Good morning, ladies and gentlemen, and welcome to the CVG's Third Quarter 2021 Earnings Conference Call. As a reminder, this conference is being recorded. I would now like to turn the call over to Mr. Chris Bohnert, Chief Financial Officer. Please go ahead, sir.

Thank you, operator, and welcome to our conference call. Joining me on the call today is Harold Bevis, President and CEO of CVG. We will provide a brief company update as well as commentary regarding our third quarter results, after which, we will open 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, and new product initiatives, among others. Actual results may differ from anticipated results because of certain risks and uncertainties. These risks and uncertainties may include, but are not limited to, economic conditions in the markets in which CVG operates, fluctuations in the production volumes of vehicles for which CVG is a supplier, financial 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. On today's call we will refer to our Q3 presentation, which is on our website. If you could please take a moment and locate that, we are going to refer to that document. We'll provide an overview of our third quarter results including an update on our strategic initiatives designed to grow our earnings and position CVG as a profitable leader in multiple new markets. While repositioning, we continue to deliver record revenues even in a modest and volatile truck build year, which is a clear validation of our strategy and the success that we are achieving in our global organic sales growth process. We are also thoroughly experiencing the supply chain and inflation issues that exist, but we are in a much better position today than just a year ago. Following my remarks, Chris will discuss our financial results in more detail and will conclude by opening the call and answering questions. Please turn to slide four in our earnings presentation. I first would like to say that we delivered our expected profits volume adjusted, and we are focused on this going forward. We delivered third quarter sales of $239.6 million, an increase of 28% as compared to a year ago third quarter. This growth was driven by new business wins in warehouse automation, a slightly increased truck build rate year-over-year in North America, and material cost pass-through. Our operating income also increased 28% to $11.4 million in the third quarter as compared to $8.9 million in the year ago third quarter. The improvement was largely the result of higher sales volumes as well as our successful efforts over the past year to reduce our cost structure and drive operational efficiencies across the company. As we have discussed on prior calls, optimizing costs is an evergreen continuum for us and continues to be a top priority of our management team. Adjusted EBITDA was $16.9 million in the third quarter, as compared to $16.4 million in the third quarter of 2020. The improvement was due to higher sales volumes. We delivered $0.25 of adjusted earnings per diluted share in the third quarter as compared to $0.21 per diluted share in the year ago third quarter. Our new business awards continue to grow. We have won approximately $190 million of new business year-to-date, and are walking away from approximately $30 million of low profit business to give us a net new award number of $168 million annualized year-to-date. We're very pleased about this, and it is a focus of our management team. Please turn the page with me to page five. And we'd like to discuss our road ahead and give an update on our four key areas; growing and diversifying our revenue mix, increasing our business in warehouse automation, increasing our business in electric and fuel cell vehicles, and optimizing our service and cost structure. We're pleased that our team has made success in these areas year-to-date and in the quarter. We're gaining new business awards in electric vehicles last mile trucks and power sports equipment. And during the quarter we secured $39 million of annual new business awards, which brings our year-to-date total to the net number that I just mentioned of $168 million. A majority of the quarterly wins were in the electric vehicle market; we're seeing strong traction with our value added products and sub-assembly systems. As a reminder, and as we've said on prior calls, when we speak about the value of new business wins, it is the estimated value at peak run rate, once the new business awards have been fully ramped up. Some of the new business wins are shorter cycles from award delivery, so the shorter cycle wins that we secured in 2020 are helping us in 2021. On the other hand, given that approximately 70% of our new business awards are in electric and fuel cell new vehicle markets, they will take several years to ramp up before delivering the full annual revenue impact. This is due to the length of time it takes to develop a new vehicle. That said, this is providing excellent forward visibility for our company's revenue growth over the medium term, as we continue to win positions on new EV and fuel cell platforms for both new and existing electric vehicle manufacturers. The last point on the right side of this chart on page five is very important and involves the daily activities of the nearly 7000 people working in our factories, and that is to deliver a quality product on time and on profit. It is a clear focus of our team to be less reliant on the North American diesel truck market as we expand into new markets like electric vehicles, warehouse automation, and power sports equipment. Ultimately, we'd like to see our growth in these more secular markets be equivalent to or even outweigh our current portfolio mix. Looking at our end markets in more detail, could you please turn to page six. I first want to speak about our largest market, which is the North America truck market. This includes trucks of all types: light duty, medium duty, heavy duty, and specialty trucks. This is approximately 36% of our sales year-to-date. Demand for medium duty and heavy duty trucks continues to increase as evidenced by the increasing backlog in the industry this year. This backlog is being driven by supply chain constraints, and demand is exceeding the industry's ability to produce. This dynamic has been referred to by some of the news agencies as an everything shortage. As these pressures rippled through our market during the third quarter, customer schedules were impacted, which impeded their output, which impeded our production output, and also impacted our efficiency. Suppliers and OEMs have progressively implemented reactions to these issues by immediately prioritizing components and managing around resource constraints. It isn't easy, and it's hard for our customers to deal with this, but as a just-in-time supplier to them, it is impacting us as well. It is not unusual to get just a few days' notice of a part shortage that we must react to. This is a constant situation for us at the moment, but it is expected to persist through the fourth quarter and well into 2022. The ACT update that came out today states that the industry backlog is greater than 12 months at this point. Therefore, the demand for our products is excellent, while the supply chains around the world are struggling to keep up. We expect demand to remain strong in this business, higher than the industry's ability to make products. The market outlook at the bottom of this page for new truck build is also strong, and the outlook for 2022 and 2023 is hopeful for growth. The demand certainly makes this possible, however, the supply constraints need to be resolved, the main issue being ocean shipping for many of us. The OECD estimates that approximately 90% of traded goods are transported over the ocean. Therefore, ocean shipping rates, container availability, port backlogs, and port operations are keys to enabling this growth to happen. We are aware of this dynamic, and it impacts our customers and our own ability to serve them. We've been reacting aggressively by sourcing key parts locally and changing our make or buy decisions when needed. As of now, ACT is estimating truck builds will be higher in both 2022 and 2023, based on assumptions of the industry's greater ability to produce. Turning to warehouse automation on the same chart, this business continues to be an important driver of our diversified growth objectives, representing approximately 18% of our sales year-to-date. According to Logistics IQ, the market is expected to grow 14% annually through 2026, driven by the growth in e-commerce. The need to automate labor-intensive material handling inside these distribution centers is significant, and improved efficiency in the supply chain is an objective. This is a program-by-program business for us, where we bid on open business against other options at the customer level and win or lose, just like any other business. Again, we're holding our line here by walking away and not participating in low-margin, no-profit business opportunities. We've already secured business for 2022 and are working on more as we go along. We reconfirm that we will achieve more than $150 million of sales in this business in 2021. This business is also impeded by the supply chain issues that are ubiquitous in the industries we serve. The vehicle market, also on this chart for construction equipment, is a business of comparable size to warehouse automation, representing 17% of CVG's year-to-date sales. We continue to win new business with new and existing OEM customers in this segment, and year-to-date, we've won 18 new programs in Europe, Asia, and North America. We're transforming this business with our customers and working to solve complex problems for both existing and new customers. Looking forward, we continue to see a strong order book for this business as well through the end of the year, which supports demand, though supply chain constraints remain an issue that we're monitoring closely. Lastly, our aftermarket business is an important component of our business, representing 11% of our sales year-to-date. This business has generated $82 million in revenue year-to-date. By walking away from low-margin business at the OE level, we are freeing up capacity to manufacture a higher volume of products for the aftermarket. We made significant progress in this area during the quarter, and we are developing a new e-commerce platform as well. Expanding our aftermarket business is a significant opportunity for us and a future growth engine for our company. Turning to page seven, and as we've discussed and touched on, global supply chain constraints are causing a slowdown in truck building at our customer level, combined with cost pressures from material, labor, and freight in our own operations. These issues have resulted in sporadic customer shutdowns throughout the quarter, which in turn causes volatility within our operations as we get caught with staff and equipment working on orders that get put on hold. Overall, we had fewer trucks built in the quarter than expected for the materials that we had ordered, at extended lead times due to the ongoing ocean freight issues. Therefore, we flexed our costs to the actual truck builds in the quarter. We did succeed in holding our profit rates for the volumes that we received. These issues are persisting into the fourth quarter, and we are operating in the same manner while we anticipate that they will persist into 2022. It's important to note that we've taken significant steps over the last year to not only improve our cost structure but also to enhance our on-time delivery. We're using this modest period of truck building to continue optimizing our footprint and cost structure that serves our legacy businesses. We are underway with consolidating multiple global facilities and implementing lean organizational structures. Simultaneously, we're opening new facilities in both Mexico and the Czech Republic to support newly won business. As our business mix evolves, we will evolve our operating footprint and organizational structures with it. We expect this to be a continuous process for us. Turning to page eight, I would like to touch on warehouse automation; it continues to be a focus area for us and is helping us diversify our business mix outside of legacy diesel truck Class 8 vehicles. I'm happy to report that we delivered approximately $37 million of sales in the quarter. We also invested in this business during the quarter with the addition of a key new leader and the startup of a new plant in Europe. We have further investments planned, and they are very important to our competitiveness in this area, and we will keep them private for now. This remains an investment area for us, as well as our electrical systems business. We are learning and investing as we go along and win new business in this area. Year-to-date, we've achieved $131 million of sales in warehouse automation and expect to exceed our $150 million target as we stated. Turning to page nine, another new end market where we're having great success as a component sub-assembly and systems provider is in the electric vehicle and last-mile delivery van market. Our competitive advantage resides in the fact that we have a naturally value-added product offering that makes it convenient for new vehicle companies to partner with us. Additionally, we can design, prototype, and build a bundle of products for these new partners, and we have many years of experience doing it. We're currently involved with over 40 opportunities globally, which include both existing customers and new startups that are expanding into the electric vehicle and fuel cell markets, as well as new entrants that I've mentioned. We have created a portfolio of new business wins on electric vehicle platforms that will allow us to participate in the coming transition from diesel to electric and fuel cell. This transition is set to occur over the next five years, and the substitution rates vary by class of truck. Overall, we've had four new EV wins in the quarter and 18 different EV wins year-to-date across North America and Europe. These wins are supporting production losses later this year, and through 2022. Turning to page 10, we'd like to speak a bit more about the $168 million of net new business wins that we've secured year-to-date. 95% of them are outside of the company's legacy business. We're concentrating on electric delivery vans, fuel cell trucks, electric buses, electric battery systems, ATVs, and side-by-side power sports equipment. Importantly, we continue to significantly lessen our dependence on heavy-duty trucks and older platforms. This is a pivot-point approach that we're using. We're pivoting from diesel-fueled heavy-duty trucks to electric and fuel cell lighter-duty vehicles. I'm proud to report that our global team has landed 236 new programs with 33 new customers located in the United States, Mexico, Canada, the UK, Germany, India, China, and Japan within the last 21 months. Most of this business is in the design development trial and/or initial production phase and will provide financial benefits in future periods. It's essential to reiterate that given the majority of our wins have been on brand new vehicles, it will take time for the revenue and profit generation cycle to reach its peak. It typically takes a few years to bring a new vehicle to market, as the OEMs involved in this work have many moving parts to prepare a new vehicle for launch. That being said, our new business wins are positioning CVG in an advantageous situation for the future, as we will be connected to multiple growth end markets. This is a purposeful effort by our teams. Our product area that I'd like to touch on is plastic injection molded parts. You may have noticed that we've announced a few developments in this business this year, branded as Advanced Tech. We successfully leveraged our large part production expertise into the power sports vehicle sector and are emerging as a leader in this area. In September, we announced our investment in two additional state-of-the-art high tonnage injection molding machines, to complement the other two large machines announced earlier this year. Our investments are crucial enablers for future success as we diversify our revenue mix effectively. Please flip to page 12 for a recap, and then I'll hand over to Chris, who will speak on a few more areas. The demand in our end markets is strong. There are record backlogs for vehicles to be built, and a growing need for alternative fuel vehicles of almost every type and vibrant e-commerce dynamics. However, global supply chain issues across our markets have led to widespread shortages and negatively impact our customers and our ability to serve them. We are prudently estimating that this situation will persist, and we're acting based on this assumption. We're shifting from buying to making, locally sourcing parts, striving to eliminate dependency on ocean routes, and addressing our prices for specific customers while opening new capacity for the ongoing new business that we continue to secure. We've already won over 200 new programs for new business, and this effort is still ongoing, gaining momentum. The financial contribution of these new awards is largely absent in our results yet, just the implementation costs. Now I would like to turn the call back over to Chris, who will discuss a few more areas in detail. Chris?

Thank you, Harold. If you're following along in the presentation, please turn to slide 14. Third quarter 2021 revenues were $239.6 million, 27.7% higher compared to $187.7 million in the prior year period. This increase primarily reflects growth in our warehouse automation business and increased pricing to offset material cost inflation. That said, Class 8 truck builds came in below expectations for the quarter, adversely impacting our results on a sequential basis. Foreign currency translation favorably impacted our third quarter revenues by $2.4 million, or about 1.3% when compared to the prior year period. Gross margins decreased slightly to 12.6% as compared to the third quarter of 2020, primarily driven by cost inflation due to the global supply chain issues Harold mentioned. Additionally, we invested $1.3 million in new business startup costs in the quarter, which primarily affected gross margins negatively compared to the prior year period. The company consolidated operating income of $11.4 million for the third quarter of 2021, compared to $8.9 million in the prior year period, an increase of 28.1%. On an adjusted basis, operating income was $12.2 million compared to $12 million in the third quarter of 2020. Adjusted EBITDA was $16.9 million for the third quarter, compared to $16.4 million last year. Adjusted EBITDA margins were 7.1%, reflecting a decrease of approximately 170 basis points compared to an adjusted EBITDA margin of 8.8% in the third quarter of '20. This margin contraction was primarily the result of cost inflation I mentioned earlier. Our third quarter interest expense was $1.6 million compared to $5.5 million in the third quarter of 2020. The decrease in interest expense was primarily due to refinancing the company's debt on April 30 of 2021. As a reminder, our new debt structure is more flexible as it provides us with up to $200 million of borrowing capacity and will allow us to expand into attractive markets, with the goal of accelerating CVG's growth and moderating the historical cyclicality of our business. I'm also pleased to report that our bank group agreed to an amendment on our credit agreement, which provides increased flexibility including our ability to engage in supply chain finance with our customers, and will also allow us to increase our capital investment threshold to $32 million, up from $25 million, to support new product development and sales growth discussed by Harold. Net income for the quarter was $7.5 million, or $0.23 per diluted share, compared to $4.2 million in the prior year period, or $0.13 per diluted share. Now turning to our electrical segment results on slide 15 for the third quarter; the electrical segment revenue was $164.1 million compared to $121.1 million in the prior year period, an increase of 35.6%. Foreign currency translation favorably impacted third quarter revenues by $0.7 million, or 6%. The year-over-year sales increase primarily resulted from new business wins in warehouse automation. Our electrical systems segment now represents 69% of our total third quarter revenues as we continue to make progress diversifying both our business mix and our customers. The electrical systems segment delivered $17.8 million of operating income in the third quarter compared to $12.2 million in the prior year period. The increase was largely due to the year-over-year sales increase I mentioned in warehouse automation. Adjusted operating income was $17.9 million in the third quarter compared to $13.4 million in the prior year. Now turning to our Global Seating segment on slide 16; Global Seating revenues increased to $76.5 million in the third quarter compared to $68.9 million in the prior year period, an increase of 11%. Foreign currency favorably impacted our sales in this segment by $41.7 million, or 2.5% in the quarter. The Global Seating segment reported an operating income of $0.4 million in the third quarter compared to $4.8 million in the prior year period. The decrease was primarily due to pricing lags on passing increased material costs to our customers. The third quarter of 2021 adjusted operating income was $0.4 million compared to $5.1 million in the quarter a year ago. As Harold touched on and as we've discussed, our focus remains on improving our operations and profitability. We made significant strides in improving our cost structure through the pandemic; however, we find ourselves now standing still. Along those lines, we have restructuring plans to optimize our manufacturing footprint across all of our business segments. We expect these activities to occur over the next several quarters, with restructuring costs estimated at $4 million to $6 million, targeting roughly equivalent annual savings. Looking to the fourth quarter, while we do not provide guidance, I thought it would be helpful to provide a few data points on the key drivers to our business. Per ACT, expectations are for an increase in North American Class 8 truck builds to 64,567 units compared to 62,850 in the third quarter. However, similar to the third quarter, we believe this truck build estimate may be impacted by supply chain issues. Finally, we're continuing to experience cost increases in key material inputs, as well as freight and labor costs. We've seen these impacts on business and are addressing these issues through pricing and cost measures. However, we anticipate supply chain disruptions will continue into 2022, and we are managing these challenges as much as possible. We believe the actions we're taking to proactively manage the current environment will help us in the short term and long term, positioning CVG for margin expansion as the environment normalizes. This concludes our prepared remarks. I'll now turn the call over to the operator and open up the line for Q&A. Thank you.

Good morning, guys. Good quarter in a tough environment. I actually want to talk about that environment itself. How much did you actually absorb in higher costs in the third quarter, and you talk about the lag in recovering some of them on this and the pricing mechanisms? How long do you think it will take you to recover those costs that you had to absorb in the September period?

Yes, there are actually three types of impacts here, John. One is the actual inefficiencies that we encounter from what we're calling pop-up customer shutdowns, where we get a two-day notice that a customer is shutting down their plant. We also had a customer that experienced a strike. When this happens, we get caught in the very short term having excess labor that we then have to reduce. So we experienced somewhat more than usual events in the third quarter. The second piece is pricing, and we do have a lag on that impact. Generally, there's a burden of proof to show that our costs have gone up, which involves transparency agreements with our customers. Typically, we present this proof, and then we negotiate to pass it through. The third element involves customers who have a contractual right to not allow us to pass those costs through. In these cases, we need to renegotiate the contracts altogether. So we did encounter multiple million dollars in profit compression during the quarter, and we've seen this year-to-date. It is a temporary compression of our profits in the quarter, and we can track it because we order these materials in advance. So we negotiate with our customers as these events occur, and we were impacted by both cost overruns in the quarter and on price compression—some of it being temporary, which we anticipate will be resolved, while other contractual agreements require more difficult negotiations.

Okay, I guess on the written agreement side, that comment leads into the announcement you made regarding Volvo. Can you talk to us a little bit about how that renegotiation is going? What should we consider when modeling into the future? And are there any restructuring actions you announced that may affect operations related to Volvo?

Yes, we value our relationship with all our customers, including Volvo. Our hope is to establish a mutually beneficial new agreement with them. We took action based on the financials not aligning. However, we cannot comment on the ongoing negotiations at this time, as they are private discussions.

Okay. All right. Just one last question. You mentioned you're walking away from low-margin businesses. Can you give us some examples of these businesses and how they relate to your restructuring actions?

So far, none of the business walkaways we've done have had any relation to our restructuring actions. We had a piece of business in China with a large customer that was coming up for renewal. Given the low profit margins and several bidders, we made a decision to walk away. We had a bottom line that we were willing to stand by, especially since we had several new opportunities in our pipeline that looked much better financially. While there is a time lag as we transition, we chose to lose that business as they rebid it, and they're winding down. It's not a quick process when transitioning away, but freeing up capacity allows us to ramp up our new business once the timing is right. For context, we walked away from over $30 million this year to date. When we report our net wins, we're overcoming these kinds of losses with new wins.

Okay, I'll get back into queue. Thanks for taking my questions.

Thank you. Your next question comes from the line of Chris Howe from Barrington Research. Your line is now open.

Good morning, Harold, good morning Chris.

Good morning.

The warehouse automation side of things is reported at $131 million year-to-date, and you're on track to exceed the $150 million target. The business continues to grow in line or outpace the industry. Have you had any internal discussions on potentially highlighting warehouse automation in a different way on a reportable basis?

Yes, two things there: that is a good business for us, and it's a new one. We acquired that business in September 2019, and we've landed several new customers that we're going through initial trials with. We aim to have multiple medium-sized profitable customers rather than just a few large ones. Regarding external reporting, yes, Chris, myself, our board of directors, and our audit committee are discussing the possibility of highlighting warehouse automation in a distinct way due to its substantial growth.

Okay. Concerning the aftermarket business generating about $82 million, could you provide some context on potential leadership driving this opportunity and your expectations for the aftermarket?

Yes, the aftermarket business is global for us. It's over $100 million annualized based on three quarters of data. It's profitable, and we have not treated it as a priority. Recently, we dedicated leadership and segregated our production to focus on this sector, keeping it separate from OE production. The aftermarket could be growing faster, but production capacity has limited that growth. We're also focusing on generating business, and we have broad access to the market, with a strategy of dedicated leadership and focused operating reviews to support growth. Given that the heavy-duty truck replacement rate is around 265,000 trucks each year, which hasn't been met in the last two years, the demand for aftermarket parts is increasing as the trucks on the road become older, thus generating higher demands for our products.

Thank you. One last question regarding the injection molding development you mentioned in the press release. Is this in response to specific customer demand, or is it aligned with overall demand? Could you talk about this opportunity?

Sure, Chris. It's actually both. We've been doing injection molding for a long time, obviously in the truck space, and we have some new business that will run on these heavier tonnage machines. We are trying to expand this business as a key focus area for us, and we feel like some of these margins are also accretive overall. With our global footprint, these new machines are going into Mexico, which is significant for us. This positions us as a player, and our Advanced Tech brand is gaining momentum in the industry.

Great. Thanks for taking my questions. Appreciate it.

Thank you.

And your next question comes from the line of Barry Haimes with Sage Asset Management. Your line is now open.

Thanks very much. And again, good quarter, despite all the issues. I have two questions. First, could you provide a sense of when you might be able to catch up, where price increases would offset the cost increases that you've incurred? Second, have you encountered any delivery issues to your customers, or, despite these challenges, have you generally been able to deliver on time and keep customer lines running? Thanks.

Yes, those are good questions, Barry. Regarding price and cost adjustments, the two components to consider are when we can have a discussion in the market about pricing for our next PEO, and then the situation where we have contractual rights that limit our ability to pass through the increases. Generally, our business isn't constrained; we've negotiated over a hundred agreements this year, which helps to address rising costs. That said, contractual negotiations are more challenging, particularly when we have a significant relationship to manage. Reasonable expectations would be for a price-volume adjustment to occur at some point. On delivery issues, it has been tough from both ends. Our customers are struggling with more parts-related issues than we have, and their labor force is predominantly fixed due to union constraints. Their output relies heavily on part availability, and some of them have experienced blanks in their feeds, changing their orders with little notice. This has resulted in downtime and delivery issues for us as well. Our goal is to maintain production and ensure timely deliveries.

Okay, thanks. Following up on the pricing-cost situation, given that many contracts have review cycles with approximately a quarter lag, would it be fair to assume that you might be caught up by mid-2022, assuming cost pressures remain stable?

Yes, regarding profit compression, we are taking a conservative approach, anticipating that certain contractual arrangements may cause delays in our ability to adjust pricing. Chris, do you wish to add anything?

Yes, the only thing I would add is that timing is dependent on how markets react. If prices for copper and steel trend down, we'll recover more quickly. Conversely, if they continue to rise, we will face ongoing lag times. As markets trend, it stands to reason we'll recover faster in subsequent quarters if conditions improve.

Got it. Thanks so much for the insight. I appreciate it.

Thank you, Barry.

Thank you.

Thank you. Ladies and gentlemen, that concludes our Q&A session for today. I will hand it back over to the management for any closing remarks.

Thank you. I will summarize by expressing gratitude that we were able to deliver our expected profit rates on volume-adjusted realities and navigate the supply chain issues we faced. We will maintain a conservative outlook to ensure profits in the face of volume fluctuations. We are not scaling back on new business endeavors and continue to have success crafting a stronger mid-term and long-term future for our revenue profile. Thank you, everyone, for joining us today. With that, we'll conclude the call.

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