Good morning, ladies and gentlemen, and welcome to Modine Manufacturing Company's Second Quarter Fiscal 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host Ms. Kathy Powers, Vice President, Treasury, Investor Relations and Tax.

Good morning, and thank you for joining our conference call to discuss Modine's second quarter fiscal 2022 results. I'm joined on this call by Neil Brinker, our President and Chief Executive Officer; and Mick Lucareli, our Executive Vice President and Chief Financial Officer. We will be using slides for today's presentation, which can be accessed either through the webcast link or by accessing the PDF file posted on the Investor Relations section of our website modine.com. On Slide 2 is our notice regarding forward-looking statements. This call will contain forward-looking statements as outlined in our earnings release, as well as in our company's filings with the Securities and Exchange Commission. With that, it's my pleasure to turn the call over to Neil.

Thank you, Kathy, and good morning, everyone. Before reviewing our second quarter results, I would like to provide an update on our recent announcement regarding the Automotive divestiture. As announced, we mutually terminated the agreement with Dana for the sale of our liquid-cooled Automotive business. After spending months going through the regulatory approval process in Germany, it became apparent that we could not reach an agreement that would receive the required regulatory approval. Because of the agreement in place, we are prohibited from taking any substantial actions on the portion of the business despite the declining volumes created by the semiconductor shortage. Now that we are back in control, we can take a different approach. Over the past few months, we have been planning for this possibility and I'm excited because we have a real opportunity to run the business differently by applying 80-20 principles. Using 80-20 is a key tool and one that we didn't have when we made our initial decision to exit the Automotive business; our goal is to optimize profit margins and cash flows while focusing resources on the products where we have sustainable competitive positions and where we can provide value to our key customers, while still meeting our return targets. We will initiate restructuring actions to reduce SG&A, and we will limit capital expenditures, especially in low-margin areas where we don't have a competitive position. We will also analyze and segment our business portfolio to identify those portions that are accretive to our margins and take actions where possible to improve commercial terms. When we started this process, our Automotive business was around $500 million of revenue, but with wind downs and the earlier divestiture of the Austrian air-cooled business, we now have an annual run rate of about $300 million to $350 million. About 80% of this remaining business relates to the liquid-cooled products that have a higher margin profile and technology links to EV. The remaining balance is mostly air-cooled products that are low margin and non-strategic. This will be addressed through further wind downs or potential divestitures. Our leadership team has a very clear objective to improve and optimize the financial profile. First, the focus will be on improving the profit margin by applying 80-20 principles and reducing the cost structure. Second, the objective is to run the business on a free cash flow positive basis, including potential restructuring costs. We believe this can be done through margin improvement, reduced capital spending, and targeted asset sales. Through these efforts, we can appropriately manage this business and support the broader Modine transformation while providing better service and a more value-added focus to our customers. I would also like to point out that we are separating our vehicle business by technology. As we recently announced, we have created a separate EV business unit that will focus on accelerating the growth of our EV systems and have hired a General Manager to run this dedicated team. As we've mentioned in the past, we have developed a battery thermal management system that optimizes the temperature of the battery system without drawing power from the battery. We are in production on this system and in development with many other bus specialty vehicle and commercial vehicle customers. This is an attractive market for us, given its growth profile and the potential to provide significantly higher content per vehicle and higher margins. Our objective is to provide this business with the resources needed to grow and to continue investing in technologies to support the needs of our EV customers. Switching gears, let's move to the state of our market on Slide 5. The current business environment has become increasingly challenging over the past few months, which impacted not only our second quarter results but also caused us to lower our full-year forecast. In particular, raw material costs have increased further, and we are dealing with more supply chain disruptions, including the impact of the semiconductor shortage on the auto industry. All of these elements have caused us to reduce our second-half outlook and to update our guidance ranges. As I mentioned, our leaders are assembling restructuring plans to address these issues and start a path to improvement. Offsetting the headwinds, we are seeing strong demand in our BHVAC, CIS, and HDE markets. Despite these challenges, we have been making many positive changes in our business, including adding several new business leaders in support of our organizational design transformation. In total, we have added seven general managers in addition to two new vice presidents named last quarter. The talent we have brought onboard is well-versed in 80-20, organizational development, P&L management, and transformational change. First, we have named leaders for our newly created EV business and for our HDE business who are actively working on the priorities. Next, in our Building HVAC segment, we have announced new general managers to lead our heating, indoor air quality, and data center businesses. These are all very attractive, fast-growing markets where we are actively gaining market share. Each of these businesses is targeted for growth. And with a decentralized structure, our new leaders will be given the tools needed to significantly grow these businesses. Demand in our heating business remains strong, and we are using our superior service model to convert distributors and further gain share. In indoor air quality, our focus is on further expanding our geographic reach in the school markets where we tend to have some concentrated focuses. Off-season demand for schools is up 300% compared to last year, coming off strong summer shipments. In data centers, we're targeting substantial growth, leveraging our many strong relationships in Europe and building capabilities in the U.S. Inflation negatively impacted margins in this segment this quarter. There is often a long lead time between order and shipment and we had over $20 million backlog orders that will be shipped in the second half. We are targeting commercial actions in this business, along with our heating and IAQ products to offset these negative impacts. We expect to see margin improvements in building HVAC in the second half of the year. In our CIS segment, we announced new general managers for our coils and coolers business. Our coils business is very complex and will benefit from the 80-20 work we are doing to reduce this complexity and improve the profitability of the business. We have a strong order book as long lead times and higher demands are causing customers to order early to secure supply. The coolers business is targeted for growth, particularly related to our offerings using alternative refrigerants, such as CO2, and orders also remain strong, particularly in the south and eastern Europe. Our coatings business is also targeted for growth, especially as we expand our network of licensees. This business was already set up as a separate business unit and will continue to be run by the same management team. The entire leadership team is highly engaged in the strategic planning process using 80-20 to define strategies to drive profitable growth and reduce complexity. Our targeted growth businesses are developing strategies to substantially increase revenues while maintaining or expanding margins. In addition, we are taking immediate pricing actions where possible and are making good progress. Finally, we are reviewing our manufacturing footprint in certain businesses to consolidate the production of key products into dedicated plants and to make rapid improvements where required. We're taking many important steps towards creating a stronger Modine, including our business to accelerate growth and identifying experienced P&L leaders to run our business units. 80-20 is driving important strategic decisions and is beginning to yield tangible improvements across the business. The change in our vehicular strategy is just one element of the story. We're also providing additional resources to grow other key businesses that have strong market drivers, including data centers, heating, indoor air quality, and coatings. Collectively, these initiatives will help Modine become a higher-growth, higher-margin, and less capital-intensive business. The process of transforming Modine will take some time and we are just at the beginning of this journey. During the first phase of this transformation, we'll use 80-20 to help us actively manage our portfolio businesses, reduce complexity, discontinue unprofitable activities, and enhance our pricing model to improve and transition our challenged businesses. At the same time, we'll shift our human and manufacturing resources to better support the businesses with the greatest growth potential. The next phase is growth acceleration. Once we have our organization structure and operating model fully in place, we plan to further invest in the products and technologies that will propel this business forward. We are excited about the prospects for the strategy and its potential to drive sustained long-term value for all of our stakeholders. Now I'd like to turn the call over to Mick, who will review our results for the quarter and provide the segment updates.

Thanks, Neil. And good morning, everyone. Please turn to Slide 6. Second quarter sales were up 4% or $18 million with double-digit increases in our building HVAC, CIS, and HDE segments. Included in the sales increase was $25 million of pricing to help recover rising material and other supply chain costs. Excluding pricing and foreign exchange, sales volume was down 3% as increases in HVAC, CIS, and HDE were more than offset by a significant decline in automotive. Adjusted EBITDA declined $26 million driven by the significant rise of material costs. The quarter included nearly $45 million increase in commodity metals, freight, packaging, and tariffs. In particular, prices for aluminum, copper, and steel were significantly higher than the prior year. As I mentioned, as an element of revenue, we adjusted prices by $25 million to offset the significant cost increases. Despite the large amount of pricing this quarter had a $20 million net negative material impact. In addition to materials, the quarter had a difficult comparison from temporary COVID savings, which peaked during Q2 of last year. Compared to the prior year, the absence of COVID savings resulted in an $11 million cost increase. Adjusted earnings per share of $0.15 were $0.28 below the prior year. As we look back at the quarter, revenue was somewhat lower than we originally expected and materials have increased beyond what we anticipated. In particular, the auto segment sales were well below our expectations as customers failed to meet their targets. Before moving on, I'd like to summarize the $5.9 million of adjustments incurred during Q2. First, we recorded $3.3 million of impairment charges related to automotive assets held for sale during the quarter. Next, we incurred $1.6 million of costs related to our 80/20 transformation with the majority relating to recruiting and severance. Finally, we incurred $700,000 of restructuring and environmental costs and $300,000 of other auto exit costs. As usual, our press release and appendix include additional information, U.S. GAAP results, and complete reconciliation. Now let's review the segment results, please turn to Slide 7. The Building HVAC segment reported sales growth of 13% from the prior year. This increase was driven by continued momentum and U.S. heating sales, which were up 17%. In addition, commercial ventilation and air conditioning sales grew 12% as demand for school products remained strong. Data center sales were up 10%, sales were temporarily impacted by timing as a large dollar value of orders were completed, but certain customers delayed shipments. As Neil covered, the order book is extremely strong and we anticipate very strong year-over-year growth in the second half. The macroeconomic cost drivers that covered in my opening comments impacted all our segments, including HVAC and resulted in an adjusted EBITDA decline of $3 million. The lower adjusted EBITDA was primarily driven by two factors. First, net material costs increased by approximately $2 million, and second, the combined impact of higher wages and COVID-related items resulted in a negative $2 million in comparison. As I mentioned last quarter, we're actively raising prices to offset commodity trends, but in some cases, there's a lag between the time of orders and delivery, which has been amplified by the supply chain challenges. The negatively impacted margins in several large custom orders, we fully expect the margin to improve as recent production orders, their shift and pricing actions fully take effect. Please turn to Slide 8. Second quarter sales for CIS were up 20% or $25 million with more than half of that increase coming from pricing. Revenue is up in most markets, including 30% in refrigeration, 21% in commercial HVAC, and 30% in coatings. Despite the sales improvement and higher pricing, adjusted EBITDA was down $1 million or 11%. Material costs net of any pricing recovery increased over $4 million and unfortunately offset the volume benefit. We anticipated a difficult SG&A comparison given the COVID savings achieved in the prior year. SG&A increased $1 million mainly due to wages and prior year COVID action. We are continuing to push through price increases and taking other actions to improve the profitability of this business. Given all of these activities, we anticipate finishing the fiscal year with a much-improved adjusted EBITDA margin in Q4. Please turn to Slide 9. Sales in the HD segment were up 18% or $30 million with about a third relating to pricing and foreign exchange. Adjusted EBITDA declined $8 million driven by a decline in gross profit and higher SG&A. Gross profit decreased $5 million, which we anticipate to be the low watermark for this fiscal year. The lower gross profit was the direct result of commodity prices and logistics costs such as tariffs, packaging, and freight. Material costs increased by approximately $12 million net of all pass-through pricing. In addition to the higher materials, SG&A was up $2 million, driven by the COVID cost savings actions taken in the prior year and higher wages. While we expect continued revenue growth in the second half, we're taking a more cautious approach from a revenue standpoint. If some customers have reduced orders due to supply chain issues. We have worked aggressively on multiple fronts to share and recover the rising costs, but in most cases, we're under long-term agreements in this business and must wait to implement material price increases. In some cases, the lag on these price adjustments is six months or longer, which can be challenging in periods of rapid cost inflation. We're working with our customers to shorten these lags wherever possible. The next wave of price adjustments will be in January, which should result in a significant Q4 margin improvement. Please turn to Slide 10. As I discussed last quarter, we anticipated that our Q1 would be the high watermark for automotive sales. During the call, we discussed the global semiconductor chip shortage combined with higher raw material costs and various COVID impacts. For the second quarter, automotive sales were down 40% with declines across all geographic regions. I'd like to highlight that approximately $18 million of the decrease was due to the sale of our air-cooled automotive business in Austria, which was completed in Q1. Adjusted EBITDA was negatively impacted by the lower sales volume as well as higher commodity prices and the lack of COVID savings. More volume accounted for approximately $14 million of the EBITDA decline; net materials and COVID accounted for another $4 million of negative variants. As Neil mentioned, we have terminated the sale agreement with Dana and have further reduced their automotive revenue for the balance of the year. We anticipate difficult comparisons in our automotive business to continue for the balance of the year. However, we're taking immediate actions to improve this business given the challenging market conditions. We'll provide more details regarding these actions during our next quarterly report. Now moving to the balance sheet, please turn to Slide 11. Year-to-date, free cash flow is a negative $39 million, including a negative $18 million in Q2. As discussed last quarter, we anticipated that cash flow would improve each quarter and finish the year in a positive position. The major drivers of year-to-date cash flow have been higher working capital and capital expenditures; in particular, inventory levels have increased significantly as material costs have increased and supply chain issues that force us to maintain safety stock to ensure adequate supply. We're working hard to reduce our order backlog, which will help to reduce inventories over the back half of the year. Overall, we expect our cash flows to improve over the second half of the year as we improve working capital and keep tight controls over capital spending. Our net debt of $333 million is slightly higher than last quarter due to the negative cash flow in Q2. Our leverage ratio is 2.5 times, which lands on the higher end of our targeted range, but well below the maximum covenant level of 3.25. Based on our full-year outlook, we anticipate the leverage ratio will return back to the 2 times range by year-end. Now let's turn to Slide 12 and our fiscal 2022 outlook. Given the various and prolonged headwinds, we are lowering our fiscal 2022 guidance; the reduced outlook mostly relates to two issues. With the first being the automotive market and the second relating ongoing cost increases. Since last quarter, we've significantly lowered our outlook for the automotive segment. Given the continued pressures from the semiconductor shortage; we mostly believe the chip shortage will continue through calendar 2022. From a cost perspective, metal prices continue to climb, which further pushes out our ability to fully offset these increases. As I previously mentioned, aluminum and steel prices have risen further since our last earnings call. We now expect that material costs for the full fiscal year will increase by more than $130 million; to offset that, we will adjust prices by more than $95 million. However, due to the additional increases in timing, the gap is temporarily widened from what we originally projected. To be clear, we will recover the majority of cost increases, but as materials have continued to increase, the additional price recovery will likely carry over into the new fiscal year. As a result of these factors, we're lowering our sales growth range to 10% to 16%; this combined with temporary costs, we now anticipate that adjusted EBITDA will be in the range of $145 million to $160 million. The team is working to reduce the lag on our pricing mechanisms and are pushing through price increases and other parts of the business leveraging the 80/20 data. We expect incremental margin and earnings improvements in Q3 above levels produced in the first half. However, we project the next large wave of pricing adjustments in Q4 with a more significant margin improvement in the final quarter of this fiscal year. In addition to the incremental pricing, we will not have the negative comparables in the second half related to prior year COVID savings. As we look at sales by end market, the demand in the majority of our end markets remains strong with double-digit growth. The auto market remains the main challenge, but we will begin our restructuring work. Our order backlog is unusually high, which has driven up inventory levels, and we expect to work through this in the back half of the year. Our focus is now on pricing recovery and order book growth, particularly in CIS and building HVAC. Based on the strong order book, 80/20 and future pricing recovery, I'm quite encouraged as we look forward to calendar 2022. With that, we'll take your questions.

Thank you. [Operator Instructions] Our first question is from Matt Summerville with D.A. Davidson. Your line is open.

Thanks. A couple of questions. You had a $20 million sort of gap, if you will, between the $45 and the $25 in fiscal Q2? [Indiscernible]

So, operator, we weren't able to hear that question. I don't know if it was just our end.

Mr. Summerville is having some audio issues.

You guys can hear me?

We got you now, Matt.

Okay. Sorry if I had some audio issues. Let me just ask you, so if a $20 million gap between the $45 and the $25 in the input cost versus price coverage. What do those numbers look like in Q3 and Q4 as of today? And assuming that input costs stay where they are, when will that gap fully close for the company?

Yes. We've got you, Matt. It's Mick here. So, the gap narrows each quarter as we go forward. Assuming the material stabilized where they're at, the gap gets smaller in Q3 will be a little bit negative on a year-over-year basis. But maybe about half of this quarter, so maybe a little more than a $10 million gap in Q3, and then in Q4 we're anticipating a net positive material pass-through. So again, we're starting to recoup more in price than in cost on a year-over-year basis. So, we would end this year with about a $40 million gap. I anticipate we'll need another quarter or two of positive gains before we fully catch up. But again, I would expect one more negative quarter in the December quarter, but less, and then having a net positive beginning in Q4, which is good news for us. And obviously, the last 10 days or so, it's been a really large change in the material aluminum and copper costs. If that were to continue or to stay, there's even opportunity for us on the positive side, but we haven't factored that in at this point.

Got it. With respect to building HVAC, as I look at the end-market slide towards the end of the presentation. I just add up those numbers and sort of average them, I guess not add them up, average them somewhere in the range of 25% to 35% type growth in the business, yet year-to-date you were only up 18%. Do you think you're gaining market share in that business? So, help me square that up. I know you mentioned you had a shipment on the data center side pushed to the right a little bit at the customer's request. So maybe quantify that, if possible, but kind of square up the growth you've seen in building HVAC versus the numbers indicated on that slide.

Yes. I'll go first. Matt from the financials and Neil can add a little more color commercially and competitively on the market space. But yes, in building HVAC Q2, the biggest driver there was between $5 million and $10 million of product that we produced completed, and customers didn't pull or take shipment at the end of the month or at the end of the quarter. That in itself would have had a big impact in the quarter from a data center revenue growth and from a margin and an earnings standpoint. So, we're expecting a very strong second half of the year. When you do the math heating and ventilation side have been pretty consistent and strong growth for the first half of the year. We knew Q1 data center growth was a little bit lower, and then this quarter data center growth at 10% is below what we're projecting for the year, but a portion of that is just a timing by days. And then there's a large backlog. I'll let Neil comment too. So, the biggest driver in the second half to get to the full year guidance will be data centers.

Yes. Thanks, Mick. Hi Matt. Yes, definitely a data center story. As you can see from the press release last night, we brought a new data center general manager and internal promotions. So, we're excited there. And he's going to help us with this transition, but overall BHVAC, we're seeing heating increase. We've got a very healthy order book on the heating side, a rolling 12 month through September orders are up over 25% from the previous year. And in our air quality, we continue to get traction and momentum, especially in the areas where we have high concentration. That's a 300% year-over-year growth on the indoor air quality side. And then, of course, with data centers, the key there was timing those large orders that we have with our two key customers and in terms of their build-out of the data center. So, our product was ready to go and ready to ship, but the data center wasn't ready to receive it relative to the supply chain constraints and the data center build-out. So, we've got the orders, we have the opportunities, and it's just a matter of getting them shipped to the end-user; just a timing issue there.

Got it. And just as a follow-up and then I can get back in queue. What sort of timeline are we looking at for us to be able to externalize those externally outside Modine to start to see tangible improvements in both the auto and non-auto businesses from the 80/20 process, the segmentation approach you're taking to the business?

Yes. That's a good question. So, this quarter, we're this – this current quarter we're working with new team members. We've got a new GM that is leading the HD portion of the business and the new GM that we've hired to lead the EV portion of the business. We're working with our consultants as well as the new leadership team to analyze the data of combined automotive and HDE. And what does that look like? So, as we filter that information, similar to what we did roughly 10 months ago with data center, it takes typically three months to get through the data analytics. So, we can start to divide the action plan, and then there's some immediate actions that we can take, even as we go through and look at the consolidated data. There's some restructuring efforts that we can do, and there's some other areas that we can address considering the semiconductor shortage that are just actions that are must-dos versus the 80/20 strategy.

Got it. Thank you.

Our next question is from Steve Ferazani with Sidoti and Company. Your line is open.

Good morning, Neil. Good morning, Mick. In terms of your guidance and I guess this sort of follows up previous questions, certainly as we've gone through this earnings season, there's been a lot of indications that supply chain issues are not getting better, potentially getting a lot worse, and the duration longer. So, when you're thinking about guidance, even in terms of your data center product being ready, but your customer not being able to take it and certainly we know on the auto parts side, the supply chain issues there, HDE perhaps extending theirs. I'm just trying to think about how the shift in supply chain issues is affecting your thoughts on guidance for the remainder of the year?

Hey, Steve, it's Neil. Good to hear from you. I'll comment on that first and I'll turn it over to Mick. Fortunately for us, when we're thinking about supply chain, we have two isolated areas that we're thinking about; primarily in the HDE side of the business in North America and then auto with semiconductors. So, it isn't as if we're managing this throughout the world globally. There are two primary areas that we can focus in on and that's essentially where we've got the management team focused currently.

Yes. From the new guidance and the balance of the year, Steve, I think there are two elements; one is volume, and I think you're getting there from that regard. We did an element on the adjustment was in volume. So, we're really looking at – we've pulled down auto for the balance of the year. And so, we feel good about that projection now. We've really level set and come under customers. And then secondly, there was an element of HDE as well, where we lowered that. The biggest driver, and you can see it right in the first half, is materials. Short of a rapid rise further, what I feel good about is these are contractual agreements. They can be painful and long, but we know what we're going to get, and we know how the mechanism works. So, I've got good confidence in that element coming through. So yeah, we've got some backlog to work through some operational challenges, by far the biggest challenge for us in the first half obviously has been metals and materials. And we will begin to flip that and get a bigger piece of the recovery in the second half of the year.

And I think it's sort of step back and look at a bigger picture, you're almost up to a year and probably more challenging year than maybe you thought when you stepped into the role. And now you have this additional challenge of automotive staying. How you're thinking about the big picture, these mixes of these four segments, whether they make sense going forward and how you're thinking big picture of Modine over the next year or two?

Yes. That's a great question, Steve. Well, big picture for me 11 months in, we've progressed considerably with the leadership team. So, we have the full leadership team in place. We're taking back control of the auto business. We're managing through the supply chain disruption. We continue to advance our 80/20 principles and further segment the company, certainly excited about the future and the strategies that we're developing currently. And then, to back it, we've got a really good order book, that's healthy. And we've got some commercial wins in the – in the focused areas that we wanted to focus in. So, those are the things that set the stage for us to think big picture. Now with a new team, as we go through our strategic planning cycle, we should come out of that by the end of this calendar year. From that, we'll be able to look at big picture how we want to continue to segment the organization. So certainly, you're right in terms of keeping our focus and having less distraction; we want to make sure that we have it segmented properly. We have the right leaders in place and they have the right goals, and we're treating these businesses differently. And that's part of who we are and where we're going to be. But I would suspect within the next 90 days, we'll be able to have something after our strategic planning cycle and our leaders – our new leaders have time to digest their business.

I guess what I'm getting at is you tried to get rid of automotive; you couldn't. As you look at these four businesses as all-encompassing Modine, does this mix make sense to you?

Yes, Steve. So, we're a diverse company, right? We have lots of different products in lots of different markets and that brings stability at times. So, I'm very accustomed and familiar with working in diversified industrials, and that's the space we're in today. So, we have a mix of HVAC, auto, data centers, and we manage these differently. As we continue to evolve, we're always going to assess the market and we'll make the determination of where is it that we want to be, where do we want to play. We'll put together some financial targets; we'll look at what businesses are accretive and what businesses are dilutive. Regardless of the space, if it's diluted to the overall target, we're going to address that, and we'll decide whether or not we want to be in that space.

Sure.

Sure.

Thanks. I'll ask you a couple of follow-ups. Just for modeling purposes, Mick, what is the revenue headwind that we should be expecting in Q3 and Q4 associated with the air-cooled divestiture? And then you mentioned from a free cash standpoint being positive for the year, can you frame that up a little bit? Does positive mean $5 million, does it mean $50 million? Obviously, that can mean a lot of different things. So maybe just put a finer point on your free cash expectations.

Yes, sure thing. So, I think first you had a question; it's about auto. I think the easiest way to look at that, Matt, would be, we see the auto segment down last year, I believe it's like $398 million, $400 million down 20% to 30%, absent the air-cooled portion that would be down approximately 10%. And then with regards to a fair question on free cash flow, we're expecting Q3 obviously to flip to be positive cash and the same with Q4. So right now, we see positive cash flow for the year, most likely between I’d say $15 million and $25 million or so from a free cash flow standpoint.

Got it. And then you mentioned coming in the second half of your fiscal year with a materially elevated backlog; can you put that in the context, talk about absolute backlog levels, how much backlog has maybe increased in the last six to twelve months with everything sort of with tightness and supply around the world, et cetera? Is there a way that you can frame that up for us?

You want me to go for it? Yes, so it really depends as we go around business to business. The shortest windows, right, is in our CIS and building HVAC space as Neil walked you through. So there really good visibility, I would say, for the second half of the year in building HVAC and CIS, well north of a $20 million in data center backlog. And Neil talked about heating as well. From a CIS standpoint, generally speaking, I believe we've got really strong visibility in orders filled or booked through the first couple of months of 2022. Obviously beyond longer and Neil can talk about the order book and the opportunities and the quotes we're doing for data centers and the like, well into calendar 2022. And then from the HDE auto EV side, I think when we think about the transition there, a good order book on EV and across the board and both specialty vehicle as well. So there, we typically have – we haven't quantified yet. I'll take that away from a vehicular standpoint, but we generally have a really good visibility over a two- or three-year window. And across auto EV, truck EV, specialty bus, and truck, we've got good visibility here to double-digit compound growth rates over the next several years. Neil, did you want to add any other to that question?

Yes, that's good. And I think of it like this, Matt, when we're looking at HVAC, we're looking at CIS; the backlog that we continue to build is we're winning in markets that we're focused in. And we continue to gain share, and that's very positive. The backlog that we've built in HDE and then automotive has been because of some issues that are outside of our major customers that go on strike or customers that closed plants for short one- or two-week periods in order to stabilize their supply chain. So, backlogs built a couple of different ways, but we're really positive and excited about the backlog in MBH back in CIS.

Got it. And then you mentioned that you're initiating a restructuring program in auto. Is it too early to frame-up what we should anticipate the cash cost of that looking like and what the savings we should be anticipating in over what timeframe? And then separately – that's question number one. Separately, you also are kind of hinting to a broader manufacturing realignment potentially born out of 80-20. And I guess, I'm also wondering sort of the same question on that, when will we get more detail?

You want to take the first one? I'll take this.

Yes. Well within this quarter, or as we approach quarter end, Matt will be able to give you more details on the level of restructuring that we'll have with regards to the automotive business. As you we've got legal, social obligations that flowing processes follow there, which we will. But I think any cash impacts to that just from a timing standpoint will likely be into the new fiscal year, and we can lay out for you both the immediate savings and the timing of that cash flow. So, we'll be able to give you more information within the quarter or in here stay tuned. Yes, relative to the second question, Matt, it's a good question. We're looking at all of our operations’ split principles. One of the benefits of being a global company is that we have facilities, factories, capabilities, and supply chain capabilities globally. And we want to leverage that and potentially repurpose some of those facilities towards our greatest growth opportunities. And data centers, we've focused a lot in terms of our facilities in the UK and how we can optimize the facilities and get plants dedicated to specific products. Removing the complexity and allowing for growth. So, there's a series of different maneuvers that are taking place in the UK to set these facilities up with dedicated product lines, to support data centers. We're doing the same in Virginia on the HVAC side of the business, where we see opportunities with indoor air quality, and we see opportunities for heat. Our biggest obstacle to growth there right now is manufacturing capability. So, we're really focused on making sure we can repurpose some of these plants and get dedicated product lines out and making sure we're manufacturing the right things. So, we're making make/buy decisions based on the opportunities and the growth potential. And then obviously within HDE and auto, there are some areas of consolidation that we can continue to look at as we've split those apart. With the previous Dakota deal, now we're looking at how we can bring some of that together where we have some offers, obvious synergies, particularly where we want to grow in EV.

Got it. Thank you, guys.

The next question is from Steve Ferazani with Sidoti and Company. Your line is open.

Yes. Just want to follow up on a couple of things just as you can imagine, all of these conference calls this quarter are so focused on trying to piece through the supply chain and labor issues. And I just want to clarify in terms of backlog, it sounds like you are indicating the issues are purely on the customer side. And I just want to get a better sense. You've indicated the material price issues, but what you are seeing in terms of component shortages, and are you just not having those issues when the backlog growth is purely on the customer side?

No. So we do have some supply chain constraints for sure, as we have that in the data center side of the business. So, it’s both ends, right, Steve. So, you have it where customers aren't able to take the finished goods because their sites or their facilities aren't prepared. And then we also have it on the front end of the business with – it’s roughly five specific suppliers that we're really focused on in the HVAC side of the business. On the HDE side and the automotive side, we're seeing some constraints there. But I would suggest it's more labor and managing the factories and getting the factories output has been a challenge. Supply chain is primarily focused in HVAC is where we have a lot of our energy and efforts and then labor on the HDE and auto automotive side of the business.

As my second, when I ask about labor, are you seeing, and how are you managing wage inflation to get people through the door? And how are you handling retention? Because I know that those have been two separate issues for a lot of companies.

Yes, we're staying competitive. We have to stay competitive in this market. We have increased our wages, and we've gone through some very creative ways in order to attract and retain people in our facilities. So certainly, that's a focus, and it's primarily been a North America play for us, Steve, where we have to continue to make sure that we have our facilities up and running and we have them properly staffed. But it's a lot of overtime; it’s shifts, three shifts, six, seven days a week in order to maintain production output. Certainly would like to have more labor so that we could dial back the overtime.

Do you think you have enough labor as particularly on the automotive and HDE side, you start seeing some of this pent-up demand, turn to production? Certainly, on the automotive side, how far off do you think you are where you need to be on the labor front? And I know particularly with automotive, you were kind of hands-off for the last four quarters. As we see some of this come back, how [indiscernible] are you on the labor side?

Yes, we're roughly a couple of hundred people behind schedule where we want to be. We've got the team looking at the stop-gap measures in order to close that. We've been running that way for multiple months now. We've been able to figure out a way to get to the levels that we're at. We can continue to maintain at these levels, but certainly we would want to increase our labor pool especially in North America.

I know you've had a lot of questions. Thanks both of you for the time.

Thank you.

I'm showing no further questions at this time. I'd like to turn the conference back to Kathy Powers.

Thank you. And thanks to everybody for joining us this morning. You'll be able to access the replay of this call through our website in about two hours. We hope you all have a great day. Thanks.

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