Q4 2021 Transcat Inc Earnings Call
Greetings and welcome to try and Scott, Inc, fourth quarter and full fiscal year 2021 conference call on webcast.
At this time all participants are in a listen only mode. A question of the extra session well for the formal presentation.
Once you require operator assistance during the conference. Please press Star Zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Craig <unk> Investor Relations for tranche debt. Thank you you may begin.
Yeah. Thank you good morning, everyone. We certainly appreciate the time today and your interest in Transcatheter with me here on the call today, we of our President Chief Executive Officer, Lee Rudow, and our Chief Financial Officer Mark duty.
After our formal remarks, we'll open the call for questions. If you don't have the news release the crossed the wire after markets closed yesterday. It can be found at our web site the transcript doctor on the.
The slides that accompany todays discussion are also on our website.
If you watch the please refer to slide 2.
We're aware of we May make forward looking statements during the formal presentation and Q&A portion of this teleconference.
Those statements apply to future events, which are subject to risks and uncertainties as well as the other factors that could cause the actual results to differ materially from where we are today.
These factors are outlined on the news release as well as the documents filed by the company with the <unk>.
The reason exchange Commission.
You can find those on our website, where we regularly post information about the company as well as on the SEC's website at <unk> Dot net.
Undertakes no obligation to publicly update or correct any of the forward looking statements contained in the call. What the result of new information future events or otherwise except as required by law. Please review our forward looking statements in conjunction with these precautionary factors.
I'd like to point out as well the turn todays call, we will discuss certain non-GAAP measures, which we believe will be useful in evaluating our performance share.
Not considered of the presentation of this additional information in isolation or as a substitute for results prepared in accordance with yet we have provided reconciliations of non-GAAP to comparable GAAP measures in the tables accompanying the earnings release, so with that I'll turn the call over to Lee to begin the discussion.
Yeah.
Thank you Craig.
Good morning, everyone. Thank you for joining us on the call today.
Without question. Our team is pleased with the fourth quarter results and the results for the full fiscal 2021 year.
In both the fourth quarter and full fiscal 2021, we generated record revenue.
Record operating income.
The record service margins and record cash flow.
The company fought through the challenges of the pandemic and demonstrated both the inherent resiliency of the business.
And the adaptability of our dedicated team.
Our performance underscores the value of our services and validates the investments we've made in technology and infrastructure and the talent needed to effectively execute our strategic plan, especially this past year.
Our service segment continues to be our primary growth engine.
The segment generated strong growth across every financial metric.
And in the fourth quarter of fiscal 2021, we returned to double digit organic revenue growth.
It was our 48 straight quarter of service growth.
And resulted in Transcatheter, passing the 100 million dollar annual service revenue Mark.
For service for.
The first time.
In addition, the service revenue growth, we delivered outstanding service margin performance gross margins were up 500 basis points in the fourth quarter to 33.9%. After the first time, our full year service gross margin achieved the milestone of 30%.
Operating margin was up 470 basis points in the fourth quarter to 15 point.
The 1% margin gains were primarily driven by technician productivity.
Inherent operating leverage on organic service revenue growth and accretive acquisitions of pipe at the dotcom and biotech.
Distribution was still impacted by the lingering effect of the pandemic that we're encouraged by the sequential improvement in the business is distribution turned in its best quarterly result of fiscal 2021.
The rental business continues to perform well up 11% in the fourth quarter overall.
Overall, our fourth quarter operating income exceeded our expectations hitting for point $5 million up 21 per cent.
Even with the downward pressure caused by the pandemic operating income for the full year hit a record $11.1 million.
We generated record cash flow of $23 $6 million during the year.
Cash is primarily allocated to support our acquisition strategy technology investments and to pay down debt by $10 $7 million.
Our current leverage ratio is now below 1 which provides us flexibility to capitalize on future organic growth opportunities and margin enhancing technology developments to drive automation and process improvement into our operation.
And of course, our balance sheet, our balance sheet will aid in the execution of our next level acquisition strategy.
Before I turn things over to Mark, though I want to walk through.
On an acquisition announced the acquisition we made on April 29, we acquired upstate metrology of small bolt on acquisition located nearby our headquarters in Rochester, New York.
I'll state metrology as annual revenue was approximately $1 million, but as of bolt on there'll be integrated very quickly with our Rochester based calibration of lab. So we can fully leverage our current infrastructure with that Mark I'll turn things over to you.
Thanks, Lee and good morning, everyone I will start on slide 4 of our earnings deck, which provides detail regarding our revenue for the fourth quarter and the full year for the fourth quarter consolidated revenue of nearly $49 million was up 7% on strong service revenue and sequentially improving distribution revenue.
Turning to the segments as we mentioned we were very pleased with the service segment revenue growth of approximately 16% with 10% organic growth and 6% coming from acquisition.
The strong organic growth was mainly driven by improving order trends and continued market share gains and to a lesser degree by an easier comparison to the prior year quarter as the service business. The began to feel the impact of the COVID-19 pandemic towards the second half of March 'twenty 'twenty.
With regard to the acquisition growth, we have now lapped the 1 year anniversary of our acquisition of quite bad Dot Com, which was acquired in February of 2021 of that in mind beginning in the first quarter of fiscal 2022, Pipettes dotcom will fully become part of our base business.
Turning to distribution segment sales of $19 8 million were down approximately 5% from prior year. The best quarterly comparison of the fiscal year 2021.
The sales improved 3% sequentially from our fiscal third quarter on modestly improving incoming trends, especially for products sold into the wind power generation market.
As a reminder, we did not feel the impact of the COVID-19 pandemic on distribution revenue until early April.
Of last year as we continued to ship out of our backlog through the end of March 2020.
Finally on a full year basis, we were very happy to set of new revenue record of $173 3 million, which was up slightly from the prior year.
Our service business was up a healthy 9% and as we mentioned the surpassed the 100 million milestone revenue Mark. This is more than offset the distribution decline of approximately <unk> 10 per cent.
Turning to slide 5 our fourth quarter consolidated gross profit was up 16% from prior year and our gross margin expanded 230 basis points to $28 6 per cent.
Service segment gross margin was up 500 basis points to 33, 9% on continued traction from our technician technician productivity initiatives operating leverage from organic growth and accretive margins from our recent acquisitions fourth quarter distribution gross margin was down 220 basis points from prior year on lower levels of cold.
Lots of advertising and rebates from our vendors.
For the full year, our consolidated gross profit increased 9% of $46 1 million and also of the Lee mentioned earlier, we achieved an important milestone of our over 30% gross margin on our service by the business for the year.
We believe this level of gross margin is largely sustainable as the majority of the year over year improvement we saw on fiscal 2021 has been driven by technician productivity and operating leverage on our fixed costs.
Turning to slide 6 on and our overall operating performance.
The fourth quarter consolidated operating income of $4 5 million was up 21% from prior year and exceeded our expectations for <unk>.
<unk> segment operating income increased $1 8 million and operating margin increased 470 basis points as a significant portion of the gross profit increase fell through to operating income distribution.
Operating income was down approximately $1 million largely on lower gross profits.
Operating expenses for the fourth quarter included incremental expense from our recent acquisitions higher technology spend as well as approximately 300000 and severance expense.
Turning to slide 7.
Q4, net income increased 29% of $3 2 million and our diluted earnings per share of <unk> 42 cents were up 11 from prior year. A result of the strong operating performance for.
For the full year net income was down 3% and diluted earnings per share were down 5 cents. The fiscal 2021 tax rate of 21, 9% was up 470 basis points from the fiscal 2020 tax rate, which was aided by a higher discrete income tax benefits.
Moving to slide 8 where.
Where we show our adjusted EBITDA and adjusted EBITDA margin. Among other measures we use of adjusted EBITDA, which is non-GAAP to gauge the performance of our segments. Because we believe it is a good measure of our operating performance and ability to generate cash a reconciliation of adjusted EBITDA. The operating and net income can be found in the supplemental section of the.
The presentation, which as a reminder is posted on our website.
The fourth quarter consolidated adjusted EBITDA was up 30% and our adjusted EBITDA margin increased to 15%.
We were especially pleased with the service segments increase of $2.4 million, which drove EBITDA margin up to 21 7 per cent.
In the quarter for the full year adjusted EBITDA was up 12% and driven by service segment EBITDA margin expansion to a healthy 16 8 per cent.
Moving to slide 9 and our cash flow.
Full year net cash provided by operations doubled from the prior year to $23 6 million and was a function of our improved EBITDA and reductions to working capital.
Full year Capex was $6 6 million and were largely focused on technology infrastructure service segment capabilities and rental pool assets.
For fiscal year 2022, we anticipate our capex to be in the range of $7 5 million to $8 5 million.
With investments focused on technology infrastructure rental pool assets and operational capability of inefficiency of projects, including calibration of automation.
Slide 10 highlights our strong balance sheet.
At quarter end, we had total net debt of $19 million, which was down $10 8 million from fiscal 2020 year on this.
Reduction our leverage ratio also came down it was slightly below 1 at quarter end.
This is calculated as of the total debt at the end of the period divided by the trailing 12 months of adjusted EBITDA, including giving credit for any acquired EBITDA.
And finally, we had $31 1 million available under our revolving credit facility at the end of the quarter.
1 more thing we expect to file our form 10-K on or around June 7th.
With that I'll turn it back to you Lee Okay. Thank you Mark.
We enter we enter fiscal 2022 with a strong balance sheet.
Strong organic sales pipeline and a very active acquisition pipeline operationally, we expect our fiscal 2021 gains in service gross margin to be largely sustainable for.
On a directional perspective, we like what we see when we look ahead on.
Our confidence is high that we have both the right strategic plan in place and the ability to execute it we.
We expect we expect both operating segments to have a strong start to the new year.
For the first quarter of fiscal 2022, we expect service organic growth to be similar to what we just achieved in the trailing 2021 fourth quarter.
We believe we can continue to improve service margins, albeit at a more moderated level as the fiscal year progresses, and technician productivity comparisons become more challenging moving.
For automation will be a key focus and we expect the gain more traction over the next 12 to 24 months.
Distribution has progressively improved since the pandemic started over the over the last year and we believe the trend will continue.
For the first quarter of fiscal 2022, we expect distribution growth to be in the high teens on improving trends and an easy comparison to the first quarter of fiscal 2021, which was heavily impacted by the onset of COVID-19.
All in all translate interest fiscal 'twenty, 2 well positioned.
We remain focused on continuous improvement and leveraging technology as a competitive advantage to drive sustainable differentiation.
In combination with improved macro economic indicators vaccine rollouts and accelerated expansion, we expect to enhance shareholder value in 2022 and beyond.
With that operator, please open the line for questions.
Thank you ladies and gentlemen at this time of will be conducting a question and answer session.
I'd like to ask a question you May press star 1 on your telephone keypad of confirmation total indicate your line is in the question queue. You May Press star 2 if he would like to remove your question from the Q4 of participants using speaker equipment. It may be necessary to pick up your handset before pressing historically.
Our first question comes from the line of Greg Palm with Craig Hallum. Please proceed with your question.
Yeah. Good morning, Thanks for taking the questions and congrats on the quarter here of really good results.
Thanks, Greg as Greg.
I guess just to start off on services I'm curious you know what are you seeing in terms of of growth by end market. You know 10, 10% organic was a pretty solid number and in what I'm trying to figure out is that is it is it broad based is it driven more by certain end markets like life Sciences, what are you seeing.
Really I would characterize it Greg is broad based.
We are seeing some recovery in the industrial markets, which is always good for US life science has been consistent for years now and so that's.
Certainly playing playing a role but overall I would say that the the double digit growth is based upon the recovery across the industrial marketplace more than anything else from previous quarters.
Is that fair to say than the most of your end markets now are are at or exceeding kind of that debt pre pandemic level or do you still feel like there's some pent up demand out there.
It's hard to tell with certainty, but I think most have recovered somewhat I think there probably is some pent up demand we will see some of that throughout the year I don't think oil and gas. For example has fully recovered I think it's taken steps in that direction, so I'm a little bit of.
Pent up demand some recoveries kind of of mix.
Okay got it makes sense and then specifically on on the margin I just wanted to kind of clarify some comments I thought Mark had said something about you know gross margins and service being sustainable, but the guidance kind of it is back in terms of you know expecting you know year over year improvement, but not to the same degree.
Experienced last year. So can you just help us understand exactly what you mean by by the comments there.
Yeah, So I think mark and I, both tried to allude to the fact that we expect the company to continue to drive improvements in our margin now we're coming off of the year with a 500 basis point improvement and so we're cautious in that we don't want to send indicators that we expect to do that again however.
However, we do expect to improve and and and as I've said in the past Marc has said in the past, it's not going to always be quarter to quarter, but directionally. We have things in place. We are investing in technology, we're investing in automation too with the end purpose of driving margins and we were going to get that done that's our intention so you're seeing some tempering based upon year over.
The year improvement, we don't see that necessarily continuing at that rate, but we do see improvements and that's what we're trying to convey.
But is the I guess is the improvement commentary based on what you saw in in last year's quarter or is it based on what you saw for the fiscal year I'm, just trying to gauge what what kind of benchmark or we use and are we using 30% is as the improvement level or the twenty-six and change that you saw last last quarter a year ago.
Yeah, I think you're you've gotta get closer to the 30% and like I said before it could dip down on you know 100 places for basis points here and there where we're in the 30 per cent range and I expect the stay there.
And again, we alluded to the sustainability of the improvements we made I think I think you're going to see that apparent this upcoming year. So I think I'd guide you closer to the 30% then going back this time last year at the 26, yeah for sure.
So just to be clear of that for the full year. We have of full year of 30%. We just achieved that milestone we expect improvement for the full year and Greg to your point around the the Q1 guidance, we do expect improvement there too and if we were just sort of setting the tone debt you know 500 basis, where the various basis points was an extremely good year, we expect improvement.
Both the quarter on the full year, but maybe not to that degree of yep.
Got it Okay makes sense I'll hop back in queue of good luck going forward. Thanks.
Great. Thank you.
Our next question comes on line, Scott book with H C. Wainwright.
Please proceed with your question.
Hey, good morning, guys.
It seems like a little bit of a slower start the MAA. This calendar year I'm curious is that a reflection of the pricing environment or you get a little bit of the deer in the headlights for them from COVID-19 with some of the potential targets.
Yeah I wouldn't.
I wouldnt read into.
Anything about the relative to a slow start to the calendar year. It was about 2 quarters ago. Almost 3 now that we hired a VP of corporate development for the express purpose of really taking advantage of what we thought.
What was going to be a good opportune time in the market to make acquisitions and in combination with the fact, Scott that we were ready as a company to sort of get to the next level and nothing has changed so we've built a really nice pipeline and I tried to characterize that you know in in our script and I think you'll see a higher level of activity as of the year progresses. So.
Taking all of the 3 or 4 months of the beginning of calendar year and I wouldn't characterize it as.
Anything other than what it is and it's the time when you know we have an active and well build pipeline and I expect to see.
Some results from that.
Okay. Good I appreciate the color second 1 for me how should we think about margins in distribution longer term I mean can they be maintained at these levels or are we likely to see some compression of overtime.
I think our goal is to see stability in distribution and that would be both from a revenue and of margin perspective.
We have you know.
We have a rental program, which we launched about 4 of 5 years ago now for the purpose of keeping margins stable, it's not as strategic as it was for the company 10 years ago of distribution, but it does still provide us with a lot of leads and the ample opportunity to do self service to customers, who buy products from us. So we really want to see.
On that business be stable over the next couple of years and we designed it. So we've invested so that it should get close to that stability. So that's what we would expect I don't expect margins to increase significantly I. Just you know is is are you satisfied.
Alright, Great and then are you guys, having any challenges on sourcing inventory and distribution to meet some of this pickup in demand.
Yeah, we actually are marching on address I think instead of what Youre hearing and reading with with all the other you know of companies sort of experiencing the same thing nothing unique to us I would say, but you know between container shortages in COVID-19, you know ramping up production of certain areas of being difficult.
And drivers yeah, so our backlog in the distribution business is higher than it normally is.
You know we've had some good orders recently, but we you know also the the lead times. It just takes longer from the time, we we tell our vendors we need something of the time, we get it.
And we hope it works that works itself out, but we're not immune to what's going on in the world there.
Alright, Thanks for that guys and appreciate you taking my questions.
You got it thanks for that.
Our next question comes from the line of Gerry Sweeney with Roth Capital. Please proceed with your question.
Hey, good morning, everyone and thank you for taking the taking my questions.
To start with revenue.
It's more out of curiosity than anything, but how much of this jump as maybe we talked about a little bit of pent up demand in the past.
Versus maybe just general economic expansion.
Okay.
So Gerry you know I said, a little bit earlier, I really think it's a combination of both we are seeing recovery in the industrial markets that has been helpful. In terms of achieving growth. So the.
We would expect to continue and without question, there's an element of.
Pent up demand as well, so I think youre seeing a blend.
We're going to continue to guide towards on the service business towards that mid to high single digit growth.
Organically and I think we're confident in that range.
Got it.
That's fair and then just on the margin side not to beat a dead horse, but any way you could maybe bucket out maybe mixed price versus productivity and enhancements I know in the Patrick talked about software of calibration of being.
Our longer term.
Driver of margin improvement.
Just wanted to see where the for.
Jerry This is mark growth for the quarter. It it really was driven by the technician productivity year over year, so doing achieving more standard hours with less hours.
Then leverage and when you start growing 10% organically at least talk about them for and the team has talked about before you have a lot of inherent leverage on our fixed costs. Those 2 things drove the vast majority of the past quarter and really for the full year improvements.
So that's what I would continue to highlight.
Got it and I don't want to put numbers in anyone's mouth, but I for some reason.
The net 35% gross margin for long term with a number that just kind of stuck in my head I'm not sure. If that's the exact number.
Obviously, I think software of calibration and all.
Automation plays a big role on to that is that what we're gonna look towards maybe a medium to long term.
You know what when we think about margin.
Enhancement of margin growth you know we started this call. It a journey for a lack of of better word of back when we hit around 20 for some odd percent and.
We had a pretty good plan in place Jerry to get Us to 30, we got there probably earlier than we expected and so that's good news, but we're not done and so the question is whats achievable and how long is it going to take I think we're going to stick to the the idea that we're gonna have a improvement over time, it's going to be fairly consistent.
And I don't think it's unrealistic or unachievable to get into the mid Thirty's I think that's a conversation that you know.
We're having internally it's.
It's not going to be quarter to quarter, we don't have time frames on it whether it be a year or 2 or 3 but at some point in the future I I I anticipate that we'll be having that conversation and so you probably heard mid thirties as a something that was mentioned in the in the last meeting during 1 of the Q&A sessions and and.
Part of the conversation.
Got it other fair.
Again, I don't want to put any numbers on anyone's mouth, but that's what I skipped the number yet.
Got.
And then just on the labor side any issues in actually acquiring the labor everything seems to be tightening up across the board and listen great quarter, I think a lot of Blue Sky ahead of you what I'm trying to figure out of maybe even set the table of little bit debt. As you said the things reported don't look at things quarter to quarter as it looked at it more year to year.
And in the past you sometimes higher.
Chunks of let's say of technicians and it's hit margins just curious if there's if that could be in the play at some point so no 1 gets surprised etc.
Yeah. So so it's a great question and anyone who has studied this company.
Knows that when we have to hire a lot of people at 1 time, there can be short term.
Deflation in margins that could be a quarter or 2 of it takes a couple of quarters to get the tick up in running the more growth you achieve organically the more you're getting the technicians technicians' are never easy to find so theres always going to be those of you know training periods as you hire a large number of technicians, but that shouldn't.
Take our eye off the ball, which is longer term efficiency in the operation and automation and margin enhancement. So that's why we we always say, let's not look at this quarter to quarter high rates of growth do sometimes have a short term.
The dampening effect on margins now as we get better of what we do and put more technologies. The operation, we should be able to offset that better than we've been able to do in the past so that'll be a factor as well on that we would hope to achieve.
Got it and again, great quarter, and I actually look at the hiring as you know as of <unk>.
Positive so yes, exactly okay, Jerry thanks, Yeah.
Thanks Bye.
Yeah.
Yeah.
Our next question comes on the line of Mitra <unk> with Sidoti and company. Please proceed with your question.
Hi, Yeah. Good morning, Thanks for taking the questions first just on the higher Capex and investments in technology infrastructure. If you can give us a sense in terms of what that might entail in.
In terms of helping facilitate the expansion via M&A and also overall improving margins for the.
Yeah, I would say.
Say, what do we do we are forecasting that we'll spend a little more of this year and the 7 5 to 8 and a half million dollar range. We're going to continue investing technology. We've talked about that will continue to invest in rental pool assets, maybe even slightly more than the prior year as it grows on very quickly you know I mentioned in.
In my prepared remarks debt automation calibration of automation that would be investments in that area and that second half of year over year impact more than we invested in the prior year. So.
Nothing really out of the ordinary you know the good news, it's really centered around.
You know our initiatives that are going on you.
You know help us long term. So that's the that's what I would how I would answer that question.
Okay No that's that's.
Thanks.
And then Lee of just a real Big picture question. If you can give us a sense of how much you think maybe.
The competitive environment has changed just a result of the pandemic and maybe opportunities that you have now from an M&A standpoint.
Or even just maybe if youre seeing any piece of willingness of the potential costs such as it relates to the sourcing.
That's made up the existing before.
Well from an M&A perspective, Mitra, we did anticipate some quarters ago sometime last year longer term that the pandemic was going to have the.
The type of effect on on the marketing on the smaller competitors that might perhaps.
Make available some some acquisitions that wouldn't otherwise be available to us and the people would get tired and it would be of difficult challenge for smaller companies and I think all of that has come to fruition. We we have an active pipeline that we're pursuing and working and I think debt and uptick in and of M&A activity will be a byproduct of of some.
Of those factors the COVID-19 effect, but it's also a factor of the fact, it's also a factor that we you know we're focusing on that and we've hired as I mentioned before of V. P. 2 to drive those initiatives for us as the combination of right time right efforts right investment and I think you'll you'll see an uptick in some activity.
The levels.
And then just on the perhaps increase the willingness of maybe 2 customers now of the appliances. It released the.
Outsourcing.
On the services to you.
Right, we haven't seen a major shift or change so far in this fiscal year or even in Q4.
In terms of outsourcing we.
We will always be well positioned to do what we call our client based labs, when theres a market for it.
But we do expect to achieve our organic growth rates, whether it's from client based labs, which is a byproduct of outsourcing or or any of our other activities.
To.
To achieve organic growth, so 1 way or the other but I cant know a specific change in the last 60 days.
That make that may occur later in the year and I would certainly.
I'll talk about it when it happens.
Okay. Thanks, again for taking the questions great quarter.
You're welcome thank you.
Yeah.
Our next question comes on the line of <expletive> Ryan with Colliers Securities. Please proceed with your question.
Thank you say Lee is of excuse me as a follow up to the CBL. How many of those are you operating now.
And what what kind of margin contribution do they bring in is the additive or dilutive to the to the core margin that you see.
We've got about 20 of those going nationwide.
Which is the same number we had last year, we've not lost any of them and the 9 of half years I've been here and we've gained some through the years, obviously from a dilutive standpoint, the margins tend to be in range of our normal margins I mean, it could be of 100 basis points less depending on you know the.
The particular customer, but as you know these are these are very sticky and there's a there's a there's a high lifetime value of these customers. So.
Sometimes that the benefit that you get but yeah, I would say that.
The the numbers in the 20 range.
Okay.
So on the Capex for the rental pool assets, you know, it's growing rapidly small base of any kind of a.
Ballpark of Oh.
How you position that business on what you know what rental could contribute 3 5 years down the road, how big of a market is that that youre trying to achieve.
Right our story dicks going to be about the same as it's been in the past and we launched that business back in 16 with the idea of stabilizing distribution bridging together our distributions segment with our service segment. There was a sort of a myriad of benefits that we were looking to achieve and nothing's really changed I mean, I don't see us.
Part of our current strategic plan to be of $50 million revenue rental company, it's not unlikely. It's not it is realistic however to say that we can go from where we are today, which as you know $506 million rental company, let's say 2 of 10 million dollar of revenue come in that very much is part of our plan. So I think modest.
So the continues to stabilize that business help stabilize that business for the express the purpose of helping to generate leads and cash flow. So that we can grow our service business. That's our strategy. That's rentals are part of that strategy I think it's going to continue.
Okay, great. Thank you.
Yep you got it.
As a reminder, ladies and gentlemen, the star 1 to ask a question. Our next question comes from the line of Kara Anderson with B Riley Securities. Please proceed with your question.
Hi, Good morning, and just 1 more on emanates on me just curious if theres an appetite for on a day.
The larger acquisition opportunities out there.
So Kara I appreciate the question. So our pipeline today is a rather different than it was a year ago. At this time for 2 reasons. 1 there are more opportunities that we're looking at today from a volume perspective and again that's based upon the initiatives we've launched.
To make it so but within the pipeline itself, we are looking at larger opportunities and when we say larger.
Talking our average size in the past the been the 3 of 5 million dollar of revenue range. We've done some of them a little bit larger, but I think our I would characterize our current pipeline as having similar type deals in it and some larger type deals that are closer to sort of the age of $10 million range $10 million to $12 million range. So we've it's kind of.
It sort of runs the gamut, but I do think there's some interesting opportunities and we just have to you know.
Eventually see if it is a good match and if we get some deals done.
Got it and then just 1 last 1 on the guide for distribution growth in the high teens range.
The implied sequential decrease from the fourth quarter can you help me with that why would that be the case of do look more towards the recovery is there seasonality offsetting it.
Yeah, it's just the normal seasonality of the business.
I would describe that as you have just post.
Post the factors, but you know you're you feel that's the normal seasonality of the business.
Yeah.
Okay, great. Thank you.
Thanks Kara.
There are no further questions in the queue I'd like to hand, the call back to management for closing remarks.
Yeah.
Well. This is Lee I appreciate everyone being on the call today. Thank you for joining us feel free to check in with US anytime otherwise I guess, we will speak with everyone. After we released our first quarter results. Thanks again for participating.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.