Welcome and thank you for standing by. At this time, all participants are in listen-only mode until the question-and-answer session of today’s conference. [Operator Instructions] I would like to inform all parties that today's conference is being recorded. If you have any objections you may disconnect at this time.

I would now like to turn the conference over to your host, Mark Oswald. Thank you. You may begin..

Thank you Danielle. Good morning and thank you for joining us as we review Adient's Results for the Fourth Quarter of Fiscal Year 2021. The press release and presentation slides for our call today have been posted to the Investors section of our website at adient.com.

This morning I'm joined by Doug Del Grosso, Adient's President and Chief Executive Officer; and Jeff Stafeil, our Executive Vice President and Chief Financial Officer. Also joining the call today is Jerome Dorlack, Executive Vice President of the Americas.

On today's call, Doug will provide an update on the business followed by Jeff who will review our fourth quarter financial results and outlook for fiscal 2022. After our prepared remarks, we will open the call to your questions. Before I turn the call over to Doug and Jeff there are a few items I'd like to cover.

First, today's conference call will include forward-looking statements. These statements are based on the environment as we see it today and therefore involve risks and uncertainties. I would caution you that our actual results could differ materially from these forward-looking statements made on the call.

Please refer to slide 2 of the presentation for our complete safe harbor statement. In addition to the financial results presented on a GAAP basis, we will be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance.

Reconciliations for these non-GAAP measures to the closest GAAP equivalent can be found in the appendix of our full earnings release. This concludes my comments. I'll now turn the call over to Doug.

Doug?.

Thanks Mark. Good morning, and thank you to our investors, prospective investors and analysts joining the call this morning as we review our fourth quarter results for fiscal 2021 and expectations for fiscal 2022. Turning to slide 4. Let me begin with a few comments related to our fourth quarter and 2021 fiscal year.

Essentially the fiscal year can be best described as a year of two halves. In the first half of the year, Adient delivered significant year-over-year earnings and margin improvement, driven by the company's focus on launch, costs, operational improvements, and customer profitability management.

Exiting our second quarter significant macro pressures including numerous unplanned production stoppages at our customers, primarily related to petrochemical and semiconductor supply chain disruptions and rising commodity prices began to impact the industry and Adient. These headwinds persisted throughout the second half of our fiscal year.

Despite the many challenges, the Adient team remained focused on successfully executing items within our control. A few notable examples include the closing of our China strategic transactions and the significant progress made throughout the year on deleveraging our balance sheet.

That said, the accomplishments achieved in fiscal 2021 were hard thought given the very tough operating environment. On the right-hand side of the slide, you can see that the top operating environment had a significant impact on our Q4 results. Adient's revenue for the quarter was $2.8 billion, down from $3.6 billion reported in Q4 fiscal year 2020.

The decrease was driven by the significant reduction in vehicle production year-over-year combined with Adient's customer mix particularly in Europe.

The lower revenue combined with premiums and temporary operating efficiencies resulted from unplanned production stoppages dropped right to our earnings with adjusted EBITDA declining $169 million year-over-year to $118 million in Q4 fiscal year 2021. Cash was a bright spot, $1.5 billion as of September 30th.

The cash balance includes $695 million of proceeds related to the first tranche of proceeds collected from the China transactions. Jeff will provide additional commentary on Adient's financial results including our cash and capital structure in just a few minutes. Turning to slide 5.

Let me spend a few minutes discussing the current operating environment. The factors shown on the slide are significantly dominating and influencing the business near-term as evidenced by our Q4 and second half fiscal 2021 results. On the left-hand side of the slide, we've listed several of the headwinds we're facing.

No surprises here as many of these macro headwinds surfaced at the end of our second quarter including ongoing supply chain semiconductor shortages, which continue to result in production downtime at our customers.

As seen with our Q3 and Q4 results, these unplanned production stoppages are leading to premiums and operating inefficiencies across our network, which as you would expect, we're working hard to mitigate.

For fiscal 2021, we estimate supply chain disruptions and the resulting lost production, operating inefficiencies, premium freight, et cetera had a net impact on the top line of about $1.9 billion and adjusted EBITDA by approximately $450 million. Unfortunately, these supply chain disruptions have not lessened as we've entered our new fiscal year.

As shown in the middle column, the visibility of our customers' production schedules has not improved over the course of the past few months. Discussions and commentary from our customers suggest supply chip and production schedules could improve in the coming months. Unfortunately, there is no evidence of this happening at this time.

As such, we're continuing to run the business with the assumption that the challenging operating environment will continue. Jeff will discuss our overall fiscal year '22 planning assumptions in his prepared remarks.

These include, our assumption that global vehicle production remains relatively flat year-over-year, up modestly in some regions, down in others. As such, it's likely unplanned production stoppages will continue leading to premiums and operating inefficiencies like those experienced in the second half of 2021.

In addition to supply chain disruptions and unplanned production stoppages, elevated input costs such as commodity prices, freight and energy costs continue to place downward pressure on the near-term results. As noted on the slide, steel prices in the Americas continue to be approximately three times higher than at the start of the year.

As mentioned on our Q3 call, although Adient has certain mechanisms and pass-through agreements in place with our customers, they were never intended to cover the movements of this magnitude or duration. For 2021, we estimate the net impact was roughly $70 million, generally consistent with our earlier expectations.

If we set aside the macro pressures and look at our core business performance as highlighted on the far right-hand side of the slide, we're continuing to see an upward trajectory. A few points worth noting. Stabilizing the operations in fiscal year '19, we achieved approximately 500 basis point increase in the company's adjusted EBITDA margin.

Fortunately, we have about 400 points of headwinds masking the performance. Roughly speaking, 250 basis points from volume, 40 basis points from net commodities and 100 basis points associated with temporary operating inefficiencies.

The team is very much focused on driving down SG&A costs, executing both temporary and permanent actions and our operating cost structure, engineering design efficiencies and cost reduction implementations are all performing well.

What has really emerged over the past several quarters, driven by inflationary pressures are commercial issues that we're working to address. As mentioned, the macro pressures impacting the business in Adient are believed to be transitory in nature. Based on this belief, Adient has executed numerous actions to lessen the impact.

In the middle of the slide, you can see examples, which include commercial negotiations with our customers to claw back the increased commodity prices over and above the contractual payments in place. If you recall, during our Q3 earnings call, we mentioned potential risk fiscal year '22 of about $200 million.

Through the recent negotiations, we were able to reduce that exposure to roughly $125 million.

From an SG&A perspective, we've executed targeted reductions in our workforce, implemented a salary reduction in stock replacement program at our executive level and made other temporary benefit actions such as delaying merit increases in the 401 (k) match in the US.

To help lessen the impact of rising freight costs, the team is implementing changes to our pack density and optimizing our freight footprint based on open capacity. We've also experienced an acceleration in VA/VE efforts with our customers. Again these are a few examples to illustrate Adient is not standing still.

Important to remember from a historical view, our business had little inflation, customers have effectively priced on a value add. That said, the level of cost increases from multiple angles that we are experiencing today is unprecedented and requires either quick market correction or a change in customer pricing.

If it's determined that the inflationary pressures are sticky, not transitory in nature, alternative customer commercial solutions need to be negotiated. Switching gears and focusing on those actions within our control, let me provide a few comments on how the team continues to drive the business forward. First on Slide 7.

You can see that we're executing day in and day out. It starts with the back-to-basics mindset, improving every aspect of the business. As mentioned just a few minutes ago, the core business has seen significant improvement since 2019.

Stripping out the temporary operating inefficiencies, the business is running well on many fronts, such as launch execution, lower ops waste, increased utilization and reuse the capital to name a few. Adient's Q1 and Q2 results this past year highlighted this improvement.

We're also working hard to ensure the long-term outlook is bright by securing new and incumbent profitable business wins. We've done this at a very steady pace. And as we've mentioned, on our calls throughout the year this includes a very healthy portion of EV wins, which will continue to strengthen our leading market position.

As noted on the slide, over 20% of the wins in fiscal year 2021 relate to EV platforms.

Program wins are a testament to the much improved relationship with our customers that we've nurtured over the past two to three years, aided by the company's ES3 initiatives; ability to provide award-winning seat solutions including innovative solutions for EV platforms, Adient is quickly becoming the supplier of choice.

In addition to blocking and tackling, operationally and commercially, Adient recognizes the company's full potential cannot be achieved unless we commit to positive environmental, social and governance-related business practices.

During fiscal year 2021, the company increased its commitment to ESG efforts with the adoption of science-based targets and KPIs. Details to be provided in the 2021 sustainability report due in January of 2022. Outside of the day today and turning to Slide 8, we've made great progress in fiscal year 2021 with regard to long-term strategic actions.

September 30, we announced the closing of our strategic transformation in China.

The completed transaction enabled Adient to drive our strategy in China independently, which is expected to result in a variety of benefits including capturing growth in profitable and expanding segments, improving the integration of the company's China operations and allowing for more certain value realization relative to status quo which were cash and value are generated from dividends at entities not in Adient's control.

We expect to remain a leader in the China market essentially a position on power with and among the top three complete seat suppliers in the market. Based on our estimates this equates to a market share of just under 20%. At closing, Adient received its first tranche of proceeds, totaling $695 million.

Not only do they – does the completed transactions in China allow us to chart our future in the country independently, but they also enabled the company to accelerate its balance sheet transformation, which we view as another key accomplishment in 2021.

During the 2021 fiscal year, the company executed approximately $840 million in voluntary debt paydown with the proceeds from China. In the bank, we will further progress on deleveraging in fiscal 2022.

Adient will continue to prioritize its capital allocations toward debt pay down and until the company reaches its targeted leverage threshold of 1.5 times to two times net debt-to-EBITDA. Bottom line, we're executing and delivering on items within our control. Turning to Slides 9 and 10.

Let me make a few comments related to our business wins and launch performance to ensure enough time is allocated to Jeff and our expectations related to fiscal year 2022. I'll be brief with regard to these slides. As you can see Slide 9, is our typical new business win slide highlighted a few of Adient's recent wins.

Bottom line for the quarter just completed similar to what we've disclosed throughout the year. The company had good success in capturing new conquest and incumbent business. The win rates for fiscal 2021, were strong and in line with internal expectations. I already mentioned, EV wins accounted for approximately 20% of our business booked in 2021.

A very good outcome as growth in this area will continue to strengthen our leading position. I'd also point out, we are pleased with our seating solutions are delivering world-class products to our customers as evidenced by a number of recent J.D. Power awards for Adient seats in the Ram F-150 and Mustang Mach-E. Flipping to Slide 10.

As we typically do, we've highlighted several critical launches that are complete in process or scheduled to begin in the near-term. The company continues to focus on process discipline around launch readiness and has driven a high level of performance especially considering the launch load and complexity of launches that were planned for the year.

In addition to the number of launches and complexity, the disruptions to production schedules presented another layer of challenges the team successfully managed through again a testament to the discipline we've instilled around the process.

As you can see at the bottom of the slide, we've provided some color on what you can expect from fiscal 2022 with respect to the volume and complexity of launches. Generally speaking volume is up. This is primarily driven by launches that were delayed from 2021 to 2022.

Complexity is mix up slightly in the Americas and in China, relatively flat in Europe and Asia, excluding China. I'm confident we'll maintain our focus on process discipline around launch readiness, driving results similar or better versus 2021. Before turning the call over to Jeff and turning to Slide 11, let me conclude with a few summary comments.

As discussed and highlighted with this presentation, Adient is executing many actions to provide the company for sustained long-term success. Advancing our back-to-basics strategy continues to be a key enabler going forward. We'll continue to drive the business forward despite the near-term macro headwinds.

No doubt the operating environment in 2022 will be difficult, given the persistent challenges impacting the industry. That said, we'll continue to manage through the difficulties executing actions along the way to lessen their impact. The underlying fundamental of the industry remains strong.

Once the near-term temporary headwinds abate, Adient will be well positioned to capitalize on the recovery. With that I'll turn the call over to Jeff to take us through Adient's fourth quarter 2021 financial performance and provide additional detail on what to expect in the coming year. .

first, we will experience a step up in our negotiated steel prices which took effect October 1; second, we benefited from several true-ups, as mentioned earlier, to our year-end accruals in fiscal 2021's fourth quarter such as our incentive compensation and medical accruals effectively meaning that we had over accrued in earlier quarters and true them up to actual results in Q4.

We largely expect these factors to offset the benefit of slightly higher revenues in our first quarter. Now that, we've covered our fiscal 2022 expectations for sales and adjusted EBITDA, let me quickly comment on expectations for a few key financial metrics on slide 23.

Starting with equity income, based on our assumptions of production in China, the portfolio actions implemented in fiscal 2021 and FX rates, we'd expect equity income to land around $80 million to $90 million. Interest expense of about $150 million, includes an assumption of a further $1 billion of principal debt prepayments in 2022.

Cash taxes in fiscal 2022 are expected to be around $80 million. Our booked cash taxes are expected to be slightly higher call, it about $100 million at this time. During fiscal 2022, we might see our adjusted effective tax rate higher than normal, and fluctuations amongst quarters, due to valuation allowances and our geographic mix of income.

That said, it's important to remember that, we maintain valuable tax attributes such as net operating loss carryforwards, and that these tax attributes can be used to offset profits on a going-forward basis, so cash taxes on Adient's operations, should remain relatively low even as profits increase.

Capital expenditures are forecast to be about $300 million to $325 million. Just a few comments regarding the forecast, as it's elevated versus the 2021 spend. First, the majority of spend supports customer launch plans and the timing of those launches.

Fiscal 2021 spend, was unusually low under 2% of sales, as certain launches were pushed into fiscal 2022. Slight uptick year-over-year is driven by the consolidation of CQ, AT&T and the Langfang entities as part of the China transaction call it around $15 million or so.

As you can see at the bottom of the slide, given the backdrop of the current operating environment, providing specific full year estimates for adjusted EBITDA equity income and free cash flow with reasonable certainty is not possible at this time. With that, let's move on to the question-and-answer portion of the call.

Operator, first question please..

[Operator Instructions] Our first question today comes from Rod Lache. Your line is now open..

Good morning, everybody..

Hey, Rod..

I'd like to just maybe hear a little bit more about, how you would characterize the bridge from what you're suggesting, you'll experience in fiscal 2022 to more trend-like environment? So you're talking about 79 million units of global production. If normal is more like 90 million that looks like 13%or so maybe a billion of revenue I'm thinking.

And maybe you can just comment on how that would convert? And then in the second half of the year you had $118 million of inefficiency. I can't remember what it was in the first half but that and the $195 million of commodities that you're saying you're absorbing in 2021 and 2022.

Can you maybe just give us some color on how that – those kinds of things might get recovered?.

Yeah. Great question, Rod. And it's – as we look through, and when IHS cut back 2022 production and we started to see that the impact of that we were seeing in 2021 would carry over, we've spent a lot of time thinking through what 2023, and what the market will look like as we get to the other side of this.

But breaking that down, and I did reference back to page 5, of the presentation, at the end of my remarks there a second ago. The 2021 impact to revenue, we had estimated about $1.9 billion. We have a pretty similar maybe even a tick higher what we think has come out of our 2022 build, or production given the macro issues that we're facing.

So call it about $2 billion in sales. I think from a contribution or flow-through on that, you're talking 15-plus percent, so call it $300 million-ish perhaps change. And we also had – similar to last year we expect similar to 2021 to have a pretty similar level of inefficiencies. I mentioned, we're having, to overstaff a lot of our operations.

We've -- the production environment has been nothing short of -- while I was going to say awful but there's probably several other words to use to characterize it. So all those inefficiencies are effectively we think duplicating themselves in fiscal 2022. And then, you mentioned the commodity headwind.

So as you start to look forward we do see a significantly higher volume picture which should have great flow-through impacts for us. We'd see in an environment where we weren't having that to not have those inefficiencies flowing through.

And the commodity situation we do expect to continue to get better either through commercial negotiations, or the time period of our lags, and cost recovery mechanisms with our customers to catch-in..

Okay. So it sounds like, you do believe that, ultimately, the full impact of these two years of commodities and inefficiencies get recovered? Just wanted to clarify that, because you also mentioned, freight, and energy, and a number of other things that are kind of influencing the -- your views on the outlook..

Yeah. I would -- Rod I would say from a commodity standpoint, they ultimately get recovered. It's a question of how long that takes. Right now, we're kind of using extraordinary measures from a commercial negotiation, because the mechanisms we have in place fall short.

But over time as commodities stabilize or go down, those mechanisms will ultimately address the issue. We're trying to bridge that gap in the near-term. Energy and ocean freight are the most emerging issues that are having an impact.

On ocean freight we think there's a lot of self-help we can put in place, but that takes a little bit of time as we look at alternative manufacturing locations. And as we mentioned in the call, we can even change pack density.

Some of that ultimately may result in a commercial negotiation, because we don't expect to bear that burden if ocean freight rates don't come back down. And they're as you know extraordinarily high right now.

Energy I think is really a new emerging issue that we have in Europe, that we're getting our arms around and assessing what that full impact is going to be. That's probably less of a commercial issue for us. And whether it transitory or not is difficult to predict at this time, but it's a relatively smaller issue in comparison to the other two..

Our next question comes from John Murphy with Bank of America. Your line is now open..

Good morning, everyone. This is Aileen Smith on for John. I understand why it's tough to give a formal outlook on adjusted EBITDA and free cash flow into next year. But I wanted to ask a question around free cash flow.

And whether it's possible to provide maybe a directional read in the same way you gave for adjusted EBITDA, or perhaps a way to think about free cash flow conversion from EBITDA into next year? Just trying to get a sense of whether on an operational basis you think you could be free cash flow generative next year, outside of some of the cash tailwinds you'll get for strategic actions?.

Yeah.

So just on a free cash flow basis, I mean, what I would expect is for a negative free cash flow in the first half of the year, primarily with the working capital movements of when volume sinks pretty heavily for us you can go back to the COVID-19 timeframe, when we were in a shut down 1.5 year half ago or so and see what that did from a working capital standpoint.

It was negative but it worked back through the system. Our expectation right now is that, while we have a first half negative, it would come back. And I don't think it's, breakeven-ish, maybe a little better maybe a little worse just depending on where the overall environment since next year.

But I would -- and a couple of other I guess key points you mentioned in there, we would expect restructuring to be down interest expense to be down CapEx slightly up from an overall year standpoint. Cash taxes are about neutral, I think year-over-year..

Okay. That's helpful..

Big volatility is just going to come from working capital..

Yes. Understood. And then I wanted to follow up on one of the headwinds that was cited on the EBITDA walk about the non-repeat of various commercial settlements.

Is that solely just the onetime benefit from renegotiating contracts with your customers that obviously doesn't repeat, or should we read into that as you're getting into the eighth or ninth inning of sorts on those discussions with your customers? And so settlements should naturally abate going forward, but the offsetting factor is that you've got more economic contracts in the business and the consolidated numbers now? Just trying to make sure there isn't anything nefarious to read into there with the commercial settlement not repeating?.

Yes, I think the way you want to think about them is particularly in our business is when you have a tremendous amount of volatility as we did in 2019 and 2020 because of COVID and really extraordinary material economics.

We sometimes settle those commercial negotiations and they're delayed and there's retro pieces and that's why they occur typically in a quarter when we go through that reconciliation.

Will that repeat itself based on what I just said? You could argue that it might because when we have major disruptions in the flow of the business, it takes a while to resolve those issues and they usually get settled out of period. So, that's how I think about it..

Yes. And just one other point to that specific point that I made in my comments. We had called out at the end of first quarter last year about $30 million of settlements that were really out of period where we had finally reached that settlement with the customer.

And we called that out a year ago if you look back and said part of the reason I think we did something close to $380 million in the first quarter of last year and we said about $30 million of it relates to some really out-of-period items that -- while a lot of this stuff just kind of mixes with the overall period year-to-year or quarter-to-quarter profitability, that $30 million was somewhat unique and special for the year and didn't want you to add it into your pro forma numbers going forward..

Okay, great. That’s very helpful. Thanks for taking the questions..

Our next question comes from Emmanuel Rosner. Your line is now open..

Thank you very much. First question is around your revenue expectations for fiscal 2022. So, I'm looking at slide 20 and we show you sales forecast versus IHS.

Would you be able to give us a sense of where you feel there's the industry production could check out better than IHS? And maybe a sense of your backlog how much net new business do you think is the benefit embedded in your base case?.

So, relative to HIS, like we said in our prepared comments the crystal ball is pretty cloudy. IHS just recently came out with the best case worst case scenario and if you factor in those numbers you can see that there's a would have a considerable impact. Right now it's two things I'd point to.

One, it's really unclear what our customers' capacity is to run because they're still on allocation with semiconductors and their outlook is pretty near-term on what that capacity looks like. The reason that is a problem for us is because we run just-in-time plant. So, our customers have not pulled back on releases.

So, the releasing which is forcing us to, as Jeff mentioned, to run at full rate and then we're getting very short notice on whether or not they have the ability to run at that rate. So, when I think about revenue, those are really the factors that make it very difficult for us to predict.

So, you can look at IHS best case, worst case, that might give you some insight, but I don't think there's really anyone out there right now that has great visibility on what the volume could be and how it unfolds.

And if we continue to have this disruption that we've had in the second half of the year, that's a very different outcome than just reduced volume, because of the way we have to run our plants..

I fully agree with you.

I'm just trying to better understand what's embedded in your base case scenario for next year, because you do have a sort of like revenue directional outlook? So any way you tell us within that how much net new business you're expecting? Because obviously two of the positive influences of volume and net new business and I'm just trying to understand in your base case what is in there?.

We do have a bit more coming in than we have going out Emmanuel and that is referenced with the market being relatively flat and we're coming in with, let's say, 400 basis points better than the market. And that's just driven by good mix and some good vehicles coming online versus those that are coming off. So that's a positive.

I will say just back to the question, every one of our customers would like to produce more than they are right now. And they're all telling us they're going to produce more than IHS is effectively saying.

So where could we have benefits? It's going to really depend on the complexities of the supply chain to get there and labor markets to be able to produce. If you go into a dealer right now, I was in one last weekend and there were zero new cars on the lot inside. There's a desire to make them.

It's just going to be a question and it's -- and that becomes really difficult to predict, because the complexity of the overall supply chain is enormous and any particular part can shut the vehicle down. So that's where we're managing right now. But I do think there's upside it's just very difficult to pinpoint where.

But it should be noted, there's probably some element of downside too. If you -- Doug mentioned the IHS pessimistic and optimistic cases and there's a pretty wide range for 2022..

Thank you. Our final question comes from Colin Langan with Wells Fargo. Your line is now open..

Great. Thanks for taking my question. Just to follow-up again on this walk from 2021 EBITDA to 2022. I mean, you called out some of the big buckets of commodity 125 commercial settlement of about $30 million. But you also at the beginning of the presentation talk about $450 million of inefficiencies.

So I guess, one is any saving -- is any of that sort of inefficiencies in the plan for sort of slightly down next year or is that all just assumed to be over a year out? And of the other -- any framing of the other buckets of mix launch and engineering? How big are those maybe I'm underestimating are in terms of headwinds?.

Yes. Just on the topic of the premiums the $450 million we called out on Page 5 of the presentation that had -- it was a mix of the contribution loss on the lost volume and the inefficiencies.

So if you use the $2 billion roughly and you use 15% you can think roughly $300 million of it is lost contribution margin and $150 million of it is inefficiencies and premiums that we've incurred. When we look at 2022, the makeup and constitution of those premiums are going to be different, but they're pretty similar year-over-year.

We don't have the Texas storm -- well hopefully, we don't have the Texas storm in 2022. But we have a pretty similar, we'll say, semiconductor impact. And we're also seeing higher freight and some of those pieces, which essentially give the total for the year pretty similar level.

As it relates to some of the other pieces here, I'd say, those are -- that particular equation we just talked about is what's dramatically driving the numbers and makes the outcome of the overall EBITDA extremely volatile and difficult to forecast. There's definitely a little bit of engineering.

It's call it 20-ish or so maybe a little higher of additional engineering that we would expect. The mix you can kind of calculate probably on your own just think of you have several bases -- or several hundred basis points higher contribution margin in maybe like 50% higher contribution margin in Asia region than you do in the rest of the globe.

So, with China being down in the IHS numbers by 4% that definitely plays a bit of an impact on mix..

The only thing I would add to that is the reason why we didn't give specifics on each one of those buckets is many of those issues are in negotiations with our customers and it takes time to sort those out and what the ultimate impact will be the net impact is still unresolved right now.

So more to come on that, and we'll continue to chip away and look to mitigate some of those impacts..

I guess, my second question just to be clear the commodity headwinds, you got it down pretty impressive improvement from 200 to 125.

Is there any more opportunity and maybe you were just alluding to that? And you also on one of the slides talked about alternative commercial solutions with customers, is that looking for concessions beyond the traditional commodities? Again trying to get any more color what you're referring to there?.

Yeah. So I would say there's more opportunity whether it's going to come in our customers making adjustments in the way they compensate us for commodities or I always go back to we have a basket of goods to commercial issues that we can negotiate around.

It's the nature of the business that we're in slightly unique just because we have such a complex module that there's so many moving parts that are impacting costs both negative and positive. We're working our way through that.

Our customers have expectations for productivity next year that we have to put on the table and negotiate against a backdrop of rising commodity costs. So all that's in discussion right now and it's just too early to really peg. Though I would say to your point, we are pleased, modestly pleased with the progress we made to date on material economics.

But a lot of work ahead of us on that front..

Got it. Thanks very much..

Great. And with that, it looks like we're at the bottom of the hour, so that will conclude the call for a day. As usual, I will be available throughout the day today, tomorrow for additional post earnings calls. So feel free to call and we'll be more than happy to address your questions at that point. But thank you..

Thanks everyone..

Thank you. .

That concludes today's conference. Thank you all for participating. You may disconnect at this time..