Operator: We will come back Greetings. Welcome to the Methode Electronics Fourth Quarter and Fiscal Year 2020 Results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, Please note this conference is being recorded. I would now like to turn the conference over to your host, Joni Konstantelos, Managing Director, Riveron.
Joni Konstantelos: You may begin. Good morning, and welcome to Methode Electronics Fiscal 2020 6 Fourth Quarter and Full Year Earnings Conference Call. Our fiscal 2020 financial results, including a press release and presentation, can be found on the Methode Investor Relations website. I am joined today by Jonathan DeGaynor, President and Chief Executive Officer and Laura Michele Kowalchik, Chief Financial Officer. Please turn to Slide 2 for our safe harbor statements. This conference call contains certain forward looking statements which reflect management's expectations regarding future events and operating performance, and speak only as of the date hereof. These forward-looking statements are subject to the safe harbor protection provided under the securities law. Methode undertakes no duty to update any forward-looking statements to conform the statements to actual results or changes in Methode's expectations on a quarterly basis or otherwise. The forward-looking statements in this conference call involve a number of risks and uncertainties. Will also be discussing non GAAP information and performance measures which we believe are useful in evaluating the company's operating performance. Reconciliations for these non GAAP measures can be found in the conference call materials. The factors that could cause actual results to differ materially from our expectations are detailed in Methode's filings with the Securities and Exchange Commission, such as our 10 k and 10 Q.
Jonathan DeGaynor: Please turn to Slide 3, and I will now turn the call over to John DeGaynor. Thanks, Joni, and good morning, everyone. Thank you for joining us for Methode's fourth quarter and fiscal 2020 earnings call. I would like to begin by thanking our global team for their dedication, resilience and commitment to serving our customers throughout another dynamic year. Turning to Slide 3. Fiscal 2020 6 was an important year for Methode. While we continue to operate in a challenging environment, including EV program delays and cancellations, customer production volatility, commercial vehicle end market softness and ongoing supply chain and tariff related complexities. We remain focused on the areas within our control. Our priorities were clear. Improve operational execution, strengthen financial performance, simplify the portfolio, generate cash, reduce leverage, and position the company for sustainable long term value creation. For the full year, net sales were approximately $1 billion down 3% from the prior year, reflecting North American auto program roll offs, commercial vehicle market softness, portfolio actions, and significant customer program delays. To address and react to the customer program delays, team negotiated approximately $45 million of customer recoveries helping offset the impact of customer driven program changes, and creating both near term and longer term financial benefits for the company. These recoveries also helped reimburse a portion of the significant development, launch, and other program costs incurred by the company over the past several years. Despite the lower sales environment, adjusted EBITDA increased 60% to $68 million driven by stronger operational performance, customer recoveries, disciplined cost management, the benefits of actions taken across our global manufacturing footprint. We also generated approximately $16 million of free cash flow through improved working capital management and inventory reduction initiatives. While these results do not yet reflect fully the potential of Methode, demonstrate meaningful progress. We expanded margins, improved cash generation, continued executing the operational and strategic actions necessary to create a more competitive and profitable company. Turning to Slide 4. As a reminder, our transformation journey began approximately 2 years ago, and is focused on improving performance, strengthening the organization, and creating a platform capable of delivering sustained profitable growth. Before discussing our progress in more detail, I think it is important to provide context on what the company has accomplished during that period because the headline financial results do not fully reflect the magnitude of the change that has occurred within Methode. First, we have been operating through a massive revenue headwind. Several mature automotive programs rolled off, while anticipated EV program launches were delayed, resized, or canceled by customers. As a result, expected replacement revenue did not materialize on the timeline originally anticipated. Despite those headwinds, we improved profitability, generated free cash flow and strengthened our balance sheet. Invested in future growth opportunities, and upgraded significant portions of the organization. Second, we spent considerable time and resources addressing legacy matters including the SEC investigation, material weakness and internal control deficiencies, inefficient financial processes, and gaps within the finance organization. Today, that work is largely behind us. The SEC investigation has concluded with no enforcement action, Our control environment is substantially stronger. We have rebuilt the finance team, and management can increasingly focus our attention and resources on growth, execution, and customer engagement. Third, we believe the market underestimates the amount of operational work completed across the business. Over the last 2020 4 months, we rebuilt leadership teams, upgraded talent, implemented a more rigorous operating cadence, strengthened manufacturing execution, improve supply chain discipline, reduced inventory, lowered scrap and freight costs, and increased accountability throughout our global footprint. Collectively, these actions have fundamentally improved the quality of the business. Turning to Slide 5. We are beginning to see tangible evidence that our efforts are working. Our progress can be viewed through 3 areas. Our people, the strategic actions we have taken, and improved operational performance. Starting with our people. We have invested heavily in building the leadership team and operating model needed for the next phase of Methode's evolution. Over the past 2 years, we substantially reshaped the organization, including changes to 8 of our 10 executive leadership positions and nearly half of the top 100 leadership roles globally. The relocation of our headquarters from Chicago to Southfield, Michigan provided an opportunity to rebuild much of our corporate organization particularly within finance and HR. We established a stronger team, improved financial rigor and visibility, and created greater accountability across the business. We also upgraded leadership across engineering, product management, sales, operations, and strategy while expanding capabilities that support our growth initiatives, including data centers. At the same time, we have been transitioning from a decentralized structure to a more global, aligned, collaborative operating model. This is improving coordination across regions, strengthening accountability, reducing redundant efforts, and driving more consistent execution throughout the company. Turning to strategic actions. Our focus has been on simplifying the portfolio and directing resources toward higher growth opportunities. 1 of the clearest examples of this redirection is our data center business. I will discuss that in more detail shortly, but we continue to see strong momentum and expected significant growth in fiscal 2020. Actions we have taken with customers reflect the more disciplined commercial approach we have implemented across the organization, which has helped improve program economics, and offset a portion of the external headwinds affecting the business. From a portfolio and footprint rationalization, we completed the divestiture of DataMate, generating an $11 million gain and further aligning the company around our long term growth priorities. We also sold our Howard Heights, Illinois facility, generating approximately $5 million in cash proceeds. Operationally, we continue to make measurable progress across our manufacturing footprint. Egypt remains 1 of our strongest examples of what improved execution can achieve. Through upgraded leadership, better process discipline, and enhanced operational rigor, the business delivered more than 700-basis-points of margin improvement during fiscal 2020. We also advanced restructuring initiatives in Malta that are expected to generate approximately $5 million of annual savings. In Mexico, our transformation efforts continue to progress. We have strengthened the leadership, improved execution, and gained significantly better visibility into our operational challenges. Although Mexico continues to be impacted by EV program delays, customer schedule changes and under absorption, we believe the cost reduction and improvement actions underway as well as the new business is coming into our Mexico facilities positions the business for improved performance in fiscal 2020. there is still work to do, particularly in Mexico. But the underlying trends give us confidence that the organization is operating more effectively and is increasingly well positioned to drive sustainable margin expansion and cash generation going forward. Turning to Slide 6. The benefits are increasingly evident in our customer relationships as well. Improved service levels, better supply chain performance, reduced lead times, and stronger coordination between engineering and commercial teams are helping us rebuild credibility through execution. We look forward to sharing more details on business wins and new business bookings during our first quarter call. Turning to Slide 7. On the next slide, 1 area where the benefits of these changes are becoming particularly visible is power solutions. Methode has more than 60 years of expertise designing and manufacturing complex, high performance power interconnect solutions often pushing the limits of thermal and electromagnetic constraints to achieve demanding power density, weight, and reliability requirements. Those capabilities have supported a diverse set of end markets over the years, including automotive, commercial vehicles, aerospace, defense, data center, and other industrial applications. Our technology has not changed. What has changed is our ability to leverage that expertise across the company and end markets. When run as a collection of independent businesses, Methode was unable to capitalize fully on engineering, manufacturing and commercial synergies. As we have become a more integrated organization, we are increasingly able to creatively apply our common technologies manufacturing capabilities and customer relationships to deliver unique solutions across multiple end markets. This is particularly important given Methode's investments to support vehicle electrification. The engineering expertise developed around advanced power distribution and 800-volt architectures combined with available capacity within our manufacturing footprint creates opportunities well beyond traditional automotive applications. The progress we are making reflects not only our technology and manufacturing capabilities, but also the leadership team we have assembled to identify opportunities across end markets and execute on a more integrated strategy. These leaders are helping break down historical silos, align resources across businesses, and position the company to generate greater returns from investments made over the past several years. Data centers are emblematic of our change and focus. We have supplied bus bars into data center applications for more than 30 years, including early participation in the open compute project. However, without continued focus and investment, Methode lapsed into a role as a second source build to print manufacturer. Today, we are engaging directly with hyperscale customers to address their needs for shortened lead times and supply chain stability. Simultaneously, we are bringing creative solutions to them to address AI driven demand for power density, and helping to enable a more efficient future based on automotive grade safe deployment of 800-volt DC rack architectures. During fiscal 2020, we generated approximately $80 million of data center related sales. Based on current visibility, we expect that figure to increase approximately 60% to $130 million in fiscal 2020 with continued growth anticipated beyond that. More broadly, we are directing capital talent, and engineering resources toward markets where we can leverage existing capabilities. Deploy our technologies across multiple end markets, and create differentiated value for our customers. As we look ahead to fiscal 2020, we are shifting our focus on this transformation journey from 'fix it' to 'growth'. The operational challenges that demanded so much of our attention in recent years are largely behind us. Today, our energy is increasingly directed toward winning new business, investing in strategic growth opportunities, and building on the stronger foundation we have established.
Laura Michele Kowalchik: With that, I will turn the call over to Laura to review our fourth quarter and fiscal 2020 results, balance sheet and fiscal 2020 outlook. Thank you, John, and good morning, everyone. Please turn to Slide 8. Unless otherwise noted, all year over year comparisons are to the prior year period. As a reminder, fiscal 2020 consisted of 52 weeks compared to 53 weeks in fiscal 2020. Fourth quarter net sales increased 15.9% to $298.1 million. The increase was primarily driven by customer recoveries in the automotive segment, strength in the industrial segment and favorable foreign exchange partially offset by the interface segment program roll off and the divestiture of the DataMate business. Fiscal 2020 2026 net sales decreased 2.8% to approximately $1 billion. The decline was driven by program roll offs in both the Automotive segment and Interface segment and the impact of 1 less week in the fiscal year. These factors were partially offset by customer recoveries in the Automotive segment, strength in the Industrial segment and favorable foreign exchange. Fourth quarter gross profit increased to $72.2 million from $19.6 million driven by customer recoveries and improved operating performance across our automotive and industrial businesses. For the full year, gross profit increased to $202.2 million from $163.4 million reflecting stronger operational execution and manufacturing efficiencies. Selling and administrative expenses were $55.6 million in the fourth quarter compared to $37.4 million. The increase is primarily driven by higher employee compensation costs $2 million of transaction related and strategic initiatives costs, and $1 million impairment charge related to the exit of our former corporate office. For fiscal 2020 6, selling and administrative expenses were $170.3 million compared to $163.9 million. The increase was driven primarily by foreign currency translation, higher employee compensation costs, and restructuring charges partially offset by lower professional fees. Income tax expense was $12.3 million in the fourth quarter, compared to a tax benefit of $2.1 million. For fiscal 2020, income tax expense was $25 million compared to $12.5 million. The year over year increase for both periods was primarily driven by approximately $4.8 million of additional tax expense related to nondeductible items and $3.4 million of higher foreign taxes. The comparison was also impacted by a nonrecurring tax benefit of $3.9 million recognized in the fourth quarter of fiscal 2020 related to expiration of certain statutes of limitations. Turning to profitability. Fourth quarter adjusted EBITDA was $26.9 million compared to an adjusted EBITDA loss of $7.1 million. For fiscal 2020 6, adjusted EBITDA increased 60% to $68.2 million. The improvement reflects stronger operational execution across the business, customer recoveries, disciplined cost management and favorable foreign exchange. As John mentioned, we negotiated approximately $45 million of customer recoveries resolving claims associated with EV program delays and cancellations. Approximately $23 million was recognized as revenue in fiscal 2020 6 and contributed approximately $19 million to earnings. For this portion of the recovery, we expect cash payments of $7 million per year in fiscal 2020 through 2020. We expect to realize the remaining $25 million of customer recoveries through future production volumes and tooling related reimbursements. Fourth quarter adjusted net loss was $10.4 million or $0.30 per diluted share compared to an adjusted net loss of $27.4 million or $0.77 per diluted share. For fiscal 2020 6, adjusted net loss was $37.5 million or $1.07 per diluted share compared to adjusted net loss of $39.7 million or $1.12 per diluted share. Turning to our segment results on Slide 9. I will focus primarily on fiscal 2020 6 performance as we believe the full year results best reflect the progress we have made across the business. Fiscal '2020 6 Automotive segment net sales were 4 and $67.7 million down 8.1% compared to the prior year. This decrease was primarily driven by the impact of program roll offs and EV program delays in North America. Partially offset by customer recovery agreements and $18 million of favorable foreign exchange. Despite these headwinds, automotive operating loss improved by $18 million to $30.1 million reflecting the benefits of customer recovery agreements operational improvements, and greater commercial discipline across the segment. While North American automotive continues to be by under absorption and customer schedule volatility, we are increasingly leveraging engineering, manufacturing, and commercial capabilities across the company, enabling us to utilize available capacity in Mexico to support new business wins across a broader range of end markets. Many of these opportunities carry more attractive margin profiles than the programs they replace while improving fixed cost absorption and further diversifying the business. We believe these actions position both the segment and the company for improvement. The Industrial segment continued to deliver strong performance, with fiscal 2020 6 net sales increasing 8% to $524.3 million and operating income growing 27% to $114.6 million Approximately half of the sales increase was attributable to favorable foreign exchange. Results were driven by continued momentum in data center power distribution and strong demand for off road lighting solutions partially offset by softness in commercial vehicle markets. Our industrial business is a strong example of the benefits of the more integrated operating model John discussed earlier. By leveraging common engineering expertise, manufacturing capabilities, and customer relationships across the organization we are increasingly able to deploy our power distribution technologies into attractive growth markets such as data centers. This not only supports growth but also allows us to better leverage our existing manufacturing footprint and demonstrate the value of investments we have made across the business over the last several years. The Interface segment net sales declined 47% to $27.2 million while operating income decreased 51% to $5 million The decline primarily reflected the planned roll off of a major appliance program and the divestiture of the DataMate business as part of our ongoing portfolio optimization efforts. Overall, the segment results demonstrate the benefits of the operational and strategic actions we have taken over the past 2 years. Sales continue to be impacted by external market factors, but we are delivering improved profitability through stronger execution, disciplined cost management, and a more focused portfolio. Turning to Slide 10. We generated free cash flow of $15.6 million in fiscal 2020 compared to an outflow of $15.2 million in the prior year driven by stronger operating performance and disciplined working capital management. Capital expenditures were $22 million down 46% year over year. We ended the year with approximately $140 million of cash and net debt of $185 million a 13% reduction from fiscal 2020. Turning to Slide 11. Our fiscal '2020 6 results reflect continued progress in cash generation, balance sheet strength, capital allocation discipline. We remain focused on reducing leverage while investing the highest return opportunities across the business. Turning to fiscal 2020 7 guidance on Slide 12. Based on our current market outlook, including third party industry forecasts, customer production schedules, current U.S. tariff policies and bank forecasts for currency. We expect fiscal 2020 net sales to be in the range of $1.025 to $1.075 billion and adjusted EBITDA to be between $72 million and $82 million representing an adjusted EBITDA margin of approximately 7% to 7.6%. We expect capital expenditures of $25 million to $30 million and free cash flow to be comparable to fiscal 2020. We expect interest expense of $20 million to $22 million income tax expense of $24 million to $26 million depreciation and amortization expense of $58 million to $62 million Turning to Slide 13. The charts provide a bridge from our fiscal 2020 6 results to the midpoint of our fiscal 2020 outlook for both net sales and adjusted EBITDA. We expect fiscal 2020 net sales to grow approximately 3% compared to fiscal 2020 6. Excluding the impact of portfolio refinement activity, including the major program appliance program roll off and the DataMate divestiture, as well as customer recoveries in fiscal 2020 6 net sales are expected to grow approximately 8% year over year. That growth is expected to be driven by approximately $50 million of incremental sales from data center applications improving commercial vehicle demand and the net benefit of volume and mix across the portfolio. We expect sales associated with our data center programs to ramp throughout the year. Adjusted EBITDA is expected to grow 13% compared to fiscal 2020 6. Excluding the impact of fiscal '2020 6 portfolio refinement activity and customer recoveries, we expect adjusted EBITDA to grow approximately 82% year over year. This improvement is expected to be driven by continued growth in our data center power distribution business, improving demand in commercial vehicles and favorable volume and mix across the portfolio. In addition, we expect to realize further operational improvements from the actions we have taken across the business including improved performance in Mexico, benefits from our restructuring initiatives in Europe and continued execution of our cost reduction programs. Together, these actions are expected to drive meaningful margin expansion and earnings growth in fiscal 2020. For modeling purposes, as you think about the cadence of the year, we expect a lighter first quarter driven by typical seasonality. From there, we expect sales and earnings to ramp throughout the year, resulting in a stronger second half of fiscal 2020 as volume growth operational improvements continue to build. In summary, fiscal '2020 6 marked an important year of progress. We improved profitability, generated positive free cash flow, strengthened the balance sheet, and continue to enhance operational performance across the business. As we look ahead to fiscal 2020, our focus remains on executing our growth initiatives expanding margins, generating cash and further reducing leverage. We believe the actions taken over the last 2 years have created a stronger foundation for sustainable value creation.
Operator: With that, I will turn the call back to the operator for questions. Certainly. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants choosing speaker equipment, it may be necessary to pick up your handset before pressing the star keys. 1 moment, please, while we poll for questions.
Gary Prestopino: Your first question for today is from Gary Prestopino with Barrington. Hey, good morning, all. Good morning, Gary. Congratulations, John and Laura, on what you have done with the company so far. A couple of questions here. First of all, in the data center, business, can you just remind me of what you are actually selling into that business. I believe it is bus bars.
Jonathan DeGaynor: Right? Yeah. Gary, as we have talked about the both the results of fiscal 2020 6 and the guide for fiscal '2020 7 are based on our current busbar business into the hyperscalers. Okay. When we reference the future technology in the 800-volt architecture, none of that is in our guide. That is opportunity that we are working on and we are really excited about, but none of that is in the revenue guide for 2027. Okay. So right now, it is just all bus bars, which is good. Correct. And then the other the other thing, could you maybe just as we talk about these recoveries, these recoveries were from the automotive programs that you guys had taken on over the last couple of years. Correct? Yes. Okay.
Gary Prestopino: So were these agreements from the due to the old team, or were these agreements that you guys had put in place then the market just really turned against you in a sense of that the volumes that you anticipated were not there. Yeah.
Jonathan DeGaynor: So, Gary, if you go back to some of the bridges that we provided in the past with regard to program with regard to program ramp ups, these programs were won years ago. And as recently as a 1.5 years ago, when we went through the revenue plan as we laid it out in earnings calls, we talked about an opportunity of a couple of hundred million dollars worth of revenue between a couple of these EV program ramps ups. So when we talk about underabsorption and some of the challenges that we mentioned during this call, that goes back to things that we anticipated happening and where we had spent the engineering and where we had spent the capital and we had done all the work in our facilities, particularly in our Mexico facility to be ready for those ramp ups. With the changes in the dynamics in North America in the North American EV market, that required us to go back to customers. So those were programs that were won years ago. That was that was revenue that was anticipated. And then over the last months, we have been negotiating with the customers to get these recoveries, and it is a team effort to get to the results that we got. Okay. So do you feel that for I guess we did not really talk too much about the automotive, but it seems like the automotive is not going to be really driving too much growth this year. Is this program of going back and getting recoveries is that over, or is that something that we could still anticipate is going to be an impact in fiscal 2020 in terms of the auto programs and the expenses, etcetera, things like that. So we will see automotive growth on a year over year on a year over year basis. Mhmm. As we have said previously, Gary, we had tremendous headwinds in fiscal 2020 and fiscal 2020 6. The recovery activity is largely done. There are a couple of customers that we continue to talk to, but those programs are much smaller, and the recovery activities are much smaller. We see growth on a year over year basis, particularly in North America from an automotive side.
Laura Michele Kowalchik: But not to the level of materiality that we envision with regard to some of the other pieces of our business. So also, Gary, of the $45 million of the customer recoveries that we have already negotiated, We said that $19 million is impacting our earnings in FY 2026. We expect to recover the remaining $25 million over time, and that is through future pricing of customer production and tooling recoveries that we collect once our programs go into production. So we expect that to come in the next 3 to 4 years.
Gary Prestopino: Okay. Yeah. that is what that is what I thought I heard you say. Okay.
Jonathan DeGaynor: Thank you.
Operator: Thanks, Gary. Your next question for today is from John Franzreb with Sidoti and Company.
John Franzreb: Yes. Congratulations, everybody, and thanks for taking the questions. Just wanna make sure we cover go back to the recoveries. 20 I am sorry, $19 million in 2026. How much was in the fourth quarter? And if I heard you correctly, this is revenue being recognized with no associated COGS, I am guessing.
Laura Michele Kowalchik: Is that how it is dropping right down into the P&L? Yeah. Hi, John. There was 22 all of the $22 million of sales was recognized in the fourth quarter, and there is a little amount of COGS, so there is $19 million flowing through down to the earnings. Down to the bottom line. I got it, Laura.
John Franzreb: Thank you. I was wondering why the gross margin jumped up. That was 1 of my original questions. So can you just maybe walk us through a little bit on the what is going on in the tax line? that is for the full year, it is been all over the board.
Laura Michele Kowalchik: So just maybe just kind of recap, and how should we think about modeling that on an adjusted basis going forward? Yeah. So as I mentioned, we had $12 million in FY25 and $20 million of tax expense in FY 2026. This is primarily due to nonrecoverability of nondeductible assets. So higher tax expense of nondeductible amounts as well as additional foreign tax expense. And then there is a onetime benefit in FY 2025. So that is nonrecurring. Going forward. However, our guidance does have us in the tax expense range that we were in this year, so you can model it, appropriately.
John Franzreb: Got it. Got it. And now on a go forward basis, I think I brought this up last conference call. But, the commercial vehicle market order book through May is up 112%. I am curious if, firstly, your order book is similar to that kind of year over year growth.
Jonathan DeGaynor: And secondly, can you remind us how much, in revenue commercial vehicles were in fiscal 2020 6? So John, we base our we base our guidance based on program programs tied to IHS or third party forecast So as you see order books going up, it that is that is in our guidance, and it does move that way. The split with regard to commercial vehicle revenue. Give me just a second. And I will 10%.
John Franzreb: it is 10 it is it is 10 percent of the total in fiscal 2020 6. Got it. And from what I recall from years past, that was a higher contribution margin business than the overall portfolio. I am sorry. Say that again. Kerry, John.
Jonathan DeGaynor: Say that 1 more time. In years past, that was a good contribution margin business. Is that still the case? Yeah. It still is the case, and we continue to you know, refine that portfolio and actually grow that business with our customers. And as we have talked about in previous situations, they are looking to shorten their supply chains and strengthen their USMCA presence. And so we are moving business between regions to support our customers, and we expect that to be additional-- create additional opportunities for growth for us. You know, I just 1 last question related to this. And I will get back into queue. From what I recall, this-- some of these products are made in Mexico. So would this be part of the revenue recoveries that helps the Mexico facility? I do not know. Does it actually move into profitability in fiscal 2020?
John Franzreb: So the commercial vehicle business has historically not been made in Mexico.
Jonathan DeGaynor: there is been a small percentage. Okay. We are actually moving business into our facility. So, John, you are exactly right. The capability that we have within our Mexico facilities is not just an automotive facility. It is supporting other end markets. it is supporting our data center localization. it is supporting our commercial vehicle localization. And, yes, you will see that from a growth from a year over year standpoint in the, Mexico facility activities. Part of it will be commercial vehicle.
John Franzreb: Got it. Thanks, John.
Operator: I will get back into queue. Thanks. As a reminder, if you would like to ask a question, please press 1. Your next question is from Luke Junk with Baird.
Luke Junk: Thanks for taking the question. John, hoping we could start with auto. I guess if you back out the EV recovery this quarter, margins still mix there. I know that is Mexico mainly in fiscal 2020 6. If you look kind of on an underlying basis was relatively similar year over year. A lot going on under the surface including the improvement that you said in Egypt, but just hoping you can comment on some of the key actions incrementally into fiscal 2020 7 here to get that business moving back towards breakeven?
Jonathan DeGaynor: Thank you. Yeah. Thanks for your question, Luke and you are right. And, certainly, the customer recoveries do make that do change that picture. But what you see is on a year over year basis in our in our guide, operating performance is worth $15 million. The recoveries were $19 million. And then and then we see volume and mix as a negative. On the automotive side of $18 million. So the we are driving performance both in Egypt and in Mexico from an operational perspective. If you were to look at a historic revenue outlook, that North American automotive business couple years back was well north of $300 million in revenue. And in fiscal 2020 6, it went as low as a $182 million. We see that coming back to close to $200 million in fiscal 2020 and continuing to continuing to grow. So the way in which we look at this is the automotive business overall, which is 46% of our total, is good business. The under absorption and the challenge that we have had in North America particularly with regard to these EV these EV program delays is why it was so important for us to get the recoveries from the customers. As we did and as we told you we would. And then why we also need to continue to drive performance in our drive cost reduction and drive performance in our in our plants in Mexico. That then become a foundation that allows us to transfer business in for the commercial vehicle business that we talked about to become a USMCA footprint for our data centers that we have talked about. And also as a USMCA footprint for us to win new business that we have talked a bit about, and then we will talk much more in our Q1 call.
Luke Junk: That is helpful. Thank you. I want to switch gears to the data center opportunity and the guidance specifically. Just wanna understand some of the grading to give you the line of sight to that 60% growth in terms of it sounds like you have got the orders in hand. Curious if there is any new program ramps in that, and then just in terms of the constitution of the business here in fiscal 2020, How many customers you are actually working with right now?
Jonathan DeGaynor: Thank you. So the business as we have talked about it is and as we have committed to our shareholders is that as we talk about guidance, it would be based on customer EDI. And that was part of the change within the organization, part of the change to go to vendor managed inventory and deepen those relationships We moved from being a spot buy, relationship to a 52-week EBI relationship. So we are quite confident with regard to the $130 million versus the $80 million. It is 2 new it is 2 new programs. And so there are program changes throughout that. And these programs move in an 18 to 2020 4 month cycle so that shortening the lead time, improving our engineering capabilities, and being able to respond to those cycles means that we get to capture a larger percentage of market share and wallet share than we did in the past. Versus the spot buy approach. So, yes, it is launches. Yes. It is new programs. It is at this point, what is in our guide is the current customer base. We are talking to additional customers. We expect to see that expand, but what is in our guide is our current base with the launches that we know right now in the EDI that we have from the customers.
Luke Junk: that is helpful. And just to clarify, think historically when this was not an area that was in focus, it was mainly a single customer relationship. Are you talking multiple programs with 1 or is it multiple programs and more than 1 customer at this point?
Jonathan DeGaynor: it is it is multiple programs and multiple customers. Understood. I will leave it there. Thank you. Great.
Operator: Thanks, Luke. Your next question for today is a follow-up question from John Franzreb.
John Franzreb: Your line is live. Yes. Just a quick question on the on the bridge. The portfolio refinement portion of it, is that just the businesses that you have sold and exited? Or is there something else built in there for exiting or maybe unprofitable product lines?
Laura Michele Kowalchik: Yeah. That John, that is the DataMate business that we sold that we discussed. As well as the appliance program roll off in our Interface segment.
John Franzreb: Got it. So where are you in the in the strategic review of the product line profitability process, especially considering all the new people that you brought in. I would imagine that was that would be something of a priority.
Jonathan DeGaynor: John, it is still a priority, and we are looking across all of our businesses. You know, what we are trying to do is make sure as not just from a product line profitability, but also from a really return on effort side that we are putting resources against the places that can drive the greatest growth. And you will not be surprised that we will continue to make adjustments over the over the forthcoming quarters. We do not have anything to announce right now. And our current portfolio is what is in our guide. But, yes, we will continue to work on that. And that leads to everything from customer negotiations as we look at unprofitable programs to also us deciding on certain product lines or segments that we will expand or that we will not continue with. Got it. And, John, maybe you could just update us on what the plan for the Interface segment on a go forward basis. Really, that interface business becomes a smaller piece of the of the company overall. it is de minimis. In fiscal 2020 it is it is less than $5 million in fiscal 2020. And we do not see it as a place where when we talk about return on effort, that it is something that we can that we could get to growth. So while it was historically a good business and profitable and we appreciate those customers, it is not a place where we are going to be focusing our time because we have so many opportunities as we grow the commercial vehicle business, as we grow the off highway lighting business, as we grow our, our user interface, both for off-highway and automotive. And as we have talked so much about we grow our data center business and the next technologies there, we have more opportunities than we have capability to pursue, so we have to be refined with regard to how we put our capital to work and how we put our engineering and our talent to work. And we are adjusting and we are moving resources to support those highest growth long term opportunities.
John Franzreb: Got it. Got it. And just 1 last question. You highlighted in the prepared remarks debt reduction in 2026 versus 2025, and you said, managing that balance sheet would also be a priority in 2027.
Laura Michele Kowalchik: Can we expect continued debt reduction in 2027? Yes.
John Franzreb: that is definitely a focus of our capital allocation. Great. Thank you for taking my follow ups.
Operator: Congratulations again. Thank you. Thanks again, John. This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.