Q1 2024 Park-Ohio Holdings Corp Earnings Call

That's what you don't it's Brandon good morning, and welcome to the Park, Ohio first quarter 2024 results conference call. At this time all participants are in a listen only mode. After the presentation. The company will conduct a question and answer session.

Operator: Good morning, and welcome to the Park Ohio first quarter 2024 results conference call. At this time, all participants are in a listen-only mode. After the presentation, the company will conduct a question and answer session. This conference is also being recorded. If you have any objections, you may disconnect at this time.

Today's conference is also being recorded if you have any objections you may disconnect. At this time before we get started I want to remind everyone that certain statements made on today's call may be forward looking statements as defined in the private Securities Litigation Reform Act of 1995.

Operator: Before we get started, I want to remind everyone that certain statements made on today's call may be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. A list of relevant risks and uncertainties may be found in the earnings press release as well as in the company's 2023 10-K, which was filed on March 6, 2024, with the SEC.

These forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected Elisa relevant risks and uncertainties may be found in the earnings press release as well as in the company's 2023, 10-K, which was filed on March six 2024 with the SEC. Additionally, the company may discuss adjusted EPS.

Operator: Additionally, the company may discuss adjusted EPS, adjusted operating income, and EBITDA as defined on a continuing operations or consolidated basis. These metrics are not measures of performance under generally accepted accounting principles. For reconciliation of EPS to adjusted EPS, operating income to adjusted operating income, and net income attributable to Park Ohio common shareholders to EBITDA as defined, please refer to the company's recent earnings release. I will now turn the conference over to Mr. Matthew Crawford, chairman, president, and CEO. Please proceed, Mr. Crawford.

EPS adjusted operating income and EBITDA as defined on a continuing operations or consolidated basis. These metrics are not measures of performance under generally accepted accounting principles for a reconciliation of EPS to adjusted EPS operated income adjusted operated income and net income attributable attributed balls.

To park, Ohio common shareholders to EBITDA as defined please refer to the company's recent earnings release I will now turn the conference over to Mr. Matthew Crawford Chairman President and CEO. Please proceed Mr. Crawford.

Matthew V. Crawford: Great, thank you very much, and welcome to the first quarter of 2024 conference call. Thank you for joining us. We're pleased with the performance of our company during the quarter, especially as it relates to our improved margins and our continued focus on managing improved cash flows. As most of you know, we've spent most of the last several years driving initiatives that would improve the quality of earnings across the business. These include commercial activity regarding pricing and exiting low or negative margin business.

Matthew V. Crawford: Great. Thank you very much and welcome to the first quarter of 2024 conference call. Thank you for joining.

Matthew V. Crawford: We're pleased with the performance of our company during the quarter, especially as it relates to our improved margins and our continued focus on managing improved cash flows as.

Matthew V. Crawford: As most of you know we've spent most of the last several years driving initiatives that would improve the quality of earnings across the businesses.

Matthew V. Crawford: These include commercial activity regarding pricing pricing in exactly the exiting low or negative margin business the restructuring of several high cost location.

Matthew V. Crawford: The restructuring of several high-cost locations, renewed focus on growing our highest-margin products and services, and the sale of non-core assets. During the first quarter, we began to see a clearer picture of the momentum of those efforts and are proceeding towards a leaner, less capital-intensive, and more predictable business. I particularly want to acknowledge the efforts of Supply Technologies. Supply Tech has led the way as an agile supplier to many of the world's most demanding and often volatile industries and customers while driving continuous improvement initiatives deeper into the organization and investing aggressively in new productivity tools in both data intelligence and operating execution.

Matthew V. Crawford: Renewed focus on growing our highest margin products and services and the sale of non core assets.

Matthew V. Crawford: During the first quarter, we began to see a clearer picture of the momentum of those efforts and are producing or are proceeding towards a leaner less capital intensive and more predictable business.

Matthew V. Crawford: I, particularly want to acknowledge the efforts of supply technologies supply Tech has led the way as an agile supplier to many of the world's most demanding and often volatile industries and customers, while driving continuous improvement improved improvement initiatives deeper into the organization and investing aggressively in new productivity tools.

Matthew V. Crawford: And both data intelligence and operating execution. Additionally.

Matthew V. Crawford: Additionally, the innovative ideas in the Faster Manufacturing Group continue to bring important value-driven solutions to an increasing set of global customers, particularly in the EV space. ACG's relentless focus on operations, after several years of consolidations, which are now substantially complete, have not only created improved and consistent performance but allowed us to quote new business and new products from a position of lower cost and world-class excellence. Our product portfolio is diverse and, in many cases, agnostic to the powertrain of the vehicle.

Matthew V. Crawford: Additionally, in innovative ideas and the faster manufacturing group continue to bring important value driven solutions to an increasing set of global customers, particularly in the EV space.

Matthew V. Crawford: Acg's relentless focus on operations. After several years of consolidations, which are now substantially complete has not only created more improved and consistent performance, but allow us to quote new business and new products from a position of lower cost and world class execution.

Matthew V. Crawford: Our product portfolio is diverse and in many cases agnostic to the powertrain of the vehicle.

Matthew V. Crawford: EPG continues to benefit from strong backlogs and a growing and impressive aftermarket in the service business, precipitated by a massive installed base globally and trusted brands in the industrial space. We're striving to improve execution in the new equipment business, where we've seen substantial turnover in key knowledge areas, and we expect improvements as we head into the latter part of the year. I remind us all that this group should and will be a leader in accretion to our consolidated market.

Matthew V. Crawford: <unk> continues to benefit from strong backlogs and a growing an impressive aftermarket and service business precipitated by a massive installed base globally and trusted brands in the industrial space.

Matthew V. Crawford: We're striving to improve execution and the new equipment business, where we've seen substantial turnover in key knowledge areas and expect improvements as we head into the latter part of the year are.

Matthew V. Crawford: I remind us all that this group should and will be a leader in accretion to our consolidated margins.

Matthew V. Crawford: For the balance of the year, we anticipate improved year-over-year comparisons and annual growth in line with our guidance. Stable demand generally combined with strong aerospace and defense volumes plus solid backlogs in the long cycle businesses support that assumption. Additionally, we believe macro trends and renewed spending in infrastructure, EV, and semiconductors will play a larger role in our success in the latter part of the year. With that, I'll turn it over to Pat to cover the quarter results.

Matthew V. Crawford: For the balance of the year, we anticipate improved year over year comparisons and annual growth in line with our guidance stay.

Matthew V. Crawford: Stable demand generally combined with strong aerospace and defense volumes plus solid backlogs in our long cycle businesses support that assumption.

Matthew V. Crawford: Additionally, we believe macro trends and renewed spending and infrastructure EV and semiconductor will play a larger role in our success towards the latter part of the year with that I'll turn it over to Pat to cover the quarter results.

Patrick W. Fogarty: Thank you, Matt. Our first quarter results were a positive start to the year. Our revenues were in line with our projections, and operating income, earnings per share, and EBITDA exceeded our internal expectations. Sales in the quarter totaled $418 million, and customer demand continued to be strong in most K&N markets. Strong in-market demand, along with operational improvements, drove the strong performance during the quarter. Our consolidated gross margin was 17.1 percent in the quarter, up 120 basis points from the first quarter of last year. This is the highest level of gross margin in over five years.

Pat: Thank you, Matt our first quarter results were a positive start to the year. Our revenues were in line with our projections and operating income earnings per share and EBITDA exceeded our internal expectations sales.

Pat: Sales in the quarter totaled $418 million and customer demand continued to be strong in most key end markets are.

Pat: The strong end market demand along with operational improvements drove the strong performance during the quarter.

Pat: Our consolidated gross margin was 17, 1% in the quarter up 120 basis points from the first quarter of last year.

Pat: This is the highest level of gross margin and over five years also our adjusted EPS of <unk> <unk> per share was up 18% compared to <unk> 72, a year ago and EBITDA as defined improved 19% year over year.

Patrick W. Fogarty: Also, our adjusted EPS of $0.85 per share was up 18% compared to $0.72 a year ago, and EBITDA has defined improved 19% year over year. Consolidated operating income improved 19% to $24 million, compared to $20.2 million in the first quarter of last year. Operating income margins improved 90 basis points year-over-year to 5.7% of net sales. The strong first quarter operating income performance was driven by record profit performance in supply technologies and operating income improvement in assembly components.

Pat: Consolidated operating income improved 19% to $24 million.

Pat: Compared to $22 million in the first quarter of last year.

Pat: Operating income margins improved 90 basis points year over year to five 7% of net sales. The strong first quarter operating income performance was driven by record profit performance in supply technologies and operating income improvement in assembly components.

Patrick W. Fogarty: SG&A expenses were $47 million compared to $45 million a year ago, with the increase driven by an increase in personnel. Interest costs increased to $11.9 million during the quarter compared to $10.7 million last year, driven by higher interest rates in the current year, partially offset by lower average borrowings outstanding in the quarter. Our effective tax rate was 25% in the quarter. Foreign tax credits and research and development credits helped offset the impact of higher foreign taxes. We expect our full-year effective tax rate to range between 23 and 25 percent.

Pat: SG&A expenses were $47 million compared to $45 million a year ago with the increase driven by an increase in personnel costs.

Pat: <unk> costs increased to $11 $9 million during the quarter compared to.

Pat: $10 $7 million last year.

Pat: Driven by higher interest rates in the current year, partially offset by lower average borrowings outstanding in the quarter.

Pat: Our effective tax rate was 25% in the quarter foreign tax credits and research and development credits helped to offset the impact of higher foreign tax rates.

Pat: We expect our full year effective tax rate to range between 23 and 25%.

Patrick W. Fogarty: The app earnings per share from continued operations for the quarter improved 36% to $0.83 per diluted share compared to $0.61 last year. On an adjusted basis, our earnings per share were $0.85 compared to $0.72 a year ago, an increase of 18%. Our EBITDAs defined total $38 million in the first quarter.

Pat: GAAP earnings per share from continued operations for the quarter improved 36% to <unk> 83 per diluted share compared to <unk> 61 last year on an adjusted basis earnings per share was <unk> 85 cents compared to <unk> 72, a year ago, an increase of 18%.

Pat: Our EBITDA as defined totaled $38 million in the first quarter on a trailing 12 month basis, our EBITDA as defined was $141 million, resulting in improved leverage ratios compared to year end.

Patrick W. Fogarty: On a trailing 12-month basis, our EBITDA defined was $141 million, resulting in improved leverage ratios compared to year end. During the quarter, we generated improved year-over-year operating cash flows and free cash. We continue to implement working capital initiatives that will drive improved free cash flow for the remainder of the year. Our liquidity at the end of the first quarter was $168 million, which consisted of approximately $62 million of cash on hand and $106 million of unused barring capacity under our various bank accounts.

Pat: During the quarter, we generated improved year over year operating cash flows and free cash flow. We continue to implement working capital initiatives, which will drive improved free cash flow for the remainder of the year.

Pat: Our liquidity at the end of the first quarter was $168 million, which consisted of approximately $62 million of cash on hand, and $106 million of unused borrowing capacity under our various banking arrangements as.

Patrick W. Fogarty: As we previously announced, S&P Global upgraded our credit ratings during the quarter due to our improved operating performance and reduced financial leverage. Also, during the quarter, we announced the acquisition of Yilma GMBA. Yilma strengthens our global induction heating expertise throughout Europe and expands both our portfolio of induction equipment brands and our aftermarket service capability.

Pat: As we previously announced S&P global upgraded our credit ratings during the quarter due to our improved operating performance and reduced financial leverage.

Pat: Also during the quarter, we announced the acquisition of EOG M. B H <unk> strengthens our global induction heating expertise throughout Europe and expands both our portfolio of induction equipment brands and our aftermarket service capabilities.

Patrick W. Fogarty: We have commenced the integration of EMA into our existing operations in Germany, and we expect EMA's annual revenues to exceed $30 million and the results to be accretive to our operating margins and our earnings per share. Turning now to our segment results. Supply technologies net sales were $197 million during the quarter, up slightly from a year ago, reflecting continued strong demand in most key end markets, and led by a 28% increase in our aerospace and defense business and strong growth in our industrial supply chain.

Pat: We have commenced the integration of bema into our existing operations in Germany, and we expect the Ms annual revenues to exceed $30 million and the results to be accretive to our operating margins and our earnings per share.

Pat: Turning now to our segment results and supply technologies net sales were $197 million during the quarter up slightly from a year ago, reflecting continued strong demand in most key end markets and led by a 28% increase in our aerospace and defense business and strong growth in our industrial supply business.

Patrick W. Fogarty: During the quarter, demand was lower year over year, and the heavy-duty truck, lawn, and garden, and agricultural equipment markets, which partially offset this growth. We also achieved record sales in our faster manufacturing, which grew up 15% from a year ago due to strong customer demand for our proprietary products throughout North America and Europe. Operating income in this segment totaled a record $19.5 million, compared to $14 million a year ago. Operating margins were also a record at 9.9 percent, up 270 basis points from 7.2 percent a year ago.

Pat: During the quarter demand was lower year over year in the heavy duty truck lawn and garden and agricultural equipment markets, which partially offset this growth.

Pat: We also achieved record sales in our faster manufacturing business, which were up 15% from a year ago due to strong customer demand for our proprietary products throughout North America and Europe Apo.

Pat: Operating income in this segment totaled a record $19 5 million compared to $14 million a year ago.

Pat: Operating margins were also a record at nine 9% up 270 basis points from seven 2% a year ago.

Patrick W. Fogarty: The higher profitability in the quarter was driven by an increase in sales from higher margin products, lower operating costs in our supply chain business, and sales growth in our proprietary fastener products. Our focus on reducing product costs, location profit improvement initiatives, and expanding our higher margin industrial supply and proprietary fastener products impacted the first quarter and will continue to positively affect future margins. In our assembly components segment, sales for the quarter continued to be strong across all product categories and totaled $107 million.

Pat: Higher profitability in the quarter was driven by an increase in sales from higher margin products lower operating costs in our supply chain business and sales growth in our <unk> and our proprietary fastener business are.

Pat: Our focus on reducing product cost location profit improvement initiatives and expanding our higher margin industrial supply and proprietary fastener products impacted the first quarter and will continue to positively affect future margins.

Pat: In our assembly components segment sales for the quarter continued to be strong across all product categories and totaled $107 million this compared to sales of $110 million a year ago with the decline primarily due to lower unit volumes in our fuel rail and extruded rubber products businesses.

Patrick W. Fogarty: This compared to sales of $110 million a year ago, with the decline primarily due to lower unit volumes in our fuel rail and extruded rubber products business. Despite the lower sales levels, segment operating income increased 18% to $8.6 million from $7.3 million a year ago. Segment margins were also higher in the current year at 8%, compared to 6.6% last year, an increase of 140 basis points. The improvement and profitability were driven by ongoing profit improvement initiatives, improved product pricing, and the benefit from completed plant consolidation.

Pat: Despite the lower sales levels segment operating income increased 18% to $8 6 million from $7 3 million a year ago.

Pat: Segment margins were also higher in the current year at 8% compared to six 6% last year, an increase of 140 basis points improve.

Pat: The improved improvement in profitability was driven by ongoing profit improvement initiatives improved product pricing and the benefit from completed plant consolidations.

Patrick W. Fogarty: In this segment, we continue to focus on improving operational execution in each of our manufacturing plants and are implementing other profit improvement actions, including expanding our rubber mixing capacity and increasing plant floor automation, which will positively impact our operating margins. In our engineering product segment, demand continues to be strong across most product brands and geographies. First quarter sales were $114 million, compared to $117 million a year ago. This slight decline in sales was driven by lower sales of new equipment, primarily in the U.S. and in Europe.

Pat: In this segment, we continue to focus on improving operational execution in each of our manufacturing plants and are implementing other profit improvement actions, including expanding our rubber mixing capacity and increasing plant floor automation, which will positively impact our operating margins.

Pat: In our engineered products segment demand continues to be strong across most product brands and geographies.

Pat: First quarter sales were $114 million compared to $117 million a year ago. The slight decline in sales was driven by lower sales of new equipment, primarily in the U S and in Europe.

Patrick W. Fogarty: During the quarter, our aftermarket revenue increased 16% year-over-year. New equipment bookings totaled approximately $40 million in the quarter compared to average quarterly bookings of $43 million in 2023. Backlogs continue to be strong in this segment and totaled $151 million compared to $162 million last quarter.

Pat: During the quarter, our aftermarket revenue increased 16% year over year.

Pat: New equipment bookings totaled approximately $40 million in the quarter compared to average quarterly bookings of $43 million in 2023.

Pat: Backlogs continue to be strong in this segment and totaled $151 million.

Pat: Third to $162 million last quarter.

Patrick W. Fogarty: Revenues in our forged machine products business also improved and increased 4% year-over-year. During the quarter, operating income in this segment was $3.5 million, compared to $5 million a year ago. And on an adjusted basis, operating income was $3.8 million in a quarter compared to $7 million last year. The profitability decline year over year in this segment was driven by lower new equipment sales in our induction business, lower sales volumes, especially in our forging operation in Arkansas, and higher operating costs to complete new equipment.

Pat: Revenue revenues in our forged and machine products business also improved and increased 4% year over year.

Pat: During the quarter operating income in this segment was $3 5 million <unk>.

Pat: Compared to $5 million, a year ago and on an adjusted basis operating income was $3 8 million in the quarter compared to $7 million last year.

Pat: Profitability declined year over year in this segment was driven by lower new equipment sales in our induction business lower sales volumes isolated in our forging operation in Arkansas and higher operating costs to complete new equipment.

Patrick W. Fogarty: We are taking aggressive actions to improve profitability in this segment, including implementing initiatives to improve supply chain challenges experienced during the quarter and to improve production throughput on new equipment orders. And finally, corporate expenses totaled $7.6 million during the quarter compared to $6.9 million a year ago, driven by higher personnel. With respect to our full year 2024 guidance, we continue to expect year-over-year revenue growth in the mid-single digits. We also continue to expect year-over-year improvement in adjusted earnings per share and EBITDA. And I'll turn the call back over to Matt.

Pat: We are taking aggressive actions to improve profitability in this segment, including implementing initiatives to improve supply chain challenges experienced during the quarter and to improve the production throughput on new equipment orders.

Pat: And finally corporate expenses totaled $7 $6 million during the quarter compared to $6 $9 million a year ago, driven by higher personnel costs.

Pat: With respect to our full year 2020 for guidance, we continue to expect year over year revenue growth in the mid single digit range.

Pat: Also continue to expect year over year improvement in adjusted earnings per share and EBITDA as defined now.

Pat: Now I'll turn the call back over to Matt.

Matthew V. Crawford: Thanks, Pat. I appreciate the look at the first quarter, and now we'll open the line up for questions.

Matt: Thanks, Pat I appreciate to have a look at the first quarter and now we will open the lineup for questions.

Pat: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the... For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. One moment, please, while we poll for your question. Our first questions come from the line of Dave Storms with Stonegate. Please proceed with your question.

Speaker Change: Confirmation tone will indicate your line is in the question queue you.

Speaker Change: You May press star two if he would like to remove your question from a Q4.

Speaker Change: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Please while we poll for your questions.

Speaker Change: Our first questions come from the line of Dave storms with Stonegate. Please proceed with your questions.

Speaker Change: Morning.

Speaker Change: Yes.

David Joseph Storms: Just hoping to.

Speaker Change: I'm sorry, it looks like supply Tech really was the flag there for everything that you know.

David Joseph Storms: I'm just hoping to... Kind of sorry, it looks like supply tech really was the flag bearer for everything that, you know, can go right for you guys. How easy or challenging will it be to map, you know, some of those process improvements onto assembly components and engineered products to see the same results there?

Speaker Change: You can go right for you guys.

Speaker Change: How easy or challenging will it be to mask some of those.

Speaker Change: Process improvements onto assembly components and engineered products to see the same results there.

Speaker Change: Yeah.

Matthew V. Crawford: It's not uncommon, Dave, I know you've looked at the business over a number of years. I often say a great industrial holding company is full of great industrial businesses, and we have a number of great industrial businesses. Underneath the hood, each of them sort of has its own particular business cycle, so having some volatility between the group and having different leadership profiles is not uncommon for us, and you're absolutely right.

Speaker Change: It's not uncommon, Dave I know you've looked at the business over a number of years.

Speaker Change: I, often say a great industrial holding company's full of great industrial businesses, and we have a number of great industrial businesses underneath the hood.

Speaker Change: And sort of have their own particular business cycle, so having some volatility between the group and having different leadership profiles is not uncommon to us and Youre absolutely right supply tech both on the manufacturing and the distribution side.

Matthew V. Crawford: Supply tech, both on the manufacturing and the distribution side, has really performed well for the better part of a couple of years here, so I use the word agile in my comments purposefully because it seems like every month there's a different challenge, but again, I think we're on a sustainable path there. As I mentioned, ACG, I think, is in a really good place relative to the stability of their business. We invested heavily in the restructuring of that business.

Speaker Change: <unk> really performed well for the better part of a couple of years here. So I use the word agile in my comments purposefully because it seems like every month is a different challenge, but again I think we're on a sustainable path there.

Speaker Change: As I mentioned ACG I think is.

Speaker Change: Really good place relative to the stability of their business.

Speaker Change: Dustin heavily and the restructuring of that business.

Matthew V. Crawford: We've put ourselves in a great position from an operating excellence standpoint. It reflects itself in productivity, operating efficiencies, and we've, I think, put ourselves in a great spot there. So I think the tail of the tape there is new business, an area of tremendous focus now that we have this operating model that we believe is best in class. So that'll play out, and I think we'll see accretion there as we build that business or continue to build that business going forward.

Speaker Change: Put ourselves in a great position from an operating excellence standpoint.

Speaker Change: It reflects itself in productivity.

Speaker Change: Operating efficiencies.

Speaker Change: <unk> put ourselves in a great spot there. So I think the tale of the tape there is.

Speaker Change: New business an area of tremendous focus now that we have this.

Speaker Change: This operating model that we believe is best in class. So that'll play out and I think we'll see accretion there as we as we build that business are continuing to build that business going forward. So I think from an operational perspective. My point is we have mapped to use your word.

Matthew V. Crawford: So I think from an operational perspective, my point is we have mapped, to use your word, a lot of the success that we hope to bring to the business after a difficult couple of years, and now it's about building it. Engineered products, again, often historically has been the leader in the business, have had their own set of challenges related to a few different things. One is some consolidations there, where we consolidated businesses, which can be a challenge.

Speaker Change: A lot of the success that we hope to get to.

Speaker Change: To bring to the business after a difficult couple of years and now now it's about building it.

Speaker Change: Engineered products again, often historically has been the leader in the business.

Speaker Change: It had its own set of challenges.

Speaker Change: Related to a few different things one is some consolidations there or we consolidated businesses, which can be a challenge.

Matthew V. Crawford: That business relies heavily on know-how and knowledge, some of which we lost during the changeover. So again, the business principles are around unique assets, strong aftermarket business, and tremendous brands in the new equipment space, particularly in electrification, industrial electrification, as well as products that are heavy in aerospace and defense. The market's there. The backlogs are there. I think it's, to use your word again, mapping over some of the operational excellence that we've begun to see in the first two units. It just took a little more time than we thought.

Speaker Change: That business is relies heavily on knowhow and knowledge some of which we lost during the changeover. So again the business principles there around unique assets strong aftermarket business and tremendous brands and the new equipment space, particularly in electrification industrial electrification as well as Prada.

Speaker Change: That are heavy in aerospace and defense.

Speaker Change: The market's their backlogs are there I think I'd say.

Speaker Change: To use your word again mapping over some of the operational excellence that we've begun to see in the first two units has just taken a little more time than we thought.

Speaker Change: Okay.

Matthew V. Crawford: I understand. That's very helpful. Thank you. When and you mentioned a little bit in your response here that you're working on, you know, obviously new business and automotives AC. What does that sales cycle look like now that we're in a more normal world than we were a couple years ago? The contact to contract cycle is trending shorter, you know, and any insight you can give us that would be very helpful.

Speaker Change: Understood that's very helpful. Thank you.

Speaker Change: And you mentioned a little bit in your response here.

Speaker Change: Youre working on obviously for new business and Automotives.

Speaker Change: Sure.

Speaker Change: What does that sales cycle look like.

Speaker Change: Now that we're in a more normal world than we were.

Speaker Change: A couple of years ago.

Speaker Change: Contact to contract cycle.

Speaker Change: Trending shorter.

Matthew V. Crawford: Yeah, I think there's, I mean, there's two types of, at least two, I'll just use two, really three types of new business in the automotive space on the OE side. I think one is the replacement business.

Speaker Change: Any insight you can give us there would be very helpful.

Speaker Change: Yes, I think there is.

Speaker Change: Two types of at least two hits two really three types of new business in the automotive space on the OE side I think one is replacement business I think we're extremely well positioned on.

Matthew V. Crawford: I think we're extremely well positioned on key programs to achieve replacement business given where we are in terms of productivity, scrap rates, and all the things that drive the performance of an automotive supplier. So I like where we are. I think there's new business in the space that we participate in, you know, extrusion, molding, et cetera. And again, I think we're particularly well-suited to it given the consolidation and the productivity improvements we've made over the last couple of years.

Speaker Change: On key programs to achieve replacement business, given where we are in terms of productivity scrap rates and all the things that drive the performance of an Ottoman automotive supplier.

Speaker Change: So I like where we are there I think theres new business in the space that we participate in.

Speaker Change: Extrusion molding et cetera, and again I think we are.

Speaker Change: Particularly well suited there given the.

Speaker Change: The consolidation and the productivity improvements we've made over the last couple of years.

Matthew V. Crawford: So I think, again, I think we're, those are sort of two of the areas I think we're primed for success in the near term. I think that the third is launching new products, and that's a little longer cycle. I see as being impactful, if not later this year, certainly into 2025 and 2026. However, developing new products and launching them, typically to be material, could take a couple more years. No, but the bottom line is we didn't just start this new business cycle, particularly in Categories 1 and 2, but I would anticipate us to outperform car builds beginning in 2025 in terms of growth.

Speaker Change: So I think again I think we are those are sort of two of the areas I think where prime for success in the near term.

Speaker Change: <unk>.

Speaker Change: The third is launching new products and that's a little longer cycles. So those first two.

Speaker Change: I see as being impactful.

Speaker Change: Not later this year certainly into 'twenty, five and 'twenty six.

Speaker Change: Developing new products and launching them typically to be material could take a couple more years. So no but the bottom line is we expect that we didn't just start this new business cycle, particularly not in categories, one and two but I would anticipate us to outperform.

Speaker Change: Car builds beginning in 2025 in terms of growth.

David Joseph Storms: That's very helpful. Thank you for taking the time to answer my questions and good luck in the future.

Speaker Change: Understood. That's very helpful. Thank you for taking my questions and good luck in the future.

Speaker Change: Thanks, Dave.

Operator: Thank you. Our next questions come from the line of Steve Barger with KeyBank Capital Markets. Please proceed with your question.

Speaker Change: Thank you our next questions come from the line of Steve Barger with Keybanc capital markets. Please proceed with your questions.

Steve Barger: Good morning, everyone.

Steve Barger: Christian dialogue for Steve Good morning.

Christian Zyla: Morning, everyone. This is actually Christian Zyla on for Steve. Morning. Chris, how are you? So, your gross margin this quarter looks to be the highest since 3Q16. Very impressive. Can you just walk us through what...

Steve Barger: Thanks for taking my questions.

Steve Barger: So your gross margin this quarter looks to be the highest since <unk> 16, very impressive can you just walk us through what enabled that was that due to pricing in your portfolio or more on the material cost side and do you think this is a sustainable new level.

Steve Barger: Okay.

Patrick W. Fogarty: Christian, this is Pat. As I mentioned, Scripps Supply Tech really led the operating income performance during the quarter as a result of, you know, a higher level of sales in higher-margin products. I mentioned aerospace and defense increased year-over-year significantly. I mentioned the growth in our industrial products business, which typically carries higher margins. So overall, mix was a big factor in the increase.

Pat: Christian this is Pat.

Pat: As I mentioned.

Pat: The script supply Tech really led the operating income performance during the quarter.

Pat: As a result of.

Pat: A higher level of sales and higher margin products.

Pat: <unk> aerospace and defense.

Pat: To increase year over year significantly I mentioned the growth in our industrial products business, which typically carries higher margins.

Steve Barger: So overall mix was a big factor in the increase in addition, the growth that we saw in our proprietary fastener products, which we expect to continue.

Patrick W. Fogarty: In addition, the growth that we saw in our proprietary fastener product, which we expect to continue. Really nice margin relative to the products that they are implementing around the world relative to EV and other applications that use our self-piercing and clinch products. So there was a lot that impacted Q1.

Steve Barger: Really nice margin relative to the products that they are implementing around the world relative to <unk> and other applications that use our self piercing and clinch products.

Steve Barger: So there was a lot that impacted Q1.

Patrick W. Fogarty: Mix obviously has a lot to do with it, but we were very pleased with where margins have been. And a lot of heavy lifting has gone on over the last two years around pricing with customers, around reducing product costs, and those initiatives will continue as we continue to drive our operating margins in that segment. In the automotive segment, we saw a nice improvement year over year in our operating income, and a lot of that has to do with the consolidations that were completed, as Matt mentioned.

Steve Barger: Mix, obviously has a lot to do with it but we were very pleased with.

Steve Barger: With where margins have been and there are a lot of heavy lifting went on over the last two years around pricing with customers around reducing product costs and those initiatives will continue.

Steve Barger: As we continue to drive our operating margins in that segment.

Steve Barger: In the automotive segment, we saw a nice improvement year over year and our operating income.

Steve Barger: A lot of that has to do with the consolidations that were completed as Matt mentioned.

Patrick W. Fogarty: And in the early part of the completion of those consolidations, there are additional costs, startup costs, training costs, inefficiencies that occur on the plant floor that we're getting over now. And we're starting to see those improvements occur, and throughput increase, which obviously helps drive an increase in our operating margin. Matt mentioned our engineered products group and some of the challenges that we face. We expect margins to continue to improve. A number of initiatives are in place.

Steve Barger: In the early part of the completion of those consolidations. There are traditional cost startup cost training cost inefficiencies that occur on the plant floor that we're getting over now.

Steve Barger: And we're starting to see those improvements occur in throughput increase.

Steve Barger: Obviously helps drive an increase in our operating margins.

Steve Barger: Matt mentioned are our engineered products group and some of the challenges that we faced we expect margins to continue to improve.

Steve Barger: A number of initiatives are in place, we did see nice improvement in our forging plant in canton.

Patrick W. Fogarty: We did see a nice improvement in our forging plant in Canton, which historically has been a higher margin business. We see a lot of new growth opportunities in our capital equipment business as it relates to forging equipment, which carries a higher margin. So we're pleased with where we're at, at 17.1% overall, and hoping to be able to continue that as we get through the rest of the year.

Steve Barger: Historically has been a higher margin business, we see a lot of new growth opportunities in our in our capital equipment business as it relates to forging equipment, which carries a higher margin. So.

Steve Barger: I'm pleased with where we're at 17, 1% overall and.

Steve Barger: Hoping to be able to continue that as we get through the rest of the year.

Matthew V. Crawford: Chris, I would only add there are, you know, two layers of improvement both inside some of the businesses, particularly supply tech, and on the consolidated gross margins. You know, one is a structural shift to higher-margin businesses. I mean, we're trying to give the businesses that have the highest margins their unfair share of capital, and that includes not only investing in the right places. In this particular case, we're benefiting from seeds we planted in narrow space and defense, you know, two, three, four, five years ago.

Speaker Change: Okay, Chris I would only add.

Speaker Change: Two layers of improvement both inside some of the businesses, particularly supply tech and on the consolidated gross margins.

Steve Barger: One is a structural shift.

Chris: The higher margin businesses.

Chris: We're trying to give the businesses that have the highest margins, they're unfair share of capital and that includes not only investing in the right places in this particular case, we're benefiting from seeds, we planted in aerospace and defense.

Steve Barger: 345 years ago. So that you can go out with the pay off I'd also includes exiting low margin businesses or we don't provide a value set that we can get paid for it so.

Matthew V. Crawford: So it takes a while to pay off. It also includes, you know, exiting low-margin businesses where we don't provide a value set that we can get paid for. So, you know, I think there's a significant amount of sort of structural work here. There's no question supply tech performed at a very strong level. So I think that our focus, particularly in the auto industry, on continuous improvement is continuing to benefit us. So, you know, again, we're going to see market leadership inside our business from different businesses at different times, unquestionably, and right now, the leader was certainly in supply tech. But you know, we believe at the end of the day we're building a more stable, simpler, sustainable business, and less capital intensive. I hope that that helps.

Steve Barger: There's a significant amount of sort of structural work here. There is no question supply tech performed at a very strong level. So.

Steve Barger: That are.

Steve Barger: Focus, particularly in auto on the continuous improvement is continuing to benefit so.

Steve Barger: Again, we're going to see market leadership inside our business from different businesses at different times.

Steve Barger: Unquestionably and right now the certainly the leader wasn't supply tech.

Steve Barger: But we believe at the end of the day, we are building a more stable simpler sustainable business model and less capital intensive so.

Speaker Change: I hope that helps.

Christian Zyla: Great. Yeah, very helpful.

Speaker Change: Great very helpful. I guess, just sticking with supply Tech and I know part of this is it.

Christian Zyla: I guess just sticking with supply tech, and I know part of this is the improvements you guys have made over the last few years, and part of it was the mix, but just how much of the margin expansion outside of that low 7% range was mix driven? And should we expect that to continue or a step down for the balance of the year? Just trying to think of the model here.

Speaker Change: Movements you guys have made over the last few years and part of it was the mix, but just how much of the margin expansion outside of that low 7% range was mixed driven and should we expect that to continue or a step down for the balance of the year just trying to think of the model here.

Patrick W. Fogarty: Yeah, Christian, I would say most of the improvement, you know, north of, say, 70 percent, was a result of MIX. But on the other hand, as we get through the rest of the quarter, we've got initiatives to continue to reduce our product costs, which will help offset the change in MIX going forward. So I'd like to believe we can continue with that 9.9 percent operating income margin, but anything that takes us north of 8 percent will generate a nice comparison year over year. But we're going to continue to drive towards, you know, a margin that looks closer to 10 percent.

Speaker Change: Yes, Christian I would say most of the improvement.

Speaker Change: North of say, 70% was the result of mix.

Speaker Change: But on the other hand, as we get through the rest of the quarter. We've got initiatives to continue to reduce our product costs, which will help offset the change in mix going forward.

Speaker Change: So.

Speaker Change: I'd like to believe we can continue with that nine 9%.

Speaker Change: Operating income margin.

Speaker Change: But anything that takes us north of 8% will will generate a nice comparison year over year.

Speaker Change: But we're going to continue to drive towards.

Speaker Change: You know margin that looks closer to 10%.

Matthew V. Crawford: We're again trying to grow our best parts of our business from a quality of earnings standpoint more quickly. Again, aerospace and defense is a good example.

Speaker Change: We're again, we're trying to grow our best parts of our business from a quality of earnings standpoint, more quickly again aerospace and defense is a good example, yes in the quarter that gave us great mix.

Matthew V. Crawford: Yes, in the quarter that gave us a great mix, maybe an optimal mix, but so it is a tough comp. There's no question if that's your point. It is. Having said that, we've made changes that, again, we think have taken the business to a higher level.

Speaker Change: Maybe maybe optimal mix.

Speaker Change: But so it is a tough comp there is no question if thats. Your if that's your point. It is having said that we have made changes that again, we think we've taken the business to a higher level.

Christian Zyla: And then just switching gears to engineered products. I know in the past you've said as engineered goes, Park Ohio goes. But as we look at the business, I mean, is there a business line in EP that's a drag on margins? And as you look at the entire engineering portfolio, is there any way to structurally improve the business, like you guys recently did with assembly components?

Speaker Change: Great and then just switching gears to engineered products I know in the past you've said is engineered goes park, Ohio goes, but as we look at the business. I mean is there a business line in EP, that's a drag on margins and as you look at the entire engineered portfolio is there any way to structurally improve the business like you guys recently did.

Speaker Change: With assembly components.

Matthew V. Crawford: I think we need to break the business apart a little bit to think about that. Number one, we have made a tremendous amount of decisions over the last few years to try and improve our business for the long term. I think the most well-known example is the consolidation of Crout Forge into Canton.

Speaker Change: Yeah.

Speaker Change: We need to break the business apart a little bit to think about that.

Speaker Change: Number one we have made a tremendous amount of.

Speaker Change: Decisions over the last few years.

Speaker Change: Try and improve.

Speaker Change: Our business for the long term.

Speaker Change: I think the most well known example is the consolidation of Kropp forge in the Canton, maybe a lesser known example is the expansion of southwest steel processing with a second <unk> line.

Matthew V. Crawford: Maybe a lesser-known example is the expansion of Southwest Steel Processing with the second forge line. You know, these decisions were made with the long-term health and interests of the business in mind. And I think they were made at the right time.

Speaker Change: These decisions were made.

Speaker Change: With the long term health and interests of the business in mind and I think they were made.

Speaker Change: At the right time.

Matthew V. Crawford: Again, these are businesses where centers of excellence, access to trained labor, these are the kinds of decisions that build a business long term. Having said that, these are very difficult operating decisions and consolidation decisions at a time when, you know, turnover was much higher than usual, retirements, and loss of knowledge were much higher than usual. So, I think benefiting from those decisions where we sort of work that through in the automotive business over a couple years is more challenging opportunities.

Speaker Change: These are businesses where centers of excellence.

Speaker Change: Access to trained labor. These are the kinds of decisions that build the business long term.

Speaker Change: Having said that these are very difficult to operating decisions and consolidation decisions at a time, where.

Speaker Change: Turnover was much higher than usual retirements and loss of knowledge much higher than usual. So I think are benefiting from.

Speaker Change: Those decisions, where we sign of sort of work that through and the automotive business over a couple of years. These are these are more challenging.

Speaker Change: Opportunities, having said that these are some of our most stable customers and products.

Matthew V. Crawford: Having said that, these are some of our most stable customers and products. These are businesses that, you know, tend to have very unique assets and capabilities. So, you know, we're not losing business. The backlogs are strong, and we need to perform against them. Separately, when I think about the equipment business, where we added Yima recently, you know, the aftermarket business is, and continues to be, a bright spot.

Speaker Change: These are businesses that.

Speaker Change: Tend to be very unique assets and capabilities. So.

Speaker Change: We're not losing business the backlogs are strong and we need to perform against that.

Speaker Change: Separately, when I think about the.

Speaker Change: Equipment business, where we added EMA recently.

Speaker Change: The aftermarket business as I mentioned is a bright spot continues to be a bright spot.

Matthew V. Crawford: And the macro trends around defense and aerospace and infrastructure will benefit that business as well as the forge business in an outsized way. So we will continue, I think, to be a premier supplier of these products in a world that's electrifying. So having said all that, you know, the new equipment part of the business, as I mentioned in my comments, is difficult right now for some of the same reasons that the forge combined with the fact that, you know, the cycle time on some of these orders, whether it be a forging press or an induction heater, could be, you know, from order to ship, or your installation could be 18 months, 16 months, 14 months.

Speaker Change: And the macro.

Speaker Change: Trends around defense, and aerospace and infrastructure will benefit that business as well as the <unk> business in an outsized way. So we continue I think to be a premier supplier of these products in the world Thats electrify.

Speaker Change: So having said all of that.

Speaker Change: The new equipment part of the business as I mentioned in my comments.

Speaker Change: It's difficult right now again for some of the same reasons at the forge combined with the fact that the cycle time on some of these orders.

Speaker Change: Whether it be a forging press or induction heater could be.

Speaker Change: From order to ship all your installation could be 18 months 16 months 14 months. It takes time to catch up it takes time too.

Matthew V. Crawford: It takes time to catch up. It takes time to optimize from, you know, both a pricing and an execution standpoint. So we have strong conviction in the macro trends, we have strong conviction in the decisions we've made, and we have strong conviction in the bones of the business from backlogs and installed base and aftermarket. It's just, you know, there's a smaller part of the business that I've mentioned in a couple areas, places where we consolidated or grew rapidly in forging or new equipment, which has been difficult and will continue to be, and But that's the nature of a diversified portfolio.

Speaker Change: Optimize.

Speaker Change: From both a pricing and an execution standpoint so.

Speaker Change: We have strong conviction on the macro trends with strong convictions on the decisions we've made.

Speaker Change: And we.

Speaker Change: We have strong conviction on the bones of the business from backlogs and installed base in aftermarket it's just.

Speaker Change: There is a smaller part of the business.

Speaker Change: I've mentioned in a couple of areas places, where we consolidated or grew rapidly in forging or new equipment, which is it's been difficult and we will continue to see and we're going to get better every day.

Speaker Change: But that's the nature of a diversified portfolio.

Christian Zyla: Great, I really appreciate the answer. I've got one last one. I'll pass it back.

Speaker Change: Great really appreciate the answer I've got one last one and I'll pass it back just with.

Christian Zyla: Just with the FY 24 guide, I know you guys added Yima, but does your M&A pipeline enable upside to your guidance? Or should we think about this year as primarily organically driven top line? And then in the quarter? Should we think about a couple points of price and the difference being volume for the overall sales performance?

Speaker Change: With the FY 'twenty four guide I know you guys added EMA, but does your M&A pipeline enable upside to your guidance or should we think about this year is primarily organic driven top line and then in the quarter.

Speaker Change: Should we think about a couple of points of pricing and the difference being volume for the overall sales performance. Thanks again for the time.

Matthew V. Crawford: Thanks again for the time. I'll let Pat...

Speaker Change: I'll, let Pat take the latter I'll take the farmer, we tend not to build acquisitions into our model.

Patrick W. Fogarty: I'll let Pat take the latter; I'll take the former. You know, we tend not to build acquisitions into our model. You know, so I think that that always has some upside to it. You know, we're not depending on future acquisitions to meet the goals we've laid in front of you, hard stop. So that is, it is opportunistic.

Pat: So I think that that always has some upside to it.

Pat: We're not depending on future acquisitions that meet the goals we've laid in front of you hard stop.

Pat: So that is that is opportunistic we've tended to do.

Matthew V. Crawford: We've tended to do, you know, deals fairly often. So, I would not want you to leave the call thinking that we're not out there thinking what's going to be beneficial for our long-term success. We always are. Having said that, you know, we're also tuned into managing our cash flow, managing our debt levels. And, you know, so we're trying to do try to walk and chew gum at the same time.

Pat: Deals fairly often so so I would not want you to leave the call thinking that we're not out there thinking what's going to be beneficial for our long term success, we always are having.

Speaker Change: Having said that we're also tuned into managing our cash flow managing our debt levels.

Speaker Change: So we're trying to do trying to walk and chew gum at the same time, but to be clear any acquisition that you would see is complete for the remainder of the year, which should be accretive to our goals and should be something that you should be awfully excited about.

Matthew V. Crawford: But to be clear, any acquisition that you would see us complete for the remainder of the year should be accretive to our goals and should be something that you should be awfully excited about. Well, we would be awfully excited about it, which means you too.

Speaker Change: Well, we would be opex.

Speaker Change: It means you too.

Operator: Thank you. Our next questions come from the line of Yilma Abebe with J.P. Morgan. Please proceed with your questions.

Speaker Change: Thank you our next questions come from the line of <unk>.

ABB: ABB with J P. Morgan. Please proceed with your questions.

ABB: Hi, Thank you good.

Yilma Abebe: Thank you. Good morning. I guess my first question is, Good morning.

ABB: Good morning.

ABB: I guess my question is good morning.

Yilma Abebe: You talked quite a bit about the operational improvements you've put in place across the businesses over the last several years. Margins expanded quite nicely in a flat revenue environment. I guess when revenue increases, how should we be thinking about the operating leverage in the business over the longer term? Really, what I'm trying to get at is, what's the margin opportunity set in a higher revenue environment?

ABB: Talk to you quite a bit about the <unk>.

ABB: Additional improvements you've put in place and then across the businesses over the last several years.

ABB: Margins expanded quite nicely in a flat revenue environment I guess.

ABB: When when when revenue increases how should we be thinking about the operating leverage in the business over the longer term.

ABB: Really what I'm trying to get out is it whats the margin opportunity sets.

ABB: And at a higher revenue environment.

Patrick W. Fogarty: Yilma, this is Pat. Clearly, we focus on that flow-through at a higher level of revenue, and we'd like to believe that that flow-through relative to our operating income margins would be north of 15%. But we have such a wide range of products and plants and so often that, you know, sometimes it could be higher, sometimes it can be lower. But, in general, we expect a flow through of at least 15% in each of the businesses as revenues expand.

Pat: This is Pat.

Pat: Clearly, we focus on that that flow through.

Pat: Higher level of revenue.

Pat: And we'd like to believe that that flow through relative to our operating income margins would be north of 15%.

Pat: But we have such a wide range of products in plants.

Pat: So often that sometimes.

Pat: Sometimes it could be higher sometimes can be lower but in general.

Pat: We expect a flow through of at least 15% in each of the businesses as revenues expand.

Patrick W. Fogarty: Because, especially in our manufacturing businesses, where there's a high level of fixed costs, we positioned ourselves nicely around the world in our manufacturing plants to have the capacity to grow revenues without growing the fixed cost makeup of the business. So that will enhance the flow of as revenues increase.

Pat: Because our especially in our manufacturing businesses, where there's a high level of fixed costs.

Pat: We've positioned ourselves nicely around the world in our manufacturing plants to have the capacity to grow revenues without growing the fixed cost.

Pat: Makeup of the business, so that will enhance the flow through.

Yilma Abebe: Thank you. That's very helpful.

Pat: Revenues increase.

Speaker Change: Okay. Thank you that's helpful. I guess, maybe a follow up to that I guess as it relates to costs.

Yilma Abebe: I guess maybe a follow-up to that. I guess as it relates to costs, I think you talked about trying to make the business less capital-intensive. From the capital-intensive perspective, are we thinking about more pure cutbacks, or would we expect to see lower working capital in the system and other layers of costs lower as we move forward here?

Speaker Change: I think with me.

Speaker Change: You've talked about trying to make the business less capital intensive.

Speaker Change: From a capital intensity perspective are we thinking about more.

Speaker Change: Mobile capex or.

Speaker Change: Would we expect to see lower working capital in the system and other other layers of costs lower as we move forward here.

Patrick W. Fogarty: Clearly, on the CapEx side, Yilma, we expect our capital to be spent in certain pockets of the business, especially where we're seeing growth. For the current year, we expect to spend approximately $25 million in CapEx, which is, compared to historic levels, much less. Much of our capital being spent this year is on these growth opportunities and in technology. But going forward, I would expect our CapEx to be lower than $25 million. We continue to focus on reducing our working capital investment in each of our businesses and have initiatives to continue to pull inventory down, accelerate customer payments, and manage our days to pay accordingly, which will help us drive an increase in our free cash flow this year.

Speaker Change: Clearly on the Capex side, we would expect.

Speaker Change: Our capital to be spent.

Speaker Change: Certain pockets of the business, especially where we're seeing growth.

Speaker Change: For the current year, we expect to approximate $25 million in Capex, which is compared to historic levels much less much of our capital being spent this year is on these growth opportunities and in technology.

Speaker Change: But going forward I would expect our capex to be lower than $25 million.

Speaker Change: We continue to focus on reducing our working capital investments in each of our business and have initiatives to continue to pull inventory down accelerate customer payments manage our days to pay accordingly, which will help us drive an increase in our free cash flow this year.

Patrick W. Fogarty: All of those things, you know, under the current model that we've built, are less than historic levels. So when you think about working capital and you think about supplier lead times, you know, over the last couple of years, between freight issues and import issues and supplier delay, and expanding lead times, we had an embedded level of inventory that exceeded $50 million. We haven't worked that all out of the system yet, so we continue to work hard on bringing those lead times with suppliers down to their most efficient levels. We try to figure out ways to push inventory back to the suppliers and reduce our level of inventory that we're carrying. All of those things will benefit our free cash flow going forward.

Speaker Change: All of those things.

Speaker Change: Under the current model that we've built are less than historic levels.

Speaker Change: So when you think about working capital and you think about supplier lead times.

Speaker Change: For the last couple of years between a.

Speaker Change: Afraid issues and import issues in it.

Speaker Change: Its supplier delay.

Speaker Change: Expanding lead times.

Speaker Change: Yes.

Speaker Change: Bedded level of inventory that exceeded $50 million, we haven't worked at all out of the system.

Pat: So we continue to work hard on bringing those lead times with suppliers down to their most efficient levels.

Pat: Trying to figure out ways to push inventory back to the suppliers.

Pat: Reduce our level of inventory that we're carrying.

Pat: All of those things will benefit our free cash flow going forward.

Yilma Abebe: Thank you very much. That's all I had. I'll pass it on.

Speaker Change: Thank you very much that's all I had.

Speaker Change: Thanks Sheila.

Matthew V. Crawford: Thank you. We have reached the end of our question and answer session. I would now like to turn the floor back over to Matthew Crawford for any closing remarks.

Sheila: Thank you we have reached the end of our question and answer session I would now like to turn the floor back over to Matthew Crawford for any closing remarks.

Matthew V. Crawford: Great. Thank you very much. Thank you for your time and intention and investment in our company. Again, we look forward to a year of improving results and also a year of stable outlook. So, we appreciate your time.

Matthew V. Crawford: Great. Thank you very much thanks for your time and attention and investment in our company again, we look forward to a year of improving results and also a year of stable outlook. So we appreciate your time. Thanks.

Operator: Thank you so much. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

Speaker Change: Thank you. So much. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].