AirBoss of America Corp. (BOS) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us for the AirBoss shareholder's meeting and discussion on the first quarter 2024 results. My name is Gren Schoch, and I'm the Chairman and Co-CEO of AirBoss. With me today Chris Bitsakakis, our President and Co-CEO; Frank Ientile, our CFO; and Chris Figel, our EVP and General Counsel. Our agenda today will start with a discussion of the first quarter 2024 results, followed by a shareholder's meeting. With respect to our results discussion, we will review the operational highlights for the quarter, followed by a discussion of our financial results. We will then hold the shareholder meeting followed by taking questions from participants. Before we begin, I'd like to remind listeners that our remarks today contain forward-looking statements including our estimates of future developments. We invite listeners to review risk factors related to our business in our annual information form and our MD&A, both of which are available on SEDAR+, on the corporate website. Also, we will discuss certain non-GAAP measures, including EBITDA. Reconciliations of these measures are available in our MD&A. And finally, please note that our reporting currency is in U.S. dollars. References today will be in U.S. dollars unless otherwise indicated. With that, I will now turn this over to Chris Bitsakakis for the operational review. Chris?

Thank you, Gren, and good morning, everyone. During Q1 2024, AirBoss maintained its focus on operational execution, aggressive deleveraging activities and the recently announced strategic transition. Despite continuing to deal with challenging economic headwinds that impacted each segment to varying degrees, the company focused on risk mitigation plans in response to these economic challenges, and managing costs with additional overhead reduction steps taken in Manufactured Products Defense business. During the quarter, the company also amended its revolving credit facility to replace the leverage and interest coverage ratios with minimum adjusted EBITDA and liquidity requirements until the end of 2024. This amendment will give AirBoss added flexibility in the execution of our long-term plan. As disclosed during Q1 2024, the company completed a resegmentation, which included a shift in reportable segments commencing with the results for the fourth quarter of 2023 and the year ended December 31, 2023. AirBoss now reports results under 2 segments: AirBoss Rubber Solutions and AirBoss Manufactured Products. The ARS segment consists of the former Rubber Solutions segment and the Rubber Compounding operations at Acton Vale, Quebec that were previously included in the AirBoss Defense Group segment. The new AMP segment consists of AirBoss Engineered Products, formerly a stand-alone unit and AirBoss Defense Group, also formerly a stand-alone unit. ARS experienced improvements in most business lines compared to Q4 2023 and Q1 2024 with a strong quarter with respect to sales volume and EBITDA. Despite impressive performance during the earlier part of 2023, there is pronounced softness experienced at the end of Q4 2023 as sales were impacted by customers focused on reducing inventory levels. Building on the traction experienced in Q1 2024, the segment remains focused on executing on its strategy to deliver strong results with specialized products, expanded production of a broader array of compounds, both white and color, and enhanced flexibility in attracting and fulfilling new business through identified synergies and margin expansion. As a segment, Rubber Solutions continue to invest in research and development to support enhanced collaboration with customers. The A&P segment experienced continued softness in the rubber molded products operations because of OEM shuttering production in the current quarter to rebalance vehicle inventory levels and the ongoing impact from labor disruptions, which impacted OEMs in the earlier part of the prior quarter. The business continued its focus on managing costs and the commitment to drive efficiencies and best-in-class automation as well as diversification of its product lines into adjacent sectors. The defense business experienced continued softness across the product portfolio throughout the quarter. Management continued its focus on operational improvements and executed on additional cost-cutting measures. In addition, the Defense business continued to collaborate with its key customers with the goal of leveraging opportunities aligned with its growth initiatives, subject to timing as delays in the conversion of these opportunities continued through the first quarter of 2024. The ability to recover in volumes in 2024 for each segment will remain subject to the ongoing challenges related to the continued inflation pressures and the ongoing global geopolitical challenges and the successful conversion of key opportunities. Having said that, we continue to view any such challenges as transient, and we will be continuing to focus on our long-term strategic plans. As was announced earlier this year, the company went through an in-depth review of corporate strategy and has established a bold new direction that will be executed on over the next few years. The resegmentation of the company's key business lines was the first step in narrowing focus on the ongoing key growth drivers for AirBoss. As such, the company will focus on growing the core Rubber Solutions segment by emphasizing rubber compounding as the main driver for sustainable growth and productivity and focusing on innovation and custom rubber compounding while aiming to expand market share through organic and inorganic means. Additionally, there will be a purposeful enhancement of diversification through a broadening of product breadth, technological advancements and investments in specialty compound niches. AMP's growth strategy will be focused on diversifying and expanding its range of rubber molded products while simultaneously narrowing the range of defense products through a renewed focus on core competencies. And as was recently announced, we will be undertaking a strategic review of all individual product lines currently manufactured and sold by the company in its Manufactured Products segment in an effort to better identify core versus noncore business. Any resultant divestitures, which may occur based on the results of this process will be structured to enhance the speed of both deleveraging efforts as well as the execution of nonorganic growth opportunities for ERS. These efforts may additionally be enhanced with the monetization of real estate assets and the establishment of world-class greenfield operations. AirBoss will focus on these priorities while investing in core areas of the business to expand a solid foundation that will support long-term growth. I will now pass the call over to Frank for the financial review. Frank?

Thanks, Chris, and good morning, everyone. As a reminder, all dollar amounts presented today are in U.S. dollars, except for dividend per share, which are in Canadian dollars. Percentage changes for Q1 of 2024 are compared to Q1 of 2023 unless otherwise stated. I also want to remind you that AirBoss now reports results under 2 segments: AirBoss Rubber Solutions and AirBoss Manufactured Products. To be respectful of your time today, I will aim to be brief in my summary of our Q1 2024 results. Starting from the top line, AirBoss' consolidated net sales for Q1 2024 were $103.5 million, a decrease of 11.6% from the prior year due to lower sales primarily at Manufactured Products and additional softness at Rubber Solutions. Consolidated gross profit for Q1 2024 decreased by $7.8 million to $14.2 million compared with Q1 2023. This decrease was driven primarily by lower volumes at Manufactured Products and more specifically in the Defense business with additional softness experienced with the rubber molded products operations. Turning now to our individual segments. Net sales in the Rubber Solutions segment for Q1 of 2024 were $65.5 million, a decrease of 3.1% compared to Q1 of 2023. Rubber Solutions experienced progressive traction over the prior quarter and saw volumes bounce back in Q1 of 2024. Volume was up 2.3% with increases in several sectors due to increased momentum in most sectors, specifically towards the end of the quarter. Gross profit within Rubber Solutions was $11 million, which was an increase of 27.9% from Q1 of 2023. This gross profit improvement was driven by the increased volume, the impacts of product mix and the management of controllable overhead. At Manufactured Products, net sales for Q1 of 2024 decreased by 26.2% to $42.3 million from $57.4 million in Q1 of 2023. The reduction was primarily due to the decrease across most of the Defense product lines in addition to lower volumes in the rubber molded products business, specifically in SUV and light truck platforms driven by economic headwinds and softness, which impacted production schedules across certain OEMs and Tier 1 suppliers in the quarter. Gross profit at Manufactured Products segment for Q1 2024 decreased to $3.1 million from $13.3 million in Q1 2023. This gross profit reduction was primarily the result of unfavorable volume and product mix in the Defense Products business in addition to volume in the rubber molded products operation, partially offset by operational cost improvements and reduced overhead costs. Free cash flow for Q1 of 2024 was negative $7.4 million compared to positive $5.2 million at the end of Q1 2023. During Q1 2024, the company invested $1.6 million in capital equipment versus $0.6 million in Q1 of 2023. The capital expenditures related to cost savings initiatives, growth initiatives and minor upgrades with Rubber Solutions and Manufactured Products. By the end of Q1 of 2024, our net debt balance was $97.6 million. We expect to fund the company's 2024 operating cash requirements, including required working capital investments, capital expenditures and scheduled debt repayments from cash on hand, cash flow from operations and committed borrowing capacity. Our current revolving credit facility provides financing up to $150 million. Currently, $108.3 million is drawn against this credit facility. With that, I will pass it over to Gren for the Chairman's Award winners and for closing remarks.

Every day at AirBoss there's inspirational work being done across all divisions and departments with team members going above and beyond to ensure our continued success. In 2019, we created our annual Chairman's Award program to formally recognize the special efforts made by AirBoss employees. It is a peer-to-peer recognition program that helps employees identify, recognize and appreciate a broad range of strong contributors who go above and beyond for AirBoss. When selecting the Chairman's recipient, we ensure that we have a strong representation of our AirBoss employees by presenting an award to 1 peer-nominated hourly employee and to 1 peer-nominated salaried employee, who have both shown exceptional dedication and commitment as they've gone above and beyond for AirBoss. I'm pleased to announce that yet again, we've had great employee participation this year with a total 294 employees nominated from across the organization and the selection of 13 divisional winners. From these 13 divisional winners there were 2 employees that stood out and best exemplified the Chairman Award attributes. I'm delighted to announce today that this year's winners are [ Richard Barnat ], IT manager from Acton Vale, Quebec and [ Ryan Price ], production supervisor from Rockhill, South Carolina. [Foreign Language] [ Ryan Price ] has been with AirBoss for 25 years and served as a general labor. On first shift, Ryan was always the first person to start work in the last 2 weeks. He is very patient with training, very knowledgeable with day-to-day operations in the plant, which continues there in respect of the employees on the floor. Ryan honestly cares about the company, customers and the people he works with every day. I would like to congratulate both Richard and Ryan on being the Chairman Award winners and recognize their efforts. They will both be receiving the 2023 Chairman Award trophy, a cash award and [ a few ] other prizes to be given at a later date. On behalf of the Board of Directors and shareholders, I would like to take this opportunity to thank our nominees and winners across the organization for their outstanding contributions over the last year. And with that, I will turn it over to live portion for this year's shareholder and general meeting. [Break]

Thank you. We are making today's meeting available through both a video and teleconference facility. Accordingly, I'd like to welcome everyone who's been able to join us today in one form or another. I am Gren Schoch, Chairman and Co-CEO of AirBoss of America Corp. Joining me today are Chris Bitsakakis, President and Co-CEO; Frank Ientile, CFO; and Chris Figel, EVP and General Counsel. I would also like to introduce our Board of Directors who are participating electronically. Anita Antenucci, David Camilleri, Mary Matthews, Robert McLeish, Stephen Ryan and Alan Watson. For your information, we'll start the meeting by addressing the formal agenda matters. We will then follow that with a Q&A session where we would welcome questions from participants. In conducting the business of the meeting, I would appreciate your cooperation in allowing us to move efficiently through the agenda. In order to make the best use of our time, certain shareholders have been asked to move and second resolutions, which we will consider at the meeting. I will call on them at the appropriate time. I would now like to call this meeting to order. Chris Bitsakakis and myself will act as Co-Chairs of the Meeting, and Chris Figel will act as Secretary of the Meeting. The Secretary has advised that the annual report containing the audited consolidated financial statements of the corporation for the fiscal year ended December 31, 2023, was mailed to the shareholders of the corporation on April 8, 2024. The notice of this meeting, the accompanying Management Information Circular and form of proxy were also mailed to the shareholders of the corporation on April 8, 2024. I direct that the proof of service be annexed to the minutes of this meeting. Chris Bitsakakis, myself and our CFO, Frank Ientile will be available to respond to any questions concerning the financial statements during the general question period that follows the formal business. Before proceeding with the business of the meeting, I would like to take a moment to discuss the voting procedure. Each holder of a common share of the corporation is entitled to 1 vote for each common share held. There are 4 formal items of business to be dealt with today: a, to receive the annual report and financial statements of the corporation for the fiscal year ended December 31, 2023; b, to elect each of the 7 nominee directors to the Board for the ensuing year; c, to reappoint the corporation's auditors, KPMG LLP, for the ensuing year and the authorization of the directors to fix the auditor's remuneration; and lastly, to approve the unallocated awards under the 2015 Omnimus incentive plan. All as described in the management information circular of the corporation dated April 8, 2024. With the consent of the meeting, representatives of Computershare Investor Services, Inc. the corporation's registrar and transfer agent will act as scrutineers and report on the number of shareholders present in person and the number of shares represented in person or by proxy. I will now ask the Secretary to confirm a quorum for this meeting.

Mr. Chairman, I confirm we have at least 2 persons present, holding or representing by proxy 25% of the eligible votes, which results in a quorum.

As a quorum is present, I declare this meeting properly constituted. I direct that the scrutineers' report on the attendance be annexed to the minutes of this meeting. As a first item of formal business, I'd ask Frank Ientile, our CFO, to table AirBoss's annual report to the shareholders, which includes the audited consolidated financial statements of the corporation for the fiscal year ended December 31, 2023, together with the auditor's report.

Mr. Chairman, the corporation's fiscal 2023 annual report is tabled.

Thank you, Frank. A copy of the 2023 annual report has been mailed to all shareholders who requested a copy. Copies can be found online under AirBoss's profile at sedarplus.com. We will now move to the second item of formal business, the election of 7 directors to the AirBoss Board of Director. Nominations have already been proposed by management in the proxy circular. All 7 of our current directors have agreed to continue serving on the Board of Directors. Details about each of the director nominees are contained in this year's proxy circular. Shareholders are required to cast their votes for each individual director nominee rather than voting for the entire slate. The meeting is now open for the nomination -- for the election of 7 nominees. Morris Eddy, would you please nominate the individuals listed in the proxy circular as directors for the coming year?

Mr. Chairman, I nominate Anita Antenucci, David Carmilleri, Mary Matthews, Robert McLeish, Stephen Ryan, P. Gren Schoch and Alan J. Watson as directors of AirBoss to hold office for the ensuing year or until their successors are elected or appointed.

Thank you. Nadine Kruse, will you please second the nominations?

Mr. Chairman, I second the nominations.

Thank you. Are there any other nominations? I declare the nominations closed. Morris, may I have a resolution, please?

Mr. Chairman, I move the following resolution. Be it resolved that Anita Antenucci, David Carmilleri, Mary Matthews, Robert McLeish, Stephen Ryan, P. Gren Schoch and Alan J. Watson be elected as directors of AirBoss for the ensuing year or until their successors are elected or appointed.

Nadine, will you second the resolution?

Mr. Chairman, I second the resolution.

Thank you. As you know, management solicited proxies for the business of today's meeting. On behalf of management, I received proxies representing over a majority of votes cast for the election of each of the director nominees named in our proxy circular. Based on the proxy report received greater than 95% of the shares voted were cast in favor of each of management's nominees. Accordingly, along with myself, the following other 6 nominees have each been properly elected as directors of AirBoss for the ensuing year. Anita Antenucci, David Camilleri, Mary Matthews, Robert McLeish, Stephen Ryan and Alan Watson. If any shareholder or proxyholder is interested in the exact number of votes cast for or withheld from each nominee you can get the particulars after the meeting from the Secretary. A press release and report on voting results indicated the detailed results -- indicating the detailed results of the vote on the election of the directors will be publicly filed after this meeting on SEDAR+. The next item of formal business is the reappointment of KPMG LLP as the auditors of the corporation and authorization of the directors to fix the remuneration of the auditors. Morris, may I have a resolution, please?

Mr. Chairman, I move the following resolution. Be it resolved of KPMG LLP, present auditors of the corporation, are hereby reappointed auditors of the corporation to hold office until the close of the next Annual Meeting of Shareholders or until their successors are appointed and that the directors of the corporation are hereby authorized to fix the remuneration of the auditors at such amounts that the directors may, in their discretion, determine to occur this fiscal year.

Nadine, will you second the resolution?

Mr. Chairman, I second the resolution.

Thank you. On behalf of management, I have received proxies representing over a majority of votes cast for reappointment of KPMG LLP as the auditors of the corporation and the authorization of the directors to fix the remuneration of the auditors. Based on the proxy report received, greater than 95% of the votes were cast in favor of the resolution. Accordingly, I declare it carried. The next item of formal business is the approval of the unallocated awards under the company's 2015 Omnibus Incentive Plan for a further 3-year term as required by the TSX and the plan itself. A copy of the plan was included in the appendices to the information circular for this meeting. As a full explanation of this approval and the plan was set out in the information circular and was filed on SEDAR+, I will not repeat such information here. However, if there are any questions regarding this matter, they can be directed towards the secondary at any time after the meeting. Morris, may I have a resolution to approve the unallocated awards under the 2015 Omnimus Incentive Plan, please?

Mr. Chairman, I move the following resolution. Whereas, one, the Board of Directors of the company adopted on April 8, 2015, the 2015 Omnibus Incentive Plan, which does not have a fixed maximum number of common shares this rule; two, the shareholders of the company approved the 2015 Omnibus Plan by a majority of votes cast on May 14, 2015; and three, the rules of the Toronto Stock Exchange provide that all unallocated options, rights or other entitlements under a security-based compensation arrangement, which does not have a fixed number of maximum securities issuable by approved every 3 years. Be it hereby resolved as an ordinary resolution of the company that: one, all unallocated awards under the 2015 Omnibus Plan are hereby approved and authorized; two, the company has the ability to continue granting awards under the 2015 Omnibus Plan until May 9, 2027, which is the date that is 3 years from the date of this shareholder meeting at which shareholder approval is being sought; and three, any 1 or more Director or officer of the company is authorized and directed on behalf of the company to take all necessary steps and proceedings to execute, deliver and file any and all declarations, agreements, documents and any other instruments and do all such acts and things, whether under corporate CEO of the company or otherwise, that may be necessary or desirable to give effect to the foregoing resolution.

Nadine, will you second the resolution, please?

Mr. Chairman, I second the resolution.

Thank you. On behalf of management, I received the proxies representing over a majority of votes cast for approval of the unallocated awards under the company's 2015 Omnibus Incentive Plan for a further 3-year term. Based on the proxy report received, greater than 95% of the votes cast were in favor of the resolution. Accordingly, I can declare it carried. If there is no further business for this meeting, I will request the motion that the formal meeting be terminated. Morris, would you please bring a motion to terminate the meeting?

Mr. Chairman, I move that the meeting be terminated.

Thank you. And Nadine, will you second?

Mr. Chairman, I second the motion.

Thank you. All in favor, please raise your hands. Contrary, if any? [Voting]

I declare the motion carried and the formal business of the meeting concluded.

Very good. We'll continue now with the management presentation. On behalf of the management team, I'm happy to present the highlights of our investor presentation, which will be posted to the website today if it hasn't been posted already. We'll just get this slide show started. And if we can go to the first page, please. Obviously, this first page are forward-looking information disclaimers. There are certain elements of this presentation that do include forward-looking information. And if you have time to read through the disclaimers, you can go through that today or at your leisure off of our website. AirBoss has always been a pioneer of innovation technology. Over the last 30 years of growth, you can see here that through organic and inorganic efforts. We have built this company into a broad-based company servicing multiple industries. And we service these industries through multiple customer channels. Our 2 divisions or 2 segments: AirBoss Rubber Solutions and AirBoss Manufactured Products continue to innovate, drive efficiency and scale through our operations to be able to support the growth that we have experienced over the past 30 years. If we can go to the next slide, please. Thank you. Our 2 segments support each other. AirBoss Rubber Solutions provides compounded rubber, materials, R&D and management services to AirBoss Manufactured Products, and AirBoss Manufactured Products through their growth in the industries that they serve can be a good vehicle for vertical integration that drives more sales through our multiple channels. Diversification for our business has always been a key strength. In 2023, our sales came in at $426 million with an adjusted EBITDA of $26.8 million. Our profit to shareholders was a negative $6.4 million, which was based on a goodwill write-off of $26.6 million. In our custom rubber compounding group AirBoss Rubber Solutions, we continue to have 500 million pounds of production capacity. We have over 2,000 proprietary compounds. This is important to us because as we innovate, the proprietary nature of what we do is extremely important to be able to compete within the markets that we serve. The net sales of $248 million and $35 million in gross profit was the -- was a good year for AirBoss Rubber Solutions, although some softness in the fourth quarter impacted that somewhat. In AirBoss Manufactured Products in 2023, we realized net sales of $202 million and gross profit of $23 million through our markets of automotive, non-automotive and defense. In AirBoss manufactured products, we're customized rubber-based antivibration noise reduction solutions for the automotive electric vehicle and heavy truck, industrial and defense industries. We have multiple domestic and offshore automakers and major Tier 1 and 2 suppliers to the global automotive market. On the defense product lines within AirBoss Manufactured Products, we continue to support industrial military-grade protection for chemical, biological, radioactive and nuclear threats. We continue to provide personal protective equipment for health care settings and we are also driving new innovation and technology for a blast monitoring in the overall prevention of traumatic brain injury for soldiers and route clearance solutions for military and law enforcement personnel. And that, as you read in our press release yesterday, we're quite excited about the award that we received recently on this particular product line of $45 million and a total of $57 million over the past 12 months. So this product line for the defense products is growing quite nicely. AirBoss has always had consistent growth through multiple economic cycles. You can see from this chart that despite the ups and downs of different recessions and different concerns throughout the global economic conditions, the AirBoss continues to grow. AirBoss also continues to outperform the industry. If you can see from this chart, as a baseline from 2000 and a multiple of revenue from that baseline, AirBoss continues to outperform both the plastics and rubber industry and the defense capital goods in terms of overall baseline growth. One of our key values is our domestic manufacturing capacity. We are geographically positioned well to win U.S. government contracts particularly as made-in-America is a key factor in many of these products. We continue and have continued for many years to provide a quarterly dividend to our shareholders and as you can see, the current dividend rate, as we announced yesterday at CAD 0.035 through our press release yesterday. Our corporation continues to focus on sustainability. In 2022, we developed our ESG reporting practices and published our inaugural sustainability report, and in 2023, we published our second sustainability report, and we have multiple initiatives underway to continue to expand this effort from our leadership team. In terms of innovation and execution, we continue to grow the rubber business over the long term. We have the core drivers for sustainable growth and productivity. We're growing our market share through organic and inorganic means. We're expanding our capabilities. We have, over the past few years, shifted to higher-value black rubber, more white and color compounds and specialty high-performance elastomers and we will continue to do so in the coming years as it supports our long-term plan for innovation -- growth through innovation. In terms of transforming the rubber business, our 100% ownership in as Ace Elastomer has really given us access to higher-margin color and specialty compounding markets. As you recall, in 2019, when we started up our first color compounding line, and we gained market share immediately, leveraging the technology group and our experience in the rubber industry. We were then able to really catapult that particular market share position that we have on the color side based on that acquisition of Ace Elastomer, which has gone very well for us. As we continue to grow that business, balanced on the efforts of an excellent and hard-working team at Ace Elastomer. In Manufactured Products, we continue to build value with new solutions with our partners. We're focusing continuously on efficiency and innovation, and we continue to grow our access into nonautomotive sectors, both in defense and in other nonautomotive sectors. Also in manufactured products, we continue to win strategic contracts for the military as part of our growth in AirBoss Manufactured Products. We're also strengthening our survivability platform, as you can see from the announcements last year, quite a few awards on military-grade PPE, and we continue to grow in that market. Leveraging the strength of our rubber compounding group and the development of innovative materials that act as a protective barrier for soldiers that are putting themselves at harm and as well as first responder products that are currently being marketed. Our acquisition of BlackBox Biometrics has really put us in a strong position as we continue to work with our military partners on finding ways to gauge and mitigate the health results of overexposure to blast. And we continue to work with all our military partners to drive that product through to their long-term plans. We have a driven and dedicated management team. Many of us are here today. And you can see through this chart who we are. And as well, we have a very strong and supportive Board of Directors that we are excited to continue to work with as we go forward on the execution of our long-term strategy. And with that, as we post this presentation to the website, then we'll also be posting the appendices, which give a little bit more detailed information on the Q1 results specifically, and I encourage you to review those at your leisure. But in terms of Q1, as we posted in our press release yesterday, we're quite excited about the award of the Bandolier, the $45 million award for Bandolier to a NATO partner nation, and we continue to see great traction in this particular product line. In Q1, we were able to reduce our borrowings by an additional $11.1 million after having a very good track record last year of also reducing our exposure to higher interest rates in the size of our credit facility. We reached the settlement of the class action lawsuit that was pending against us here in Canada, and we're quite happy to put that to rest. We also amended our credit facilities to replace the leverage and interest coverage ratios with minimum adjusted EBITDA and liquidity requirements. And what that does for us, it gives us a lot more flexibility as we start to roll out our long-term strategic plan. And of course, we declared a dividend, as was announced yesterday of CAD 0.035. And with that, that draws to a conclusion our presentation -- management presentation, and we will now open the floor to questions from anyone attending the meeting here in person. We have a microphone here at the front of the room. So if anybody would like to queue up and ask a question, you're more than welcome to.

Thanks. David Ocampo, Cormark Securities. Chris, you continue to flag nonautomotive as an opportunity, and that's been a theme for the last, call it, 2 or 3 years. So I guess I'm just curious how that revenue has trended over the last 2 or 3 years. And how does the margin profile compare between nonautomotive and automotive?

Yes, that's a great question. We've had some very good success on the nonautomotive side. And as we said from the very beginning, the nonautomotive products that are out there can leverage our capabilities, both on the rubber compound and the rubber molding side. However, they're normally smaller in volume but higher in margin. And that's what we're seeing. We've had significant traction in construction products. We've had significant traction in heavy truck. But as you see these different awards coming in because of the great size of the automotive business that we have, it appears small in relation to that, although our target is 50%. But already within that operation, we started producing military products as well that are traditional military products for our defense group product lines. And so we are producing the rubber overboot now for the U.S. military in our operation in the U.S. in our Detroit plants. And we are growing in the nonautomotive side. The margins are significantly higher, but the volumes are low. So we haven't reached that tipping point yet. Where we can say where we can point to it and say, see what an impact it's having, kind of similar to on the AirBoss Rubber Solutions side. The specialty compounding is also higher margin but it's lower volume. So in order to tip the needle, it takes quite a few of these success stories to kind of line up to make a big difference. But we're relatively pleased with the traction we've gotten. We wish it could go a little bit faster. But again, when each of these awards are smaller in nature, it takes a lot of these singles, doubles and triples to really add up to move the needle on that target that we've always had for a 50-50 operations [ in terms of ] auto and non-auto. And we have prospects that we think can really help accelerate that, but it's probably too early to speak about them right now. But the program is going well, albeit it's going to take quite a few of these events to start to move the needle.