Stoneridge, Inc. Price & Performance (SRI)

Additional information about such factors and uncertainties that could cause actual results to differ may be found on Page three of the presentation and in our 10 ks will be filed with the Securities and Exchange Commission under the heading Forward Looking Statements. After Jim and Matt have finished their formal remarks, we will then open up the call to questions. And with that, I will hand the call over to Jim. Thank you and good morning everyone. Let me begin on Page four.

In 2024, Stoneridge specific growth drivers our continued focus on the execution of our major program launches, continuous improvement in our manufacturing facilities and structural cost control enabled us to navigate through a very challenging macroeconomic environment. Driven primarily by our key growth products including MirrorEye and our next generation TACOGraft, the Smart two, we were able to outperform our weighted average end markets by four ninety basis points. As our gross products continue to mature and our end markets continue to improve, we remain focused on improving our ability to drive earnings growth and cash performance through improved material and structural costs and improvements in working capital particularly in inventory. In 2024, we were able to reduce our overall material costs by 120 basis points and improved directly over by 30 basis points which is effectively a 7% improvement year over year. Additionally, our focus on cash performance and inventory management resulted in positive free cash flow of approximately $24,000,000 an increase of approximately $56,000,000 versus the prior year. While we are proud of our achievements in 2024, we recognize there is still opportunity for significant improvement especially in quality. Additionally, we are focused on overall cost structure as evidenced by our recent actions to delayer certain corporate functions which reduced costs and is improving operational efficiency.

Finally, in 2024, we initiated a project in our largest manufacturing facility in Juarez, Mexico to streamline our operations reduce manufacturing costs, improve material flow and reduce our structural overhead. While we began to see the benefits of this project in 2024, we expect to annualize these savings and add to them as we complete the project this year. Quality related costs, material cost improvement and structural reductions remain our key priorities. For 2025. Page five summarizes our key financial metrics for the full year 2024 compared to the prior year. In an environment where our weighted average OEM end markets declined by 10.4%, our full year 2024 sales of $908,300,000 outperformed those end markets by four ninety basis points. More specifically, MirrorEye revenue increased 22% year over year driven primarily by the launch of our program with Volvo in Europe. We expect continued success with MirrorEye in 2025 as we launch additional programs in North America with Volvo and Daimler truck driving more than $50,000,000 of additional growth for MirrorEye. Additionally, Smart2 Tachygraph continued to ramp up in 2020 in both the OEM and aftermarket in Europe resulting in just under $60,000,000 in revenue for the full year. Again, these tachygraph programs provide significant growth over the prior year with sales almost doubling relative to 2023.

We expect continued success with our Smart two TACOGRAF in 2025 as more vehicles become subject European regulations requiring this device. Stoneridge remains well positioned for growth in our key product areas. Full year gross margin was relatively in line with 2023 despite the decline in revenue. This was driven by our actions to improve material costs, manufacturing performance and quality related costs. Driven by our continued focus on supply chain strategy including resourcing and negotiated price downs with our suppliers, as well as reengineering components were able to reduce material costs by 120 basis points year over year. We continue to focus on operational improvement throughout our facilities, contributed to a 30 basis point improvement in direct labor again, which is a 7% reduction year over year. Finally, we continue to focus on built in quality, responsiveness and proactive process to address any quality issues we find as we continue to enhance our engineering capabilities and capacity globally. Full year adjusted EBITDA margin declined by Despite significant top line headwinds driven primarily by challenging end market Our focus on improved operational performance drove a decremental contribution margin of just 19% versus our historical average of 25% to 30%. And finally, I mentioned previously our focus on cash and inventory management drove positive free cash flow of approximately $24,000,000 an increase of approximately $56,000,000 versus the prior year.

This was driven primarily by significant improvement in our inventory balances, which declined by $36,000,000 this year. Overall, despite continued and significant challenges in our end markets, we were able to outperform our weighted average end markets significantly improve our operational performance and drive much stronger cash performance in 2024. Turning to Slide six, Mirai continued to gain momentum in 2024 through our global OEM programs as well as continued expansion in both the aftermarket and bus end markets. We expect strong momentum to continue in 2025 as Mirai continues to be the industry leading camera monitor system for the global commercial vehicle and markets Full year 2024 Mirai revenue of $66,000,000 grew by 22% compared to the prior year. This was primarily driven by newly launched OE programs offset by significant headwinds impacting global commercial vehicle production volumes, particularly in Europe where production declined by 24% versus 2023. We launched our European Volvo program on the FM and FH model trucks in mid-twenty twenty four. As expected, this program contributed as a new truck model ramped up production. Additionally, we launched with Peterbilt on models five seventy nine and five sixty seven in North America joining the already launched Kenworth program driving incremental sales.

During the year. This year, we are launching MirrorEye programs on Volvo's all new VNL truck in North America and Daimler Truck North America's fifth generation Freightliner Cascadia truck. Both launches include the independent wing design, which separates the system from the traditional mirrors. As such, the system falls under Stone Ridge's FMCSA exemption, owners to remove conventional rearview mirrors and operate using only the factory installed fully recognize the benefits of the aerodynamic wing design that reduces drag by eliminating the traditional side mirrors [indiscernible] to improved fuel efficiency. As a result, we expect the take rates of these systems to improve as the new truck models ramp up throughout this year and into 2026. This morning, I'm also happy to announce that we are partnering with the final primary North American OEM customer to roll out retrofit applications to their customers through a pre wire option and direct installation with a selected aftermarket upfitter. Similar to other pre wire programs, this program is without an official volume based award However, it creates a significant opportunity to showcase our system specifications and capabilities to both this OEM partner as well as their end customers. With this program, Mirai will continue to be the the only system available on new production vehicles in The United States and with every major OEM in North America.

As has been historically the case, will continue to work with this OEM to expand their pre wire program into permanent OEM available system. Based on current market indications, additional program launches and the expected ramp up of new truck models, we expect significant MirrorEye revenue growth in 2025. Full year 2025 revenue is expected to grow by at least $54,000,000 or almost double to $120,000,000 of which $100,000,000 relates to OEM program revenue. As discussed on previous earnings calls, many of our existing customers have begun to equip their trucks with MirrorEye as standard equipment. Including certain long haul trucks for DAF and Volvo and Europe. Additionally, Mirai continues to be optional on many other models for these same customers. Given the adoption on some trucks as standard equipment, well as the continued positive feedback from our customers and their end customers, we we are expecting higher take rates for the system in 2025 and beyond. We are confident market adoption of this industry changing As a result and as we will discuss, in more detail later in the call, we are updating our long term revenue targets to reflect MirrorEye OEM revenue to almost triple by 2029 to almost $300,000,000 annually.

This estimation is based on our targeted European take rate of based on the extrapolation of current take rates and targeted North American take rates of 25% to 35%. This North American improvement is driven by customer feed feedback from both our OEM and fleet partners, expected momentum in overall market adoption maturing launches and design and functionality changes in our new and existing programs. The end of twenty twenty five, we will have all four global OEM programs launched on a number of different nameplates and models. With so many models already we are confident market adoption will continue to accelerate. Now turning to Slide seven. As we have discussed in the past, we continue to expand our core technology and product areas to drive long term growth. Aligned with our focus on commercial vehicle safety and efficiency, we have developed a suite of products related to trailer connectivity, to the tractor. The ability to connect the tractor to the trailer seamlessly stems from our proprietary technology enabling data to be transmitted through existing power cables in the trailer and connected to the tractor through the existing harness and wiring. This allows for fast and easy adoption of the capabilities and does not require any additional training or change to driver habits.

This point of connection enables many different trailer connectivity products and capabilities. The most impactful and most desired by our fleet partners with which we are working is the trailer backup camera. The digital backup camera is mounted on the back of the trailer with integrated lighting and software overlays, to illuminate and guide the driver as they maneuver the trailer in low light or tight parking product is the ability to integrate the backup camera to a hardwired connection providing effectively no latency and a very high quality digital image. This configuration avoids the adverse effects of wireless systems such as the distance to the camera or impediments to the video signal. The value proposition for the backup camera is very strong we expect good adoption once the system is broadly available which we expect to start later this year. With the hardware connection of the trailer, the possibilities for connectivity and system expansion are almost limitless. We are able to add additional camera and sensor applications throughout the trailer both inside and out to address a number of the issues drivers deal with today. Through the secondary display that can be integrated with the current climate and infotainment display, we can transmit critical information to the driver such as tire pressure and temperature, rear door ajar status, and the ability to monitor cargo on the interior of the trailer with an integrated camera.

We have been working with select key fleet partners to design the system features and align the value proposition before expanding our commercial focus and broadly launching the system. We expect to begin to roll out the system on a limited basis in 2025 followed by significant expansion in 2026. Our suite of trailer connectivity products and solutions highlight our continued focus on expanding on our core technologies and platforms to drive long term growth. With that, I'll turn it over to Matt to discuss our financial performance and expectations in more detail. Matt? Thanks, Jim. Turning to Page nine, fourth quarter sales were 218 point dollars As expected, sales were significantly impacted by continued pressure across all of our major end markets. However, revenue from Stone Ridge specific growth drivers helped to offset end market declines. More specifically, in the quarter, we saw growth in MirrorEye revenue, particularly from the newly launched Volvo program, which grew $3,100,000 over the third quarter. And the largest quarter yet for Smart2 TEGEGRAS revenue of over $17,000,000 Fourth quarter adjusted EBITDA was $6,000,000 or 2.7% of sales. Elevated warranty and other quality related costs significantly impacted the quarter versus our prior expectations. However, improved manufacturing performance partially offset these headwinds for a net impact of $3,100,000 More specific these quality and inventory related costs were related to specific incidents and products, which have been contained through supplier Finally, fourth quarter engineering expenses were $2,100,000 higher than previously expected, primarily due to design related tooling changes resulting from a change in supplier, as well as delayed timing of customer reimbursements.

We expect to be able to offset a portion of these costs in 2025 once we meet the required engineering or program hurdles and recognize the customer funding. Page 10 summarizes our key financial metrics specific to control devices. Control Devices full year sales of $296,300,000 declined by approximately 14% versus the prior year, primarily due to lower production volumes for our largest North American passenger vehicle According to the latest IHS production data, the domestic 3% or approximately three times the North American end market decline of 1.5%. Full year adjusted operating income of $6,600,000 or 2.2% of sales declined by 170 basis points compared to the prior year primarily as a result of the sales decline. We continued to focus on improved operational performance, driving a two fifty basis point improvement in material costs and a $2,100,000 improvement in quality related costs. Looking into 2025, we expect production volumes to continue to decline moderately in North America. Additionally, there are a couple of programs that are coming to an end for control devices that will put additional pressure on top line performance this year. As a result, we are expecting Control Devices sales to decline this year relative to last.

We will continue to focus on the things we can control and drive improvement in material costs and manufacturing performance. As a result, are expecting a stable margin profile this year despite the modest decline in sales that we expect the segment. Page 11 summarizes our key financial metrics specific to electronics. Full year sales of $594,700,000 were approximately in line with the prior year. Stable revenue was driven by Stoneridge specific growth factors including incremental revenue from the SMART-two Tachygraph programs and incremental MirrorEye revenue. Was offset by a significant decline in the commercial vehicle end markets including a 24% decline in Europe and a 2.5% decline in North America. On growth of 0.2%, we outperformed [indiscernible] Gross margin remained flat compared to the prior year, primarily as a result of material cost improvements resulting in a 110 basis point improvement as well as reduced direct labor which contributed 40 basis points of improvement. Included in our operating performance was increased quality related costs of $1,200,000 as well as one time costs related to distressed suppliers impacting our operating performance by approximately $3,200,000 during the year. We continue to focus on these issues and expect significant improvement in 2025.

We are expecting a relatively flat commercial vehicle end market in 2025. We expect revenue growth for electronics, primarily driven by the annualization and launch of MirrorEye OEM programs and continued strong performance with our Smart two TACT Graph both on OEM and aftermarket applications. Page 12 summarizes our key financial metrics specific to Stoneridge Brazil. Stoneridge Brazil's full year sales were approximately $50,100,000 which declined year over year primarily driven by continued macroeconomic challenges in South America. Full year adjusted operating margin declined by approximately 500 basis points, primarily driven by reduced fixed cost leverage on lower sales, partially offset by lower SG and A costs. We expect revenue growth and margin expansion in 2025 as we continue to shift our portfolio in Brazil to more closely align with our global growth initiatives and further expand our local OEM program to support our global customers. Brazil is a critical engineering center which we will continue to utilize to cost effectively support our global business. [indiscernible] Turning to Page 13, As Jim discussed earlier on the call, we generated $23,800,000 in free cash flow during the year which is an improvement of $55,500,000 compared to 2023. This significant improvement was driven by our continued focus on reducing net working capital, including a $36,400,000 reduction in inventory this year.

With a $25,100,000 reduction in the fourth quarter alone. As we remain focused on our key working capital initiatives, we are expecting continued improvement in 2025. We also announced an amendment to our existing credit facility that modified our leverage and interest coverage ratios to provide financial covenant relief through the third quarter of twenty twenty five. The covenants returned to a 3.5 times net debt leverage ratio and a 3.5 times interest coverage ratio the fourth quarter of twenty twenty five. With this amendment, we are confident the company has ample liquidity and flexibility to operate in the current macroeconomic conditions. Based on our 2025 guidance, we expect a compliance leverage ratio between two and two point five times by the end of the year and expect to remain compliant with the amended covenant ratios. Turning to Slide 14, This morning, we are issuing our full year 2025 guidance. We are expecting sales of $860,000,000 to $890,000,000 We expect continued progress on our material cost improvement initiatives, quality related costs and manufacturing performance to drive improvement in gross margin to a midpoint of approximately 22.25%, which is a 135 basis points improvement versus 2024.

We expect operating income to improve by 70 basis points to a midpoint of 1% based on the gross margin improvement I just outlined. We expect these improvements to drive EBITDA margin expansion of $2,000,000 to a midpoint of $40,000,000 and an EBITDA margin of approximately 4.6%. Finally, this year we are introducing free cash flow guidance as we continue to put a significant focus on inventory Similar to 2024, when we reduced inventory by over $36,000,000 we are expecting continued improvement in inventory balances and overall improved earnings to drive this year. Slide 15 outlines our expectations for 2025 revenue and EBITDA in additional detail. Typically, we use IHS as a benchmark for weighted average end market performance. In 2025, IHS is suggesting that our weighted average OEM end markets will be approximately flat relative to 2024. However, we are expecting OEM volume to decline by approximately 3.8% over last year.

That I said, should production materialize as IHS is forecasted, there could be upside to our guidance as the year progresses. As Jim outlined previously, we are expecting another year of strong growth from EuraEye.

In total, we expect that MirrorEye will grow by approximately $54,000,000 which approximately 75% over 2024 resulting in total Mirai sales of approximately $120,000,000 this year. We expect the MirrorEye growth will be partially offset by the end of a couple of programs, contributing approximately $41,000,000 of revenue decline in 2025 relative to 2024.

These revenue drivers result in a mid of $875,000,000 in revenue for 2025. Moving on to EBITDA. The slight decline in revenue drives a contribution headwind of approximately $9,000,000 Similarly, we eliminated the vast majority of our incentive compensation in 2024 with the expectation that programs return to target in 2025 driving a $7,000,000 headwind year over year. As we have discussed throughout the call, we remain focused on improving quality related costs and reducing material cost. Improvement in these areas as well as the elimination of one time distress supplier related costs incurred in expected to contribute $14,000,000 of improvement this year. Finally, as Jim discussed earlier, we have continued to focus on our overall cost structure to both reduce our corporate structure and improve our manufacturing performance. Overall, we are expecting an incremental $4,000,000 in savings related to these initiatives. Finally, we continue to monitor the impacts of potential tariffs particularly as it relates to Mexico. Similar to previously enacted will implement supply chain and customer pricing strategies to mitigate any cost increases that may occur. We will continue to monitor shifts macroeconomic policies and the potential for impacts on our business, ensure that we act quickly to offset any incremental costs as we have done historically.

In summary, we are expecting a slight decline in revenue and continued significantly improved operating performance to drive EBITDA, improvement in 2025 to our midpoint EBITDA guidance of $40,000,000 As it relates to the cadence of our guidance, we are expecting an even split of revenue between as Smart2 sales come off of a record quarter. We are expecting EBITDA to be more weighted to the second half of the year driven by continued ramp up of structural cost improvements and reduced engineering expenses after the launches of the Volvo and Daimler Mirai programs in North America. We are expecting first quarter EBITDA to be approximately in line with the fourth quarter of twenty twenty four.

Slide 16 lays out the basic assumption that provide the framework for our short and long term targets. First, looking at 2026, we are targeting versus our midpoint expectation for 2025. This is primarily driven by expectations of strong commercial vehicle production, particularly in North America in advance of new emissions regulations in 2027. Growth in our weighted average OEM end markets is expected to be 7.4% based on current IHS forecasts, In addition to a strong market, we are expecting continued expansion of our Mirai programs driven primarily by continued expansion in North America as the programs launching this year will annualize next year. Are expecting continued strong take rate rates in Europe and growth in our fleet business to contribute to incremental Mirai revenue in 2026. We have additional opportunities for growth, including growth in our and growth in our aftermarket businesses, including our off highway business, which we will quantify in more detail as we get closer to the end of this year and formally issue our 2026 guidance. Overall, we are expecting very strong revenue growth in 2026. We expect that growth will drive significant earnings expansion as well. Based on our historical and expected contribution margin, we expect that our growth will improve EBITDA to at least $70,000,000 in 2026 which would represent an EBITDA margin of at least 7%.

We will have the ability to outperform this contribution based target as we will continue to execute on our pipeline of material and drive operational improvement as we grow. [indiscernible] Looking beyond 2026, we are expecting continued strong growth in our key product categories. We expect that Control Devices will return to market outperformance driven by expanding content and new programs, both awarded and in our pipeline, including the leak detection module program we have outlined on previous calls. We expect continued expansion in our MirrorEye programs as they mature and continue to ramp up. Similarly, with the launch of the Connected Trailer products this year, and the continued adoption of camera based safety systems in the off highway market, we are expecting our aftermarket products to outpace market growth. We expect these growth drivers to result in $1,300,000,000 to $1,450,000,000 of revenue by 2029 representing a five year compound annual growth rate of approximately 7.5% to almost 10%. Based on our long term revenue targets, we expect EBITDA contribution of more than $100,000,000 which is in line with our historical 25% to 30% contribution margin. With this growth, we are targeting EBITDA of approximately 160 to $200,000,000 in 2029. [indiscernible] Turning to Page 17.

In summary, continue to execute against our key priorities throughout 2024 setting up strong performance in the future. In 2024, we outperformed our weighted average OEM end markets by four ninety basis points, improved material costs by 120 basis points and reduced direct labor costs by 7%. Additionally, our focus on cash performance resulted in a free cash flow improvement of $56,000,000 year over year driven by inventory reduction of $36,000,000 Stoneridge Stoneridge a strong portfolio of products and opportunities to continue to expand our market share and content growth going forward. We expect that this growth along with the continued execution of our key operational priorities will drive significant earnings expansion and as a result strong shareholder returns both in the short and long term.

Stoneridge remains well positioned to outpace our weighted average end markets significantly expand our earnings and drive long term shareholder value.

With that, I will open the call to questions.

Our first question comes from Daniel Imbro with Stephens. Please go ahead.

Hey, good morning guys. Thanks for taking our questions.

Hey, Daniel. Good morning. Maybe if we could start on the fourth quarter a little bit. On the cost side. I guess, Matt, the engineering and quality costs for the surprises versus the guidance that you set in late October, I guess can you just unpack maybe how those unfold Those caused us to accelerate quickly and very late in the quarter? Really the heart of the question, trying to figure out you guys visibility that these won't recur and how comfortable you feel with the 25 guidance? Just given how maybe surprising these costs have been in recent quarters as we think about the outlook here? Yes, sure. Good question, Daniel. I mean, on the engineering side, we're a lot of those reimbursements are the result of meeting certain hurdles in the program development or or kind of in the development of the software. That we're building. And those things can be a little bit variable.

Obviously, we're very close to those hurdles, which is why we expect in the fourth quarter and why I timed in the 2025. So generally, we've got pretty good visibility there. At the end of the year, we've got relatively more reimbursement than we expect just in the fourth quarter, which is historically similar. So the fourth quarter always has a little bit more variability there.

Also, if you think about it, we're launching some very significant programs in 2025. So combined with kind of the seasonality of the expected reimbursements and the magnitude of that potential reimbursement because of the launches, it creates a little bit more volatility, particularly this fourth quarter even than most. We said though, we expect that that's kind of retimed in 2025. So it kind of gives you some idea of how close we are in those hurdles for the quarter. On the quality related side, Daniel, as you heard in the prepared remarks, we are extremely focused on improving quality and that includes really an in-depth review of all the processes that historically even have gone into building these programs and products. And as we review those processes and dig into that, we find some areas that need some improvement. So, I would look at that as a sign of continuous improvement. We're trying to close those items out faster than we have in the past and get through some of those issues. As you know, when we find a quality issue, the accrual requires us to take into account all the future expectations for those issues. That's why you get a little bit of lumpiness.

You had a little bit earlier this year, little bit later this year. That's why you get some of that lumpiness. So generally speaking, we've got good visibility to improvement there and kind of foundational improvement. Occasionally, you get like we did in the fourth quarter some kind of peaks and valleys in specific incidents. The idea there is to reduce the time until we're response to those peaks and valleys and try to reduce that overall cost and that's really where we're focused. And maybe I would add just a little bit more on the quality side too. And you brought it up, but just to be clear, you're talking about quality. There's really two two elements to it. One is what are you doing today to avoid or minimize quality issues in the future? Right? So and those are the processes that Matt was talking about. Do we feel Now that we have the right processes, the right rigor, the right discipline in place to Basically build in quality, ensure absolute quality in the product that you have forward. And we actually feel that way, right? We've made a lot of changes in the last two years and those processes are very strong.

We have a lot of dredging for issues during the development process to avoid I'll say the manifestation of quality later on. So we think as as far as Stoneridge is concerned, we are in very good shape with that now. And what still is getting us a little bit are some of the things that were from the past. Right? So what are we doing about that? Because look, if there was some weakness out there, the have to deal with Soviet, what we can do now is [indiscernible] all over that stuff, making sure that we are identifying and finding those things as early as possible and then quickly addressing anything that comes up in the field. That absolutely minimizes the impact to our earnings and to the performance of the company. So we have also instituted those processes again to make sure that what is happening out there from historic products is found very fast and addressed very quickly inside the company. So I think on both ends, the future built in quality and then addressing existing quality issues, I think we've got our act together here and really made a big difference in our And Daniel, I would say on the confidence in the guidance, look across the foundational improvements we've made at the company this year.

Material costs significantly improved, Even direct labor significantly improved. You heard about some of this specific actions we've been taking to focus the cost the overall cost structure and structural cost As you saw in the kind of the prepared presentation, several of those things we expect to continue and the guidance calls for even at a moderated rate even to last year. So, we've got good momentum across a lot of those foundational issues. Like Jim said, the quality issues, we got a lot of room for improvement there and we're seeing the improvement. So I feel very confident in the guidance going into next year. Obviously, we were a little more conservative than IHS on the top line. There's maybe some opportunity there. Should IHS materialize as had been forecasted, but we've got good visibility to a lot of that improvement and I feel very confident in where we're headed. No, that's really encouraging. Maybe following up on that revenue outlook, if I look on Slide 15, so revenue growth next year seems like it's mirror eye, but I guess can you unpack a little bit what's Technographic expected to do. The growth there isn't clear from that side.

Have we plateaued a little bit there? What's your growth expectation for that product? Yes. So, Daniel, good question. So if you remember, there's really two pieces of Smart two. One is the aftermarket, which has these kind of rolling on requirements every year as this regulation rolls out to different weighted vehicles and the way the vehicles operate. And then you've got the OEM opportunity, which is generally pretty stable as new trucks are manufactured. So we had this ramp up last year as kind of the first tranche of that aftermarket business hit. There's still opportunity to expand our market share in that space. But generally speaking, the guidance expects fairly stable revenue contribution from Smart two as we head into 2025 here. Great. And then last one follow-up for me. Inventory working capital have been good guys on the cash flow side. Guess that's expected to continue in 2025, but revenues down, that makes sense. I guess when we roll forward to 2026, how do we feel about the ability for inventory to continue? Improving or will there need to be an inventory build and maybe a use of working capital to support that top line growth when we return to top line growth?

Yes.

No, I don't expect appreciate the comments on the improvement in 2024 and 2025 here, but still not where we want to be. I mean, if you look historically, we've been double digit turns in some of our facilities. If you look at the guidance, not where we're expecting to be by the end of this year. So there is still plenty of improvement opportunity in inventory. With significant growth, you might get a little bit of inventory build in normal state. But versus where we are now, we still think that there's opportunity to reduce inventory. As we head into that growth. So I would not expect a significant certainly not a significant build in working capital going into 2026. If anything, we may moderate the improvement with the growth opportunity that we've got going forward there. But I think it's clear that we the focus on cap performance and cash flow profile has resulted in some significant improvement. I would expect that to continue in 2025 here on the working capital side.

Build a good foundation as we go into 2026 to make sure that Great. Appreciate the color. That's a lot guys. Thanks, Daniel. Thanks, Daniel.

This concludes our question and answer session. I would like to turn the conference back over to Jim Ziselman for any closing remarks.

Thank you everyone for joining the call again today. I know your time is very important. And as always, we truly appreciate your willingness to engage us in each and every one of these calls. We have built a strong foundation that will allow us to drive significant earnings expansions as we grow here in the future. We'll continue to deliver on our commitments by focusing on long term strategy quality improvements material manufacturing cost reductions and several other company initiatives. We expect that our performance along with our unique mix of industry changing product platforms will continue to drive strong shareholder you. Again everybody.

The conference has now concluded. You may now disconnect.