Q4 2024 RBC Bearings Inc Earnings Call

Operator: Greetings and welcome to RBC Bearings' fiscal 2024 fourth quarter earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Josh Carroll, with Investor Relations. Please go ahead.

Greetings and welcome to RBC bearings fiscal 2020 for fourth quarter earnings call. At this time, all participants are in a listen only mode.

<unk> and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Josh Carroll with Investor Relations. Please go ahead.

Josh Carroll: Good morning, and thank you for joining us for RBC Bearings' fiscal 2024 fourth quarter earnings conference call. With me on the call today are Dr. Michael Hartnett, Chairman, President, and Chief Executive Officer; Daniel Bergeron, Director, Vice President, and Chief Operating Officer; Rob Sullivan, Vice President, Chief Financial Officer, and Rob Moffatt, Director of Investor Relations.

Speaker Change: Good morning, and thank you for joining us for RBC bearings fiscal 2020 for fourth quarter earnings Conference call.

Speaker Change: With me on the call today are Dr. Michael Hartnett, Chairman, President and Chief Executive Officer, and you're Bearish on director, Vice President and Chief operating Officer.

Rob Sullivan, Vice President Chief Financial Officer, and Ron about fact director of Investor Relations.

Josh Carroll: Before beginning today's call, let me remind you that some of the statements made today will be forward-looking and are made under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected or implied due to a variety of factors. We refer you to RBC Bearings' recent filings with the SEC for more detailed discussion of the risks that could impact the company's future operating results and financial conditions.

Before beginning todays call, let me remind you that some of the statements made today.

Speaker Change: Forward looking and are made under the private Securities Litigation Reform Act of 1995.

Speaker Change: Actual results may differ materially from those projected or implied due to a variety of factors.

Speaker Change: For you to RBC bearings recent filings with the SEC.

Speaker Change: For a more detailed discussion of the risks that could impact the company's future operating results and financial condition.

Josh Carroll: These factors are also described in greater detail in the press release and on the company's website. In addition, reconciliation between GAAP and non-GAAP financial information is included as part of the release and is available on the company's website. With that, I'll now turn the call over to Dr. Hartnett.

Speaker Change: These factors are also described in greater detail in the press release and on the company's website.

Speaker Change: In addition, reconciliation between GAAP and non-GAAP financial information is included as part of the release, it's available on the company's website with.

Speaker Change: With that I'll now turn the call over to Doctor.

Michael J. Hartnett: Okay, thank you. And good morning, everyone. And thanks for joining us. I'm going to start today's call with a quick review of our quarter and Fiscal Year and hand it over to Rob for some detailed color on the numbers, and then I'll finish with high-level thoughts on the industry and our fiscal 2025 outlook. In the fourth quarter, we delivered a strong finish to what was a historic year for RBC. Net sales came in at the higher end of our quarterly guidance range, at $413.7 million, delivering roughly 5% of year-over-year growth, capping out a strong fiscal 2024 with revenues of $1.56 billion, delivering growth of about 6.2% year-over-year.

Speaker Change: Okay. Thank you and good morning, everyone and thanks for joining us.

Speaker Change: I'm going to start today's call with a quick review of our quarter and.

In fiscal year and hand, it over to Rob for some detailed color on the numbers.

Speaker Change: And then I'll finish with a high level thoughts on the industry and our fiscal 2025 outlook.

Rob: In the fourth quarter, we delivered a strong finish to what was a historic year for RBC.

Rob: Net sales came in at a higher end of our quarterly guidance range.

Rob: $413 7 million delivering roughly 5% year over year growth capping a strong fiscal 2024 with revenues of 1.56 billion.

Rob: Delivering growth of about six 2% year over year.

Michael J. Hartnett: 2024 was another year where 70% of our revenues were sole, single, or primary sources. That's a key component of our business profile. And over half of our revenues continue to be from the maintenance and repair site of the market. These offer attractive margins and non-cyclical growth, and obviously a continually growing installed base. In the aerospace and defense segment, we reached an important milestone with fiscal 2024 sales, surpassing their pre-COVID peak, coming in at $519 million with a year-over-year growth of 20.7%. We expect more growth to come in fiscal 25 and beyond. But more on that later.

Speaker Change: 2024, it was another year, where 70% of our revenues were so single our prime area.

Speaker Change: Primary sourced that's.

Speaker Change: That's a key component of our business profile and over half of our revenues continue to.

Speaker Change: T V from the maintenance and repair related.

Speaker Change: Side of the market.

Speaker Change: These offer attractive margins.

Speaker Change: Non cyclical growth.

Speaker Change: And obviously a continually growing installed base.

Speaker Change: In the aerospace and defense segment, we reached an important milestone with the fiscal 2024 sales surpassing their 2000, they're pre Covid peak come.

Speaker Change: Coming in at $519 million with a year over year growth of 27%.

Speaker Change: We expect more growth to come in fiscal 'twenty five and beyond.

Speaker Change: But more on that later.

Michael J. Hartnett: Within the segment, commercial aerospace was up 12.0% year-over-year in the quarter and 20.3% for the full fiscal year, with defense revenues up 29% in the quarter and 21.6% for the full year. Additionally, growth in A&D was fairly balanced through the year, with distribution and aftermarket sales up 23.4%, and OEM sales up 20%. On the industrial side, trends remain flattish, with fourth-quarter sales down 0.4% and full-year sales up 0.2%. Broadly speaking, aftermarket sales remain stronger than OEM in both periods, and end markets continue to be mixed, with some growing and others down. During the quarter, we saw strength in power generation, waste, and water management, while weakness was seen in multi-industry, aggregate, Cement, and Oil and Gas.

Speaker Change: With the segment within the segment commercial aerospace was up 12.0% year over year in the quarter and 23% for the full year full fiscal year.

Speaker Change: With defense revenues up 29% in the quarter in 21, 6% for the full year.

Speaker Change: Additionally growth in A&D was fairly balanced through the year with distribution and aftermarket sales up 23.4%.

And OEM sales up 20%.

Speaker Change: On the industrial side trends remain flattish with fourth quarter sales down 24.

Speaker Change: 4% and full year sales up 2%.

Speaker Change: Broadly speaking aftermarket sales remained strong stronger than OEM in both periods.

In end markets continued to be mixed with some growing and others down.

Speaker Change: During the quarter, we saw strength in power generation.

Speaker Change: Waste and water management.

Speaker Change: Weakness was seen in multi industry.

Speaker Change: Aggregate cement and oil and gas.

Speaker Change: Delivering strong organic growth.

Michael J. Hartnett: Delivering strong organic growth Relative to Our Peers is a key part of RBC's playbook, and in Fiscal 2025-24, that was no exception. Adjusted gross margins for the quarter came in at $178.3 million, or 43.1% of sales, an expansion of 90 basis points over fiscal Q23. And for the full year, we came in at 670.5 million, or 43.0% of sales, an expansion of 180 basis points versus fiscal 2000-2023 and a new all-time record for RBC.

Speaker Change: Relative to our peers as a key key part of Rbcs playbook and in fiscal 2025 24 that was no exception.

Speaker Change: Adjusted gross margins for the quarter came in at $178 3 million.

Speaker Change: Our 43, 1% of sales and expansion of 90 basis points over fiscal <unk>.

Speaker Change: For Q 'twenty three.

For the full year, we came in at $670 5 million or 43.0% of sales and expansion of 180 basis points versus fiscal 2000 2023.

Speaker Change: And a new all time record for RBC.

Michael J. Hartnett: Our success here is driven by multiple factors, with ongoing synergies from the Dodge acquisition being the biggest contributor, coupled with improving utilization of our aerospace asset base and an ongoing pursuit of growth in higher margins and markets. For comparison, our adjusted gross margin as a percentage of sales per FY, Unknown Speaker for the third quarter of 22, in the first quarter following the Dodge acquisition was 37.6% compared to 43.1% for exiting Fiscal 2024.

Our success here is driven by multiple factors.

Speaker Change: With ongoing synergies from Dodge from the Dodge acquisition being the biggest contributor coupled with improving utilization of our aerospace asset base.

Speaker Change: On growing pursuit of growth in higher margin end markets.

Speaker Change: For comparison, our adjusted margin gross margin as a percentage of sales for F y.

Speaker Change:

Speaker Change: Yeah.

Speaker Change: For the third quarter of 'twenty two.

Speaker Change: In the first quarter following Dodge acquisition was 37, 6% compared to 43, 1%.

Speaker Change: Exiting fiscal 2024.

Michael J. Hartnett: That's a 550 basis point expansion on the gross margin line. At the time of the acquisition, we said we were targeting 75 to 100 million in synergies over five years. We estimate that we have achieved somewhere between 70 and 80 million in just over two years since the closing, with more to come. And you can add that we have already repaid 625 million of the term loan that was taken to make the acquisition.

Speaker Change: That's a 550.

Speaker Change: This point expansion on the gross margin line.

Speaker Change: At the time of the acquisition, we said, we retired targeting $75 million to $100 million of synergies over five years, we estimate that we have achieved somewhere between 70 and $80 million in just over two years since the closing.

Speaker Change: Okay.

Speaker Change: With more to come.

Speaker Change: Yeah.

Speaker Change: And you can add we have already repaid.

Speaker Change: $625 million term loan that was taken to make the acquisition.

Speaker Change: The Dodge transition transaction.

Michael J. Hartnett: The Dodge Transaction and what we've accomplished with the Shoblin and Sargent acquisitions before that have been absolutely transformative for RBC. Over the past five years, net sales have gone from roughly $700 million to over $1.56 billion, growing at a 17.3% rate. And even more impressive is Evithea, which has grown 19.8% CAGR, and Free Cash Flow, which has compounded at an amazing 29.2% CAGR over the past five years. I'd like to use this opportunity to express how proud I am of the team for delivering this kind of performance, along with yet another year of strong operating results in fiscal 2024 and for creating much of our own success with company-specific roles and margin-focused initiatives.

Speaker Change: And what we've accomplished with children and SGT acquisitions before that its been absolutely transformative for RBC.

Speaker Change: Over the past five years net sales have gone from roughly 700 million to over 1.56 billion growing at a 17, 3%.

Speaker Change: CAGR.

Speaker Change: And even more impressive is EBITDA, which has grown 19.8% CAGR.

Speaker Change: And free cash flow, which is compounded pounded at an amazing 29.2% CAGR over the past five years.

Speaker Change: Yeah.

Speaker Change: Like to use this opportunity to express how proud I am of the team for delivering this kind of performance.

Speaker Change: Along with yet another year of strong operating results in fiscal 2024 and.

And for creating much of our own success with company specific roles and margin focused initiatives.

Speaker Change: We have a lot to be proud of.

Speaker Change: And what's been accomplished.

Speaker Change: And as always we will be aiming a little higher in the upcoming year.

Michael J. Hartnett: We have a lot to be proud of and what's been accomplished. And, as always, we'll be aiming a little higher in the upcoming year. With that, I'll turn it over to Rob for more details on the finances. Thank you, Mike.

Speaker Change: With that I'll turn it over to Rob for more details on the financial results. Thank you Mike.

Robert Sullivan: Dr. Hartnett indicated fiscal 2024 was another year of strong organic growth in aerospace, continued growth in markets, and industrial business, and total sales growth of 4.9% in the US. This was enabled in part by solid progress on gross margin expansion, with fourth-quarter gross margin as a percentage of sales coming in at 43.1%, an expansion of roughly 90 basis points year over year, and the full year coming in at 43%, an increase of roughly 180 basis points. Strength in the Gross Margin Line was derived from the Dodge Synergies, increased utilization of our aerospace assets, and our ongoing pursuit of higher margins.

Rob: I had a hard no indicated fiscal 'twenty 'twenty four was another year of strong organic growth in aerospace continued growth over market industrial business.

Rob: Total sales growth of four 9% in the quarter.

Rob: 2% in the full year was surpassed by adjusted EBITDA growth of seven 4% a quarter and 11, 1% in the year and by free cash flow growth of 18, 4% in the quarter 35, 1% for the full year.

Speaker Change: This was enabled in part by solid progress on gross margin gross margin expansion with fourth quarter gross margin as a percentage of sales coming in at 43, 1% an expansion of roughly 90 basis points year over year, and our full year coming in at 43% an increase of roughly 180 basis points.

Speaker Change: And the gross margin line was derived from the Dodge synergies.

Speaker Change: Kris utilization of our aerospace assets and our ongoing pursuit of higher margin mix.

Robert Sullivan: We leverage the healthy operating environment to make additional investments in SG&A aimed at positioning the business for continued growth. This includes investments in our IT infrastructure and our overall headcount, including Salesforce and back office personnel that should enable the company to be able to secure and process higher volumes of orders in fiscal 25 and beyond. Even with the SG&A investments, adjusted EBITDA margins expanded, with the fiscal fourth quarter coming in at 31.4%, an expansion of roughly 70 basis points year-over-year, and fiscal 24 coming in at an all-time record of 30.9%, an expansion of nearly 140 basis points.

Speaker Change: We leveraged a healthy operating environment to make additional investments in SG&A aimed at positioning the business for continued growth. This.

Speaker Change: This includes investments in our it infrastructure and our overall head count, including sales force and back office personnel that should enable the company to be able to execute secure and process higher volumes of worst fiscal 'twenty and beyond.

Speaker Change: Even with the SG&A investments adjusted EBITDA margins expanded with the fiscal fourth quarter coming in at 31, 4% an expansion of roughly 70 basis points year over year.

Speaker Change: Fiscal 'twenty four coming in at an all time record of 39% an expansion of nearly 140 basis points. This is the first time, our full year adjusted EBITDAX.

Robert Sullivan: This is the first time our full-year adjusted dividend margin crossed the 30% mark and, based on what we see for fiscal 25 and beyond, should serve as a base for additional expansion. In terms of EPS, there seems to be a bit of confusion this morning on tax. Although our effective GAAP tax rate was 16.8% for Q4, the effective tax rate for our adjusted net income and adjusted EPS is 21.2%. This is reflected in the reconciliation statement within the press release.

<unk> crossed the 30% Mark and based on what we see for fiscal 'twenty, five and beyond should serve as a base for additional expansion.

Speaker Change: In terms of EPS, there seems to be a bit of confusion. This morning on tax in the quarter, Although our effective GAAP tax rate was 16, 8% for Q4, the effective tax rate for our adjusted net income and adjusted EPS is 21, 2%. This is reflected in the reconciliation within the press release I called this out because it's important to note that the strength of.

Robert Sullivan: I call this out because it's important to note that the strength of our performance in Q4 was primarily driven by our operating. Free cash flow also outgrew the top line with $69.9 million generated in the quarter, delivering growth of 18.4% year-over-year and $241.5 million for the full year, representing 35.1% of year-over-year growth and free cash flow conversion of 115%. We use that free cash flow to continue to reduce debt from this hijacker, paying down $225 million on the term loan, coming in at the high end of our internal target for the year.

Speaker Change: Our performance in Q4 was primarily driven by our operating performance.

Speaker Change: Free cash flow also outgrew the topline was $69 9 million generated in the quarter delivering growth of 18, 4% year over year and $241 5 million for the full year, representing 35, 1% of year over year growth and free cash flow conversion of 115%.

Speaker Change: We used that free cash flow to continue to reduce debt from the <unk> acquisition paying down $225 million on the term loan coming in at the high end of our internal target for the year.

Robert Sullivan: This brings total net debt to $1.1 billion and net leverage to 2.3 times on a trailing basis. One item that you will want to take into account for your models in fiscal 2025 is the planned conversion of our Series A mandatory convertible preferred stock expected to automatically convert on October 15, 2024. Using Q4 results as an approximation, the net impact of this conversion is expected to be slightly accretive to EPS, assuming that the conversion takes place at the current share price.

Speaker Change: This brings total net debt to $1 1 billion in net leverage to two three times on a trailing basis.

Speaker Change: One item that you will want to take into account for your models.

Speaker Change: <unk> is the planned conversion of our series.

Speaker Change: A convertible preferred stock expected to automatically convert on October 15th 2024.

Speaker Change: Q4 results as an approximation the net impact of this conversion is expected to be slightly accretive to EPS assuming conversion at the current share price it'll be more meaningfully accretive however to free cash flow as the conversion will remove the cash dividend payment, reducing our future total cash outlays by approximately $23 million on an annualized basis.

Robert Sullivan: It will be more meaningfully accretive, however, to free cash flow, as the conversion will remove the cash dividend payment, reducing our future total cash outlays by approximately $23 million on an annualized basis. This is roughly 9.5% of fiscal 2024's total cash flow. Importantly, the removal of this cache can further accelerate the pace at which we are reducing the turmoil. All together, the combination of healthy growth, margin expansion, solid cash generation, and continued debt reduction capped off a strong fiscal 2024 and leaves the company well positioned heading into fiscal 25 and beyond. With that, I'll now turn the call back to Mike for some closing thoughts. Okay, thank you.

Speaker Change: This is roughly nine 5% in fiscal 'twenty 'twenty four is total cash flow.

Speaker Change: Importantly, the removal of this cash can further accelerate the pace at which we are reducing the term loan.

Speaker Change: Altogether, the combination of healthy growth margin expansion solid cash generation and continued debt reduction and capped off a strong fiscal 'twenty 'twenty four and leaves the company well positioned heading into fiscal 'twenty five and beyond.

Mike: With that I'll now turn the call back to Mike for some closing thoughts.

Mike: Okay. Thank you Rob.

Michael J. Hartnett: Before we turn the call over to Q&A, I wanted to spend some time on our outlook and how we're thinking about fiscal 25. To start, we are guiding first fiscal quarter net sales of $4.15 to $4.20 million, representing year-over-year growth of 7.2% to 8.5%.

Mike: Before we turn the call over to Q&A I wanted to spend some time on our outlook and how we're thinking about fiscal 'twenty five.

Mike: To start we are guiding first fiscal quarter net sales to $4 $15 million to $420 million representing year over year growth of 7.2 to eight 5%.

Michael J. Hartnett: This outlook largely reflects an environment that's similar to the past quarter, where demand for A&E is strong and industrial end markets are uneven, with some markets stronger and others softer, and overall industrial demand supported more by aftermarket sales than OEM. In terms of the full year, our outlook for commercial aerospace remains positive. Passenger miles traveled are back above pre-pandemic levels and continue to grow, driving plane utilization levels up and retirements down.

Mike: This outlook luxury reflects an environment, that's similar to the past quarter, where demand in A&D is strong and industrial end markets are uneven.

Speaker Change: With some markets stronger than other softer.

Speaker Change: And overall industrial demand supported more by aftermarket sales that Oems.

Speaker Change: Okay.

Speaker Change: In terms of the full year, our outlook for commercial aerospace remains positive.

Speaker Change: Passenger miles traveled are back above.

Speaker Change: Pandemic levels and continue to grow driving plane utilization levels up and retirement stone.

Michael J. Hartnett: New plane demand remains robust and continues to be throttled by supply chain shortages. As I've said before, the only constraint in commercial aerospace right now is not demand, but supply. On the OEM side, I'm sure many of you have been following the headlines and build rates at Boeing lately. Over the long term, I'm confident that Boeing will successfully navigate the current challenges it's facing and emerge stronger by the end of 2024.

Speaker Change: New playing demand remains robust and continues to be throttled by supply chain shortages.

Speaker Change: As I've said before the only constraint in commercial aerospace.

Speaker Change: Right now is not demand, but its supply.

Speaker Change: On the OEM side and I'm sure. Many of you have been following the headlines and build rates at Boeing lately.

Speaker Change: Over the long term I am confident that Boeing will successfully navigate the current challenges, it's facing and emerged stronger by the end of 2024.

Speaker Change: Yeah.

Michael J. Hartnett: We believe that headwind, however, can be mitigated in the short term by stronger than expected requirements from other markets, including international airframe producers, space, defense, and the aftermarket. As for RBC, we fully expect Boeing requirements to rebound by mid Q3. Remembering our products are needed approximately six months before the airplane is assembled, and industry lead times are typically 50 to 60 weeks for our products, depending upon material composition. Altogether, this points to A&D revenues expected to be up low double digits in fiscal 25 on top of fiscal 24's record base. However, it will likely be back-end loaded. I think that's probably obvious.

Speaker Change: We believe that headwind however, it can be mitigated.

Speaker Change: In the short term by stronger than expected requirements from other markets, including international airframe producers.

Speaker Change: Defense and the aftermarket.

Speaker Change: Okay.

Speaker Change: As for RBC, we fully expect Boeing requirements to rebound by mid Q3.

Speaker Change: Remembering our products are needed approximately six months before airplane has assembled an industry lead times are typically 50 to 60 weeks for our products depending upon the material composition.

Speaker Change: Altogether this points to an A&D revenues expected to be up.

Speaker Change: Low double digits in fiscal 'twenty five on top of fiscal 'twenty for us record base.

Speaker Change: It will likely be backend ended backend loaded.

I think that's probably obvious.

Michael J. Hartnett: On the industrial side, we believe some tough comps we've seen in pockets of the OEM business should start to abate as we progress through the year, and the aftermarket should continue to grow. What's important here is the growth over market. We believe the combination of our ongoing organic sales initiatives, coupled with our Dodge Revenue Synergies, should continue to grow, and our target of two times GDP is still our target for FY. 25.

Speaker Change: On the industrial side, we believe some.

Speaker Change: <unk> comps, we've seen in pockets of the OEM business should start to abate.

Speaker Change: As we progress through the year.

Speaker Change: And aftermarket should continue to grow.

Speaker Change: What's important here is the growth over market, we believe the combination of our on growing organic sales initiatives.

Speaker Change: Coupled with our Dodge revenue synergies.

Speaker Change: It should continue to grow growth.

Speaker Change: And our target of two times GDP.

Speaker Change:

Speaker Change: Is.

Yes.

Speaker Change: It is still our target for FY <unk>.

Speaker Change: 25.

Michael J. Hartnett: In terms of gross margin, as I mentioned earlier, we made a tremendous amount of progress in Fiscal 24 and are well ahead of schedule on the Dodge Synergy. Going forward, we expect a higher mix of Dodge synergies to be derived from revenue growth as we continue to work to integrate the sales effort and drive new product development. With that in mind, we expect 50 to 75 basis points of gross margin expansion in fiscal 25, driven by a combination of moderating Dodge tailwinds, ongoing absorption of our aerospace capacity, and higher margin new products being introduced to the market.

Speaker Change: In terms of gross margin I mentioned earlier, we made tremendous amount of progress in fiscal 'twenty for <unk>.

Speaker Change: Well ahead of schedule on the Dodge synergies.

Speaker Change: Going forward, we expect higher mix of Dodge synergies to be derived from revenue growth as we continue to work to integrate the sales effort and drive new product development.

Speaker Change: With that in mind, we expect 50.

Speaker Change: 50 to 75 basis points of gross margin expansion in fiscal 'twenty, five driven by a combination of <unk>.

Speaker Change: Moderating Dodge tail winds ongoing absorption.

Speaker Change: Of our aerospace capacity and higher margin new products being introduced.

Speaker Change: To the market.

Michael J. Hartnett: Altogether, this paints a picture of another year of strong free cash flow generation, setting the stage for a term loan reduction of another $275 to $300 million, leaving us on track for a five-year goal of fully repaying the debt generated from the Dodge acquisition. Our current net leverage is 2.3 times on a trailing basis and even lower on a forward basis, and that's before the $275 to $300 million of further debt reduction plan for fiscal 25.

Speaker Change: Altogether. This paints a picture of another year of strong free cash flow generation setting the stage for term loan reduction of another $275 million to $300 million.

Speaker Change: Leaving us on track for a five year goal of fully repaying the debt generated from the <unk> acquisition.

Speaker Change: Our current net leverage is two to three times on a trailing basis.

Speaker Change: And even lower on a forward basis, and that's before the $275 million to $300 million of further debt reduction plan for fiscal 'twenty five.

Michael J. Hartnett: This leaves us well positioned to more seriously evaluate M&A opportunities, and the team has been active in growing that pipeline. We expect, at our current rate, to be well under two times EBITDA by the end of FY 25. Our principal bias here is to manage the company towards a balanced mix of aerospace and defense and industrial and market exposure over the long term.

Speaker Change: This leaves us well positioned to more seriously evaluate M&A.

Speaker Change: M&A opportunities.

Speaker Change: And the team has been active and growing that pipeline.

Speaker Change: We expect at our current rate to be well under two times EBITDA by the end of <unk>.

Speaker Change: Why 25.

Speaker Change: Our principal bias here is to manage the company towards a balanced mix of.

Speaker Change: Aerospace and defense and industrial end market exposure over the long term.

Michael J. Hartnett: To conclude, fiscal 2024 was a record year for RBC. We delivered another year of solid growth. It was fully further mitigated by margin expansion or magnified by margin expansion and strong free cash flow conversion. We are ahead of schedule on our Dodge Synergies, and we are on track for our deleveraging and return to acquisitive growth. We look forward to fiscal 25. We expect more of the same. With that, I'll turn it over to the operator for questions.

Speaker Change: To conclude fiscal 2024 was a record year for RBC, we delivered another year of solid growth. It was fully further mitigated by margin expansion are magnified by margin expansion and strong free cash flow conversion.

We're ahead of schedule on our Dodge synergies and we are on track for deleveraging.

Speaker Change: And returned to acquisitive growth.

Speaker Change: We look forward to fiscal 'twenty five we expect more of the same.

Speaker Change: With that I'll turn it over to the operator for questions.

Operator: Thank you. The floor is now open to questions. If you would like to ask a question, please press star one on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Thank you the floor is now open for questions.

Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Operator: One moment, please, while we pull for questions. Today's first question is coming from Kristine Liwag of Mork & Stanley. Please go ahead. Okay, thanks for all the details.

Speaker Change: One moment, please while we poll for questions.

Speaker Change: Today's first question is coming from Christine C. Wang of Morgan Stanley. Please go ahead.

Kristine Tan Liwag: Hey, thanks for all the details. Mike, you know, you touched on the DODGE revenue synergies in your prepared commentary. Can you provide more color on how that strategy is going, how the integration of your two sales teams has been progressing? I think, from what I recall, DODGE has something like 10x the salespeople's legacy RBC bearings. I'm not sure if that's still the case today, but how would this, you know, be implemented, and when you start measuring results, what kind of revenue synergy target do you think you can extract from this?

Okay. Thanks for all the detail.

Mike.

Touched on this Dodge wrapping your synergies in your prepared commentary can you provide more color on how that strategy is going how is the integration of <unk> sales team, having progressing I think from what I recall, a dodge has something like kind of ex the salespeople as legacy RBC bearings.

Speaker Change: I'm not sure if that's still the case today, but how would this be implemented and when you start measuring resolved.

Speaker Change: What kind of revenue synergy target do you think you can extract.

Speaker Change: From this.

Speaker Change: Okay.

Michael J. Hartnett: I guess my two-times GDP growth was just too simple, huh, Kristine? Well, Mike, a two-times GDP growth for legacy RBC bearings had historically been your target, so I was thinking that revenue synergy from the deal would be incremental. Yeah, well, I think there's, you know, there's good revenue synergy here for a number of There's, there's a lot, there's a lot in the mix right now in terms of revenue synergy options that are being developed.

Speaker Change: I guess my two times GDP growth was just two simple her christy well.

Speaker Change: Well, Mike two times GDP growth for legacy RBC bearings had historically been your targets I was thinking.

Speaker Change: Yeah.

Speaker Change: Our revenue synergy from the deal would be incremental.

Speaker Change: Yeah.

Speaker Change: Yeah, well I think I think there's you know there's good revenue synergy here.

Speaker Change: For a number of.

Michael J. Hartnett: And part of that mix is accessing more of the world market, per Dodge. And obviously, RBC will ride on Dodge's coattails. And we're particularly, you know, focused on Europe and India, Mexico and Canada, and we see opportunities in all those areas for DODGE in 25. And if there are opportunities for DODGE, as I said, RBC should should follow right through on the coattails. So those are, you know, pretty active initiatives that we have underway currently focused on these their markets and what we do in these markets, and what we can offer to these markets, and how we can better develop jointly between Dodge and RBC our market access.

Speaker Change: There is there's a lot there's a lot in the mix right now in terms of.

Speaker Change: Revenue synergy options that are that are being.

Speaker Change: Developed and part of that mix is.

Speaker Change: Accessing more of the world market that for Dodge.

Speaker Change: And.

Speaker Change: Obviously, RBC will write on Dodgers cold coat tails and.

Speaker Change: We are particularly focused on Europe.

Speaker Change: And India.

Speaker Change: And.

Speaker Change: Mexico, and Canada, and we see opportunities in all those areas for Dodge.

Speaker Change: In 'twenty five and.

Speaker Change: If there's opportunities for <unk> as I said RBC should should follow right through on the on the coat tails. So that's those are you know pretty active initiatives that we have underway currently.

Speaker Change: Focused on these.

Speaker Change: Different foreign countries.

Speaker Change: Based upon.

Speaker Change: Their markets and what we do in these markets and what we can offer to these markets and how we can better developed jointly between Dodge and RBC our market access.

Michael J. Hartnett: If we take India as an example, India. We have a great amount of infrastructure in India that allows us to have things manufactured there, to move things around the country, to import and export, which requires a certain infrastructure that has some sophistication to it. But at the same time, we see many of our aerospace customers moving to India for, you know, economic reasons, and it allows us better access, through the Dodge sales force, to the Indian Aerospace Customer Base.

Speaker Change: If if we take India as an example.

Speaker Change: India.

Speaker Change: We have a.

Speaker Change: A great amount of infrastructure in India that allows us to.

Speaker Change: Two.

Speaker Change: Have things manufactured there to move things around the country to import and export which requires a certain infrastructure that has some sophistication to it.

Speaker Change: But at the same time, we see our many of our aerospace customers.

Speaker Change: Moving to India for economic reasons and.

Speaker Change: And it allows allows us better access through the Dodge sales force.

Speaker Change: To the Indian aerospace.

Speaker Change: Customer base.

Michael J. Hartnett: And we expect to grow that customer base from somewhere less than $10 million a year today to certainly $30 to $40 million per year in the next few years. It's very meaningful. So, and that's just one example of, you know, maybe an Aerospace and Industrial Synergy Ongoing based upon the support created by the DODGE infrastructure.

Speaker Change: And we expect to grow that customer base for from somewhere less than $10 million a year today to certainly in the $30 million to $40 million per year in the next in the next few years. It's it's.

Speaker Change: It's very it's very meaningful.

Speaker Change: So and that's just that's just one example of.

Speaker Change: You know maybe in.

Speaker Change: In aerospace and industrial synergy going based upon.

Speaker Change: The support created by the Dodge infrastructure.

Michael J. Hartnett: Thank you for the color, Mike. And if I could ask a second question, maybe on cost. You know, you know, when you've talked about the footprint of Dodge manufacturing in the past, you've talked about how it's still mostly US based, but there's an opportunity to move some to low-cost countries while keeping, you know, the higher value things in the US. Can you give any progress in terms of where you are in terms of that initiative? And when will everything be completed, as you've planned, in the next 12 or 24 months? How much more margin do you think you can get from a lower cost structure?

Speaker Change: Thank you for the color, Mike and if I could take a second question median cost.

Speaker Change: You know when you've talked about like the footprint Dodge manufacturing you you've talked about in the past, how it's still mostly U S based but there is opportunity to move some to low cost countries, while keeping you know the higher value things in the U S. Can you give any progress in terms of where you are in terms of that initiative and when.

Speaker Change: When everything is completed as you've planned in the next 12 or 24 months.

Speaker Change: How much more margin do you think you can get from a lower cost structure.

Michael J. Hartnett: Yeah, well, we just completed building a plant in Tecate, Mexico, for Dodge. It's about 100,000 square feet, and it allows us to move some of Dodge's U.S. manufacturing into Mexico and free up some of the floor space in some of the Dodge plants for Product Expansion, because they are constrained in The Dodge Plants based upon floor space and based upon their supply chain. So we're, our plan is to, and actually, it's more than a plan now. We've capitalized it, and we have things moving around, and, You know, if you're on Interstate 10, this weekend, you can watch our trucks go by. Unknown Speaker. ......

Speaker Change: Yeah, well, we just we just completed.

Speaker Change: Building a plant in <unk>.

Speaker Change: To catch a Mexico.

Speaker Change: Dodge.

Speaker Change: Sickly.

Speaker Change: It's about 100000 square feet.

Speaker Change: And.

Speaker Change: And it allows us to move some of Dad's Dodges U S manufacturing into Mexico.

Speaker Change: And free up some of the floor space in some of the Dodge plants.

Speaker Change: For product expansion.

Speaker Change: Because they are constrained.

Speaker Change: The Dodge plants.

Speaker Change: Based upon based upon floor space and based upon.

Speaker Change: Hum their supply chain.

Speaker Change: So where we are.

Speaker Change: Our plan is to actually it's more than a plan, we've capitalized and we have things moving around in.

Speaker Change: If you're on Interstate 10 this.

Speaker Change: This weekend and you can you can watch our trucks go by.

Speaker Change:

Speaker Change: But we we expect that's going to allow us to expand some of Dodgers product offering in terms of volume that was that they were unable to achieve in the past. So that's going to not only fund grant growth, but also move will be existing product into our low cost country and so that's sort of the first.

Speaker Change: Step of the effort and obviously you don't build 100000 square foot plant overnight. So this has been in the planning for the last 18 months and where.

Speaker Change: Where we are.

Michael J. Hartnett: But we expect that's going to allow us to expand some of Dodge's product offering in terms of volume that they were unable to achieve in the past. So that's going to not only fund growth but also move existing product into a low cost country. And so that's sort of the first step of the effort. And obviously, you know, you don't build a 100,000 square foot plant overnight. So this has been in the planning for the last 18 months. And, and we're, you know, we'll be in production in Tecate with the first round of products by July.

Speaker Change: We'll be we'll be in production.

Speaker Change: Intercut day with with the first round of products by July.

Speaker Change: Okay.

Kristine Tan Liwag: Wow, great. Well, you know, I'll keep an eye out for RBC trucks and count them on Interstate 10. Thank you very much.

Speaker Change: Oh, great well, you know I'll keep an eye out for our RBC trucks and count on Interstate 10. Thank you.

Speaker Change: Okay.

Speaker Change: Sure.

Peter John Skibitski: Thank you. The next question is coming from Pete Skibitski of Alembic Global. Please go ahead. Thank you, everyone.

Speaker Change: Thank you. The next question is coming from Pete Skibinski of Alembic Global. Please go ahead.

Michael J. Hartnett: Hey, good morning, guys. Hope you're doing well. Morning, Pete. Let me start by saying one of the things that stood out was the backlog growth sequentially and year over year. It's really nice to see that. But was that what we should think of, you know, mostly commercial aerospace orders coming in?

Peter John Skibitski: Hey, good morning, guys hope you're doing well.

Speaker Change: Good morning, Pete.

Peter John Skibitski: Let me start I thought one of the things that stood out was the.

Speaker Change: The.

Peter John Skibitski: Backlog growth sequentially and year over year as really really nice to see that was that what we should think mostly commercial aerospace you know longer term commercial aerospace orders coming in.

Michael J. Hartnett: Well, aerospace and marine, I mean, that's probably heavily focused on aerospace and marine. But some of that is industrial. It's probably an 80-20 kind of thing. Obviously, very little of Dodge's backlog is represented there; it's just that it's not their business model. What's ordered by customers for Dodge is usually shipped within the same day or within two or three days, depending upon the product, so it never gets a chance to hit backlog, so that's 50% of our sales.

Well aerospace and marine I mean, that's probably heavily heavily aerospace and marine.

Speaker Change: Is there some of that is industrial.

Speaker Change: Probably 80 20 kind of a thing.

Speaker Change: Got you.

Speaker Change: Obviously very little debt little of dodges background.

Speaker Change: Backlog.

Speaker Change: Is represented there is just it's not their business model.

Speaker Change: They are.

Speaker Change: What's ordered by customers for Dodge is usually shipped within within the same day or.

Speaker Change: Within two or three days, depending upon the products. So it never gets a chance to hit backlog. So that's 50% of our sales.

Peter John Skibitski: Yeah, yeah, okay. Okay, that's helpful.

Speaker Change: Okay. Okay. That's helpful. And then just you know your guidance for the first quarter that would be a reacceleration of sales right youre kind of in that 4% to 6% range. The last three quarters now youre talking close to 8%.

Michael J. Hartnett: And then just, you know, your guidance for the first quarter, that would be, you know, a reacceleration of sales, right? You were kind of in that four to 6% range the last three quarters; now you're talking close to 8%. I imagine the backlog doesn't hurt with regard to visibility there, but can you talk to us about what you're seeing in this first quarter versus the prior three quarters that kind of lead you to believe that sales are going to reaccelerate?

You mentioned backlog does it doesn't hurt.

Speaker Change: The visibility there.

Speaker Change: Could you talk to us about what Youre seeing.

Speaker Change: And this first quarter versus the prior three quarters.

Speaker Change: Leaves you to believe that sales are going to reaccelerate.

Michael J. Hartnett: Well, we're seeing great bookings. You know, particularly in A and D. I mean, it's, it's, it's very good.

Speaker Change: Well, we're seeing great bookings.

Speaker Change: Oh, there's particularly in a N D. I mean, it's it's a it's very good.

Michael J. Hartnett: You know, I don't think the Boeing 737 buildout, the step down in their production rate, is reflected in that quarter. I think it's going to be reflected in the second quarter. But it isn't reflected in the first quarter at all.

Speaker Change: You know the.

Speaker Change: I don't think the the Boeing.

Speaker Change: 737 build out.

Speaker Change: The step down in their production rate is reflected in that in that quarter I think it's going to be reflected in the second quarter.

Speaker Change: Right it isn't reflected in the in the first quarter at all.

Peter John Skibitski: Okay, yeah that's helpful. That was a little confusing because, yeah, so I was gonna ask you in terms of the changes to Boeing's master schedule and how they're impacting you. I know they've tried to keep a lot of suppliers at a roughly 30 a month rate, I think on the max, but it sounds like maybe you guys are gonna go below that for a quarter or two and then rise back up. I Well, I...

Speaker Change: Okay. Yeah, that's helpful and that was a little confusing because it yes. So I was going to ask you in terms of the changes to Boeing's master schedule and how it's impacting you and I know they've tried to keep a lot of suppliers at a roughly 30, a month rate I think on the Max but it sounds like maybe you guys are going to go below that for a quarter or two and.

Speaker Change: Then rise back up is that the way to think about it.

Michael J. Hartnett: Well, you know, the way I think about it is, you know, if you look at Boeing's production rate now and where they have to be, and, you know, 38 ships per month is sort of the magic number, right? And they're talking about 20, 25 ships a month right now, maybe 30. So, bye.

Speaker Change: Well you know the way I think about it is.

Speaker Change: Is is if you look at you know boeing's production rate now and where they have to be.

Speaker Change: Of course, the 38.

Speaker Change: Shifts per month as is sort of a magic number right.

Speaker Change: And they're talking about 2025 ships a month right now maybe 30.

Speaker Change:

Speaker Change: Bye.

Speaker Change: Next.

Speaker Change: April.

Michael J. Hartnett: April, We're certainly expecting them to be healthy enough to be assembling 38 ships a month. Given that, that means for our product. We have to produce it; we have to ship it in October. And if we have to ship it in October, We have to start making it in July. So we're not going to, you know, we're going to be, we're going to be making it, probably not shipping it at a great rate, probably a reduced rate based on, you know, relative to the first quarter.

Speaker Change: We're certainly expecting them to be healthy enough.

Speaker Change: To be to be assembling 38 ships a month.

Speaker Change:

Speaker Change: And giving given that that means for our product.

Speaker Change #100: We have to produce it we have to ship it in in October.

Speaker Change #100: And if we have to ship it in October.

Speaker Change #101: We have to start making it.

Speaker Change #101: In.

Speaker Change #101: July.

Speaker Change #102: So we're not going to we're going to be we're going to be making it probably not shipping it.

Speaker Change #102: At a great rate.

Speaker Change #102: Probably a reduced rate based upon relative to the first quarter.

Michael J. Hartnett: But I suspect the year will step up after our second quarter, which is ending in September, right? I, I, I, I, I, I, I suspect every quarter now will step up to match their assembly rate at the beginning of April. Maybe they'll pull that in, but I think they... You know, I think they know what has to be done. Everything's in their wheelhouse. There's no new rockets that have to be invented.

Speaker Change #102: But I suspect the year will will step up.

Speaker Change #103: After our second quarter, which is September ending rate.

Speaker Change #103: Hum.

Speaker Change #103: Yes.

Speaker Change #104: Suspect every quarter now will will step up to match there.

Speaker Change #104: Assembly right.

Speaker Change #104: Beginning in April maybe maybe they pull that in but.

Speaker Change #104: I think they.

Speaker Change #104: Yeah.

Speaker Change #105: They know what has to be done everything's in their wheelhouse. If there is no new rockets have to be invented.

Michael J. Hartnett: It's all basic execution and. They're smart, qualified, capable people. You know, they

Speaker Change #105: It's all basic execution in.

Speaker Change #105: They're smart qualified capable people.

Speaker Change #106: They are.

They'll get this done.

Peter John Skibitski: Yep, yep, I appreciate it. Last one for me: Defense growth was pretty incredible this year, you know. Is that mostly Marine Corps, you know, the submarines or anything else driving that? And then I just got the feel that maybe you're expecting another potentially double-digit growth in defense as well as commercial, but it sounds like the strength is going to continue.

Speaker Change #107: Yes, yes, and I appreciate it last one for me.

Speaker Change #107: Defense growth was pretty incredible this year.

Speaker Change #108: Is that mostly marine the submarines or anything else driving that and then I just got the feel that maybe youre expecting another potentially I can't remember you said double digit growth in defense as well as commercial but it sounds like the strength is going to continue.

Michael J. Hartnett: Yeah, defense is going to continue. Right now, you know, for certain, we're constrained by being able to produce enough defense products overall. And so we're working hard to bring up our rate. And so that's dependent upon, you know, labor, material availability, supply chain, and other qualifications.

Speaker Change #109: Yeah defense is going to continue.

Speaker Change #109: Right now you know.

Speaker Change #109: For certain.

Speaker Change #110: We're constrained by April being able to produce enough defense products.

Speaker Change #110: Overall.

Speaker Change #110: Hmm.

Speaker Change #110: And so we're working hard to bring up our rates.

Speaker Change #110: And so that's dependent upon.

Speaker Change #110: Labor and material availability supply chain.

Speaker Change #110:

Michael J. Hartnett: So we're doing a great job bringing up certain rates at the sort of the, you know, mid teens, kind of a rate year to year, sometimes a little bit more than that. And in some areas, we have to continue that for the next three or four years to get to the, to get balanced with demand. So some of our defense, and that's particularly in the marine area.

Speaker Change #110: And.

Speaker Change #110: In other qualifications.

Speaker Change #111: So we're doing we're doing a great job, bringing up certain rates.

Speaker Change #111: Yes.

The sort of the.

Speaker Change #111: Mid teens kind of a rate year to year, sometimes a little bit more than that.

Speaker Change #111: In some areas we have to continue that for.

Speaker Change #111: For the next three or four years to get it to get to the.

Speaker Change #112: To get balanced with demand so some of our defense and that's particularly in the marine area.

Speaker Change #112: It's.

Michael J. Hartnett: It's very strong. Other areas like, you know, obviously with what's going on in Ukraine, and now everybody wants, you know, all the foreign countries want a joint strike fighter. So that's an important platform for us. So, you know, we're gonna, we're seeing more demand coming from Lockheed on those kinds of programs.

Speaker Change #113: It is very strong.

Speaker Change #113: Other areas like obviously with what's going on in Ukraine.

Ukraine and.

Speaker Change #113: Now everybody wants you know other foreign countries wanted joint strike fighter.

Speaker Change #113: So that's an important platform for us so we're going to we're seeing more.

Demand coming from Lockheed on those kinds of programs.

Michael J. Hartnett: The Long-Range Bomber is active and demanding. And that's, you know; we're in the middle of that program. So yeah, Marine and Airframe are really, really good for us. Guided Munitions is another area that's extremely strong, whether it's ground to ground, like that HIMAR system, or it's shoulder-mounted, or it's a ballistic interceptor. We're on all those programs.

Speaker Change #113: So it's a long range bomber is active.

Speaker Change #113: And demanding.

Speaker Change #113: That's we're in the middle of that program so yeah marine.

Speaker Change #113: And airframe are really really good for us.

Speaker Change #114: <unk> guided munitions is another area that's extremely strong.

Speaker Change #114: Whether it's ground to ground.

Speaker Change #115: Hi, I'm our system.

Or its shoulder mounted.

Michael J. Hartnett: And right now, there's a lot of replacement demand for Ukraine, and there's also demand to fortify our arsenal. So I don't see that ending any time soon.

Speaker Change #116: Or it's a ballistic interceptor were on all those programs and and.

Speaker Change #117: And right now there's a lot of replacement demand for Ukraine, and there is also demand to fortify U S arsenals.

Speaker Change #117: So I don't I don't see that ending anytime soon maybe Ukraine thing gets solved.

Michael J. Hartnett: You know, maybe the Ukraine thing gets solved in the intermediate term, but in the longer term, these US arsenals were not deep enough. Everybody recognizes that, including the Chinese. That's why they're building out their arsenals. They're not going to do anything with Taiwan until they, you know, their arsenals are built up the way they feel comfortable. So this is this is going to be a long-term event.

Speaker Change #117: Intermediate term.

Speaker Change #117: And the longer term.

Speaker Change #118: U S. Arsenal, we're not deep enough everybody recognizes that including the Chinese that's why they are building out their arsenals.

Speaker Change #118: We're not going to do anything with Taiwan until they.

Speaker Change #118: Their arsenals are built up the way they feel comfortable.

Speaker Change #118: So.

Speaker Change #119: This is this is this is a long term.

Speaker Change #119:

Speaker Change #119: Cycle event.

Peter John Skibitski: Yeah, no, it's a great color. Appreciate it, Mike. Thanks, guys.

Speaker Change #119: Yes, no that's great color I appreciate it thanks guys.

Speaker Change #119: Yes.

Steve Barger: Thank you. The next question is coming from Steve Barger of KeyBank Capital Markets. Please go ahead.

Speaker Change #120: Thank you. The next question is coming from Steve Barger of Keybanc capital markets. Please go ahead.

Steve Barger: Hey, good morning. Thanks. Hello, Steve. Hello, Mike. As you talked about accessing more world markets for Dodge, is that all organic channel development, or would you think about geographic acquisitions to accelerate that process?

Steve Barger: Hey, good morning. Thanks.

Steve Barger: It's Michael it's Steve.

Steve Barger: Hello.

Steve Barger: Mike as you talked about X accessing more world markets for Dodge is that all organic channel development or would you think about geographic acquisitions to accelerate that process.

Michael J. Hartnett: Um, yeah, we, we would, we would. Think of both.

Mike: Yeah, we we would we would.

Steve Barger: Yes.

Michael J. Hartnett: I mean, you know. Then but it's organic. I think it's primarily organic.

Steve Barger: Think of both I mean.

Steve Barger: Yeah.

Steve Barger: The but it's organic I think it's primarily organic.

Michael J. Hartnett: If there was a, you know, an acquisition, that would accelerate the process. You know, it We'd consider it, but you know, right now, it's pretty much using the assets that we already have more effectively and sort of building out, building out the teams. It's, it's a, You know, what has to be done there is very achievable. And so it's a matter of paying attention to what's going on in Europe, spending more time with the foreign nationals at these various sites and making sure that they're well integrated with the RBC and DODGE missions.

Steve Barger: If there was a.

Speaker Change #122: An acquisition that would accelerate the process.

Speaker Change #122: Yeah.

Speaker Change #122: Well, we'd consider it but it's.

Speaker Change #122: It's.

Speaker Change #122: Now it's.

Speaker Change #122: It's pretty much using the assets that we already have.

More effectively and sort of building out building out the team.

Speaker Change #122: It's a.

Speaker Change #122: Okay.

Speaker Change #123: You know what has to be done there is very.

Speaker Change #123: Achievable.

Speaker Change #123: Very achievable.

Speaker Change #123: And.

Speaker Change #123: So it's it's a matter of paying attention to what's going on in Europe spending more time with the <unk>.

Speaker Change #123: With the.

Speaker Change #124: Foreign nationals.

Speaker Change #125: At these various sites.

And making sure that they are well integrated with our with with the.

Speaker Change #126: RBC and Dodge missions.

Michael J. Hartnett: So before we acquired Dodge, Dodge really didn't have access to these markets; they had access through ABB, their previous owner, and ABB sort of didn't pay a great amount of attention to the mechanical side of their world. And so these languished and atrophied, and now we're pleasantly surprised that we have these footprints in active and productive areas of the world that we can spool up. And so we're in the process of spooling them up.

Speaker Change #126: So before before we acquired Dodge Dodge.

Speaker Change #126: Really didn't have access to these markets they had access through ABB either previous owner and.

Speaker Change #127: And a b b.

Speaker Change #128: Sort of didn't pay a great amount of attention to the mechanical side of their so their world.

Speaker Change #128: And so these languished atrophied.

Speaker Change #128: And then.

Speaker Change #128: And now we're pleasantly surprised that we have these footprints and active and productive areas of the world that we can.

Speaker Change #128: We can spool up and so we're in the process of Spooling them up.

Steve Barger: And when you talk about, I think you said, Europe, India, Mexico, Canada, as you start to make a more directed push in that direction, are you competing against other global manufacturers? Or is it more against locals? And I'm just trying to get a sense for what the market share opportunity is as you focus in that direction.

Speaker Change #129: And when you talk about I think you said Europe, India, Mexico, Canada.

Speaker Change #130: As you start to make them more directed push in that direction are you competing against other global.

Speaker Change #131: Barings manufacturers or is it more against the locals.

Speaker Change #131: I'm, just trying to get a sense for what the market share opportunity is as you do focus in that direction.

Speaker Change #132: Yeah, well it's.

Michael J. Hartnett: Yeah, well, it's the global bearing manufacturers, if it's bearings. It's sort of the global gearbox manufacturers of its gearbox, in a lot, you know, and it's in a lot of cases for aerospace and defense. It's particularly for aerospace.

Speaker Change #132: It's it's the global bearing manufacturers if its if its bearings.

Speaker Change #132: Sort of a global gearbox manufacturers, if it's gearbox.

Speaker Change #132: <unk>.

Speaker Change #132: And it's.

Speaker Change #132: And a lot of cases for.

Speaker Change #133: Aerospace and defense.

Speaker Change #133: Hum.

Speaker Change #134: Particularly aerospace it's.

Michael J. Hartnett: It's, It's a matter of following your customer to these remote sites and being able to service his requirements effectively. And so if you have the footprint to follow him and service him, um, you're well ahead of anybody else. Yeah.

Speaker Change #134: It's a matter of following your customer.

Speaker Change #135: These remote sites and being able to services requirements effectively.

Speaker Change #136: So if you have the footprint too.

Speaker Change #137: To follow him and to service him.

Speaker Change #138: You know you're well ahead of anybody else.

Speaker Change #138: Yes.

Speaker Change #139: Got it.

Steve Barger: And then, given all the funding visibility out there from the government for big projects, it's interesting that aggregates and cement are weak. Is this a D stock? Or what are your customers telling you? And how do you think that unfolds for the back half of the calendar year?

Speaker Change #140: And then.

Speaker Change #140: Given all of the funding visibility out there from the government for big projects.

Speaker Change #141: It's interesting that aggregates and cement are weak.

Speaker Change #142: Is this a destock or what are your customers, telling you in and how do you think that unfolds for the back half of the calendar year.

Michael J. Hartnett: Well, um... I think you know as much about that as I do, Steve. [inaudible] The aggregate and cement business is pretty much correlated, almost perfectly with Housing Start. So.

Speaker Change #142: Well.

Speaker Change #142: <unk>.

Speaker Change #142: I think I think you know as much about that as I do Steve.

Speaker Change #142:

Speaker Change #143: The aggregate and cement business.

Speaker Change #143: Is pretty much correlated.

Speaker Change #143: Almost perfectly with housing starts.

Speaker Change #143: So.

Michael J. Hartnett: When housing starts are up, that business is very strong, and when housing starts are not up, that business is not so strong. So, you know when housing starts. It's all about mortgage rates, right? So yeah, I mean, when you read the research on Vulcan or Martin Marietta or the people that are in this world. Um, you know, and the investment analysts correlate housing starts with demand for their Business Volumes. It's, it's amazingly correlated.

Speaker Change #143: When housing starts are up that business is very strong.

And when housing starts are not up that businesses is not so strong.

Speaker Change #143: So.

Speaker Change #143: And housing starts.

Speaker Change #143: All about mortgage rates right. So.

Yeah, I mean, it's when you when you read the research on the.

Speaker Change #144: Vulcan or Martin Marietta or the people that are in this world.

Speaker Change #144: <unk>.

Speaker Change #145: In the investment analysts correlate housing starts with demand for their <unk>.

Speaker Change #146: As Ms volumes.

Michael J. Hartnett: I mean, it's like an R square of 1995 or something. It's it's it's one-on-one, so yeah, so we look at housing starts. I don't think the infrastructure bill has really impacted anything at this point. I mean, there are people that talk about it here and there, but it has not had any macro influence on this state that I can put my finger on.

Speaker Change #147: It's it's amazingly correlated I mean, it's like an R square of.

Speaker Change #148: And 95 or something it's one on one.

Speaker Change #148: So yeah. So we look at housing starts I don't think the infrastructure Bill is really.

Speaker Change #148:

Speaker Change #148: Impacted anything at this point I mean, there is theres people that talk about it here and there, but it has not had any macro influence to the state that I can that I can put my finger on.

Steve Barger: Got it. Nope. That makes a lot of sense. Thanks.

Speaker Change #148: Got it no that makes a lot of sense. Thanks.

Michael Frank Ciarmoli: Thank you. The next question is coming from Michael Ciarmoli of CHOA Securities.

Speaker Change #149: Thank you. The next question is coming from Michael <unk> of <unk> Securities. Please go ahead.

Michael Frank Ciarmoli: Hey, good morning, guys. Thanks for taking the question; thanks for joining us.

Speaker Change #150: Hey, good morning, guys. Thanks for taking my furnished this morning.

Michael Frank Ciarmoli: Hey, quick question, not to nitpick, I know you just talked about aggregates, but I think the prior view for the fourth quarter was for industrial to maybe grow year over year on a few points that obviously came up a little bit like, what was, was it, did the aggregates and cement, I know in the earlier prepared commentary, you gave some of that end market with power gen waste, did anything turn unexpectedly weak? Was it just that aggregate? I think you flagged oil and gas as being a bit weaker.

Quick question not to Nitpick I know you just talked about the aggregate, but I think the prior view for fourth quarter was for industrial to maybe grow year over year, a few points that obviously came up a little bit light.

Speaker Change #151: In the aggregates and cement I know in the earlier prepared commentary you gave some of that end market with power. Gen. Weighs did anything turn unexpectedly weak was it wasn't just that aggregate I think you flagged oil and gas as being a bit weaker.

Michael J. Hartnett: Well, you know, I think, first of all, one of the things we didn't talk about was last year. We had, we dodged, a backlog, and that backlog was supply chain driven, so last year's fourth quarter of that backlog sort of supercharged the sales number as it was liberated.

Speaker Change #152: Well you know.

Speaker Change #153: I think first of all what.

Speaker Change #154: We did one of the things we didn't talk about.

Speaker Change #154: Last year, we had we Dodge did have backlog.

Speaker Change #154: And that backlog was supply supply chain driven.

And so.

Speaker Change #154: Last year's fourth quarter.

Speaker Change #154: That that backlog sort of.

Speaker Change #154:

Speaker Change #154: Supercharged the sales number as it was liberated.

Michael J. Hartnett: It had about a 10 million impact.

Speaker Change #155: $10 million impact okay. So okay by about 10 minutes by about $10 billion. Okay. That's okay.

Michael J. Hartnett: Okay, so by about 10 by about 10 million dollars. Okay. Okay. Yeah, that was the difference. So this year, Supply chain is normalized so that, you know, they don't have these kinds of backlogs anymore. And so it's not It's a hard comp. It's a hard comp.

Speaker Change #156: That was that was the difference so this year supply chain has normalized.

Speaker Change #156: They don't have these kinds of backlogs anymore.

Speaker Change #157: So it's not.

It's a hard comp.

Speaker Change #157: Yes.

Michael Frank Ciarmoli: Okay, that makes sense. That makes sense. And then just back on to 25, I want to make sure I heard you. Did you say low double-digit growth for aero-defense combined? And is there an expected parse-out between commercial aero and defense in that view?

Speaker Change #158: Okay that makes sense that makes sense and then just back onto 25 I want to make sure I heard did you say low double digit growth for Aero defense combined and is there a <unk>.

Speaker Change #158: Expected parse out between commercial Aero and defense in that view.

Michael J. Hartnett: There's no break down, but yes, it's combined, and we're just, you know, we're just trying to figure out this Boeing thing. And, and, and, you know, we had all of our plans around a different build rate for the ships. And so, you know, now we're Maria, reevaluating those plans and determining, you know, what we should bring in in terms of additional business to offset any of the losses. And so that's, that's sort of ongoing.

Speaker Change #159: Theres no parse out, but yes. It is okay behind.

Speaker Change #160: We're just we're just trying to figure out this Boeing thing and.

Speaker Change #160: And.

Speaker Change #161: We had all of our all of our plans around it are different build rate for or the shifts and so now we are.

Speaker Change #160: Three.

We are reevaluating those plans and determining.

You know what.

Speaker Change #162: What we should bring in in terms of additional business to offset any of the losses.

Speaker Change #162: So that's that's sort of ongoing.

Michael J. Hartnett: Got it. It's not going to, you know, it's not going to be a normal year in terms of...

Speaker Change #162: Got it.

Speaker Change #163: It's not going to you know its not going to be a normal year in terms of.

Speaker Change #162: Yeah.

Michael J. Hartnett: Assuming Boeing gets their problems solved and gets to where they need to be, like in the upper 50s in terms of 737 rates per year. I mean, they've got a 10-year backlog on this stuff. So they have got to giddy up. They have got to get this problem behind them. So, um, assuming they get into that kind of, um, that kind of a mode again, and I don't think they have a choice. They have to get into that. They have to get this behind them. You know, we'll be back. We'll be back up into the top teams again.

Speaker Change #162: Assuming Boeing gets to there.

Speaker Change #164: Yes, their problems solved and gets to there.

Speaker Change #164: They need to be like in the in the upper <unk> in terms of.

Speaker Change #164: 737 rates per year, I mean, they've got a 10 year backlog of this stuff. So they've got a they've gotta giddy up so they've got to get this problem behind them.

Speaker Change #164: Assuming they get into that kind of.

Speaker Change #164: That kind of a mode again.

Speaker Change #164: And I don't think they have the choice they have to get into that they have to get this behind them.

Speaker Change #164: We'll be back we'll be back up into that into the high teens again.

Michael Frank Ciarmoli: Yep. Okay. And then maybe on that as well, I mean, you talked about 50 to 75 basis points of gross margin expansion with that ongoing absorption and arrow. Is that kind of taken into your commentary there? Should we expect the margin expansion to be a little bit more back end loaded in 25 as you kind of get clarity from Boeing? Okay. And then that would imply maybe a really strong fourth quarter, especially as the 5.8 million preferred shares drop off. So just from a modeling perspective, I mean, is that kind of how we should think about the...

Speaker Change #165: Okay, and then just maybe on that as well I mean, you talked about 50 to 75 basis points of gross margin expansion.

Speaker Change #166: With that ongoing absorption in Aero.

Speaker Change #167: <unk> kind of taken into your commentary there should we expect the margin expansion being a little bit more back end loaded in 'twenty five as you kind of get clarity from Boeing Okay and then.

That would imply maybe a really strong fourth quarter, especially as the.

Speaker Change #168: The $5 8 million of preferred drop off so just from a modeling I mean is that kind of how we should think about the year.

Michael Frank Ciarmoli: You're on the right track there. Okay, very good. The last one I had.

Speaker Change #168: You're you're you're on the right you were on the right track there. Okay very good last one I had any it sounds like leverage is going to come down any any big appetite for more M&A out there I mean Dodge has seemingly been a.

Michael Frank Ciarmoli: It sounds like leverage is going to come down. Any big appetite for more M&A out there? I mean, Dodge has seemingly been a home run and is still driving value creation. So what's the appetite for another deal? Well, the appetite's there, you know, but it's picky.

A home run and it's still driving value creation, so what what's the appetite for for another deal.

Speaker Change #169: Oh, well the appetite is good.

Speaker Change #169: But the appetite picky.

Speaker Change #169: Yeah.

Speaker Change #169: Yeah.

Michael J. Hartnett: [inaudible] Got it. Got it. All right, guys. I'll leave it at that. Thanks.

Speaker Change #170: Got it got it alright, guys I'll leave it at that thanks.

Speaker Change #169: Sure.

Joe Ritchie: Thank you. The next question is coming from Joe Ritchie of Goldman Sachs. Please go ahead.

Speaker Change #171: Thank you. The next question is coming from Joe Ritchie of Goldman Sachs. Please go ahead.

Vivek Srivastava: Thanks, this is Vivek Srivastava on behalf of Joe. My first question is just on revenue seasonality. It looks like this time your first quarter revenue would be better than where the fourth quarter ended. As we think about gross profit and even dollars, should that be sequentially better also on higher sales, or is there something else we should keep in mind?

Speaker Change #169: Hi.

Speaker Change #172: <unk> on for Joe My first question is just on revenue seasonality.

Speaker Change #173: Looks like this time your first quarter.

Speaker Change #174: Would it be better than fourth quarter, and then how does it.

Speaker Change #175: Think about <unk>.

Speaker Change #176: And then EBIT dollars.

Speaker Change #176: Should should that be sequentially better also.

Speaker Change #177: Sorry, if there's something else, we should keep in mind.

Unknown Executive: I think, as Mike just kind of spoke to regarding margin, we think that the overall margin expansion we discussed is really backloaded, it's lumpy throughout the year. You know, we'll continue to invest in a bit of SG&A in fiscal 25. So, you know, we're expecting continued strong performance.

Speaker Change #178: I think as Mike just kind of spoke to regarding margin.

Speaker Change #178: We think that.

Mike: The overall margin expansion, we discussed is really back loaded its lumpy throughout the year.

Speaker Change #179: You know, we'll continue to invest in a bit of SG&A in fiscal 'twenty five.

Speaker Change #179: So we're expecting continued strong performance.

Vivek Srivastava: Understandable. And just a high-level question, your EBITDA margin this quarter was 31.4%, very impressive. Just as we think about the long term, what kind of long-term margin target do you have in mind? And then, outside of arrow volume recovery and some dot synergies, is there anything like improvement in terms of the base business that could further aid that margin expansion?

Speaker Change #180: Understood and just a high level question.

Speaker Change #181: This quadrant pardee, one 4% very impactful.

Speaker Change #181: Yes.

Speaker Change #181: We think about the long term kind of.

Speaker Change #182: Margin targets.

Speaker Change #182: And then on.

Adam: Adam volume recovery.

Speaker Change #184: Is there anything like improvement in terms of the base.

Adam: That could further impact margin expansion.

Michael J. Hartnett: Yeah, I mean, there's no end. Yeah, I think, You know, there's, there's, there's still, there's still, What can I say there?

Yeah, I mean, it's.

Adam: Theres no end.

Adam:

Adam: Yeah I think.

Adam: You know, there's there's there's still there's still it's it's.

Adam: How can I say that.

Michael J. Hartnett: It's, it's really, a, you know, one by one kind of project, in terms of manufacturing technology and identifying, you know, what on the Pareto, where are your lower margin performers? And what, if anything, does the world provide in terms of technology? to reduce labor or improve material costs or reduce scrap that would accrue to better margin performance. And so we have active programs with. All of our plans, which we review every month.

Speaker Change #185: It's it's really hum.

Speaker Change #185: Okay.

Speaker Change #186: One by one kind of a project.

And in terms of manufacturing technology and identifying.

Speaker Change #186: On the on the Paredo, where are your lower margin performers.

Speaker Change #187: And what if anything does the world to provide in terms of technology.

Speaker Change #187: To reduce labor or improve material costs or or reduce scrap that would that would accrue to a better margin performance.

Speaker Change #187: And so we have active programs.

Speaker Change #187: With all of our plants that we review every month.

Michael J. Hartnett: And we look at the Pareto, and we look at what generates revenue, and what could be done to improve the operating performance of that particular line item, and what the manufacturing options might be for improvement that would benefit the overall margin of the line. So, you know, it's a matter of. It's a matter of investing time and money with all of the divisions, one by one, to create a program of improvement that accrues to a higher consolidated margin.

Speaker Change #187: And we look at the Paredo.

Speaker Change #187: And we look at what generates the revenue.

Speaker Change #187: And what could be done to improve the operating performance of that particular line item.

Speaker Change #187: What the options manufacturing options might be.

Speaker Change #187: For for improvement that.

Speaker Change #187: That would benefit the overall.

Speaker Change #187: The overall.

Speaker Change #187: <unk>.

Speaker Change #187: Of the line so.

Speaker Change #187: It's a matter of.

Speaker Change #188: It's a matter of putting the time, Inc.

Speaker Change #188: Investment.

Speaker Change #189: With all of the divisions.

Speaker Change #189: One by one to create a program of improvement there.

Speaker Change #189: That accrues to a higher consolidated margin and.

Michael J. Hartnett: And that's what RBC is really good at. And that's what we've done since I started this job 30 years ago, and we haven't stopped yet. So, yeah, I mean, come on over to one of our plants, and we'll show you how we do that.

Robert Stephen Barger: That's what RBC is really good at and that's what we've done.

Speaker Change #191: Since I started the job 30 years ago, and we Havent started we haven't we haven't we haven't stopped yet so.

Speaker Change #192: Yeah, I mean come on come on over to a to one of our plants and.

Speaker Change #192: It will show you how how it's how we do that.

Vivek Srivastava: That sounds great. Yeah

Speaker Change #192: That sounds great.

Speaker Change #193: Just last question on free cash flow.

Speaker Change #194: When we think about free cash flow in 2025, and then from a working capital standpoint.

Unknown Executive: Just last question on free cash flow. How should we think about free cash flow in 2025? And from a working capital standpoint, maybe just talk about what improvements are you making for the coming year? Yeah, so, you know, as Mike just said.

Speaker Change #194: Can you just talk about what improvement value.

Speaker Change #194: Yeah.

Unknown Executive: Yeah, so, as Mike just referenced, ultimately, we're looking to de-lever by another $275 to $300 million, so we're going to have to generate some healthy free cash flow to do that. We're always, you know, targeting over a hundred percent conversion on that income, 115% this year, so we'll continue to drive that. Within the working capital section, you know, as we look to the long term, which is important to do, we always are strategically looking at our inventory levels, making sure that we're prepared to strike and deliver to our customers as needed. So there's, you know, potential for a little bit of investment in that side, especially in aerospace, and we'll continue to manage the remainder of the working capital along the way.

Speaker Change #195: Yeah. So you know as Mike just referenced ultimately, we're looking to delever by another $275 million to $300 million.

Speaker Change #196: We're going to have to generate some healthy free cash flow to do that we're always targeting over 100% conversion on net income of 115%. This year. So we'll continue to to drive that within the working capital section.

Speaker Change #197: As we look to the long term, which is important to do.

Speaker Change #198: We always are strategically looking at our inventory levels, making sure that we're prepared to strike and deliver to our customers as needed.

Speaker Change #199: So there is potential for a little bit of investment in that side, especially in aerospace.

Speaker Change #199: And we will continue to manage the remainder of the working capital along the way.

Speaker Change #199: Okay.

Speaker Change #200: Great. Thank you.

Jordan Leone: Thank you. The next question is coming from Jordan Leone of Bank of America. Please go ahead.

Speaker Change #201: Thank you. The next question is coming from Jordan <unk> of Bank of America. Please go ahead.

Jordan Leone: Hey, good morning. Thank you for taking the question. No problem. Last quarter you guys said on the 787 that you were going to step up to 7 a month in April, and it would be an important shift. Are you still producing at, or still planning to produce at 7 a month? We saw Spirits cutting headcount, and Boeing also just cut. So could you give any more color for the wide bodies?

Hey, good morning, Thanks for taking the question.

Speaker Change #202: No problem.

Speaker Change #203: Last quarter, you guys said.

700, <unk> you were going to step up to seven a month in April.

Speaker Change #203: It would be an important shift are you still producing at.

Are you still planning to produce at seven a month.

Speaker Change #204: We saw spirits cutting head count.

Speaker Change #205: And Boeing also just Scott.

Speaker Change #206: So could you give any more color for the wide bodies.

Michael J. Hartnett: Yeah, no, we're staying at five for a month. OK.

Speaker Change #207: Yeah, no we're staying at five a month.

Speaker Change #207: Okay.

Jordan Leone: And then also, too, for the AeroGuide, how much, if there's still all of the production uncertainty, how much are you guys looking at the guide for how much you can make up in terms of pricing? Or just defense acceleration to make up for the commercial side.

Speaker Change #208: And then also choose so for the Aero Guide.

Speaker Change #209: How much if if they're still all of the <unk>.

Speaker Change #210: Production uncertainty how much do you guys are looking at the guide of how much you can make up in terms of pricing.

Speaker Change #210: Or just defense accelerating to make up for the commercial side.

Michael J. Hartnett: Well, I mean, we... In terms of mitigating, how are we going to mitigate the shortfall there from?

Speaker Change #211: Well I mean, we.

Speaker Change #212: In terms of mitigating how are we going to mitigate the shortfall there for for Boeing for awhile.

Michael J. Hartnett: Yeah, yeah, just said I'd do your thing. Yeah, I think I think we have a quarter or two of the Boeing effect. You know, I think given a quarter or two, I mean, the maximum impact on revenues. You know, if we didn't do any mitigation, it would be $20 million over two quarters. $10 million would be sort of the minimum if we did no mitigation over two quarters. So it's, it's a, you know, it's it's sort of an achievable number.

Yeah, well just just any derisking.

Speaker Change #213: Yeah, I think I think we have a quarter or two of them.

Speaker Change #213: Oh, the Boeing effect.

Speaker Change #213: <unk>.

Speaker Change #213: Given a quarter or two.

Speaker Change #213: The maximum impact on revenues.

Speaker Change #213: If we didn't do any.

Speaker Change #214: Any mitigation it would be it would be $20 million.

Speaker Change #214: Over over two quarters.

Speaker Change #215: $10 million would be sort of the minimum if we did no mitigation.

Speaker Change #215: Over two quarters. So it's it's a.

Speaker Change #216: You know, it's sort of an achievable number when I look at some of the markets that we've been servicing I mean, particularly.

Michael J. Hartnett: And when I look at some of the markets that we've been servicing, I mean, particularly, we talked about how strong defense is and how much we can realign our schedules to bring some of that defense production into earlier quarters, which is what's happening right now to address some of the mitigation. But on the other hand, you know, a few years ago, we started working in space, and in 2004.

Speaker Change #217: Well, we talked about how strong defenses and how much how much we can realign our schedules to bring some of that defense.

Speaker Change #217: Defense production in earlier quarters, which is what's happening right now too.

Speaker Change #217: For some of the mitigation, but on the other hand.

Speaker Change #217: A few years ago we.

Speaker Change #218: We started working in space.

Speaker Change #219: And in 'twenty.

Speaker Change #219: Four.

Michael J. Hartnett: We ship $20 million into the space world. And so our business on space products is accelerating. We see that getting to 40 million, and we see that probably getting to 30 million this year. So, you know, space is starting to become a significant component of our A&E sales.

Speaker Change #220: We shipped.

Speaker Change #220: A $20 million into the space World.

Speaker Change #220: And.

Speaker Change #220: So our our business on <unk>.

Speaker Change #221: Space products is accelerating.

We see that getting to $40 million and we see that probably getting to $30 million. This year.

Space is starting to.

Speaker Change #221: Become a.

Speaker Change #221: A.

Speaker Change #222: Significant component of our A&D sales.

Speaker Change #222: So.

Michael J. Hartnett: That's part of the mitigation. Defense is part of the mitigation. And increasing our spares sales is another part of the mitigation. So, you know, we have... What do we have? Maybe a half a dozen significant divisions that are working on various mitigation techniques, products, to offset any shortfall in the second quarter that we might see from the Boeing production reduction. I suspect they'll get a long way towards the goal.

Speaker Change #223: That's that's part of the mitigation defense as part of the mitigation in.

Speaker Change #224: Increasing our spares.

Speaker Change #225: Sales is another part of the mitigation. So you know we have.

Speaker Change #226: What do we have.

Speaker Change #226: A half a dozen significant divisions that are.

Speaker Change #226: Working on various mitigation.

Speaker Change #226: Techniques.

Speaker Change #227: <unk> to offset any shortfall of the.

Speaker Change #227: For the second quarter that we might see from from the Boeing.

Speaker Change #228: It's a production reduction.

Speaker Change #228: A reduction in <unk>.

Speaker Change #228: I suspect I suspect they'll get a long way towards the goal.

Speaker Change #228: Okay.

Jordan Leone: Great. That's really helpful. Thank you.

Speaker Change #229: Okay. That's really helpful. Thank you.

Speaker Change #228: Okay.

Michael J. Hartnett: Thank you. Ladies and gentlemen, there are no further questions at this time. I would like to turn the call over to Dr. Hartnett for closing comments.

Speaker Change #228: Thank you ladies and gentlemen, there are no further questions at this time I would like to turn the call over to Dr. Hartnett for closing comments.

Michael J. Hartnett: Okay, well, thank you. Well, that completes our call for today, and I appreciate everybody participating and listening to our presentation. Unknown Speaker, Thank you. You know, obviously, we've delivered another year of solid growth and great cash cash flow conversion. We look forward to talking to you again in July.

Michael J. Hartnett: Okay, well thank you.

Michael J. Hartnett: Well that completes our call today.

Michael J. Hartnett: And I appreciate everybody participating and listening listening to our.

Our presentation.

Michael J. Hartnett:

Speaker Change #231: Thank you you know obviously, we've delivered another year of solid growth.

Speaker Change #231: Great cash cash flow conversion.

Speaker Change #231: And.

Speaker Change #231: We look forward to talking to you again in July.

Operator: Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.

Speaker Change #232: Ladies and gentlemen, thank you for your participation. This concludes today's event you may disconnect your lines of log off the webcast at this time and enjoy the rest of your day.

Speaker Change #232: Okay.

Speaker Change #232: [music].

Speaker Change #232: Yes.

Speaker Change #232: [music].