Stoneridge [SRI] Conference call transcript for 2023 q3
2023-11-03 12:14:09
Fiscal: 2023 q3
Operator: Good day, and thank you for standing by. Welcome to the conference call of Stoneridge. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Kelly Harvey, Director of Investor Relations.
Kelly Harvey: Good morning, everyone, and thank you for joining us to discuss our third quarter results. The release and accompanying presentation was filed with the SEC yesterday evening and is posted to our Web site at stoneridge.com in the Investors section under Webcasts and Presentations. Joining me on today's call are Jim Zizelman, our President and Chief Executive Officer; and Matt Horvath, our Chief Financial Officer. Before we begin, I need to inform you that certain statements today may be forward-looking statements. Forward-looking statements include statements that are not historical in nature and include information concerning our future results or plans. Although we believe that such statements are based upon reasonable assumptions, you should understand that these statements are subject to risks and uncertainties, and actual results may differ materially. Additional information about such factors and uncertainties that could cause actual results to differ may be found in our 10-Q, which was filed with the Securities and Exchange Commission under the heading Forward-Looking Statements. During today's call, we will also be referring to certain non-GAAP financial measures. Please see the index for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. After Jim and Matt have finished their formal remarks, we will then open up the call to questions. With that, I will turn the call over to Jim.
Jim Zizelman: Thanks, Kelly, and good morning, everyone. Let me begin on page three. During the third quarter, we continued to build on our second quarter progression to drive significant sequential margin and earnings improvement. Third quarter adjusted EPS of $0.10 is an increase of $0.15 versus the second quarter, while EBITDA margin improved by 260 basis points, or approximately $5 million. We continue to focus on gross margin improvements through production efficiency, material cost reduction, and excellence in execution. Despite volatility in our end markets, we continue to deliver on our commitments driven by an unwavering focus to both execute on our long-term strategy and drive continuous operational excellence. Our third quarter performance, which builds on improved results last quarter, continues to establish a good foundation to drive operating performance as we continue to grow the company. Given the strength of the foundation, even in the face of market-based revenue headwinds, our full-year 2023, exclusive of the impact of the UAW strike, is expected to be directly in line with our original guidance. We are refining our guidance, still keeping it within our original range, but reducing the adjusted EPS midpoint by $0.05, which is equal to the estimated impact of the UAW strike. Our updated full-year midpoint guidance implies fourth quarter revenue of approximately $238 million, and adjusted EPS of $0.15 or a $0.05 improvement relative to the third quarter. We will continue to build on the foundation of the last couple of quarters to drive strong performance to finish the year, and provide a good runway heading into 2024. This morning, we are providing our preliminary revenue expectation of over 5% growth in 2024. This significantly outpaces our underlying end markets which are expected to contract by 1.5%. Matt will provide additional detail on our full-year guidance and our expectations for 2024 later in the call. As we continue to drive margin performance, we are also focused on executing on the program launches that will continue to drive growth for the company. During the third quarter, we launched the Smart 2 tachograph program in the European commercial vehicle market. This next-generation smart tachograph was designed to meet the EU Mobility Package standards, and provides us with significant revenue opportunities in both the OEM and the aftermarket applications over the next several years. I will discuss this program launch and our expectations for final contributions in more detail later in the call. Finally, today, we are also announcing our participation in the Department of Energy's SuperTruck 2 innovation program with the largest North American commercial OEMs, including Navistar, Daimler Truck North America, Peterbilt, and Volvo Trucks. We are thrilled to partner with these OEMs on this program as the camera mirror system supplier to not only increase fuel efficiency and the meet the Super Truck program goals but also provide significant safety benefit to the drivers. I’ll provide additional details on our involvement in this program as well later in the call. Now moving to page four; page four summarizes our key financial metrics for the third quarter relative to the prior quarter in more detail. For comparison purposes, we have excluded the favorable impact of the $3.3 million of non-recurring retroactive pricing that was recognized in the second quarter that was applicable to prior periods. Third quarter adjusted sales of $237.2 declined by approximately 8% relative to the second quarter of 2023 due in part to variation in seasonal production and an unfavorable foreign currency translation impact of $1.3 million. Additionally, we are seeing slower than expected ramp-ups in certain electrified vehicle platforms as well as reduced demand in our on- and off-highway commercial end markets. Third quarter adjusted gross margin of 22.1% was approximately in line with the second quarter of 2023, primarily due to material cost improvements and improved freight costs, offset by reduced fixed cost leverage on decremental revenue versus the second quarter. Adjusted operating margin improved by approximately 200 basis points to $7.3 million, primarily due to a significant step-down in engineering costs. As we outlined last quarter, we expect this reduction to continue through the end of the year as program launch cost decline and due to the timing of customer engineering reimbursements as we close the year. We continue to deliver on our commitments driven by our focus to both execute on a long-term strategy under our continuous operational excellence. Throughout 2023, we continue to take actions to optimize our organizational structure, reduce discretionary spending, and improve operating leverage. As a result, we expect continued operating margin expansion as revenue continues to grow, and finally, adjusted EBITDA margin of 7.2% improved by approximately 380 basis points over the prior quarter. And going forward, we will significantly outperform our underlying end markets as we continue to launch new programs and recognize the benefit of ramp up of recently launched programs. Additionally, we expect to further build on our margin momentum and drive significant earnings growth. Now turning to page five; the UAW strike begun on September 15 with incremental strike targets announced through mid-October. Over the last week, the UAW announced tentative agreements with Ford, Stellantis, and GM, which will bring the strikes to an end once the agreements are ratified by the union members. UAW began the strike targeted Ford, GM, and Stellantis plants in the middle of September. And in September given the specific plant on strike and the lag in production downtime we saw between the strike and order reduction from the OEs, the final impact on the third quarter was relatively small. That said, the impact of the fourth quarter will be more substantial as additional strikes continued into October. In October, UAW strikes reduced revenue by approximately $3.5 million and operating income by approximately by $1 million or $0.03 for the month. We expect there to be some residual impact of the strikes as impacted facilities return to work and ramp up production to normalize the output. We expect this residual impact to reduce revenue by an incremental $3 million and approximately $800,000 in operating income or additional $0.02 in November before normalizing in December. In total, we expect that the UAW strikes will reduce revenue $7 million, reduce operating income by $2 million, and reduce adjusted EPS by approximately $0.05. We have refined our guidance midpoint to reflect this $0.05 impact. As a company, we are committed to working to offset this and other externalities to ensure continued strong financial performance without sacrificing future growth or deviating from our long-term strategy. We remain focused on responding to strike impacts as appropriate with consideration for an efficient ramp-up as strikes ended. We continue to move forward with stable production now and our efficiency and our supple chain, our customer orders and business operations. Now turning to page six, this morning I want to highlight yet another recent program launch; the launch of our next-generation tachograph, the Smart 2, in Europe. The program aligns with our overall strategy and continued focus on vehicle intelligence and connectivity as we expand our content for vehicle aligned with industry megatrends, and in this case, also aligned with regulatory requirements. The Smart 2 tachograph is the next generation of our existing tachograph product, providing incremental capabilities to conform with the EU mobility package standards. Our platform makes drive time analysis more flexible and consistent, and provides for the opportunity to add features and functionality to the platform going forward to ensure continued compliance with the latest regulatory requirements. The current market is primarily served by Stoneridge and one other competitor, and regulatory barriers exist for entry for other competitors. Beginning in August of 2023, the next generation smart tachograph is required to be on all newly registered vehicles -- commercial vehicles over 3.5 tons that are involved with international transport. The new European standard also has incremental regulations requiring adoption on various vehicles types over the next several years, including the requirements for existing vehicles on the road. And as a result, we expect this program to drive significant growth opportunities with both European OEMs and in the aftermarket. The product launched in the third quarter and will ramp up next year, continuing to grow as new vehicles fall under the updated requirements. We are estimating Smart 2 tachograph revenue to be approximately $20 million in 2023 and more than $60 million in 2024 for both OEM and aftermarket opportunities. This is the latest in the longline of program and product launches over the last several years, including our digital driver information systems, our park by wire actuators, our axel-based actuators, our MirrorEye, and now our most innovative tachograph yet. Stoneridge continues to build a strong portfolio of technologies and vehicle systems aligned with the global industry megatrends. Now turning to page seven, I am happy to announce and discuss our involvement with the Department of Energy Super Truck II Innovation program with our MirrorEye platform. The Super Truck II program was launched by the Department of Energy in 2016 with the goal of achieving 120% increase in freight efficiency for the Super Truck I program that launched in 2009. The Department of Energy has indicated that heavy duty trucks haul 80% of goods in United States and use about 28 billion gallons of fuel per year, accounting for approximately 22% of total transportation energy usage. This presents a significant opportunity for carbon emissions reduction and energy savings for a key segment for our nation’s transportation sector. The DoE has funded four projects to develop and demonstrate cost-effective technologies that collectively will more than double the freight efficiency of Class A trucks, and as I mentioned with Navistar, with Daimler Truck North America, with Peterbilt, and with Volvo Trucks. MirrorEye was selected as a partner for all four Super Truck II teams to help achieve significant increases in freight efficiency with the application of the MirrorEye and resulting in improved fuel economy. MirrorEye continues to gain momentum in North America. MirrorEye launched with Kenworth in North America in the second quarter of this year and is expected to launch on the Peterbilt nameplate soon. In addition, two additional North American OEMs are expected to launch in 2025. In Europe, we are anticipating our largest OEM program to launch in the first-half of 2024. As we continue to expand awareness of the system through our expanding fleet trials and retrofit applications as well as through the highly visible programs like Super Truck II, we expect take rates to continue to improve along with incremental program launches. Stoneridge remains well-positioned as the industry continues to focus on both vehicle efficiency as well as vehicle safety. Now turning to page eight, and in summary, we are so very pleased with our performance in the third quarter as we demonstrated our ability to execute yet another quarter-over-quarter improvement in financial performance. We continue to be laser-focused on operating performance. And as a result, we have continued to deliver on our commitment set at the beginning of the year. This is driven by an unwavering focus to both execute on our long-term strategy and drive continuous operational excellence through our all other functions within the company. Our third quarter performance, which builds upon improved results last quarter, continues to establish a strong foundation to drive operating performance as we continue to grow the company. Stoneridge remains well-positioned with a strong backlog of awarded business and a robust portfolio of innovative technologies aligned with the key industry megatrends. We will remain focused on execution to ensure that we not only significantly outgrow our underlying end markets but we optimize earnings as we do so. With that, I will turn it over to Matt and he'll discuss our financial results in more detail. Matt?
Matthew Horvath: Great. Thanks, Jim. Before I begin on slide 10, our third quarter financial performance, as well as our expectations of continued growth and earning expansion going forward, enabled us to complete the refinancing of our credit facility this morning, which we announced with an 8-K and press release shortly before our call. The refinance facility is a three-year, $275 million revolving credit facility with a $150 million recording feature. The refinance facility has similar leverage and interest coverage ratio covenants as our current facility. Despite a more turbulent macroeconomic backdrop, we were able to achieve pricing that is only slightly higher than our current facility across the pricing grid. We were able to offset this slightly increased pricing with a slightly smaller overall facility and less fees associated with undrawn commitments. The complete credit facility detail can be found in the 8-K we issued this morning. This refinance facility extends our maturity date and provides the company with ample liquidity to continue to support our growth while also limiting total interest expense. Turning to slide 10, adjusted sales in the third quarter were approximately $237.2 million. Adjusted operating income was $7.3 million or 3.1% of adjusted sales, which was an increase of approximately 70 basis points from the prior quarter. Each of our segments performed well in the quarter, with Control Devices expanding operating margin by approximately 40 basis points over the second quarter and electronics expanding operating margin by 80 basis points over the prior quarter. I will provide additional detail on segment level performance on the subsequent slides. As Jim discussed earlier in the call, we are updating our full-year 2023 guidance ranges. Our implied fourth quarter guidance based on the mid points of our updated full-year ranges implies stable revenue performance quarter-to-quarter even after consideration of the impact of the UAW strike, which is expected to be approximately $6.5 million in the fourth quarter. We expect gross margin performance relatively in line with the third quarter and continued expansion of our operating margin as increased customer engineering reimbursements are expected to drive at least 80 basis points of operating margin improvement versus the third quarter. Excluding the estimated impact of the UAW strike, the midpoint of our updated full-year guidance is in line with our previously provided guidance. After adjusting for an expected $0.05 of UAW strike-related impact, we have reduced our adjusted EPS midpoint by the same $0.05, which is in line with the low end of our previously provided range. As I will discuss later in the call, we expect significant growth next year. Our fourth quarter guidance provides a strong foundation for continued growth and earnings expansion in 2024. Page 11 summarizes the significant drivers of our third quarter adjusted earnings per share relative to the expectations we outlined on our second quarter call. In the third quarter, we drove strong financial performance, exceeding our previously provided expectations of above breakeven adjusted EPS performance by approximately $0.08 with adjusted EPS of $0.10 for the quarter. Although we expected revenue to be down versus the second quarter due to normal seasonality, production volumes were slightly lower than expected, driving approximately $0.02 of headwind in the quarter. This was due primarily to a slower ramp-up in customer production related to certain electrified vehicle platforms and reduced demand in our commercial vehicle end markets. During the third quarter, gross margin outperformed our previous expectations due to reduced material costs, favorable sales mix, and favorable operating performance. Most notably, we saw material cost improvement versus prior expectations as supply chains have continued to normalize and the impact of previously negotiated price increases and material cost mitigation actions continue to positively impact our overall material costs. During the quarter, we incurred approximately $0.02 of additional costs related to a specific distressed supplier. These incremental costs were required to provide additional support and prevent end customer disruption. Although we expect some additional costs to be incurred in the fourth quarter, we believe this issue is contained, which would result in relatively less impact in the fourth quarter. We are working to recover these incremental costs, but have not included the expectation of any recovery in our full-year 2023 guidance. SG&A and engineering spend was approximately in line with prior expectations as relatively higher costs incurred in the second quarter subsided to more normalized levels. This was due in part to reduced project launch-related expenses as our SMART2 tachograph launched in August as well as the continued optimization of our overall global engineering footprint and cost structure. Third quarter performance was positively impacted by $0.05 due to the non-operating impact of foreign currency on intercompany loans. Similarly, third quarter performance was negatively impacted by approximately $0.04 due to incremental tax expense as a result of the change in jurisdictional mix of pretax earnings. In summary, not only did we exceed our previously outlined expectations, we remain on track for continued earnings expansion in the fourth quarter as we remain focused on improvement in our supply chains and material costs, efficiency in our manufacturing facilities, and optimization of our global cost structure. Page 12 summarizes our key financial metrics specific to Control Devices. Control Devices third quarter sales of $90.1 million decreased by 3.2% compared to the prior quarter due to lower sales in the North American passenger vehicle end market, primarily driven by reduced production for certain electrified vehicle platforms relative to the second quarter, partially offset by higher sales in China. As Jim outlined previously, the UAW strike at Ford, GM and Stellantis had a minimal impact on our third quarter financial results, but are expected to have an impact on the fourth quarter, even though negotiations are now complete and customer production facilities are expected to ramp back up in November. Adjusted operating income was $5.6 million for the quarter or 6.2% of sales, which improved by approximately 40 basis points versus the prior quarter. The continued expansion was driven by higher gross margin, partially offset by the impact of the distressed supplier related expenses I discussed previously, which were approximately $700,000 during the quarter. For the remainder of the year, we will continue to focus on driving manufacturing performance efficiency and cost control to mitigate production volatility primarily resulting from the UAW strike. Looking forward, we are focused on strong margin performance in 2024, driven primarily by a continued focus on manufacturing performance and material cost improvement actions. We will continue to react to changes in our end markets as needed to drive sustained profitable growth. Page 13 summarizes our key financial metrics, specific to electronics. For comparison purposes, we have excluded the favorable impact of nonrecurring retroactive pricing recognized in the second quarter related to prior periods. Electronics third quarter sales were approximately $142.4 million, a decrease of 11.3% versus the prior quarter due in part to expected production seasonality as well as reduced demand in our commercial vehicle and off-highway markets. That said, we continue to expect significant growth in our Electronics segment next year as we capitalize on recently launched and to-be-launched products over the next 12 months. Adjusted operating margin increased by approximately 270 basis points relative to the second quarter. This significant margin expansion was primarily due to a step down in D&D costs compared to the second quarter as elevated D&D spend for program launches declined as expected. We continue to focus on discretionary cost control driving reduced SG&A expenses as well. We are expecting revenue growth in Electronics segment in the fourth quarter due to the ramp-up of new and recently launched programs, including the SMART2 tachograph program highlighted earlier on the call. Similarly, we are expecting continued margin expansion in the fourth quarter, primarily driven by the continued reduction of net engineering costs as a result of the timing of customer reimbursements and the continued focus on optimizing base engineering expense globally. Looking forward, in 2024, although our commercial vehicle end markets are expected to decline, we expect strong revenue growth. Our growth will be driven by the continued ramp-up and expansion of recently launched programs, including MirrorEye in North America and the SMART2 tachograph as well as additional program launches, including our next OEM MirrorEye program in the first-half of next year. We expect a strong top-line growth as well as our continued focus on material cost improvement actions and structural cost optimizations will drive strong margin performance next year. Page 14 summarizes our key financial metrics, specific to Stoneridge Brazil. Stoneridge Brazil's third quarter sales declined by $700,000 relative to the prior quarter. Revenue was primarily impacted by lower OEM signals, offset by higher sales in our aftermarket products. Despite continued macroeconomic challenges in Brazil, we expect revenue and operating margin to remain relatively stable for the remainder of this year and 2024. Brazil has become a critical engineering center as we continue to expand our global engineering capabilities and capacity. We will continue to utilize our global footprint to cost-effectively support our global business. Page 15 summarizes our expectations for full-year adjusted EPS. As discussed earlier on the call, third quarter adjusted EPS performance of $0.10 exceeded our prior expectations by approximately $0.08. Our updated guidance reduces our revenue expectations by $20 million from the high end of our previously provided range as we discussed last quarter. This includes a couple of million dollars of impact in the third quarter and $7 million worth of impact from the UAW strike. The remainder, which is expected to impact the fourth quarter is primarily related to reduced demand for certain electrified vehicle platforms and reduced demand in our overall on and off-highway commercial vehicle markets earlier than previously expected. In total, we expect fourth quarter production volume reductions to reduce adjusted EPS by $0.07 relative to our prior expectations, excluding the UAW strike impact, which I will discuss separately. We are also expecting incremental tax expense in the fourth quarter versus prior expectations, primarily due to the geographic mix of our pre-tax earnings. In summary, excluding the estimated impact of the UAW strike, our updated full-year adjusted EPS midpoint is in line with our prior midpoint guidance of breakeven adjusted EPS for the year. As Jim discussed earlier on the call, the estimated impact of the UAW strike is approximately $6.5 million in revenue in the fourth quarter, and approximately $1.9 million in operating income or approximately $0.05. As a result, we are refining our guidance to the low end of our previously provided adjusted EPS guidance range to reflect the estimated impact of the UAW strike. Our updated midpoint guidance implies fourth quarter adjusted EPS performance to be approximately $0.15, and revenue of approximately $238 million, representing continued earnings growth and stable revenue over the third quarter. Our implied margin run rate in the fourth quarter provides a strong foundation to support significant earnings going forward on our expectation of continued sales growth. We remain focused on creating a strong run rate from both a top and bottom line perspective into 2024. As we're referenced throughout the call this morning, we are expecting revenue growth next year that will significantly outperform our weighted average end markets. Turning to slide 16, I'd like to highlight the major drivers of growth for our 2024 preliminary revenue guidance. One of the most significant specific growth drivers in 2024 is the expected ramp up of our Smart 2 tachograph program, as Jim discussed in detail earlier on the call. We expect the program to contribute approximately $30 million of incremental revenue in 2024. This replaces approximately $10 million of revenue related to the Smart 1 tachograph this year, and is in addition to the estimated $20 million of incremental revenue expected this year for Smart 2. As our MirrorEye OEM programs continue to launch and expand, we are expecting an incremental $30 million in 2024 related to MirrorEye OEM programs. This program is our largest OEM program, with an estimated peak annual revenue of approximately $60 million. Prior to launch, the OEM has increased the volume expectations compared to the initially awarded take rate due to increased market demand across the industry. In addition, we expect our first OEM program in North America to continue to ramp up and expand as MirrorEye launches on the second nameplate, and both the nameplates continue to ramp up production. Our MirrorEye programs continue to have significant upside potential as the system becomes more widely adopted and validated by major fleets. Based on feedback received from fleets, we are optimistic that the take rates will increase over time and drive continued revenue upside for Stoneridge in both the OEM and retrofit markets. Other factors contributing to our growth in 2024 include the continued growth in our off-highway vision systems and aftermarket MirrorEye fleet applications. Furthermore, there are several OEM programs launching in Brazil as we continue to expand our OEM product offerings in South America. As we continue to build on the foundation of the last couple of quarters, we expect to drive strong performance to finish this year, and provide a good runway heading into 2024. We will provide our full 2024 guidance during our fourth quarter earnings call early next year. Moving to slide 17, in closing, as evidenced by the strong operating performance in the quarter, this team is focused on strong execution and careful cost control to continue to drive margin improvement. We are very pleased with our progress during the quarter with sequential margin expansion, and are even more excited for 2024 as we expect our top line growth to support continued earnings power. In addition, we continue to execute on our long-term strategy by focusing on products that are drivetrain-agnostic, winning business in critical growth areas, and expanding our existing opportunities. Stoneridge is committed to driving shareholder value, and that focus remains at the forefront of all of our strategic initiatives. With that, I will open up the call to questions.
Operator: Thank you so much, Matt. At this time, we will conduct the question-and-answer session. [Operator Instructions] I will be moving up our first speaker, and this is Justin Long from Stephens Institution. Okay, Justin, you are now good to ask your question.
Q – Justin Long: Thanks and good morning. Maybe I'll start with one on the refinancing announcement that just hit. And I know you talked about that a little bit, Matt. And it sounds like the rates and covenants are fairly similar. But is there any additional color you can provide in interest expense expectations in the fourth quarter, and moving into next year? And can you comment on this refi being included in the guidance you just provided?
Matthew Horvath: Yes, the refinance -- and thanks, Justin, thanks for the question. The refinance is included in the guidance we just provided. I wouldn't expect much incremental interest expense in the fourth quarter relative to prior expectations. The pricing grid for the refinancing is very similar, only slightly higher than our prior facility, which given the market is a really great outcome for the company. The covenants and all of the -- really all of the general terms and conditions are very similar to our existing facility. So, I would not expect much change this year. Going forward, because the pricing grid is only slightly higher than where we are now. We expect, obviously, with continued earnings expansion and that continued growth. I would expect that interest expense would at worst remain relatively stable to where we are now. With the opportunity to improve that as we as we improve cash flow, particularly focus on networking capital improvement and turning that into cash. And of course, the earnings power we expect next year. So, we're really excited to announce the refinancing. It allows us to really focus on the performance of the business going forward. Gives us plenty of liquidity to fund the growth that we need going forward, all while really limiting any incremental interest expense going forward here.
Justin Long: Okay, great. That's helpful. And then, maybe, Jim, I'll shift to you for my next question. I think one of the most impressive things about this quarter was the fact that revenue was down by a pretty substantial amount on a basis. But margins were up sequentially. So, as we look forward, how much of a remaining opportunity do you see from what I would define as self-help margin improvement? I know you're expecting revenue to get better next year, but let's play out a scenario where the macro deteriorates and revenues kind of more stable. How much additional runway do you see for margin expansion from things that you can control?
Jim Zizelman: Well, first off, good morning, Justin. Thanks for the question. And let me just first start by summarizing how do we get here? And we had a very significant focus on material cost reduction. And as I've been saying for the last few months we've been very strongly focused on operational excellence. And that's both in the manufacturing plant as well as throughout all the supporting functions within the company upstream of the manufacturing plant. Not just efficiency, but also process and control in the organization. And so, we've made some great progress here. But I have to say that we've only gotten started, right? This is really the beginning of the journey here to drive continued excellence and continued improvement. So, there is certainly more to come from that perspective from inside of Stoneridge. And some of the margin expansion that we talked about today comes from a continuous application of those methodologies throughout the company. So, we're quite optimistic that we're going to see more from it.
Justin Long: Okay, great. And last one for me, I wanted to ask about MirrorEye. It was helpful to get the outlook or preliminary outlook for 2024. But could you share your base expectation for MirrorEye revenue in 2023? I think you had talked earlier this year about $60 million in revenue. I'm just curious if that's changed and then maybe you could give some color on the visibility you have to that ramp and MirrorEye next year as well?
Jim Zizelman: Have we rejoined the conference?
Operator: Yes. We can hear loud and clear.
Justin Long: Well, I'm not sure if you caught my question, so I'll re-ask it and no problem at all. I was asking about the MirrorEye revenue contribution that you're expecting in 2023. I think you had previously guided for $60 million. I'm curious if that base number has changed. And then, as we move into next year, as you think about that incremental $30 million of revenue from MirrorEye, I wanted to ask about your visibility to that number. Thanks.
Matthew Horvath: Yes. Thanks for the question, Justin, and again, sorry for the disconnection there. Yes. So, this year, obviously, the OEM program that we had originally in Europe has remained pretty strong. We talked about a little bit of a slower ramp up on the first North American program just as kind of the production ramp up and volume expectations continue to ramp up here as we head into the back half of the year. So, overall, OEM volume was a little bit lower this year than what we expected. And I would say kind of the same thing for retrofit, maybe a little bit lower than what we expected. That said, we have really good visibility, obviously, next year. Certainly as we've got a program launch in the middle of the year related to our largest program in Europe. And that OEM has already increased their expectations, their volume expectations. So, there's always variability, of course, in things that are take rate or option based. But between some incremental ramp up in the retrofit market as we continue to work with some of the largest fleets, as well as continued growth in the OEM market and the addition of that incremental very large program in the middle of the year, we've got pretty good visibility to pretty strong incremental MirrorEye revenue next year.
Justin Long: Okay, great. I'll leave it there. Thanks for the time.
Matthew Horvath: Thanks, Justin.
Jim Zizelman: Thanks, Justin, very much. Yes.
Operator: Okay. Thank you so much, Speaker and Justin. We appreciate it very much. I am showing no further questions at this time. I would now like to turn it back to -- one moment, please. I would like to turn it back to Jim Zizelman for closing remarks.
Jim Zizelman: Thank you, everyone, for joining us for the call. I know your time is very important, and we really appreciate your willingness to engage with us today. In closing, I want to reiterate that we continue to deliver on our commitments by focusing on foundational improvements and strong execution, which led us once again to the results we outlined today. This is driven by an unwavering focus to both execute on a long-term strategy and drive continuous operational excellence, ultimately driving shareholder value as we continue to build on our strong strategic foundation. Thanks again.
Operator: Thank you for participating in today's conference. This does conclude the program. You may now disconnect.
