CTS Corporation (NYSE:CTS) Q4 2022 Earnings Call Transcript

CTS Corporation (NYSE:CTS) Q4 2022 Earnings Call Transcript February 7, 2023

Operator: Hello, everyone and welcome to the CTS Q4 2022 Earnings Call. My name is Bruno and I will be operating your call today. I will now hand over to your host, Mr. Kieran O’Sullivan, President, CEO. Mr. Kieran, please go ahead.

Kieran O’Sullivan: Thanks, Bruno. Good morning and welcome everyone to our fourth quarter and full year 2022 earnings call. We delivered solid financial results in the face of economic uncertainties that remain elevated driven in part by the current geopolitical environment in Europe, demand softness as well as rising interest rates and inflation. Although supply constraints are easing as we experience shortened lead times, we expect inflation and some supply pressures to remain a challenge, especially in the first quarter of 2023. As discussed in October, we were impacted in the fourth quarter by supply issues from a semiconductor supplier for our smart actuator product line. Our focus on profitable growth, diversification through our advanced materials capability and electrification in mobility markets remain our highest priorities.

We are energized and focused on achieving our long-term growth goals and improving our operational performance. For the fourth quarter 2022, sales were $142 million, an increase of 7.4% from the same period last year, including the negative impact of the anticipated short-term semiconductor supply pressures we noted in our last earnings call. Adjusted gross margin was 36.3%, down 38 basis points from the same period last year. Adjusted EBITDA margin was 22.9%, up 200 basis points versus the fourth quarter of 2021. Adjusted diluted earnings per share increased 14% to $0.56 on a year-over-year basis. Operating cash flow was $25.5 million compared to $26 million in the fourth quarter of 2021. New business awards were $71 million. We added 4 electric vehicle platform wins in the quarter and 10 new customers in non-transportation markets.

Turning to full year 2022 results, sales rose 14.4% to $587 million from $513 million in 2021. Adjusted gross margin was 36.5%, up 50 basis points from 2021. Adjusted EBITDA margin increased 180 basis points to 22.8% from last year. Adjusted diluted earnings per share increased 27% from $1.93 to $2.46. Operating cash flow was $121 million, up $35 million from 2021. New business awards were $523 million, below the elevated levels we achieved in 2021 as transportation customers delayed sourcing awards while they manage critical supply constraints. Going forward, we are reintroducing total book-to-business for transportation only and also introducing book-to-bill ratios for the company to provide more visibility into long and short-term trends.

We continue to make progress on our diversification strategy as non-transportation sales increased to approximately 48% of our overall revenue, up from 45% last year. Ashish will take us through the Safe Harbor statement. Ashish?

Ashish Agrawal: I would like to remind our listeners that this conference call contains forward-looking statements. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Additional information regarding these risks and uncertainties is contained in the press release issued today and more information can be found in the company’s SEC filings. To the extent that today’s discussion refers to any non-GAAP measures under Regulation G, the required explanations and reconciliations are available in the Investors section of the CTS website. I will now turn the discussion back to our CEO, Kieran O’Sullivan. Thanks, Ashish.

Kieran O’Sullivan: Overall, we achieved strong results in 2022, finishing the year delivering sales growth of 7.4% in the fourth quarter and 14.4% for the full year. Organic sales, which excludes sales from our two acquisitions in 2022, were essentially flat in the fourth quarter, due in part to the impact of the temporary semiconductor shortage. Full year sales grew nearly 10% organically. We continue to advance our diversification strategy throughout the year with non-transportation revenues increasing 24% and up 13% organically. Transportation sales were up 7% from last year. Customer demand was somewhat tempered towards the end of the year. We did see some supply chain stabilization in the fourth quarter, thanks in part to the agility of our teams to keep us on track to manage through the temporary semiconductor shortage that impacted sales.

We expect to see continued easing of the semiconductor supply constraints with supply expected to normalize by the end of the first quarter of 2023. We continue to benefit from our diverse and high-quality customer base across our end markets. The integration of the acquisitions we completed in 2022, TEWA Sensors and Ferroperm, remain on track and are performing well. These acquisitions have further strengthened our ability to add new applications and improved our distribution offerings, which have helped us to continue to gain traction with our customers. Gross margin for the fourth quarter decreased 38 basis points to 36.3% and full year gross margin rose 50 basis points to 36.5% versus 2021. We continue to gain momentum from our diversification strategy despite margin pressures from supply side cost increases.

While we expect cost pressures to persist in 2023, we remain confident in our ability to partner with our customers to share these cost increases and to execute successfully together in the year ahead. Our customer retention rate speaks to the deep relationships and value we provide our customers. In addition, to offset these pressures and support long-term margin improvement, we remain focused on implementing operational improvement projects. Fourth quarter adjusted diluted earnings per share of $0.56 was up 14% from $0.49 in the same period last year. Full year adjusted diluted earnings per share of $2.46 increased 27% from 2021. Later, Ashish will add further color on our financial performance. We added 10 new customers in the quarter, including 1 EV customer for a temperature sensing application.

In Industrial, we added 5 new customers with broad applications, including test and measurement, home appliances, small cell stations and temperature applications in both water heating and refrigeration. In Medical, we added 4 new customers, 3 for ultrasound imaging and another for an ultrasonic dental cleaning application. New business awards for the full year totaled $523 million, down from 2021’s elevated levels as certain transportation awards were delayed from the fourth quarter to 2023. We expect a stronger performance in the year ahead as automotive supply challenges ease for our customer sourcing teams. Our book-to-bill ratio was 0.9 in the fourth quarter and 1.0 for the full year. The recent reduction in the bookings reflects normalization from several quarters of elevated book-to-bill rates in 2021 and the early parts of 2022.

We will continue to include the book-to-bill ratio in our future communications for added transparency. As we have previously mentioned, consolidation of the sites in Denmark resulting from the acquisition of Ferroperm is underway and is expected to be completed in the third quarter of 2023. More recently, we began the process of consolidating our Juarez location into the Matamoros site in Mexico. This consolidation is driven by multiple factors, including the stability of the workforce in Matamoros as well as the need to strategically align our operations in Mexico to achieve better efficiencies. The consolidation is expected to be completed within the next 18 months. In the non-transportation end markets, we have achieved strong double-digit growth in the last couple of years.

Our material formulations have continued to drive our performance throughout key high-growth end markets. Customers view our leading-edge technologies, deep industry experience and vertical integration as key differentiators helping us deliver long-term value. Our in-house know-how and proprietary processes coupled with our competencies across three leading piezoceramic technologies are a proven key competitive advantage, enabling us to develop new piezo material formulations such as textured and lead-free. Our global foundry footprint positions us to support and drive growth for our customers. In the industrial market, demand for microactuators used in industrial printing applications has softened, primarily driven by demand in China. Across temperature sensing, we see more stable demand, although at a reduced level, which has been helped by the addition of new customers in refrigeration and cooler display applications.

We are working with a customer on a hydrogen fuel cell temperature application and added new wins in industrial food preparation. For our EMC product line, we signed a contract with a European OEM and expect shipments to begin this year. We also secured RF wins for precision off-road vehicle tracking. With our portfolio of sensor and control products, we are at various stages of qualification for home appliance, automation and marine applications. In the fourth quarter, we added temperature sensor products to our distribution portfolio across Europe and U.S. markets and are assessing the viability of moving piezoceramic products through this channel. In medical markets, we see good momentum in the year ahead. Our targeted business development efforts continued to progress as we add new customers and new applications.

We added 4 new customers, 3 for medical ultrasound and one for an ultrasonic dental cleaning application. Across our portfolio of ultrasound applications, we received prototype orders for 3 new programs and a preproduction order for a new program with an existing customer. Our temperature portfolio continues to support growth in medical applications. We secured our first single crystal technology award for an application in pacemakers with an existing Ferroperm customer and a new contract with an existing customer. In therapeutics, we received the next generation award with an existing customer. Sales to the medical end market were a little softer in the fourth quarter as our customers focused on managing their inventory levels. However, we expect demand to be solid in 2023.

We remain confident in the long-term prospects for the aerospace and defense end market, given our enhanced capabilities, new material formulations and the geopolitical landscape. We received multiple orders across several defense Tier 1s for sonar, hydrophone and sonobuoy applications. We also had wins for munition detonation and countermeasure applications. A new application is in development for depth detection, where we expect first orders in the first half of 2023. With temperature sensing products, we received orders in aerospace, defense and space applications. We continue to make progress in unmanned underwater vehicle applications, where we are deploying our single crystal technology and obtained additional advanced development awards.

Finally, we were awarded new contracts for RF filter products and precision frequency applications. Looking ahead at 2023 for non-transportation end markets, growth remains mixed in certain industrial applications. Distribution continues to adjust the inventory levels, while defense and medical end markets remain more resilient and in some cases, we are improving our market share. As I mentioned, we remain focused on advancing our long-term growth strategy, which centers on diversifying our end market profile through expansion of our technologies, products, customers and geographic reach. This strategy enhances the value creation opportunity for our stakeholders as well as the quality of our earnings. We have made good progress on diversification efforts over the past year, notably increasing non-transportation sales to approximately 48% of total 2022 sales.

Full year 2022 non-transportation-related revenue increased 24% compared to 2021, while transportation-related revenue increased 7%. Looking ahead, we will continue to focus on further diversification to grow non-transportation revenues at a faster pace, leveraging our balance sheet to pursue M&A opportunities while continuing to strategically grow our transportation business and strengthen our product portfolio. As a result, we continue to target long-term revenue growth of 10% with a goal of greater than 50% of total revenues coming from non-transportation markets in the years ahead. Transportation sales in the fourth quarter were negatively impacted by the short-term IC shortage we discussed in our last earnings call, resulting in sales declining approximately 9% sequentially.

We expect this temporary shortage to be resolved by the end of the first quarter. For the full year, our transportation sales grew by 7% despite supply challenges and unfavorable currency impact. We anticipate automotive demand to be flat to up low single-digits in 2023. IHS is forecasting 4% growth globally, attributed to a stronger rebound in Europe and North America. Transportation total booked business was $1.48 billion at the end of the year. Since the last time we published total booked business, we have made a few changes. First, to simplify, we have removed the contracts for our non-transportation customers as these contracts are shorter in duration and we will track them in our book-to-bill ratio. Second, as you know, the auto market has faced supply chain issues that have meaningfully impacted volumes globally in the last few years and the recovery is expected to take longer.

We have adjusted our transportation total booked business numbers to reflect changes in industry production volumes from 2020 onwards. In 2022, we saw significant delays in sourcing decisions as our customers focused on supply challenges to maintain current production. In the fourth quarter, we had wins in the accelerator module product line with an Asian OEM across two platforms for chassis ride height sensing, we had wins with a North American OEM. On the Mechatronics front, we were awarded extensions related to existing products in commercial vehicle applications. More importantly, we are driving to achieve our goal of having 25% of our light vehicle revenue come from electrified platforms by 2025. Progress on securing electric vehicle wins continued as we added 4 electric vehicle platform wins, including an application in a European shuttle vehicle.

In two-wheeler applications, we had an award with an Asian OEM. We are also excited by the progress made in 2022 as we gain traction towards achieving our goal from new products. In the fourth quarter, we launched products on the Toyota Yaris, General Motors Buick, GL8 in China, Honda MDX and Renault Duster in South America as well as passive safety sensors with a Tier 1 customer. The move towards hybrid €“ electric and hybrid vehicles as well as increased sensor content with passive safety and future e-break applications present tremendous opportunities for us. Smart actuators aside, the majority of our portfolio is agnostic to the propulsion system, creating flexibility for us to meet the needs of our customers. In 2022, the global share of electrified automobiles grew to approximately 10% to 12% of the global vehicle share, and we expect this to accelerate to 15% or more by 2025 and above 30% by the end of the decade, with the Chinese market delivering the largest share gains followed by Europe.

Demand for two-wheel applications such as throttle sensing modules and travel position sensors is rebounding from recent softness in Asian markets. We continue to invest in the company’s future growth and are strengthening our electrification portfolio through M&A. We are pleased to announce the completion of our acquisition of maglab AG on February 6. Maglab has deep expertise in magnetic system design and current measurement solutions for use in e-mobility, industrial automation and renewable energy applications. The company’s domain expertise, coupled with CTS’ commercial, technical and operational capabilities position us to advance our status as a recognized innovator in electric motor sensing and controls markets. We’d like to welcome the maglab team to CTS.

We look forward to working together to achieve our goal of greater than 25% of light vehicle sales from electrified platforms and expanding into other end markets. Our balance sheet, bolstered by strong cash flow generation, continues to provide us with a solid foundation to further our diversification strategy. Our capital deployment priorities remain focused on supporting organic growth investments, leveraging our financial strength to advance M&A in alignment with our long-term growth strategy; and finally, returning cash to shareholders. We remain committed to effective capital management, while maintaining a disciplined approach to acquisitions as we have done in the past. The investments we’ve made in the front-end processes, including commercial resources and IT capabilities, along with implementing SAP across the organization have strengthened our foundation, operational performance and position us to execute on our strategy.

We are pleased with the progress made in 2022 with the integration of TEWA Sensors and Ferroperm and our financial performance. We continue to build a solid M&A pipeline and are committed to leveraging value-creating acquisitions in order to accelerate our growth and diversification. As mentioned, we will remain disciplined in our approach, focusing on acquisitions that meet our criteria, including enhancing our technology portfolio, strengthening customer relationships as well as expanding products, applications, end markets and geography. We are continuing to target acquisitions in the range of up to $50 million a year in sales. However, we remain open to larger opportunities that will advance our long-term strategy. In-line with our capital allocation strategy, we continue to return cash to shareholders.

This past quarter, we repurchased approximately $8 million of stock as part of the previously announced buyback program. We have returned a total of $142 million to shareholders since 2013. At CTS, our purpose is to enable an intelligent and seamless world. Through deep customer relationships, we play an instrumental role in helping our customers shape the future by designing components and solutions with effective and efficient technologies that make their products smarter. I’ve previously highlighted our strides in supporting sustainable products like electric vehicles, and how we play a pivotal role in promoting health and safety by supplying components used in noninvasive medical devices such as medical ultrasound. We are driving our growth on battery electric vehicles and hybrid light vehicle platforms, and our goal is to achieve greater than 25% by 2025.

We understand we have a responsibility to help shape not only a smarter future, but one that will be sustainable for future generations. This begins with making sustainable business choices across our organization, creating long-term value for our company, our stakeholders and the communities in which we do business. We work to bring these values to light through the CTS CARES platform through which our employees across the globe participated in community activities and contributed more than 4,400 hours to community projects in 2022. Additionally, to report on our progress in driving sustainability throughout our operations, we plan to issue our first sustainability report in the second quarter of 2023. Summarizing our outlook for the year ahead, increased safety, automation and efficiency needs will continue to drive demand for CTS solutions.

Our non-transportation end markets are growing, and we continue to use our core technology and domain expertise to expand our presence with new products and new customers while also finding deeper penetration with current end market applications. We expect the transportation market to be flat to up low single digits. Looking at the U.S. light vehicle transportation market, the SAAR was closer to 14 million for 2022, and we expect the 14 million to 15-million-unit range for 2023. European production is forecasted in the 16 million to 17-million-unit range. China volumes are expected in the 26-million-unit range, marginally up compared to 2022. The commercial vehicle market remains solid, and we expect it to be robust throughout the first half of 2023.

The near-term semiconductor supply challenge, which I mentioned earlier, will impact our sales in the coming months. However, we expect it to be resolved by the end of the first quarter. For non-transportation markets, in-line with our diversification strategy, we continue to expand the customer base and range of applications in the industrial, medical and defense end markets. In some cases, inventory levels are correcting to more normal quantities, especially in certain industrial applications and in distribution impacting volume in 2023. Demand in defense and medical markets remains more resilient. As I mentioned earlier, we expect a softer first quarter at levels similar to the fourth quarter of 2022 and an improving trend for the rest of the year.

Overall, we remain energized and focused on our long-term goals to drive profitable growth in the face of near-term challenges and improving our operational performance. In terms of guidance for full year 2023, we are forecasting sales in the range of $580 million to $640 million and adjusted diluted earnings per share in the range of $2.40 to $2.70. Now I’ll turn it over to Ashish, who will walk us through the financial results in more detail. Ashish?

Ashish Agrawal: Thank you, Kieran. Fourth quarter sales were up €“ were at $142 million, up 7% compared to the fourth quarter of 2021 and down 6% sequentially from the third quarter of 2022. Foreign currency exchange rates impacted revenue unfavorably by approximately $4.3 million, mainly due to the changes in Euro and Chinese renminbi exchange rates. Sales to non-transportation end markets increased 22% year-over-year, supported by another quarter of double-digit growth in the industrial and medical end markets. Our two acquisitions added $9 million in sales during the quarter. Sales to transportation customers were down 4% compared to the fourth quarter of 2021 and decreased 9% sequentially. The primary driver for the softness in transportation revenue was a supply issue that impacted sales of our actuator product line.

Our adjusted gross margin was 36.3% in the fourth quarter, down 38 basis points compared to the fourth quarter of 2021 and down 24 basis points compared to the third quarter of 2022. We continue to partner with our customers to partially offset the impact of cost increases we have experienced. Foreign exchange rates impacted gross margin unfavorably by $1.7 million in the quarter. While some parts of our 2020 restructuring program will be completed in 2023, we have realized $0.25 of EPS in savings to date. Earnings per diluted share were $0.47 in the fourth quarter. Adjusted earnings for the fourth quarter were $0.56 per diluted share compared to $0.49 per diluted share in the same time last year and $0.62 per diluted share in the prior quarter.

For the full year, we achieved $587 million in revenue, an increase of 14% compared to 2021. Sales to the transportation end market grew 7%, and sales to other end markets grew 24% in 2022. We achieved strong double-digit growth in the industrial and medical end markets and made solid progress in sales to the aerospace and defense end market. Our two acquisitions performed well and added approximately $23 million in revenue during the year. Foreign exchange rates impacted sales unfavorably by almost $11 million in 2022. Overall, as we continue to focus on diversifying our business, non-transportation sales were over 48% of our total sales in 2022, up from 44.6% in 2021. Our gross margin was at 36.5% in 2022, up 50 basis points compared to 2021.

Our global teams executed efficiently in the face of significant supply challenges to offset the impact of cost increases and delivered solid results. Supply challenges and inflation are expected to continue impacting us in 2023. However, we continue to work closely with our customers to share the cost increases, and we are confident in our ability to execute successfully. Foreign exchange rates impacted gross margin unfavorably by approximately $3.6 million. For the full year of 2022, our earnings were $1.85 per diluted share. Adjusted earnings for the full year of 2022 were $2.46 per diluted share compared to $1.93 per diluted share for 2021, an increase of 27%. We achieved. We achieved 22.8% EBITDA in 2022, an improvement of 100 basis points compared to 2021.

Moving on to cash flow generation and the balance sheet. We generated $25.5 million in operating cash flow for the fourth quarter of 2022 and $121 million for the full year, up from $86 million in 2021. Our 2022 operating cash flow number includes $27 million in surplus cash received from the termination of our U.S. pension plan. Our balance sheet remains strong with a cash balance of $157 million as of December 31, 2022, up from $141 million on December 31, 2021. Our long-term debt balance was at $84 million, up from $50 million as of December 31, 2021, due to the partial funding of our Ferroperm acquisition. Our debt to capital ratio was at 14.2% at the end of the fourth quarter compared to 9.7% at the end of 2021. We remain focused on strong cash generation and are committed to maintaining a healthy balance sheet to continue to support organic growth and strategic acquisitions.

During the quarter, we repurchased approximately 199,000 shares of CTS stock totaling approximately $8 million. In total, in 2022, we returned over $27 million to shareholders through dividends and buybacks. This concludes our prepared comments. We would like to open the line for questions at this time.

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Q&A Session

Operator: Our first question is from Brady Lierz from Stephens. Mr. Brady, your line is now open. Please go ahead.

Brady Lierz: Yes. Good morning, everyone. This is Brady on for Justin. And thank you for taking my questions. So you mentioned expectations for a softer first quarter in the release. Could you kind of talk about the drivers to that comment and maybe kind of quantify the order of magnitude of that softness against your expectations for the remainder of 2023? And then I’ve got a follow-up.

Kieran O’Sullivan: Yes, Brady, just the real drivers for the first quarter softness, first of all, is the continued IC shortage we talked about in our last earnings call, which will be something that will be resolved at the end of the quarter. So it’s still a temporary thing we’re working through. And then we are seeing softness in industrial and distribution primarily. That’s where we’ve got some things that we’re working through. You heard me say softness in micro actuators for industrial printing and some other applications and the inventory levels in distribution. On the flip side, the medical side, defense side remain robust and resilient, and we feel good about that for the rest of the year as well as well as flat to single-digit growth in transportation.

Brady Lierz: Okay, thanks so much. And then maybe just a quick follow-up, so your 2023 revenue and EPS guide kind of implies margins remain relatively flat on a year-over-year basis. Could you kind of talk about a few of the things that might be offsetting the potential for some margin expansion in 2023?

Ashish Agrawal: Yes. Brady, that’s a good question. If you look at the range that we provided, we are dealing with some volume uncertainty in different end markets. And we are also looking at exchange rate as well as continued cost pressures on the raw material side that we have already talked about in the past. So those are some of the things that we are watching for carefully. And the other thing that we want to stay ahead of is as the economy evolves during the year, we could potentially see price pressures from our customers, and we’ll be working the supply chain very hard to make sure that we can offset any pressures on the price side with cost savings from our material suppliers.

Brady Lierz: Okay. Great. That makes sense. I’ll pass it on.

Operator: Thank you, Mr. Brady. Our next question is from Joshua Buchalter from Cowen. Mr. Joshua, your line is now open. Please go ahead.

Joshua Buchalter: Hey, team. Good morning. Thanks for taking my question and congrats on all the progress in 2022. I wanted to ask again about the component shortage impacting your transport market. Is that sort of a single point of failure and you just can’t get enough of the single €“ of the component for the actuator? And I guess what gives you the confidence that you’ll be able to get that cleared up in 2023? And within the guide, are there any embedded €“ I know in the past, you talked about your customers not being able to get semis also. I was wondering if that’s still impacting the Transportation segment as well. Thank you.

Kieran O’Sullivan: Joshua, thanks for the question. It’s not a customer thing. It’s a supply thing for us. It’s one part. It’s a very well designed in part and take the design and substitution to replace it would take quite some time to qualify. Obviously, we’re preparing for that for the future. But it will be solved in the €“ by the end of the first quarter. We’re already seeing an improved trend, and we have the commitments and the capacity that’s lined up to make that happen. So we feel good about resolving it. And as you said, it is impacting our sales in the first quarter, just like it did in the fourth quarter as well.

Ashish Agrawal: Yes. Joshua, to answer the second part of your…sorry, go ahead.

Joshua Buchalter: No, please continue, sorry.

Ashish Agrawal: You had also asked about the embedded risk from our customer volumes in the €“ in our guide. The €“ there is some level of built-in. You will see that we have guided to a slightly wider range that we normally do. And embedded in that is some level of uncertainty primarily on the demand side of the equation. We see a continuing improving trend on the supply side, but we are watching carefully how the demand scenario looks in the interim. What I would also add is that we are very well positioned, in our opinion, on the mid to long-term growth of the business with all the development activity that’s underway and the traction that we are getting in winning in different end markets, in industrial, medical and aerospace and defense.

Joshua Buchalter: Okay. Thank you for all that color. And for my follow-up, if we sort of account for TEWA and Ferroperm, and I think another acquisition you did, I am letting at around $10 million to $20 million of organic growth implied in the guide. One, I guess can you confirm if I am in the ballpark. And then secondly, can you walk us through directionally which end markets and products you expect to contribute most? It sounds like aerospace and defense and medical in particular, would be helpful to hear your directional color there. Thank you.

Ashish Agrawal: So, Joshua, I think the first part of your question was asking about the expected contribution from acquisitions to this year’s revenue. Is that right?

Joshua Buchalter: Well, it was more €“ yes, it was more about like what are the underlying drivers of the organic growth if we sort of back out the €“ half a year of Ferroperm in

Ashish Agrawal: Okay. So, like Kieran mentioned, we are expecting transportation to be flat to up low-single digits, and that’s going to be mostly driven by the demand environment. Industrial, we are seeing some softness at the moment, including in the distribution space. Our expectation is that, that could last Q1 and Q2 with potential for more stable to some recovery in the second half of the year. Medical and aerospace and defense look pretty stable to us at the moment. So, that’s kind of how we are looking at 2023 in terms of expectations by the different end markets. Kieran, would you want to add something?

Kieran O’Sullivan: Yes. Just since Joshua, you asked about acquisitions, you heard in our prepared comments, Josh, that we acquired maglab. It’s a company based in Switzerland. It’s got an expertise in magnetic system design, primarily focused on custom current sensing and position sensing solutions. So, it’s a great addition for us. It doesn’t come with revenues or anything. We are really bringing in a technical capability to advance our electrification strength and position going forward.

Joshua Buchalter: Thank you, guys. Appreciate it.