Ladies and gentlemen, thank you for standing by, and welcome to CVG's Third Quarter 2020 Earnings Call. Please be advised that today's conference is being recorded. Please note that the speakers will be referring to the presentation that is available on the company's website. I'd now like to hand the conference over to your speaker today, Chris Bohnert, Chief Financial Officer and Chief Accounting Officer. Thank you. Please go ahead, sir.

Thank you, and welcome to our conference call. Joining me on the call today is Harold Bevis, President, CEO of CVG. We'll provide a brief company update as well as commentary regarding our third quarter 2020 financial results. After which, we'll open up the call for questions. This conference call is being webcast and a supplemental earnings presentation is available on our website. Both may contain forward-looking statements, including, but not limited to, expectations for future periods, regarding market trends, cost savings initiatives, 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 will now turn the call over to Harold to provide a company update.

Thank you, Chris, and thank you to everyone for joining the call today. First, I want to introduce Chris Bohnert, who just spoke. He joined CVG as Chief Financial Officer and Chief Accounting Officer a few weeks ago. Chris brings over 25 years of global leadership across a wide range of industries, including industrials and plastics. Chris has great experience in mergers, acquisitions, financial excellence, and capital market financing, which we will leverage to help accelerate our activities to expand the company's portfolio and lessen our exposure to medium-duty and heavy-duty combustion engine truck markets. We are excited to welcome him to our team. Thank you, Chris. Now, please join me and turn to Page 3 in our investor presentation if you have that before you. If not, I'll make the same points verbally here. Q3 2020 was a good quarter for us and a strong bounce back from Q2, which was impacted by COVID. Most likely, you've heard other CEOs of other companies thank their employees, their families and their suppliers for going through this together; I will be no exception. I want to thank the CVG family for all we've gone through and conquered together this year. We're 7,000 strong and getting stronger. In fact, while some companies were laying off people, we were hiring, and we have hired approximately 1,000 people in the last few months and we're still hiring. We're committed to being a great place to work where employees can advance, have fun and be part of a diverse and inclusive global team. Now, let’s talk about our specific results in the quarter for a minute. You can see that our sales were $188 million, which was down versus the prior year, basically due to the market, which we're going to cover in a minute, but up 48% sequentially. The commercial vehicle markets recovered sequentially and us with it. But they are below 2019 levels. And the warehouse automation market continues to be a bright spot for us. Adjusted operating income improved as well. It was down a little bit versus the prior year. But our margins increased, and our operating income increased sequentially by quite a bit, $15.6 million. Our adjusted EBITDA actually increased in an absolute manner versus the prior year to $16.4 million from $38 million less sales. And we grew our liquidity again. Our free cash flow generation was $9 million in the quarter, and we paid down an additional $20 million of debt and we funded so far $6 million of CapEx, and we're on pace to do about $8 million to $10 million for this year. So all in all, it was a good quarter for us. Turning to Page 4, please. Our sales mix is turning the corner. I have seen a couple of analyses that show our sales mix being very similar over a long period of time, and in fact, that's true. If you look at our sales mix, for about a 10-year period, approximately 45% of our sales were tied to the truck markets. That's changed this year. We're now at about 35%, and it's lessening. The focus areas for us are our sales team and the commercial team; the warehouse automation subsystems; delivery vans; Class 5 through 7 trucks, especially tied to e-commerce; electric vehicles; and then alternate markets for current assets that we have to make plastic parts and wire harnesses. So it was a good quarter and year-to-date performance for our sales mix. And just put the little graphic here of a truck turning the corner. But we foresee that this is going to continue to be part of our future. Turning to Page 5, please. You can see that the truck markets really went through a 'V' recovery. It's a classic one. The Class 8 market, in the upper left corner, dropped Q1 to Q2 by 54% and then recovered almost entirely with a 109% gain in Q3. You can see the quarterly outlooks through next year are going to continue to be trending up. To the right, you can see the Class 8 market is expected to grow over the next couple of years as well. Below it is a Class 5 through 7 market, which went through a similar drop and gain. Not quite as steep a drop, not quite as much of a gain, but still a 'V' recovery and good outlook. This is 35% of our market. It's a big part of our legacy core business, and it's healthy and growing, and there was a substantial improvement during the market. If you follow any other companies in our sector, they've all been reporting the same thing. We all kind of use ACT. This data is from ACT Research. And the big thing is that e-commerce growth and GDP outlooks are driving favorable new truck builds. Eventually, electric vehicle substitution is going to occur during these time periods, and I'm going to speak about that in a moment as well. Please turn to Page 6. We have had discussions with some of you both individually and in group sessions regarding the warehouse automation business, which became part of our portfolio following the acquisition of FSE. We are in the process of integrating and optimizing it to maximize its potential by utilizing resources from CVG, particularly our global team and infrastructure. We have increased the capacity at four of our plants and are currently assessing our next steps for further capacity expansion. On the workforce front, we added dedicated leaders and procurement resources during the quarter and hired around 100 additional personnel. We expanded our product portfolio in Q3 with the addition of complex subassemblies to our catalog. We anticipate this will be a business exceeding $100 million for us next year. It is a growth-oriented business linked to the warehouse automation market, which corresponds with the increasing e-commerce trends and growth rates above 20%. This represents a significant opportunity for us and highlights our interest in FSE, as well as in Kevin and his team. Kevin, the founder of that business, remains with us and continues to lead it. Please turn to Page 7. Another big market that we're focusing on is electric vehicles. This is a really important market for the industry and for us. We have a bundled product offering that is meaningful to these new startups. There are a little over 20 startups globally that are properly funded. We've secured 2 marquee positions, one in this quarter, one in the second quarter, and they represent greater than $200 million of business potential with future start dates. We secured 3 smaller electric vehicle contingent awards also in the quarter and have pending business opportunities at several other electric vehicle companies. This is working fine for us. We have a natural value-added product offering to make life simpler for these new truck companies and delivery van companies to start up and buy a bundle of products from one place. It really helps us diversify our customer concentrations while tethering to what part of this market is growing on a go-forward basis. We are attacking the whole vehicle size spectrum from delivery vans to Class 8 and special purpose vehicles, like garbage trucks and marine terminal vehicles. So it was a good quarter for us for the future. If you think about warehouse automation and electric vehicles, warehouse automation is here and now. We're shipping in this quarter. We're shipping in the next quarter. It's a current business that will help the quarters that are coming at us. Electric vehicles is more of a long term win, where you need to tool up with the customer, set production systems, and they primarily will impact our company in 2022 and beyond. Page 8. The takeaways for the quarter, the markets that we're in performed well, both the old markets we've been in and our traditional core markets as well as the brand new markets that we're focused on. The truck markets have absolutely recovered in 'V' fashion. Warehouse automation was strong in Q2 and it's strong now. The pandemic has caused that to strengthen. The cost reductions we've implemented were aggressive and have worked. Our adjusted operating income margins went up primarily due to the big cost takeouts that we implemented. We are starting to restore some of those costs now in Q4 and Q1. We're in our hiring phase to staff up the new businesses we won, as well as in our recovered markets. On the other hand, we are still permanently reducing some of our footprint, which was redundant, looking backwards, and we have several facility restructuring projects that are still underway. On the growth side, we are very happy with the pipeline filling that we've done as well as the contingent new business awards that we have gained as a company. We're focused on growth markets and less cyclicality. We've added people, capacity, products, and customers in the quarter. We've also pulled down another marquee electric vehicle customer. I've spoken with some of you one-on-one, and quite a few people are desirous to know the names of these startup customers, but we are bound by confidentiality to not speak about them; however, they are good customers that are well capitalized. And lastly on COVID, although that's still a concern for us, in our company, and in our supply chain and our customers, cases have been rising rapidly. All of us saw the news this morning about the vaccine. Good news that happened. We're hopeful for a vaccine to COVID in the near future, but it is a concern for us at the moment. We're dealing with it. And it could impact the outlook. If we have an unforeseen impact right now, it would be due to COVID, really, because the demand for our products is pretty steady.

Thank you, Harold. If you're following along in the presentation, please turn to Page 10. Third quarter 2020 revenues were $187.7 million compared to $225.4 million in the prior year period, a decrease of 16.7%. This decrease reflects the sharp declines in sales due to the COVID-19 pandemic and end market decline and more specifically lower heavy-duty truck production in North America and the global construction markets we serve. This was partially offset by an increase in industrial and military revenues, primarily attributable to the FSE business. On a sequential basis, revenue increased 47.9% over second quarter 2020 and revenue of $126.9 million. Foreign currencies favorably impacted our third quarter 2020 revenues by about $1 million. SG&A was $14.4 million in the third quarter of 2020, a decline of roughly 18% year-over-year and 10% sequentially, driven by our continued focus on cost optimization. The company reported consolidated operating income of $8.9 million for the third quarter of 2020 compared to $11.5 million in the prior year period, primarily attributable to the decreased sales volume. Third quarter 2020 adjusted operating income was $12 million, a slight decrease compared to $12.4 million in the prior year, but up sequentially from adjusted operating loss of $3.6 million in the second quarter of 2020. Adjusted EBITDA of $16.4 million was slightly ahead, as Harold mentioned, versus prior year. On a sequential basis, adjusted EBITDA recovered slightly from $1.2 million in the second quarter of 2020. As a percentage of sales, adjusted EBITDA increased 150 basis points compared to the third quarter 2019 and increased 780 basis points sequentially. As Harold also mentioned, the impact of the decline in sales was partially offset by successful cost reduction initiatives. Interest and other expense totaled $5.7 million in the third quarter of 2020 compared to $3.8 million in the third quarter of 2019. The 2020 figure included a $1.8 million charge for PIK interest related to the loan refinancing that occurred in the second quarter of 2020. Net income for the quarter was $4.2 million or $0.13 diluted share compared to net income of $7.2 million in the prior period or $0.23 per diluted share. Please turn on Slide 11. I'll talk a little bit about the Electrical Segment results. For the third quarter of 2020, Electrical Systems revenues were $121.1 million compared to $131.4 million in the prior year period, a decrease of 7.9%. The year-over-year decrease primarily resulted from declines in sales due to the COVID pandemic and market declines, specifically the lower heavy-duty truck production in North America, which was partially offset by industrial and military revenues, primarily attributable to the FSE business. Of note, warehouse automation subsystems contributed an incremental $26 million in the third quarter. On a sequential basis, segment revenues increased 63.2% over the second quarter. Foreign currency translation favorably impacted the third quarter Electrical Segment revenues by about $400,000. The Electrical Systems Segment reported operating income of $12.2 million in the third quarter compared to $12.8 million in the prior year period. The decrease is primarily attributable to lower sales volume. Third quarter adjusted operating income for the Electrical Systems Segment was $13.4 million when excluding special charges. Slide 12 details our P&L on the Global Seating Segment. Revenues declined 68.9% or $68.9 million in the third quarter of 2020 compared to $95.7 million in the prior year period. This primarily resulted from the sharp declines in sales due to COVID-19 and other market declines, specifically the lower heavy-duty truck production in North America. On a sequential basis, revenues increased 27.8% over the second quarter of 2020. Foreign currencies favorably impacted sales by approximately $600,000 in the quarter. The Global Seating Segment reported an operating income of $4.8 million during the third quarter compared to $7.2 million in the prior year period. The decrease in operating income was primarily attributable to lower sales volume, partially offset by cost savings from ongoing restructuring initiatives. Third quarter 2020 adjusted operating income was $5.1 million when excluding special charges, an increase of 143% over the second quarter. Adjusted operating income as a percent of revenue was essentially flat year-on-year despite a $26.8 million decline in revenue. Turning to Slide 13, please. On September 30, 2020, the company had liquidity of $126.2 million, which was made up of $53.6 million of cash and $72.6 million of availability on our revolving credit facility. There were no outstanding borrowings under our revolving credit facility as of September 30, 2020. As Harold mentioned, we've paid down $15 million on the ABL, and an additional $5 million on the term loan during the quarter. Free cash flow for the quarter was $9 million. This concludes our prepared remarks. I will now turn it over to the operator for Q&A. Thank you.

Your first question comes from Mike Shlisky from Collier Securities.

Can you provide more details about the new EV contract you just signed along with the contingent contracts? Are they for similar seating systems that you announced last quarter, which was a substantial contract? Or do these also include additional components like wire harnesses or other products?

Yes. So two things there. The customer is a supplier of trucks in Europe and North America. That's about all I can say. In terms of our product offering, it’s similar. The name of our seating system is Unity. It integrates with plastic parts of the pedestal and harnesses if needed by the customer, featuring a state-of-the-art form, fit, and function aesthetic package. It's easily customizable, which is one reason they love it. They can select exactly what they want and avoid paying for anything extra. It's a modular seating system, and they can also choose the level of suspension technology they prefer. This is our main product offering right now, part of our next-gen bundled approach, Mike.

Can you also summarize any discussions you're having with some of the big current truck makers that make diesel trucks? I'm sure they all want to do battery powered hydrogen trucks in the future. Have you had any talks with them about how you can help and what you can contribute to their models? And can you give us a sense as to what the opportunity might be there, both on an aggregate basis and maybe on a per truck basis compared to a diesel?

Yes. The legacy truck makers who are already in the business generally have existing platforms. Some of them are using the electric vehicle new product offering in their product line to upgrade their cabs, some of them are not. We generally get to compete when there's an upgrade or a change or a refresh of the cab environment in the case where they're just going to transition the powertrain from a combustion engine to a low-emission system. Sometimes, they don't change much of the cab. So it varies. Our new business opportunity is different if they're not going to refresh the cab. We are involved with electric vehicles at all the traditional players, but whether or not it's an additional business opportunity, yes, it's specific to what they're doing, Mike.

Would you be able to say in aggregate that you've got to see the table, most of the changes that ever happened and the overall impact, your number of trucks that have CVG materials in them will roughly be the same, whether they're all-electric or whether they're all diesel in the future?

Well, we have about a 30% market share, and we're getting the same looks we've always had. We have access to all major makers globally. There's a lot of companies in China, specifically, if you talk about the global market, that 100% buy domestically, and those are hard accounts to crack into. I would say our looks are the same and mirror our market share. In terms of are we growing share or trying to maintain share, our initiative here with the electric vehicle pursuit is to gain share by basically being a winner in the electric vehicle product offering. Did that answer your question?

Yes, yes, it did. You did. Clearly, you don't plan to be disruptive in this process, so that's certainly good to hear. I saw you kind of touched on this a bit during your prepared remarks. Can you just give us more color on some of your efforts to expand beyond the traditional markets, some of the hiring, some of the new markets that you're pursuing, which ones have been successful so far, which ones haven't, et cetera?

Yes. So we have three main ones, the biggest being warehouse automation subsystems. We got a good foothold there when we bought FSE. They had several subsystems they offered. We expanded that business. We assigned an executive internally, that's Rich Tajer who's leading our electric wire harness business to lead a big expansion of the product line globally. That's the big one that we're doing, and it is what's causing us to put in place new manufacturing departments inside of our existing footprint. Our primary emphasis is to leverage our current plant teams and our current footprint. We don't foresee at this moment in time doing any greenfield investments, just leveraging current teams that we have so that we can get overhead absorption from this, as well as derisk the ramp-up from having our experienced people oversee them. So that's our biggest. The other two, which are a little smaller than the warehouse automation, growth is in wiring harnesses. We can make wiring harnesses for any kind of vehicle, any kind of large equipment and are sales leader there. Rich is also leading that business unit and has had great successes here getting positions on non-trucks. We've had a good set of wins, some of them short term, some of them longer term. Our third area is in plastic parts. We have a big portfolio of injection molding and thermal forming machines. We have traditionally only made parts for trucks. We've turned our attention to making parts for other industries, medical, consumer products, industrial products, and we had to hire sales leaders who knew those markets, knew the competitors, knew the customers to lead the way for us. We have the footprint, the know-how, and the capacity, but we didn't really have the commercial tip of the spear, if you will. So that's been the nature of our main hiring is commercial leadership. Thanks, Mike.

Your next question comes from Chris Howe from Barrington Research.

I wanted to begin by addressing the slide that illustrates the changing business mix. Considering that slide alongside your remarks about the potential $100 million market in warehouse automation, how should we approach the incremental margin related to this amount? Additionally, as the business mix evolves to become less cyclical, how might that positively influence incremental margins in the upcoming years?

The main change this year compared to the 10-year average or even 2019 is definitely warehouse automation. It is adding value, though it has some cyclicality and can be inconsistent. It's been trending upward but with fluctuations, as growth comes in large increments related to new warehouses and automation efforts. It's growing at around 20% annually. To illustrate, consider a $100 million business growing at that rate, and it adds value. We aim to expand our role in this market. The business we acquired has served this industry for six years and was a recognized supplier to some of the largest retailers we are now working with on e-commerce warehouse distribution systems. While we can’t disclose specific client names, we are becoming known as a supplier and are broadening our services for them. Primarily, we develop subsystems that are components of these automated warehouses, like control boxes or panels that connect to conveyors, and often include elevators to move materials. The business we have is expanding, and we are looking to increase our offerings. Regarding wiring harnesses and plastic parts, we are aiming for a mix that outperforms GDP, but for now, I would see it as a GDP-driven business.

As I think about things on an aggregate basis, you had 2 key wins in the electric vehicle space. We have the growing warehouse automation space. How should we assess key takeaways as you've been able to win and gain new business, and how that has changed your outlook or your approach on new strategic deals in the future? And as we look at future opportunities, given the current mix of products going into these customers, what sort of product development opportunities are you currently working on or are available in a short or long term?

Yes. We've achieved five electric vehicle wins, including two significant ones and three smaller ones. We're targeting the top 20 globally and although we don't expect to secure all of them, we're being as ambitious as possible. You can anticipate that profit rates will remain consistent with what we've experienced in that sector. Doug Bowen is still leading this business and is overseeing both aspects of it, which is a transition for us. We're connecting ourselves to the high-growth segment of the industry. As a company, we're dedicated to sustainability and making a positive impact. We view this as a multi-year strategy where we incrementally secure this business. We are also leveraging this opportunity to enhance our capabilities. This involves a design modification to the Unity platform, which is modular. We plan to share a presentation on our website for clarity. Our manufacturing processes are cutting-edge, incorporating robotic welding and painting, as well as advanced paint quality systems and improved form, fit, and function to eliminate any imperfections, such as wrinkles on seat covers. It's about achieving a superior aesthetic along with a smart manufacturing process within our facility, which follows established practices in the automotive industry. We're implementing one smart manufacturing process in North America and another in China. This will enable us to supply Japan, Thailand, China, and other Asian nations while servicing North America from Mexico. These new production lines will be operational soon. We've analyzed the best practices and will integrate them into our Unity manufacturing process, which will require some capital expenditures.

And just to revisit your comments about the $100 million opportunity we've discussed, the timing or pace of that may vary from quarter to quarter. However, for the entirety of 2021, do you feel confident about that $100 million?

Yes, we do. We did release what FSE was in the quarter. It's primarily a PO business, Chris. You have overriding bracket agreements to handle terms and conditions. But the business is tied to retailers and e-commerce distributors, the people that deliver the box parcels to our doors. It depends on them choosing to do an investment to speed up their processes or expand their capacity. So it comes at us in project form and firm. Our visibility is okay. I would say it's a little better than trucking. Trucking is up and down quite a bit. This one right now is secular growth at a high number. Thank you, Chris.

We have no further questions. I would like to hand the call back to Harold Bevis, President and Chief Executive Officer, for closing remarks.

Thank you, everyone for joining us. I spoke a lot today because Chris has only been here a few days. In the subsequent meetings we're going to have, obviously, Chris is going to speak a lot more. I want to thank Chris again for joining. I want to thank the employees for the tough year. We went through this year of furloughs, layoffs, salary cuts, and benefit cuts, and then a hire back and then hiring of new people. Like many industries, our company has gone through that, and I'm very happy that we've delivered good results here in the quarter and have a good outlook. Thanks for calling in. We look forward to speaking with you on our next call. With that, we'll end it. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.