Prepared remarks
Thank you for standing by. My name is Christina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Phinia Fourth Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Thank you. I would like to turn the call over to Kellen Ferris. Kellen, the floor is now yours.
Thank you. Good morning, everyone. We appreciate you joining us. Our conference call materials were issued this morning and are available on Phinia's Investor Relations website, including a slide deck we'll be referencing in our remarks. We are also broadcasting this call via webcast. Joining us today are Brady Ericson, CEO; and Chris Gropp, CFO. During this call, we will make forward-looking statements, which are based on management's current expectations and are subject to risks and uncertainties. Actual results may differ materially from these statements due to a variety of factors, including those described in our SEC filings. And with that, it's my pleasure to turn the call over to Brady.
Thank you, Kellen, and thank you to everyone for joining us this morning. I will start with some overall comments on the fourth quarter and the full year 2024 highlights and then provide some thoughts on 2025 and beyond. Chris will then provide additional detail on our financials and discuss our 2025 guidance. We'll then open up the call for questions. Starting on Slide 4 of the deck. During the fourth quarter, the macro environment and industry environment were similar to what we experienced in Q3, as the results reflect a soft top line but with good operating margin performance by the segments. Strong aftermarket segment sales were offset by lower fuel system sales. As a result, net sales in the quarter were $833 million, down 5.6% from the same period of the prior year, which included some contract manufacturing revenues. Encouragingly, we are winning significant new business, and I'm particularly pleased with our second product win in the aerospace and defense industry.
We reported adjusted EBITDA of $110 million with a margin of 13.2%, a 160 basis point year-over-year decrease. The positive benefits of supplier savings were more than offset by sales decreases, higher annual incentive compensation and added infrastructure to support the business as a standalone entity. Total segment adjusted operating margins were 12.8%, a 20 basis point improvement when compared with the fourth quarter 2023. Our adjusted free cash flow was healthy at $72 million, while the balance sheet remains strong with cash and cash equivalents of $484 million, up from $365 million at year-end 2023. Our total liquidity is approximately $1 billion when considering our undrawn revolver. This performance enabled us to return $35 million to shareholders via share buybacks and dividends during the fourth quarter. Let us now move to Slide 5 and 6 for a discussion of new business wins. Our ongoing focus on providing market-leading technology and the continued expansion of our product offering into new verticals is being reflected in significant new business wins across product lines as well as new markets.
Let me call out a few. Our second product win in the aerospace and defense industry with a post-combustion injector system, a key contract extension with a medium-duty engine manufacturer, a Light Vehicle GDi program extension for the South American market. Our aftermarket segment won new business in Europe, with subsidiaries of a major customer, won incremental business at a major customer in Europe, signed a multiyear contract to supply remanufactured products to a major CV OEM in South America and developed new distributor to support business growth in Southeast Asia. Finally, building on our core, we introduced over 3,600 SKUs for our aftermarket customers this year to expand our offering, improve our coverage and ultimately better serve more of our customers' needs. Winning business across product lines and in all geographic regions underscores the benefits of the diversity of our end markets, customers and global footprint.
Now moving to Slide 7, we've added some more clarity by separating the light vehicle OE end market, into Light Commercial Vehicle OE or LCV OE, which includes trucks and vans and then also into Light Passenger Vehicle OE or LPV OE, which includes passenger cars, mini vans, crossovers and SUVs. Although LCV may have some product overlap with LPV, the usage, buying decisions and market dynamics are different and closer to commercial vehicle. Our combined commercial vehicle markets totaled 39% of our revenues. OES and independent aftermarket was 34% and LPV OE was 27%. We also continue to maintain strong regional diversity and limited customer concentration levels. From a footprint perspective, we've reduced site in 2024, as we exited one of our former parent sites in Europe. Moving next to Slide 8, for a summary of our 2024 performance and 2025 objectives, on the operations front, we successfully exited all CMAs and TSAs with our former parent, launched innovative new products, entered new markets, won a significant amount of new business, gained efficiencies and drove supply chain improvements.
With respect to our financial position, we've achieved working capital efficiencies and strengthened our balance sheet with two refinancings that lowered our rates, extended maturities and removed restrictive covenants. Adjusted EBITDA margin closed the year at 14.1%. Adjusted free cash flow was $253 million. And lastly, we returned $256 million to our shareholders via dividends and share buybacks in the year. For 2025, we're focused on continuing our journey, being financially disciplined, focused on growing our aftermarket, commercial and industrial OE business and efficiently leveraging our human and manufacturing capital. Now moving on to Slide 9, really no change in direction here, continue to be financially disciplined and focused on maximizing long-term shareholder value. As evidenced, we exit 2024 with a net leverage of 1.2 times, and plenty of liquidity after having returned $303 million to shareholders through the end of 2024.
We are entering 2025 from a position of strength, a position that we've earned through operational and commercial excellence, financial discipline and with a strong free cash flow generating business. As such, we started 2025 by purchasing over 800,000 shares and announcing today that our Board of Directors approved an increase in our share repurchase program by another $200 million and declared a quarterly dividend of $0.27 per share, an increase of 8%, compared to the dividend paid in the same quarter last year. These actions reflect the Board's confidence in the strong cash flow generation of our business and execution of our strategy. We believe successful execution of our strategy, coupled with our disciplined capital allocation, delivers a compelling proposition; a proposition that balances financial strength, disciplined investments to drive profitable growth and distributing capital to shareholders.
In closing, I would like to note how very proud I am of all of our associates across the company who have worked together this past year to deliver the solid results we reported today. And with that, I'll hand it over to Chris, who will walk us through our Q4 results and discuss our outlook for the year.
Thanks, Brady, and thank you all for joining us this morning. I am pleased to report that during the fourth quarter, we continued to successfully execute and drive our business forward. I also want to thank our employees across the globe for their efforts in responding quickly and methodically to rapid changes in market conditions, ensuring we were able to report the solid results we are discussing today. As a reminder, reconciliations of all non-GAAP financial measures that I will discuss can be found in today's press release and in the presentation, both of which are on our website. Moving to page 11 of the deck. Revenue in the fourth quarter reflects similar market trends to earlier quarters in 2024, as we generated $833 million in sales, down 5.6% versus a year ago. Excluding contract manufacturing sales that ended earlier this year, the reduction in sales for Q4 was 2.9% year-over-year.
Our aftermarket segment benefited from higher volume and pricing for a year-over-year increase of 4.9% as volumes across all regions expanded. Fuel Systems segment sales, by contrast, were down 11.7%, including prior year contract manufacturing sales or 7.7%, excluding the effect of contract manufacturing. The decline is attributable to lower commercial vehicle revenue in Europe and China, partially offset by growth in the Americas. Adjusted operating income was $78 million with a 9.4% adjusted operating margin, which represents a year-over-year decrease of $11 million and 100 basis points. Moving to page 13. Adjusted EBITDA was $110 million and a margin of 13.2%, representing a year-over-year decrease of $17 million and 160 basis points. Margins benefited from favorable conditions in Fuel Systems; however, this was offset by higher corporate costs as we were still reliant upon TSAs through the first half of 2024 and full corporate staffing had not been completed by the end of 2023.
We ended 2024 with a disappointing adjusted effective tax rate of 41.5%, above the high end of our guide of 33% to 37%. We have and will continue to pour substantial time and effort into adjusting our legacy structure, which should translate into market level ETR. Our adjusted net earnings per diluted share in the fourth quarter was $0.71, which excludes non-comparable items described in the appendix of our presentation and affected by our high ETR as noted. From a core business performance standpoint, our segments reported solid overall margins. Q4 segment adjusted operating margin was healthy at 12.8%, an increase of 20 basis points year-over-year, primarily due to higher margins in Fuel Systems, partially offset by lower aftermarket margins. Aftermarket segment margin decreased 140 basis points, ending the quarter at 14.9% due to increased freight and other charges, partially offset by volume increases.
Q4 Fuel Systems segment margins were strong at 11.4%, up 110 basis points year-over-year due to favorable price, supplier savings, and customer cost recoveries offset by lower volumes. Let me now bridge our adjusted revenue and adjusted EBITDA for the full year, which you can find on Pages 15 and 16 in the presentation. Our sales performance for the year was impacted by softness in volume, which was a headwind of $104 million on lower CV sales in Europe and lower sales in China, partially offset by growth in the Americas and higher aftermarket sales. We ended the year with adjusted sales of $3.38 billion, down 2%, with a decrease in Fuel Systems of 6.1%, partially offset by an increase in aftermarket sales of 4.5%. Adjusted EBITDA for the year was $478 million or 14.1%, with no degradation in margin despite the reduction in sales. Volume and mix on the change in sales was a normal 25% contribution margin.
Pricing, along with continued strong supplier savings and recoveries totaled $91 million, which offset increases in employee and other manufacturing costs of $48 million. Corporate costs, as the function was fully built out in 2024, increased by $28 million, along with increased R&D and other spending. Now for a quick recap of our balance sheet and cash flow. Strengthening our balance sheet was an important initiative for us throughout the year. We completed two refinancings, resulting in lower interest rates and extending out our debt maturities and amending our credit facility. As a result, we ended the year with substantial current liquidity with cash, cash equivalents and available capacity under our credit facilities of approximately $1 billion. Net cash from operations in Q4 was $73 million and $308 million for the full year. During the quarter, we generated adjusted free cash flow of $72 million, up from $55 million in the same period of the prior year as we continue to be disciplined in management of our working capital and drive optimization of resources and daily processes.
Adjusted free cash flow for the full year was $253 million. On the capital allocation front, we paid dividends of $11 million in the quarter and completed share repurchases totaling $24 million. Capital spend of $20 million was 2.4% of sales in the quarter and was 3.1% for the full year. Funds were primarily used for investments in new machinery and equipment and for new program launches. Now moving to Slide 17 for a discussion of overall industry performance. We expect the industry to experience trends in 2025 that are similar to those in 2024. Light vehicle ICE sales are expected to be down in the low single-digit range globally. By contrast, we expect the industry to experience increased CV sales in the low to mid-single-digit range, varying by region. On a consolidated basis, we would, therefore, expect a flat to a modest increase in sales, excluding the effects of year-over-year exchange rates.
We expect the same level of sales in the first half of the year as the last half of 2024, with a modest increase in the last half as CV sales begin to rebound. Going into 2025, we also anticipate headwinds related to exchange rates with the backdrop of a stronger US dollar. As a reminder, more than 60% of our sales are generated outside of the US. Based upon our expectations for overall industry performance and adjusted for a stronger US dollar, the 2025 net sales range is expected to be between $3.23 billion and $3.43 billion, which includes a negative approximately $80 million impact from foreign exchange. Adjusted EBITDA is projected to be $450 million to $490 million with an EBITDA margin of 13.7% to 14.5%. Overall, we expect solid earnings and cash generation in 2025 as we continue to drive operational efficiencies and search for new areas of growth for both segments. Note that, none of the projections in our outlook include any possible ramifications related to policy changes by the new US administration.
This includes tariffs, tax reform or any other policy that could inflate or duplicate revenue, or affect our cost base, although, we will continue to monitor and have and will continue to develop plans as appropriate with no additional costs expected to be borne by PHINIA. In closing, the strategic actions that we have undertaken are expected to continue and drive meaningful cash flow generation and solid sustainable growth. Our strong balance sheet provides us with financial flexibility to support our current and future growth initiatives, and we are very focused on creating value for our shareholders, customers and employees.
Questions and answers
Thank you. Your first question comes from Bobby Brooks from Northland Capital Markets. Your line is open.
Hey, good morning, guys. Thank you for taking my question. So first thing, I wanted to ask, you guys did $105 million of CapEx in the quarter. You mentioned it was mostly for investments in new machinery for new program launches. Could you just give us a bit more color on that? What programs are they associated with? And could we expect these new machines maybe help lift margins going forward?
Yeah. I think, one, just to clarify, the $105 million was for the year, not for the quarter. I think the quarter was about $20 million. Yes, full year came in at just over 3%. And again, it's really spread out around the world. There's really not one major program. I think the team did a nice job cutting back on some of the CapEx and being as efficient as possible. But these are all going to primarily be supporting new launches that are coming in the coming year as well. So most of it is going to be for new product launches and expansion.
There's a material amount of expansion going on related to CV for the upcoming pre-buys. So it's also for existing programs that are being improved. It's like the next generation, and it's also expansion of that capacity over the next couple of years.
Got it. Yes, my mistake on that. So then transitioning to your mention of the second win within the aerospace and defense market, I was wondering if this is a completely new customer from the first one. Additionally, are these products going to come off that same line that you previously mentioned was upfitted to serve the aerospace and defense markets?
Yes. Right now, it's the same customer, and it will be kind of in that same facility using those same type of equipment. I think the one thing of note, just to remind folks, we're actually on pace to getting our quality certification, our aerospace quality certification here end of Q1, early Q2 in support of our first SOP in that aerospace in Q4 of this year.
That's great. Following up on this, I know you've mentioned it before, but it would be helpful to remind the market about why you chose to focus on the aerospace and defense sectors to diversify your revenues. Could you discuss why you've successfully secured these first two projects and why you believe you can continue to win new programs in aerospace and defense moving forward?
We are actively seeking opportunities that can utilize our existing strengths in both our workforce and our manufacturing capabilities. These opportunities involve precise fuel management and controls across aerospace, off-highway, industrial, and marine sectors, all of which capitalize on our core competencies. This is one of the reasons we aim to expand into these new markets, which we believe have the potential for steady and profitable long-term growth. We've been successful in attracting attention from aerospace companies, who have been impressed by our ability to maintain tolerances of plus or minus 0.5 micron in high volumes and our advanced inspection capabilities for various products. We anticipate receiving a substantial number of requests for quotes moving forward. Achieving our quality certification by the end of the first quarter will unlock many more opportunities for us. The aerospace industry has a fragmented supply base that has struggled with volume and quality issues for years, and they view us as a dependable supplier with strong capabilities and a global presence. We possess the manufacturing, design, and validation capabilities they need.
It allows us also to use existing capital. And because the volume profiles are very different, if you're talking about a pass car or even CV, the volumes are much higher, then you take that same capital and dedicate it to an aerospace, much smaller volume base. You're able to produce it on the same capital, but much higher revenue on the overall. So, it's very complementary, and it helps us utilize that capital that's already sitting on the production floor.
Fair enough, that's a great overview. I appreciate it. And I'll turn back to the queue and let some other guys jump on. Thank you guys and congrats on a good quarter.
Thank you.
Your next question comes from the line of Jake Scholl from BNP Paribas Asset Management. Your line is open.
Hi guys. Congrats on a strong finish to the year. So, I just wanted to dig in a little bit more on taxes. I want to if you can help me understand just why the tax rate remains so high in 2025? If my math is right, it looks like about a $35 million headwind versus the targeted long-term tax rate of 27%. And is there any impact from the global minimum tax in here?
Yes, it was quite disappointing. We've put in a lot of effort, and while it may seem like nothing was done, my team has been working hard. We completed Phase 1, which aimed to address some inefficiencies within the overall structure. However, it will take us longer than anticipated, and we are just wrapping up Phase 1. We experienced a bit of carryover from the previous structure in 2023 due to the local units settling their taxes overseas, resulting in more carryover than we had expected. This will be cleaned up, but we are not expecting a significant reduction next year. I want to be cautious and allow my team some flexibility. Now we are moving into Phase 2 while also starting Phase 3. This project will take time, especially since we have two specific regions that are particularly challenging, requiring a lot of effort. We will continue to work through it, but it's not something that can be resolved quickly.
Thanks Chris. And could you guys also just give us a little bit of color on your expectations by segment? Thank you.
From an overall segment perspective, we are observing continued softness in the light vehicle market, though there may be a slight global improvement in commercial vehicles, particularly in the second half of the year. Our Fuel Systems segment is likely to face ongoing volume and revenue challenges, but we anticipate that will be more than counterbalanced by our Aftermarket segment. The Aftermarket is expected to show steady progress. We expect the original equipment market will remain challenging this year, particularly in the first half of 2024, with a potential recovery in the second half driven mainly by commercial vehicles. Our Aftermarket team is optimistic when the OE market declines, as it provides new opportunities for them. This trend was evident last year when the OE market fell, and our Aftermarket performance helped mitigate much of that decline. The substantial size and balance of our Aftermarket business offer us a buffer in times of downturn and volatility in the OE market.
And from a quality of earnings perspective, if you look, FS, despite the reduction in sales actually held up higher quality earnings. And we also improved on the Aftermarket side for the full year, if you look at the quality of earnings for each. So, all-in-all, even with the soft top line, the bottom line held up quite well, and the units did a really good job managing.
All right. Thanks. Very helpful. And congrats again on a great first full year and update.
Okay. Thank you.
Your next question comes from the line of Joseph Spak from UBS. Your line is open.
Hi. This is Gabe on for Joe. Thanks for taking my questions. So I saw that you raised the dividend this quarter alongside an increase in the buyback program. So that's encouraging. But there's still some excess cash on the balance sheet. I know you'll probably remain balanced in how you allocate capital going forward, but you've talked about wanting to grow CV and aftermarket inorganically. So as you look at potential M&A, how should we think about the potential opportunities you're sizing up the market?
Certainly. It's difficult to view increased cash inflow as negative; however, it is indeed above our target level, which has led us to boost our buyback efforts. As for acquisitions, we remain committed to being financially disciplined. We are seeking specific assets that will enhance our presence in the commercial vehicle, industrial, and aftermarket sectors. Additionally, we will focus on acquiring companies that are profitable, contribute to our earnings per share, and have valuations at or below ours. We believe our company is still undervalued, which justifies our ongoing share repurchases. We are gaining more confidence in identifying promising opportunities that align with our criteria, and we hope to finalize and announce some deals in the coming quarters.
Got it. That's some helpful color. And then my follow-up is just on offsetting the tougher industry outlook with GDI. I think you mentioned in the past about half of the combustion market is GDI you have mid-teens share in that market. What's the current level of penetration in the market today? How is your position strengthened over the past year? And as we move from 350 bar to more efficient 500 bar, what sort of content uplift comes with that? Thanks, guys.
Yes. GDI global penetration rates are currently in the 60%-65% range. We believe this number is stable at the moment and may see a slight increase, but not significantly. Regarding market share for GDI, we remain in the mid-teens and have been steadily gaining market share. We anticipate more launches, particularly with the 500 bar, as we've secured several new programs that will launch in the upcoming year and the following year. This will help us continue to gain market share by providing significant value to our customers. As for content increase, there isn't much, which is one of the reasons for our market share gains. The product serves as a drop-in replacement for the 350 bar, requiring only minor adjustments to achieve enhanced performance. Although there is a slight content increase for us, the value it offers customers is substantial, contributing to our market share growth.
Appreciate it Brady. Congrats.
Okay. Thank you.
Your next question comes from the line of David Silver from CL King & Associates. Your line is open.
Thank you for the opportunity to ask a question. I would like to inquire about your overall guidance for the upcoming year. I understand that there are several assumptions and judgments involved in this. Could you share where you think the most likely source of weakness might be if you were to fall a little short? Conversely, if you were to exceed expectations, particularly on the top line, do you believe greater GDI adoption, which you mentioned earlier, would contribute to that, or do you see other areas where there might be upside to your forecast?
Yes. From a guidance perspective, one of our key assumptions is that commercial vehicles will recover and perform better in the second half of the year. If that doesn't happen, it would be our main concern regarding potential downturns. On the upside, if the recovery is even stronger and the global market for light vehicles continues to stabilize without being significantly impacted by trade conflicts, this could lead to positive results. If interest rates decrease somewhat, inflation remains low, and global markets begin to improve, that could also contribute to positive outcomes. Currently, our forecast indicates that light vehicle OE is expected to decline year-over-year, which means that combustion volumes for light vehicles will decline even more. If consumers continue to purchase more hybrids and combustion engines, and if electric vehicle adoption remains weak this year, there could still be some positive developments.
I also see ongoing potential in our aftermarket business, as they tend to pursue new opportunities that can quickly reflect in our results this year. On the OE side, success will not come from adoption rates but rather from stronger market performance than we anticipated. As Chris pointed out, a weaker U.S. dollar could positively impact our numbers due to the international nature of our business. Currently, the forecast indicates that the dollar's strength poses an $80 million headwind at existing exchange rates. If the dollar weakens against other currencies, we will also gain some upside from that.
The other item is that chaos in the market is never beneficial for the end consumer. They become hesitant and might not want to make purchases. On the other hand, if they reduce the incentives for electric vehicles, that may not be factored into the outlook numbers. This could potentially benefit GDI and PassCAR. The major commercial vehicle manufacturers are sending mixed signals regarding whether they believe a pre-buy is on the horizon. The preliminary figures look fairly promising, but they seem to be taking a cautious approach. Most of them do not view potential regulatory changes negatively, as they have incorporated the next generation, which is more efficient. Therefore, they believe this will actually boost sales, making it more appealing to end users. However, all of this relies on the market experiencing some anxiety, which is never helpful.
That's a great answer. Thank you for providing so much detail. I might be repeating myself, but I wanted to ask about the impact of tariffs on some of your key customers. I'm curious about their thoughts on the current situation. I've observed that the past year or two seem to have slowed down timelines and decision-making for various programs. Do you think the uncertainty surrounding tariffs is causing further delays in those decisions or extending the timelines? What are you hearing from your major customers regarding the current environment?
I think many were already planning to further regionalize their supply base, becoming less dependent on China for North American production. That strategy is still relevant. The potential complications with the USMCA and tariffs involving Canada and Mexico have caught many off guard. The hope is that we can navigate this situation sensibly and make progress. The main concern is that the suppliers may not be able to absorb these costs, and it will likely be challenging for OEMs to take on all of it. As a result, consumers will feel the impact, which could affect overall volumes. That’s something we need to be ready for. There have been some public announcements about the possibility of shifting production between plants in Mexico and North America. While there may be some capacity to shift production, it is unlikely to be significant enough to counteract the substantial cost increases from the proposed 25% tariffs.
Plus it's not a short-term thing that you can do.
It's going to take a while.
No, from a China point of view, we have very little exposure on the China tariffs at all. And what we do, it's only a couple of million dollars in revenue total. And 80% of that is aftermarket, which means that we can immediately push through a price increase. Of course, again, that hurts the end customer or we can try to resource, which again would have cost involved in it that we would push through. But it's minimal exposure from the China side for sure.
Thanks for all the detail. I appreciate it.
Your next question comes from the line of Bobby Brooks from Northland Capital Markets. Your line is open.
Hey, everyone, I wanted to ask one more question. The press release mentioned some good success in the commercial vehicle market, and I was hoping to get more details on that. Specifically, I was wondering if any of these commercial vehicle successes were more related to on-highway applications or if any were off-highway. I know that expanding in the off-highway sector is crucial for your growth moving forward.
Yes. I mean a lot of those were on-highway, both medium-duty and some off-highway as well. So I mean the one that we highlighted there, I think, was an off-highway application for the contract extension.
Got it. That's all for me. I'll turn it back to the queue. Thanks.
Okay. Thank you.
Your next question comes from the line of Drew Estes from Banyan Capital Management. Your line is open.
Hi, Brady and Chris. Thanks for taking the question. Just a follow-up on taxes. You said that you called out two regions that are structurally difficult to fix. Can you elaborate, does that mean that you need to adjust the manufacturing footprint? Or what exactly is required?
The holding company structures are challenging. There isn't much manufacturing involved. The problem arises when you begin to dismantle them, as it can be quite costly to reverse the process. However, we are investigating this matter. We have highly skilled professionals analyzing the situation, and I am also engaging my tax advisors to assess the short-term versus long-term effects of breaking this down and extracting it.
Yes, primary legal structure, I mean, again, when we got spun, we got spun with a structure that made sense for the total, but it didn't make sense for us. And so that's what we're having to try to look to unwind and were areas that made sense for kind of primarily the prior Delphi organization doesn't make sense for the makeup of our operational footprint. To highlight Chris', it's not moving plants. It's more just moving some of the legal entities, shutting them down, removing IP to more appropriate locations that makes sense for us. And so right now, a lot of what we're doing is we're continuing to generate NOLs in countries that we can't take advantage of while we continue to pay taxes and other areas that we're making money. So we've got to get to a point that it starts balancing out, and that's going to require some kind of heavy lifting to shut down some of those entities and kind of move some of the IP and kind of the flow of financials.
Okay. That's very helpful. Thank you. And just second, you spoke about CapEx and how most of it was attributable to the new programs. Just curious if you didn't have the new programs and it was just the legacy business and we assume kind of steady-state unit volume, what do you think CapEx would be roughly? And that's it. Thank you.
Yes. I mean, in general, we expect that to be right around, I guess, our current plan with some of those new program launches is at 4%. If we're not launching any new programs, it's probably going to be in the 1% range as far as maintaining the equipment and maintenance and facilities. Now just to kind of remember and highlight, most of our programs are always kind of refreshing every two to four years. They're going to need some type of upgrade. They want some improvement. It requires some new supplier tooling, some adjustment to our capital equipment. So if you're not spending some of that money, you're going to see revenues declining. So I don't think it's possible for you not to spend CapEx and maintain revenues because they're always going to need some type of improvement and/or upgrade on those vehicle programs.
Okay. That's very helpful. Thanks.
Thank you. And with no further questions, I'd like to turn the call back over to Brady Ericson.
Great. Thank you very much. Again, really proud of all of our employees on a great full calendar year as a stand-alone company. We'll continue to stay focused on adapting to this dynamic market as well as continuing to make good financially disciplined decisions to maximize shareholder value. Appreciate all your support and all your questions. Have a great day.
Thank you. And this does conclude today's conference call. You may now disconnect. Have a great day.