become our largest end market in the coming years as the transition from internal combustion engines takes place. In fact, the U.S. electric truck market is expected to grow at a 54% CAGR over the next 10 years per P&S Intelligence. Additionally, the global conversion to electric vehicles and fuel cells is expected to disrupt the legacy market dynamics, and we are well positioned to benefit from the coming change. We are currently on over 300 electric vehicle platforms globally as we position CVG as a leading supplier of Electrical Systems around the world. We have achieved this outcome in just two short years, and our platform count and pro forma business size continues to grow. Warehouse Automation is our third major end market, and the long-term outlook shows the market reaching $41 billion by 2027, which represents 15% compound annual growth rate. At the moment, this market is currently below the growth trend line. As I touched on earlier, our largest indirect customer is evaluating their warehouse capacity globally and has temporarily paused their new warehouse investments. This is impacting our results and will continue to do so over the coming quarters. Importantly, we remain well-positioned in this sector and recognize the need to diversify both our customer base and our product set to ensure we deliver more consistent and higher growth. To that end, we recruited and hired an experienced executive from the industrial automation management sector to lead our Warehouse Automation segment, and he began in June. We believe his leadership will be instrumental in expanding both our customer and product set while returning the segment back to growth over the next year or so as our largest customer resumes building new warehouses. Turning to page six, just a few more comments about our electrical business. We believe that we are an emerging leader in electrification systems across Class 8 trucks, electric vehicles, and in industrial equipment, both here in North America and in Europe, while we are making strong progress entering new markets like aerospace and defense. We have in-house capabilities for custom-designed low and high voltage systems and have invested to automate these processes in both North America and Europe. We also partner with battery providers to supply full solutions for our OEM customers. Importantly, we serve these end markets with a full array of products, which provides a competitive advantage as we can supply a full solution, including cab structures, interior trim, exterior trim, doors, mirrors, sensors, wipers, and seating solutions. We are one of the few one-stop shops in this industry. Over the last two years, we have won business with over 50 OEMs, and as mentioned, we are on over 300 vehicle platforms and are currently ramping up right now on over 100 platforms across the globe. While there's uncertainty over who will be the winners and losers in this market, it will be coming through a transition to electric vehicles, and we believe we have a balanced customer portfolio consisting of well-established incumbents and well-capitalized new entrants, which provides confidence in our ability to drive revenue growth and margin expansion in the years ahead. This is an exciting part of our company, and we are fully invested in this market segment. Turning to page 7, just to give you a little bit bigger picture on our organic new business win program. We expect our new business wins to contribute $154 million in revenues this year and ramp up to more than $300 million in 2025. Electrification is the largest contributor to new business revenue growth, which we expect will ramp from $35 million this year to more than $200 million in 2025. Warehouse Automation also remains a significant contributor to our new business momentum, though we have reached a pause in this segment as just discussed, and are confident that we can return this segment to growth given the strong secular tailwinds that exist in this industry with e-commerce. We have lost no net new positions. This is a situation in our particular business performance that's due to a temporary pause by one of the big market players. While we have won new business worth more than $2 billion in lifetime revenues, we're not standing still. We have a robust new business pipeline that we have been carefully cultivating and are working hard to convert to new business wins. Ending the second quarter, our pipeline on new business opportunities stands at approximately $5 billion, and it spans electric vehicles, warehouse automation, heavy and medium-duty trucks, as well as new emerging opportunities in commercial aerospace and in defense. This provides visibility to future new business wins and continued momentum. When you do the math here on the new business won in our pipeline, you can see that we're running around a 10% hit rate, and that's our expectation going forward. Turning to page eight, we have three focus initiatives that are designed to expand our business into fast-growing end markets and improve our profitability. As we expand our business, we're working aggressively to reduce our dependence on complex supply chains while driving improved pricing terms with our legacy customers as we strive to unlock profits that have been latent within our business. As we have discussed this morning, our business is at a profit inflection point, and our new business wins are also translating to revenue and now fully absorbing our investment in start-up costs, while our renegotiated pricing with the majority of our customers expected to add approximately $15 million to second half profits. Additionally, we generated almost $12 million in free cash flow in the second quarter, as we mentioned, and we expect our free cash generation to further improve in the third and fourth quarters, which we will prioritize for debt pay down as we work to lower our leverage ratio. Turning to page nine, we're very proud of the work that we are doing regarding ESG at CVG. This ESG work will continue to outline our commitment to the environment as we work to minimize our impact through the reduction in our global carbon emissions. This is very consistent with our focus on the electric vehicle markets, and we're embracing our own initiatives and targeted reductions in these areas. We also continue to be focused on our employees and remain committed to a diverse workforce with a continued focus on safety as well as career advancement as we strive to be an employer of choice around the world. Lastly, we have a solid governance program and a committed board of directors who remains very engaged and provides excellent oversight to our ESG committee, and this clearly demonstrates the importance of this initiative from our board of directors down to our factory floor. Turning to page 10, I would like to conclude my remarks by restating that we are at a clear inflection point. Very proud of the work our team has done to get through this record spike in inflation and get in front of it, with corrected pricing algorithms and price levels. We expect this performance to turn up in results in the second half of this year and beyond. We've cleared significant hurdles to our results and are positioned to increase our profits in the third quarter as we benefit from improved pricing, moderated cost inflation, an improved truck build outlook, and in our case, a reopening of our China plant, a corrected Ukraine manufacturing operation, and full absorption of our new business startup costs. We also continue to win new business as we go, including this month. We are firmly committed to organically growing and diversify our company and establishing ourselves as a critical supplier of electrification systems in the world. Taken together, we are firmly on track to reduce the cyclicality of our business as we expand into new secular growth industries with improved profitability as we work towards our goal of delivering $1.9 billion in sales and approximately 8.5% adjusted income margins over the next 3-5 years. Additionally, as we work towards our goal, we will see our cash flow improve, and we will use that cash to continue to invest in our business while also strengthening our balance sheet and paying down debt. Now, I would like to turn the call back over to Chris for a more detailed review of our financial results. Chris. Thank you, Harold. If you're following along in the presentation, please turn to slide 12. Second quarter revenues of 2022 were $250.8 million as compared to $257.9 million from the prior year period. The 2.8% decline was primarily attributable to reduced volume in our warehouse automation segment, as Harold touched on, and the impacts of the COVID lockdown in China. These impacts were partially offset by increased revenue resulting from renegotiated pricing to offset material cost increases across our other operating segments. Foreign currency translation unfavorably impacted our second quarter revenues by $4.8 million or 1.9% compared to the prior year. Our gross margins decreased a little bit to 8.7% compared to 13.3% in the second quarter of 2021, primarily due to a lag in price increases to offset cost inflation and $2.9 million in new business startup costs, which we expect to have peaked this quarter. We expect to markedly improve our gross margins beginning in the third quarter, given the renegotiated pricing Harold discussed. The company reported consolidated operating income of $6.2 million for the second quarter of 2022 compared to $16.3 million in the prior year period. Primarily due to the previously mentioned lag in price increases, combined with $2.9 million of business startup costs and $1.8 million of restructuring expenses due to our continued execution of our core business optimization. On an adjusted basis, operating income was $8.1 million, excluding special charges. Adjusted EBITDA was $12.4 million for the second quarter as compared to $21.6 million for the prior year. Adjusted EBITDA margins were 4.9% as compared to the adjusted EBITDA margins of 8.5% in the second quarter of 2021. This margin contraction was due to the previously discussed factors. Our interest expense was $2.1 million as compared to $2.8 million in the second quarter of 2021. The interest expense declined compared to prior year due to the company's new debt agreement, which was completed in the second quarter of 2021. Net income for the quarter was $2.5 million or $0.08 per diluted share as compared to net income of $5.1 million or $0.16 per diluted share in the prior year period. Now turning to our segment results. Our Vehicle Solutions segment delivered second quarter revenues of $142.8 million compared to $130.2 million in the year ago quarter, primarily due to material cost pass-through. Operating income for the second quarter was $1.5 million, a decrease compared to operating income of $8.2 million compared to the prior year, primarily resulting from the expected lag in our increased pricing to offset costs and increases in new business start-up costs. The second quarter of 2022 adjusted operating income was in line with GAAP operating income of $1.5 million. Our warehouse automation segment produced second quarter revenues of $28.5 million, a decrease as compared to $54.3 million in the second quarter of 2021 due to lower demand levels. Operating income was $1.3 million, a decrease from $8.5 million compared to a year ago, and adjusted operating income was $1.7 million. As Harold noted, we have seen a slowdown in volumes as our largest customer reevaluates their demands. Turning to electrical systems, the segment achieved revenues of $47.3 million, an increase as compared to $44.2 million in the year ago second quarter due to the realization of material cost pass-throughs. Operating income was up to $5.9 million, an increase. Operating income was $6.5 million, an increase of $2.8 million as compared to the second quarter due to higher volumes of material cost pass-throughs. Adjusted operating income was $6.5 million, an increase of $3.1 million from the year ago second quarter. Turning now to our aftermarket segment, it delivered revenues of $32.2 million, an increase as compared to $29.2 million in the year ago quarter, primarily from material costs pass-throughs. Operating income was $1.1 million compared to operating income of $3.7 million in the prior year period. The decrease was primarily attributable to the expected lag in price-cost offsets. Our adjusted operating income in this segment was $1.7 million, a decline from $3.7 million in the year ago quarter. To conclude, we're pleased with the significant operational progress we've achieved in the second quarter. Of particular significance was our ability to continue to renegotiate pricing to offset the significant cost inflation we have experienced. Additionally, we continue to focus on reducing expenses through our restructuring program to ensure we are maintaining expense discipline and improving operational efficiency. We expect profits and free cash flow to improve sequentially in the second half of 2022. This concludes our prepared remarks. I'll now turn the call over to the operator to open up the line for questions. Thank you. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be queued in the order they are received. Should you wish to decline from the queuing process, please press the star followed by the number two. One moment for your first question. Your first question is from John Franzreb, Sidoti. Please go ahead. Good morning, Harold and Chris. Thanks for taking the questions. Yeah. Guys, I guess I wanna start with your change in sentiment in the Class 8 trucks. Certainly it's a positive, but what kind of confidence do you have beyond the second half of 2022 in the sustainability of it? You've always been a little bit more cautious about the recovery there. Maybe a little bit of an update on your near term and a little bit longer term thoughts. Yep. You're correct that we're cautiously moving up our outlook here. We obviously do have visibility from all of our major OEs, and they're all public reporters. You can also corroborate our comments with them, and we pass along the ACT information. There's an allocation program going on in North America, where the dealers and fleet owners want more trucks than can be made. The main OEs have stopped taking orders for this year because they're sold out, and they're allocating slots for 2023. They're really putting pressure on us, John, to get our output up. Mm-hmm. that they can get more trucks out. We are a big supplier into this industry, so we're one of the holdups, if you will. We're not the only one. There's axles and brakes and other things. There's a lot of pressure to get output up, and we have plans to increase our output. We're careful not to increase expectations on us yet. We can see that there's firmly a need for us to increase our output, and we're trying to do that by adding capacity. Our OEMs are effectively sold out. Having said that, if we could make the parts for another 10,000 trucks, they would make those trucks and sell them. The industry is capacity constrained right now, John, and that goes out for four quarters. Okay. In contrast to that, you talk about the contraction you're seeing in the Warehouse Automation market, due to a key industry player reevaluating, I guess their spending plans. Can you kind of give us a little bit more color onto how long that's been going on and how long it will take? Do you have any kind of insight when those decisions will be done and how that will impact you in the near term? Yeah. There's a big e-commerce player that accounts for about 48% of the spending in North America on Warehouse Automation investment. I think you know who that is, but we're not allowed to say their name. But they're a public reporter, and they've been public about that they overbuilt a little bit in the Northeast part of the U.S., and they're reevaluating their spending plans. The reevaluation is really balanced between how many new warehouses do they need versus how much investment should they make into existing warehouses to increase their labor productivity and throughputs. We're participant in either of those, but this particular player who we're tied into a lot indirectly through an integrator has not committed yet to what exactly they're gonna do. They're taking a wait and see approach. Having said that, they're in the paper this week talking about big plans in the state of New York and elsewhere that are bigger than ever before. There's a little bit of uncertainty, John, right now in that business. We decided to be conservative and right-size our cost structure. We declared a WARN Act at our Baltimore plant, which you have to do if you lay off more than 50 people, and right-size our cost structure. You know, we had dinner with them this week. We're trying to get clarity. The way that that industry operates for us and others is the quoting on the new builds are done towards the end of the year or the beginning of the year, and then production starts at mid-year. We're on pause right now for the second half, John. Mm-hmm. That's our true visibility right now in that business. Okay. Thanks for that. In your slide deck you talk a little bit about targeted M&A, maybe to help some of your vertical integration. Can you just talk a little bit more about what kind of M&A targets we're kind of thinking about here? Yeah. Several. M&A can accelerate any of these areas for us really. On winning new business, we have successfully penetrated the aerospace business, which we mentioned. There are some wire harness specialists in that area that could accelerate our know-how and de-risk our business programs and keep our startup costs under control. We have some M&A we're looking at to help us on the pre-revenue portfolio diversification and then also on the core business optimization. In essence, we're very exposed to global inflation because we source a lot. At least nine months ago, maybe four quarters ago, we started to vertically integrate in metal fabrication in our seating business and in our cab structures business, and started making parts that we had been buying for over 10 years. There are some participants, suppliers in this industry that have the kind of equipment we need to further vertically integrate. The looks we've been having here, John, suggest that when we vertically integrate, when we make versus buy, we capture about 15% margin back to ourself. The areas where we're looking to vertically integrate are areas that are permanently in our products that we intend to keep, and so they're kind of forever bets. It would make us more profitable, and it would reduce our working capital. We have a couple we're looking at right now on both fronts, both on revenue diversification as well as vertical integration. All these things have, you know, risks of happening or not happening, and you're a player in a process, as you know. We feel firm about our guidance saying that we're gonna generate cash and pay down debt. That's our base plan. If we get a chance to accelerate and quote a good deal, we'll take it. We have nothing sitting in our lap right now, John. Okay. One last question, and it kind of ties into something you just said. You announced an award in late June in the aerospace industry. Could you give us a little? I guess you can't name the client, but maybe the kind of platform or that you're selling into. Something, any additional color would be helpful. It's one of the top commercial aircraft makers in the world, and they're headquartered in North America, and it is wiring harness for the cockpit. Okay. All right, Harold. Yeah. Thanks for taking my questions. I'll get back in the queue. Thank you, John. Your next question comes from Chris Howe, Barrington Research. Please go ahead. Good morning, Harold. Good morning, Chris. Thanks for taking our questions. Hey, Chris. Hey, I wanted to start off with which has been a common theme across my companies, which is currency. Can you just talk about the global exposure on revenue? I know you don't give full year guidance on revenue, but perhaps you could kind of give an idea of the magnitude of headwind that currency could present for the business here moving forward. Yeah, Chris. Great question. You saw it. We were impacted already this quarter a little bit as the dollar continues to strengthen. There's kind of a two-pronged impact to our company. While the revenues get impacted more negatively if the dollar strengthens, if our overseas businesses grow, as we pay cash to fund businesses outside the U.S., obviously that our expenses go down. We're primarily North American-based, Chris, 70%+. Overall, the exposures will be less than if we were, say, obviously 50% or greater. You know, the exposures will go up as our overseas businesses do better, such as China or Europe, Ukraine and so forth. Mm-hmm. We saw that a little bit this quarter. Hard to predict based on how the dollar's gonna move. In general, I think from a cash flow standpoint, it helps us overall as we fund our operations globally and, you know, starting in dollars and convert. Then it hurts obviously as we translate those sales in non-U.S. currencies. I'll give you a specific one too, Chris. We buy fabricated metal parts from China, and the RMB has depreciated about 7% to the dollar, and we immediately went back and got a 7% price decrease from those suppliers. To Chris's point, we're sourcing in these foreign currencies, mainly selling in the U.S. dollar. It's net help through all of that. We are monitoring it. You know, it's very specific on the flows of the currencies, but it's not a huge topic for us, but it should net help us a little. Okay. Shifting to your long-term outlook, if I'm correct here, before it was 2025, and now I think the timeline is 2025 to 2027. Do I have that correct? Yeah. We gave a range, and we also flattened out our new business win outlook. What's been happening, you know, you can see the reporters here, Rivian, everyone is flattening out their production plans. It's very EV dependent. Our wins are very EV oriented, and this is tied into the whole shortage of chips and everything. Mm-hmm. as our customers have flattened out their revenue guidance, we're a tag along. They're caveating their outlooks also based on supply chains. Mm-hmm. availability. We're doing the same thing. We're mimicking it, and we're mimicking the revenue profiles of our new business wins. Chris, anything else on that? No, that's exactly right, Harold. I think, you know, as these wins come in and the EV players kind of modify their, you know, supply and demand, we'll adjust, as Harold said, accordingly. Okay. If I extrapolate the long-term outlook and focus on the aftermarket segments, you still kind of reiterate or reaffirm that CAGR that you mentioned previously. I think it was a 10% CAGR on the aftermarket business longer term. Yeah. We left it out of the deck just because there's so much things happening in the business. Yeah. ... building a new plant in Piedmont, Alabama, for the North American aftermarket business. It's on track. It's robotic welding, robotic painting, and it's our main A items. We finished our e-commerce platform working with Shopify, I mean. We have a build plan to put all our A items in stock so that people can order, and we can ship from stock. We're currently a make to order aftermarket business and it's gonna be a business model shift. Then to do that, you have to get into the software and the search engine optimization and all the internet search stuff. That whole program is underway. We hired an executive last fall. Mm-hmm. that understands that whole business very well. Our internal expectations are a lot higher, Chris, than that. Yeah, yeah. Because we've been, I don't know, a laissez-faire player, and now we're gonna very aggressively go after the aftermarket and be set up to win. Yeah. It's on track. Chris, as Harold mentioned in his prepared remarks, the aging of the Class 8 truck fleet, it might help us in the future spur a little demand, so that could benefit that CAGR as well. Perfect. I'll just throw one follow-up question on that and then hop back in the queue. You have a new plant in Piedmont, Alabama, high expectations for the aftermarket. When will you have to reinvest again? Can this plant support growth over the next 3-5 years, or will you have to look at other options? No, we're just manning it at one shift right now, so it's not gonna be capacity limited for three to five years. Okay. All right. Thanks for taking my questions. Appreciate it. Thank you. Thanks, Chris. Thanks, Chris. Thank you. Your next question comes from Matt Brooklier, GAMCO. Please go ahead. Hey. Thanks. Good morning. Thanks for taking my questions. A decent amount of moving parts in 2Q, you know, you mentioned that Russia, Ukraine, and China lockdowns were a headwind. Is there any way to maybe quantify, you know, how much it impacted the quarter? I'm assuming these headwinds are going away as we move into the third quarter. Correct. The China operation was a big deal to us because it's our most profitable business unit, and it's fully restarted now. We're committed to having our full-year plan implemented. We're gonna be playing catch up there. Chris, any- Yeah, yeah. Just to get a little more specific, Matt, I think, you know, the demand there is going up and down. You know, we supply products in Asia. Similar to the U.S., there's some pent-up demand there. It's just hard for us to tell, you know, the timing of that based on supply chain and so forth. I think what Harold said is generally it's our most profitable location, and that bodes well that we can go back to near full production in that site. It's a seating plant in China that exports seats to Korea and Japan. It's very good revenue, and we have very high-end suspension seating products that are bought out of there. It's material, that's why we mentioned it on our profits. It really hurt us in the Vehicle Solutions business, as Chris mentioned, as a reason why we really tanked in that segment. We lost our sweetest piece of it. The Ukraine is in our Electrical Systems business, it ended up mainly being an output thing, Matt, because we were able to negotiate a margin recovery with our largest customer there, Volkswagen. You can see that the business unit, that segment did fine. It will continue to do fine. That one's mainly gonna be output recovery. We should mainly get more revenue now that we have. This year, we had to build two new plants on the fly in the Czech Republic as alternate supply to the Ukraine operation for the main A items for Volkswagen. I can say their name 'cause they connected themselves to us on the Internet. We worked with them to move a lot of passenger car Electrical Systems to the Czech Republic. We have our output where we need it. It's still a terrible situation in the Ukraine, and our town still gets bombed. It's still a bad deal. Answering your question on financials, we've achieved stability. In the second half, we'll have more operating income in the Vehicle Solutions segment due to China starting up. In the electrical business, it will be more revenue, but the profits are gonna be similar. Okay. That's very helpful. Then second question. You know, you guys have done a great job in terms of garnering incremental price and, you know, you've laid out how you think it's gonna impact the second half of this year, which is definitely helpful. Maybe talk to what percentage of the business hasn't repriced at this point and, you know, your expectations for if you think you're able to get price increases on that business. Thanks. Yep. It's a good question. We still have about 20% of our revenue trapped. We have some contracts that expire in the third quarter of 2023, and they're with big companies, and they've been unwilling to negotiate, and we don't have an out. We're living with a couple of old contracts that are bad, if you will. They're negative, and we're living with them. With regards to pricing, we have a lot of pricing out now, new pricing still. What we've done is we've as we've broken our contracts or let them expire, as we incur inflation, we're going out with new pricing. We actually expect to continue pricing aggressively through the second half to maintain our profit margins. It took us a while to get there. We had to break a lot of agreements. We're now in a position so that we can price to the market, and maintain our profit rates. Okay. We talk about pricing is kind of what we talk about at the coffee machine here, so. Yeah. We're vigilant with pricing. We have a dedicated team monitoring our pricing. We monitor our pricing by customer, by plant, by product. We're doing surcharges for everything, fuel, freight, steel, foam, plastic, leather. The industry term is RMS, raw material surcharges. We're vigilantly pricing it. It's a very dynamic topic for us. We weren't sure how to talk about it in this call, but we wanted to be clear of the significance of the increases that were kind of tied to July 1. We had our top customer tied to July 1 reprice, and that's more than half of the price increase, and it's already, Chris, subtracted into EDI, so those prices are happening right now. By the way, we have new payment terms with that customer, so that's gonna really help us on working capital too, a lot shorter payment terms. It's a vibrant topic, Matt, for us, but we do have 20% trapped down until third quarter next year. Okay. Helpful. Thank you. You're welcome. Thank you. Your next question comes from Barry Haimes, Sage Asset Management. Please go ahead. Thanks so much for taking the questions. I had a couple. First one is, referring to the long-term slide, where you had the 2022-2025 revenues and margins. My question is on the margin side. You know, what's the right way to think about the margin progression, as we go, you know, from, you know, through that period, given that, you know, there are startup cost issues, you know, there have been, you know, some of the price cost issues you were just talking about. Is the margin target more back-end loaded, or is it ratable across the period? Love any insight on that. That's the first question. Yep. On margins, the margin rate will make significant progress in the second half of this year, to be honest. We intend to equally step up that ladder. It's not back-end loaded. We're trying to get to it now. We can't get there now because we have a certain part of the business trapped. It is trapped at a negative number, but that's gonna end. We haven't given year-by-year guidance on that yet, Barry. Not against it, but we've had so many moving parts. It's been weird. It's been a weird year, but we've stayed in front of it, net. We've seen some of our peers have lost money in the first quarter and second quarter. We stayed in front of that, but we've been compressed. We're gonna make a dent on it in the second half of this year, Barry. I think some of it, Barry, is gonna be helped through our restructuring plans and cost savings initiatives, some through our revenue diversification, depending upon which markets kind of move up for us. The big item that we've been fighting, as Harold mentioned, is just, you know, pricing against RMS and so forth. It's kind of a three-pronged attack there. Got it. Thanks. Second question was related to the aftermarket. You talked about some of the changes there, and the price cost lag in terms of the down margin in the quarter. Normally I think of aftermarket as, you know, sort of parts and services, something that you can change price on fairly quickly. Would love any color as to, you know, what the lag is and why in that. Yep. It's annoying, I agree. There's two parts. We have a backlog, so we have about a three-month backlog. So the backlog's already priced, and we've been carrying a backlog that in a rising inflation environment has compressed profit. Then we increase our prices, and then we have inflation again, and we increase prices again. As this inflation really took off, it really damaged the profits of that business. Now we think we're in front of it. We've definitely been accused of that by our aftermarket customers. The test for us, Barry, is, are we losing any business, you know, to our competitors in the aftermarket, and we haven't been. We've really, in all the repricing we've done globally throughout our entire business, we've only lost a couple customers. We didn't really even care that we lost them. They weren't making any money anyway. I think we still have pricing power, Barry, and our whole team's very committed to it. We're not internally fighting this. We are pushing the boundary, and specifically in aftermarket, we are. Evidence of that is that we have really long lead times in that business. If you can only imagine a truck that has a broken seat, it's sidelined. Paying $700-$800 for a seat is not a big deal to get the truck back on the road. We're kind of pricing into that as well. We're not gouging because people have long memories, but we're pricing up to the upper quartile right now. I think that this will be corrected going into the year. Got it. Thanks. That's very helpful. Two other quick ones. One, then in the warehouse business, you talked about the percent of the market that the large customer is. In terms of the percent of your business, is it sort of in line with that or much more or much less? If you were to take the big customer out, is that business still growing? Is it mostly the one customer, or is there a sort of a more generalized slowdown? The 50% customer is 70% of our business, so we're more dependent upon them than just the market. When they take a pause, it has a bigger impact on us. On our other customers, we're growing. We're growing with the other customers and with the new gentleman that we hired. His name is Minja Zahirovic. I have to say it three ways. He's an industry expert on industrial automation, and he's redoing our pipeline and our product offerings, and we already have a much more attractive forward pipeline of business opportunities. His knowledge is very additive to what we were doing before. My hope is that we continue to lessen our dependence on that big customer, but we're still very engaged with that big customer. You know, they're being cautious with their public comments, but behind the scenes, they're super aggressive. They don't want to lose any share to anybody, anywhere. We're repeating the guidance that they gave to the market, which is they're taking a wait and see approach for a few quarters to see if the e-commerce upward inflection that happened post-COVID stays at a higher trend line or if it revises back to the trend line. No matter what, they don't have that much extra capacity, and so they will need to net build no matter which trend line you pick, whether it's a long pause. If it's a longer pause, it means that it's gonna revert back to the original trend line it was on. If it's a shorter pause, it means it's gonna stay, that e-commerce is gonna stay at a higher level now. They're just waiting to play that out. We know more than this in the public market, but we're not allowed to say it. Got it. Thanks so much. My last question is just on the free cash flow in the second quarter, which was terrific, but it was a very strong number versus a negative number last year in spite of the fact that sales and profits were down. Could you just talk through you know what generated that strong free cash flow? Thanks. Well, Chris doesn't get a lot of glory at all, but Chris made that happen. Chris, you wanna take it? Thanks, Harold. Good question. Yeah, it was a lot of heavy lifting by the team. We were able to, you know, basically manage our working capital much more effectively, our inventories, our AR, as well as our AP. The business generated more profitability, so that all benefited us, because sequentially, it was a big change. You know, as we've stated publicly, we hope that this continues on in the second half of the year. We've put in some new efforts to try to drive down working capital. I think we've talked about those publicly in the past. You know, these things start, and they sometimes take several quarters. I think we're starting to see some benefits of the efforts by the team. Hope to be able to report more positive results in the coming quarters. I'll tag along on the big picture. You know, when COVID happened, and we had so much sourcing from Asia and supply chains lengthened. If you look at right now, if you look at the ports in North America in June, they reached one of the highest levels again. The ports in North America clogged up again, if you're not following that. We're not getting beat up by it because we decided to invest into our inventory profile to not cause damage to our customers or us. We have consequences if we shut down our customers. We invested into safety stock, into our inventory profile, and then at the same time, put these verticalization programs in place to make more parts than source them. We made our profile more safe. That peaked. That had a peak to it. Now we're whittling it down a little bit by doing verticalization. We're not isolated from these shortages, but we have a big safety factor now that we did not have going into this. I think that we'll keep. Our internal plan is to feather this down. We're not over-promising a big come down in inventory. We intend to feather it down, as Chris said. We believe that our startup costs have peaked. It was public knowledge that we reached an agreement with Rivian, with whom we had a dispute, and we're happy with the outcome. That had caused some inventory irregularities as well in that steady state also. I think that the inventory and working capital investment, the worst is behind us, Barry. Great. Thanks so much for all the info and all the hard work. Appreciate it. Thank you, Barry, for noticing it. Thank you. There are no further questions at this time. I will turn it back to Mr. Harold Bevis. Thank you, Michelle, and thank you to everyone who joined and listened today. Appreciate it. Asked all the thoughtful questions of us. It definitely, it's been a hard year for the management team, and I'm glad that we're staying in front of it. We wish our profits were higher than they have been, but we've been trapped by fixed prices with escalating costs. I'm thankful that we've turned a corner on that with revised agreements and increased price levels so that we can get our profits back on track here in the second quarter, and continue to win business and grow the company's profits and revenue profile. Thank you for your time today and look forward to speaking with you soon. With that, we'll conclude the call. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your line.