Q4 2024 RBC Bearings Inc Earnings Call
Greetings and welcome to RBC bearings fiscal 2020 for 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.
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.
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.
Speaker Change: Good morning, and thank you for joining us for RBC bearings fiscal 2020 for fourth quarter earnings Conference call.
Joshua 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: With me on the call today are Dr. Michael Hartnett, Chairman, President and Chief Executive Officer, and you're Bearish urn director, Vice President and Chief operating Officer.
Rob Sullivan, Vice President and Chief Financial Officer, and Rob about fast director of Investor Relations.
Joshua 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 Security Litigation Reform Act of 1995. Actual results may differ materially from those projected or implied due to a variety of facts. 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.
Speaker Change: Before beginning todays 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.
Speaker Change: Actual results may differ materially from those projected or implied due to a variety of factors.
Speaker Change: We refer you to RBC bearings recent filings with the SEC.
Speaker Change: More detailed discussion of the risks that could impact the company's future operating results and financial condition.
Joshua 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.
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.
Speaker Change: With that I'll now turn the call over to Dr.
Speaker Change: Okay. Thank you and good morning, everyone and thanks for joining us.
Michael J. Hartnett: OK, 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 some 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.
I'm going to start today's call with a quick review of our quarter and.
Speaker Change: In fiscal year and hand, it over to Rob for some detailed color on the numbers 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.
Michael J. Hartnett: 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. 2024 was another year where 70% of our revenues were sole, single, or primary, primary sources. That's a key component of our business profile.
Rob: Net sales came in at a higher end of our quarterly guidance range.
Rob: $413 7 million delivering roughly 5% of year over year growth capping a strong fiscal 2024 with revenues of 1.56 billion.
Rob: Delivering growth of about 6.2% year over year.
Speaker Change: 2024, it was another year, where 70% of our revenues were so single or prime area.
Speaker Change: Primary sourced that's.
Michael J. Hartnett: And over half of our revenues continue to be from the maintenance and repair side 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 2000 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: That's a key component of our business profile and over half of our revenues continue to.
Speaker Change: To be 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 our installed base.
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.
But more on that later.
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.
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 defense revenues up 29% in the quarter and 21, 6% for the full year.
Additionally growth in a N 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 remained flattish with fourth quarter sales down four.
Speaker Change: And 4% in full year sales up 2%.
Speaker Change: Broadly speaking aftermarket sales remained strong stronger than OEM in both periods.
Speaker Change: 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: The weakness we've 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 Rpc's 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.
Speaker Change: For the full year, we came in at $675 million or 43.0% of sales and expansion of 180 basis points versus fiscal 2000 2023.
And a new all time record for RBC.
Speaker Change: Our success here is driven by multiple factors.
Michael J. Hartnett: Our success here is driven by multiple factors, with ongoing synergies from DODGE, 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 Dodge's acquisition, was 37.6% compared to 43.1% for fiscal 2024.
Speaker Change: With ongoing synergies from Dodge from the <unk> 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 FY <unk>.
Speaker Change:
Speaker Change: Yeah.
Speaker Change: For the third quarter of 'twenty two.
Speaker Change: In the first quarter following <unk> 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 <unk>.
Speaker Change: At this point expansion on the gross margin line.
Speaker Change: At the time of the acquisition, we said, we were targeting $75 million to $100 million of synergies over five years, we estimate that we have achieved somewhere between 70 and $80 million and just over two years since the closing.
Speaker Change: Okay.
Speaker Change: With more to come.
Speaker Change: Yeah.
And you can add we have already repaid.
Speaker Change: $625 million of 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% CAGR. And even more impressive is Evithia, 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 has been absolutely transfer formative for RBC.
Speaker Change: Over the past five years net sales have gone from roughly 700 million to over 156 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: I'd 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.
Speaker Change: And for creating much of our own success with company specific roles and margin focused initiatives.
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 financial results. Thank you, Mike.
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.
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 across markets, industrial total sales growth of 4.9% in the. 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. We leverage the healthy operating environment to make additional investments in SG&A aimed at positioning the business for continued growth.
Speaker Change: Banco <unk> indicated fiscal 2024 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 by 2% in the full year was surpassed by adjusted EBITDA growth of seven 4% at quarter end 11, 1% in the year and by free cash flow growth of 18, 4% in the quarter 35, 1% for the full year.
Rob: 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 the full year coming in at 43% an increase of roughly 180 basis points strengthen the gross margin line was derived from the Dod.
Synergies increased utilization of our aerospace assets and our ongoing pursuit of higher margin mix we.
Speaker Change: We leveraged a 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 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 fiscal 'twenty.
Robert Sullivan: 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 during 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: John.
Speaker Change: Even with the SG&A investments adjusted EBITDA margins expanded for the fiscal fourth quarter coming in at 31, 4% an expansion of roughly 70 basis points year over year in fiscal 2004 coming in at an all time record of 39% an expansion of nearly 140 basis points. This is the first.
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.
Speaker Change: Our full year adjusted EBITDA margin 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.
Speaker Change: 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 our performance in Q4 was primarily driven by our operating performance.
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: 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 Taj 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 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 a convertible preferred stock expected to automatically convert on October 15 2024.
Speaker Change: Using 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 terminal. All together, the combination of healthy growth, margin expansion, solid cash generation, and continued debt reduction caps 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.
This is roughly nine 5% in fiscal 2024 as total cash flow.
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 2024 and leaves the company well positioned heading into fiscal 'twenty five and beyond.
Speaker Change: 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 to $4.15 to $4.20 million, representing year-over-year growth of 7.2 to 8.5 percent.
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 seven two 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.
Mike: With some markets stronger than other softer.
Mike: And overall industrial demand supported more by aftermarket sales that Oems.
Mike: Okay.
In terms of the full year, our outlook for commercial aerospace remains positive.
Mike: Passenger miles traveled are back above pre 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: <unk> 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 space defense and the aftermarket.
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 material composition.
Speaker Change: Altogether this points to an A&D revenues expected to be up low double digits in fiscal 'twenty five.
Speaker Change: Top of fiscal 'twenty for us record base it.
Speaker Change: It will likely be back ended ended backend loaded.
I think thats 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: Should continue to grow growth.
Speaker Change: Our target of two times GDP.
Speaker Change: Is.
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've 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 to 75 basis points of gross margin expansion in fiscal 'twenty five driven by a combination of.
Speaker Change: Moderating Dodge tail winds ongoing absorption.
Speaker Change: Of our aerospace capacity and higher margin new products being introduced to.
Speaker Change: To the market.
Speaker Change: Altogether. This paints a picture of another year of strong free cash flow generation.
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: 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.
Our current net leverage is two to three times on a trailing basis in.
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.
Speaker Change: This leaves us well positioned to more seriously evaluate.
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: M&A opportunities.
Speaker Change: The team has been active and growing that pipeline.
Speaker Change: We expect that our current rate to be well under two times EBITDA by the end of <unk>.
Speaker Change: 2025.
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.
Speaker Change: Further mitigated by margin expansion are magnified by margin expansion and strong free cash flow conversion.
Speaker Change: We're ahead of schedule on our dogs 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.
Speaker Change: Thank you the floor is now open for questions.
Operator: Thank you. The floor is now open to questions. If you would like to ask a question, please press star 1 on your telephone keypad, and 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 queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
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 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.
Operator: One moment, please, while we pull for questions. Today's first question is coming from Kristine Liwag of Morgan Stanley. Please go ahead. Thanks for all the details on Mike, you know.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: Today's first question is coming from Kristine <unk> of Morgan Stanley. Please go ahead.
Kristine 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?
Kristine Liwag: Okay. Thanks for all the detail.
Speaker Change: Mike.
Speaker Change: Touched on this large revenue synergies.
Speaker Change: 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.
Speaker Change: <unk> has something like kind of ex the salespeople as legacy RBC bearings.
Speaker Change: 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.
Speaker Change: <unk>.
Speaker Change: From this.
I guess my two times GDP growth was just too simple for Christine.
Michael J. Hartnett: I guess my two times GDP growth was just too simple, huh, Kristine? Well, Mike, 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 synergies options that are being developed. And part of that mix is accessing more of the world market that, 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.
Speaker Change: I got two times GDP growth for legacy RBC bearings have historically been your targets I was thinking.
That 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.
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.
Speaker Change: That are being.
Speaker Change: Developed and.
Speaker Change: Part of that mix is.
Speaker Change: Accessing more of the world market for Dodge.
Speaker Change: <unk>.
Speaker Change: Obviously, RBC will ride on dodges coat tails.
And we're particularly focused on Europe.
Speaker Change: In India.
Speaker Change: And.
Michael J. Hartnett: And we see opportunities in all those areas for DOD in 25. And if there's 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 and Different Foreign Countries, based upon, you know, 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 DOJ and RBC our market access.
Speaker Change: Mexico, and Canada, and we see opportunities in all those areas where Dodge.
Speaker Change: In 'twenty five and.
Speaker Change: If there is opportunities for <unk> as I said RBC should should follow right through on the on the coat tails. So that's those are pretty active initiatives that we have underway currently.
Speaker Change: Focused on these.
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 in RBC.
Speaker Change: Our market access.
Speaker Change: If we take India as an example.
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: 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 moving to India for economic reasons and.
Speaker Change: And it allows allows us better access through the Dodge sales force.
To the Indian aerospace customer.
Speaker Change: Our 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 in an Aerospace and Industrial Synergy ongoing based upon the support created by the Dodge Infrastructure Program.
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.
Speaker Change: It's very it's very meaningful so.
Speaker Change: That's just one example of.
Speaker Change: Maybe.
Speaker Change: In aerospace and industrial synergy going based upon.
Speaker Change: The support created by the Dodge infrastructure.
Speaker Change: Great. Thank you for the color, Mike and if I could take a second question on median cost.
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: 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 the higher value things in the U S. Can you give any progress in terms of.
Speaker Change: Where you are in terms of that initiative and when 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.
Speaker Change: Yes, well.
Michael J. Hartnett: Yeah, well, we just completed building a plant in Tecate, Mexico, for Dodge, basically, and 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, we're, our plan is to, and actually, it's more than a plan.
Speaker Change: We just we just completed.
Speaker Change: Building a plant in.
Speaker Change: Jakarta, Mexico.
Speaker Change: For Dutch.
Speaker Change: Basically.
Speaker Change: It's about 100000 square feet.
Speaker Change: And.
And it allows us to move some of Dodd'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.
The Dodge plants.
Speaker Change: Based upon based upon floor space and based upon.
Speaker Change: Their supply chain, so where we.
Speaker Change: Our plan is to actually it's more than a plan we've capitalized it and we have things moving around in.
Michael J. Hartnett: Now we've capitalized on 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, 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 Steve Barger, Vivek Srivastava, Kristine Liwag, Robert Sullivan, Michael Hartnett, and Daniel Bergeron will be in production in Tecate with the first round of products by July.
Speaker Change: If you're on Interstate 10.
Speaker Change: This weekend and you can you can watch our trucks go by.
Speaker Change:
Speaker Change: But we expect that's going to allow us to expand some of dodges 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 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 list.
Speaker Change: 18 months and where we are.
Sure.
Speaker Change: We'll be we'll be in production.
Speaker Change: Intercut with with the first round of products by July.
Speaker Change: Okay.
Speaker Change: Well, great well I'll keep an eye out for our RBC trucks and count on Interstate 10. Thank you.
Kristine 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: Yes.
Speaker Change: Okay.
Speaker Change: Thank you. The next question is coming from Pete Kubicki of Alembic Global. Please go ahead.
Operator: Thank you. The next question is coming from Pete Skibitski of Alembic Global. Please go ahead. Thank you, everyone.
Peter John Skibitski: 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, really nice to see that. Is 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.
Peter John Skibitski: Good morning, Pete.
Speaker Change: Let me start I thought one of the things that stood out was the.
Peter John Skibitski: Backlog growth sequentially and year over year as really really nice to see that was that what we should think.
Speaker Change: Commercial aerospace longer term commercial aerospace orders coming in.
Michael J. Hartnett: Well, aerospace and marine, I mean, that's probably heavily aerospace and marine. There's some of that is industrial, but it's probably an 80-20 kind of a 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.
Speaker Change: Well aerospace and marine I mean, that's probably heavily heavily in aerospace in marine.
Speaker Change: Is there some of that is industrial.
Speaker Change: It's probably 80 20 kind of a thing.
Speaker Change: Got.
Speaker Change: <unk> very little debt little of dodges background.
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.
Michael J. Hartnett: Yeah, yeah, okay. Okay, that's helpful.
Speaker Change: Okay. Okay. That's helpful and then just.
Speaker Change: 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?
Speaker Change: The backlog does it doesn't hurt with regard to visibility there.
Speaker Change: Could you talk to us about what Youre seeing.
Speaker Change #100: And this first quarter versus the prior three quarters.
Speaker Change #100: Leaves you to believe that sales are going to reaccelerate.
Speaker Change #101: Well, we're seeing great bookings.
Michael J. Hartnett: Well, we're seeing great bookings. You know, there's particularly an A and D. I mean, it's, it's, it's very good.
Speaker Change #102: Particularly in A&D.
Speaker Change #102: It's it's 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.
The.
Speaker Change #103: I don't think the Boeing.
Speaker Change #102: <unk>.
Speaker Change #102: 737 build out.
Speaker Change #102: The step down in their production rate is reflected in that in that quarter. I think it is going to be reflected in the second quarter.
Speaker Change #104: But it isn't reflected in the in the first quarter at all.
Michael J. Hartnett: Okay, yeah, that's helpful. That was a little confusing because, yeah, 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 then rise back up. Is that the way to think about it? Well, you know, the way I think about it is this way.
Speaker Change #105: 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 I'm just trying 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 #105: Then rise back up is that the way to think about it.
Speaker Change #106: Well the way I think about it is.
Michael J. Hartnett: Well, you know, the way I think about it is, um, 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 #105: Yes.
Speaker Change #105: Is is if you look at Boeing's production rate now.
Speaker Change #105: Where they have to be.
Speaker Change #105: And <unk>.
Speaker Change #105: Of course, the 38 <unk>.
Speaker Change #105: Chips per month is.
Speaker Change #105: Is sort of a magic number right.
Speaker Change #105: Sure.
Speaker Change #105: Talking about 2025 ships a month right now may be 30 so.
Speaker Change #105: Bye.
Speaker Change #105: Next <unk>.
Speaker Change #105: Oral.
We're certainly expecting them to be healthy enough.
Michael J. Hartnett: April, We're certainly expecting them to be healthy enough to be assembling 38 ships. 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 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 #107: To be to be assembling 38 ships a month.
Speaker Change #107:
Speaker Change #107: And giving given that that means for our product.
Speaker Change #107: We have to produce it we have to ship it in in October.
Speaker Change #107: And if we have to ship it in October.
Speaker Change #107: We have to start making it.
In.
Speaker Change #107: July.
Speaker Change #108: So we're not going to we're going to be we're going to be making it probably not shipping.
Speaker Change #108: At a great rate.
Speaker Change #108: Probably a reduced rate based upon relative to the first quarter.
Speaker Change #108: But I suspect the year, we will we will step up.
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 suspect every quarter now will step up to match their assembly rate beginning in 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 are no new rockets have to be invented.
Speaker Change #108: After our second quarter, which is September ending rate.
Speaker Change #108: Aye.
Speaker Change #108: Yes.
Speaker Change #108: Suspect every quarter now will step up to match their.
Speaker Change #108: Assembly right.
Speaker Change #108: Beginning in April maybe maybe they pull that in.
But.
Speaker Change #108: I think.
Speaker Change #108: Yeah.
Speaker Change #108: They know it has to be done everything's in their wheelhouse. So there is no new rockets apt to be invented.
Michael J. Hartnett: It's all basic execution and. They're smart, qualified, capable people. You know, they
Speaker Change #108: So basic execution in.
Speaker Change #109: They're smart qualified capable people.
Speaker Change #109: Sure.
Speaker Change #109: They will get this done.
Speaker Change #110: Yes, yes, and I appreciate it last one for me.
Michael J. Hartnett: Yep, yep, I appreciate it. Last one for me.
Michael J. Hartnett: 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 #110: Defense growth was pretty incredible this year.
Speaker Change #111: 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 #111: Yeah defense is going to continue.
Speaker Change #111: Right now.
Speaker Change #111: For.
Speaker Change #111: For certain.
Speaker Change #111: We're constrained by able being able to produce enough defense products.
Speaker Change #111: Overall.
Speaker Change #111: And so we're working hard to bring up our rates.
Speaker Change #111: And so that's dependent upon.
Speaker Change #111: Labor and material availability supply chain.
Speaker Change #111: And in <unk>.
Michael J. Hartnett: So we're doing a great job bringing up certain rates at in the sort of the, you know, mid teens, kind of 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. It's very strong.
Speaker Change #111: Other qualifications. So we're doing we're doing a great job, bringing up certain rates.
Speaker Change #111: Yes.
Speaker Change #112: And there is sort of the.
Speaker Change #113: Mid teens kind of a rate year to year, sometimes a little bit more than that.
Speaker Change #113: And in some areas we have to continue that for.
For the next three or four years to get it to get to the year.
Speaker Change #114: To get balanced with demand so some of our defense, that's particularly in the marine area.
Speaker Change #114: It's.
Speaker Change #115: It is very strong.
Michael J. Hartnett: Other areas, like, you know, obviously with what's going on in Ukraine, and now everybody wants one. All the foreign countries want a joint strike fighter. So that's an important platform for us. So, you know, we're gonna see more or demand coming from Lockheed on those kinds of programs. You know, 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 #115: Other areas like.
Speaker Change #116: Obviously with what's going on in your.
Speaker Change #117: Ukraine and.
Speaker Change #117: Now everybody wants other foreign countries want to joint strike fighter.
Speaker Change #117: So that's an important platform for us so we're going to we're seeing more.
Speaker Change #117: Demand coming from Lockheed on those kinds of programs.
Speaker Change #117: The long range bomber is active.
Speaker Change #118: And demanding.
Speaker Change #119: We're in the middle of that program, so yeah marine.
Speaker Change #119: Airframe are really really good for us.
Speaker Change #120: <unk> guided munitions is another area that's extremely strong.
Speaker Change #121: Whether it's ground to ground.
Speaker Change #122: Hi, I'm our system.
Speaker Change #122: Or it's shoulder mounted.
Michael J. Hartnett: And right now, there's a lot of replacement demand for Ukraine, and there's also demand to fortify US arsenals. So I don't see that ending anytime soon. You know, maybe the Ukraine thing gets solved in the intermediate term, in the, in the, 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 a long-term..., cycle event.
Speaker Change #122: Or it's a ballistic interceptor were on all those programs and in.
Speaker Change #122: And right now there's a lot of replacement demand for Ukraine, and there is also demand to fortify U S arsenals.
Speaker Change #122: So I don't see that ending anytime soon.
Speaker Change #122: Same thing gets solved.
Speaker Change #122: Intermediate term.
Speaker Change #122: And the longer term.
Speaker Change #123: <unk>, we're not deep enough everybody recognizes that including the Chinese that's why they are building out their arsenals.
Speaker Change #123: And then I can do anything with Taiwan until.
Speaker Change #123: <unk>.
Speaker Change #123: <unk> built up the way they feel comfortable so.
Speaker Change #123: This is this is this is a long term.
Speaker Change #123:
Speaker Change #123: Cycle event.
Speaker Change #124: Yes, no that's great color I appreciate it thanks guys.
Michael J. Hartnett: Yeah, no, it's a great color. Appreciate it, Mike. Thanks, guys.
Speaker Change #123: Yes.
Speaker Change #125: Thank you. The next question is coming from Steve Barger of Keybanc capital markets. Please go ahead.
Steve Barger: Thank you. The next question is coming from Steve Barger of KeyBank Capital Markets. Please go ahead.
Speaker Change #126: Hey, good morning. Thanks.
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?
Speaker Change #127: Hello, Steve.
Hello.
Speaker Change #127: 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 would have thought of both. I mean, you know, The but it's organic. I think it's primarily organic.
Mike: Yes, we would.
Mike: Yes.
Speaker Change #128: Think of both.
Speaker Change #129: 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, 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 the teams. It's a... What has to be done there is very achievable. 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.
Speaker Change #130: If there was a.
Speaker Change #130: An acquisition that would accelerate the process.
Speaker Change #130: Yes.
Speaker Change #131: We would consider it but.
Speaker Change #131: Right now it's.
It's pretty much using the assets that we already have.
Speaker Change #131: More effectively and sort of building out building out the team.
Speaker Change #131: I'd say.
Speaker Change #131: What has to be done there is very.
Speaker Change #131: Yeah.
Speaker Change #131: Sure.
Achievable very achievable.
Speaker Change #131: And so it's a matter of paying attention to what's going on in Europe spending more time with the with the.
Speaker Change #132: Foreign nationals.
Speaker Change #132: At these various sites.
Speaker Change #133: And making sure that they are well integrated with with with the.
Speaker Change #134: RBC and Dodge missions.
Speaker Change #134: Sure.
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.
Dodge: So before before we acquired Dodge Dodge.
Speaker Change #136: Really didn't have access to these markets they had access through ABB either previous owner and.
Speaker Change #136: ABB.
Speaker Change #137: Sort of didn't pay a great amount of attention to the mechanical side of their so their world.
Speaker Change #138: So these languished.
Speaker Change #138: <unk>.
Speaker Change #138: <unk>.
Speaker Change #139: And now we're pleasantly surprised that we have these footprints and active and productive areas of the world that we can.
Speaker Change #140: We can spool up and so we're in the process of Spooling them up.
Speaker Change #141: And when you talk about I think you said Europe, India, Mexico, Canada.
Michael J. Hartnett: 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 #141: As you start to make them more directed push in that direction.
Speaker Change #141: Are you competing against other global.
Speaker Change #141: Bearings manufacturers or is it more against the locals.
Speaker Change #142: And I'm, just trying to get a sense for what the market share opportunity is as you do focus in that direction.
Yeah, well it's.
Michael J. Hartnett: Yeah, well, it's It's the global bearing manufacturers if it's bearings. It's sort of the global gearbox manufacturers of its gearbox. Um, you know, and in a lot of cases for aerospace and defense, particularly aerospace, 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. You know, you're well ahead of anybody else. Yeah.
It's it's the global bearing manufacturers if its bearings.
Speaker Change #142: It's sort of a global gearbox manufacturers if it's gearbox.
Speaker Change #142: <unk>.
Speaker Change #142: And it's.
Speaker Change #142: And a lot of cases for <unk>.
Speaker Change #143: Aerospace and defense.
Speaker Change #143: <unk>.
Speaker Change #143: Particularly aerospace.
Speaker Change #144: It's a matter of following your customer.
Speaker Change #145: These remote sites and being able to services requirements effectively.
Speaker Change #146: So if you have the footprint too.
Speaker Change #147: To follow him and to service him.
Speaker Change #147:
Speaker Change #147: You're well ahead of anybody else.
Speaker Change #147: Yes.
Speaker Change #147: Got it.
Michael J. Hartnett: And then, given all the funding visibility out there from the government for big projects, it's interesting that aggregates and cement are... 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 #148: And then.
Speaker Change #149: Given all of the funding visibility out there from the government for big projects.
Speaker Change #150: It's interesting that aggregates and cement are weak.
Is this a destock or what are your customers, telling you and how do you think that unfolds for the back half of the calendar year.
Speaker Change #150: Well.
Michael J. Hartnett: Well, um... I think you know as much about that as I do, Steve. The aggregate and cement business is pretty much correlated, almost perfectly with Housing Start. So.
<unk>.
Speaker Change #151: I think I think you know us.
Speaker Change #152: As much about that as I do Steve.
Speaker Change #153: The aggregate and cement business.
Speaker Change #153: Is pretty much correlated.
Almost perfectly with housing starts.
Speaker Change #153: 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, and 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, you know, and the investment analysts, correlate housing starts with demand for their business volumes.
Speaker Change #153: Housing starts are up.
Speaker Change #153: <unk> is very strong.
Speaker Change #153: And when housing starts are not up that businesses is not so strong.
Speaker Change #153: So.
Speaker Change #153: And housing starts.
Speaker Change #153: All about mortgage rates right. So.
Speaker Change #154: Yes, I mean, it's when you when you read the research on.
Speaker Change #154: Balkan or Martin Marietta or the people that are in this world.
Speaker Change #154: <unk>.
Speaker Change #155: In the <unk>.
Speaker Change #155: Investment analysts.
Speaker Change #157: Correlate housing starts with demand for their <unk>.
Speaker Change #157: Business volumes.
Michael J. Hartnett: It's amazingly correlated. I mean, it's like an R square of 1995 or something. It's, it's, it's one on one. So, um, 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 #158: It's amazingly correlated I mean, it's like an R square of <unk>.
Speaker Change #158: <unk> 95, or something it's one on one.
Speaker Change #159: Yes. So we look at housing starts I don't think the infrastructure Bill is really.
Speaker Change #159: Impacted anything at this point I mean, there is there is 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.
Speaker Change #159: Got it.
Steve Barger: Got it. Nope. That makes a lot of sense. Thanks.
Speaker Change #160: Makes a lot of sense. Thanks.
Speaker Change #161: Thank you. The next question is coming from Michael <unk> of <unk> Securities. Please go ahead.
Michael J. Hartnett: Thank you. The next question is coming from Michael Ciaramoli of True Securities.
Michael J. Hartnett: Hey, good morning, guys. Thanks for taking the question; thanks for joining us.
Michael J. Hartnett: Hey, good morning, guys. Thanks for taking my furnished this morning.
Michael J. Hartnett: 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 by a few points that obviously came up a little bit late. What 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.
Speaker Change #163: 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.
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.
Speaker Change #163: Well.
Michael J. Hartnett: Well, you know, first of all, one of the things we didn't talk about was last year. We had a backlog. Okay, and that backlog was supply chain driven. And so last year's fourth quarter of that backlog sort of supercharged the sales number as it was liberated.
Speaker Change #164: First of all.
Speaker Change #165: What we did one of the things we didn't talk about.
Speaker Change #165: Whereas last year, we had.
Speaker Change #165: Dodge did have backlog.
Speaker Change #166: And that backlog was supply supply chain driven.
Speaker Change #166: So.
Speaker Change #166: Last year's fourth quarter.
Speaker Change #166: That backlog sort of.
Supercharged the sales number as it was liberated it.
Michael J. Hartnett: It had about a 10 million impact.
Speaker Change #167: That was about $10 million impact okay. So by about 10 million by about $10 billion. Okay. Okay. Yeah.
Michael J. Hartnett: Okay. So by about $10 million. So that was the difference. So this year, the supply chain is normalized, and 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 #167: That was that was the difference so this year.
Speaker Change #168: Supply chain has normalized.
Speaker Change #169: They don't have these kinds of backlogs anymore.
It's not.
Speaker Change #169: It's a hard comp it's a hard capital.
Michael J. Hartnett: 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 #170: That makes sense that makes sense and then just back onto 25 I want to make sure I heard it did you say low double digit growth for Aero defense combined and is there a <unk>.
Speaker Change #171: Expected parse out between commercial Aero and defense in that view.
Michael J. Hartnett: Unknown Speaker 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, you know, we had all of our plans around a different build rate for the ships. And so, you know, now we're Korea, 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 #172: Theres no parse out but yes. It is aligned and we're just we're just trying to figure out this Boeing thing.
Speaker Change #172: And.
Speaker Change #173: We had all of our all of our plans around it are different build rate for for the ships and so now.
Speaker Change #174: The re.
Speaker Change #174: We are reevaluating those plans and determining.
Speaker Change #174: What.
Speaker Change #174: What we should bring in in terms of additional business to offset any of the losses.
Speaker Change #174: And so that's that's sort of ongoing.
Michael J. Hartnett: It's not going to be a normal year in terms of...
Speaker Change #174: Got it.
Speaker Change #174: Not going to it's not going to be a normal year in terms of.
Speaker Change #174: Yes.
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 got to, they got to giddy up. So they 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 high teens again.
Speaker Change #175: Assuming Boeing gets to there.
Speaker Change #176: It's their problem solve and gets to there.
Speaker Change #177: They need to be like in the in the upper <unk> in terms of.
Speaker Change #177: 737 rates per year, I mean, they've got a 10 year backlog of this stuff. So they've got a they've got giddy up so they've got to get this problem behind them.
Speaker Change #177: So assuming they get into that kind of.
Speaker Change #177: That kind of a mode again.
And I don't think they have the choice they have to get into that they have to get through.
This behind them.
Speaker Change #177: We'll be back we'll be back up into the into the high teens again.
Michael J. Hartnett: 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 year?
Speaker Change #178: Okay, and then just maybe on that as well I mean, you've talked about 50 to 75 basis points of gross margin expansion.
Speaker Change #178: That ongoing absorption in Aero.
Speaker Change #179: <unk> kind of taken into your commentary there should we expect the margin expansion being a little bit more backend loaded in 'twenty five.
Boeing: You kind of get clarity from Boeing Okay, and then.
Speaker Change #181: That would imply maybe a really strong fourth quarter, especially as the.
Speaker Change #182: 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.
Speaker Change #182: You're on the right you are 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.
Michael J. Hartnett: You're on the right track there. Okay, very good. The last one I had.
Michael J. Hartnett: 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 good, you know, but the appetite's picky. Yeah. Hehe.
Speaker Change #183: A home run and it's still driving value creation, so what what's the appetite for another deal.
Speaker Change #184: Oh, well the appetite is good.
Speaker Change #184: But the appetite picky.
Speaker Change #184: Yeah.
Speaker Change #184: Yeah.
Michael J. Hartnett: Got it. Got it. All right, guys. I'll leave it at that. Thanks.
Speaker Change #185: Got it got it alright, guys I'll leave it at that thanks.
Speaker Change #185: Okay.
Speaker Change #185: Thank you. The next question is coming from Joe Ritchie of Goldman Sachs. Please go ahead.
Joe Ritchie: Thank you. The next question is coming from Joe Ritchie of Goldman Sachs. Please go ahead.
Speaker Change #186: Hi, This is <unk> on for Joe.
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 you 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 #187: First question is just on revenue seasonality.
Speaker Change #188: Looks like this time of year for last quarter.
Speaker Change #188: Would it be better than fourth quarter, and then as we think about.
Speaker Change #189: Again EBIT dollars.
Speaker Change #190: Should should that be sequentially better also.
Speaker Change #191: So is there something else, we should keep in mind.
Unknown Executive: I think as Mike just kind of spoke to regarding margin, we think that 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 #191: I think as Mike just kind of spoke to regarding margin.
Speaker Change #192: We think there.
Speaker Change #193: <unk> margin expansion, we discussed is really back loaded its lumpy throughout the year.
Speaker Change #194: We will continue to invest in a bit of SG&A in fiscal 'twenty five.
Speaker Change #194:
Speaker Change #195: So over.
Speaker Change #196: <unk> continued strong performance.
Understood.
Vivek Srivastava: Understandable. And just a high-level question, your EBITDA margin this quarter at 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 #197: Just a high level question your EBITDA margin this quarter and probably one for us and very impactful.
Speaker Change #196: Yes.
Speaker Change #198: Think about the long term margin targets.
Speaker Change #199: Have in mind, and then I'll kind of add on volume recovery.
Speaker Change #200: Is there anything like improvement in terms of the base business that could further impact margin expansion.
Speaker Change #201: Yeah, I mean, it's a.
Michael J. Hartnett: Yeah, I mean, there's no end. Yeah, I think, you know, there's, there's, there's still, there's, What can I say there?
Speaker Change #202: There's no end.
Speaker Change #201: <unk>.
Speaker Change #203: Yeah I think.
Speaker Change #203: There's there's there's still there's still.
Speaker Change #203: <unk>.
Speaker Change #204: How can I say that.
Speaker Change #204: It's it's really.
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 #204: Okay.
Speaker Change #204: One by one kind of a project.
Speaker Change #205: In terms of manufacturing technology and identifying.
Speaker Change #205: On the <unk>.
Speaker Change #206: Where are your lower margin performers.
Speaker Change #207: And what if anything does the world to provide in terms of technology.
Speaker Change #207: To reduce labor or improve material costs or or reduce scrap that would that would accrue to better margin performance.
Speaker Change #207: And so we have active programs.
Speaker Change #207: <unk>.
Speaker Change #208: All of our plants that we review every month.
Speaker Change #208: And we look at the <unk>.
Michael J. Hartnett: And we look at the Pareto, and we look at what generates the revenue, and what could be done to improve the operating performance of that particular line item, and what the options, manufacturing options might be, for improvement that would benefit the overall, the overall margin of the line. So you know, it's a matter of, It's a matter of putting in the time. Investment, with all of the divisions, one by one, to create a program of improvement that accrues to a higher consolidated margin.
Speaker Change #209: And we look at what generates the revenue.
Speaker Change #210: And what could be done to improve the operating performance of that particular line item.
Speaker Change #210: What the options manufacturing options might be.
Speaker Change #211: For for improvement that.
Speaker Change #211: That would benefit the overall.
Speaker Change #211: The overall.
Speaker Change #211: Margin of the.
Speaker Change #211: The line so.
Speaker Change #211: It's a matter of.
Speaker Change #212: It's a matter of putting the time, Inc.
Speaker Change #212: <unk>.
Speaker Change #212: With all of the divisions.
One by one to create a program of improvement there.
Speaker Change #213: It accrues to a higher consolidated margins.
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 started, 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.
Speaker Change #214: That's what RBC is really good at and that's what we've done.
Speaker Change #215: Since I started the job 30 years ago, and we Havent started that we haven't we haven't we haven't stopped yet so.
Speaker Change #216: Yeah, I mean come on come on over two to one of our plants in <unk>.
Speaker Change #216: And we will show you how it's how we do that.
Speaker Change #217: That sounds great.
Vivek Srivastava: That sounds great. Yeah
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 and go back.
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.
Yeah.
Speaker Change #217: Yes so.
Unknown Executive: Yeah, so, as Mike just referenced, ultimately, we're looking to be levered 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 100% 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 on that side, especially in aerospace, and we'll continue to manage the remainder of the working capital along the way.
Speaker Change #217: Nick just referenced ultimately we're looking to delever by another $275 million to $300 million. So 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 drive that within the working capital section.
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.
Speaker Change #217: There is.
Nick: Potential for a little bit of investment and that side, especially in aerospace.
Nick: And we will continue to manage the remainder of the working capital along the way.
Nick: Okay.
Alright, thank you.
Jordan <unk>: Thank you. The next question is coming from Jordan <unk> of Bank of America. Please go ahead.
Jordan Leonet: Thank you. The next question is coming from Jordan Leonet of Bank of America. Please go ahead.
Jordan <unk>: Hey, good morning, Thanks for taking the question.
Speaker Change #220: No problem.
Jordan Leonet: 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?
Speaker Change #221: Last quarter, you guys said.
Jordan <unk>: 700, <unk> you were going to step up to seven a month in April and it would be an important shift are you still producing at.
Jordan <unk>: Are you still planning to produce at seven a month.
Speaker Change #222: We saw spirits cutting head count.
And Boeing also just Scott.
Speaker Change #223: So could you give any more color for the wide bodies.
Yes, no we're staying at five a month.
Michael J. Hartnett: Yeah, no, we're staying at five for a month. OK.
Speaker Change #223: Okay.
Speaker Change #224: And then also change so for the Aero Guide.
Jordan Leonet: 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 #225: How much if there's still all of the <unk>.
Speaker Change #226: 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 #227: 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 for Boeing for a while? Yeah, yeah, just said he'd be risking.
Speaker Change #228: Well I mean, we.
Sure.
Speaker Change #229: In terms of mitigating how are we going to mitigate the shortfall there for for Boeing for a while.
Speaker Change #228: Yeah.
Speaker Change #228: Just any derisking.
Michael J. Hartnett: Yeah, I think I think we have a quarter or two of the Boeing effect. You know, I think given a quarter of a 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 a, you know, it's sort of an achievable number.
Speaker Change #228: I think I think we have a quarter or two of them.
Speaker Change #228: The Boeing effect.
Speaker Change #228: Zinc.
Speaker Change #228: Given a quarter or two.
The maximum impact on revenues.
Speaker Change #230: If we didn't do any.
Speaker Change #230: Any mitigation it would be would be $20 million.
Speaker Change #230: Over over two quarters.
Speaker Change #231: $10 million would be sort of the minimum if we did no mitigation.
Speaker Change #231: Over two quarters. So it's it's a.
Speaker Change #232: It's sort of an achievable number and 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 20-4.
Speaker Change #232: We talked about how strong defenses and how much how much we can realign our schedules to bring some of that defense.
Speaker Change #232: Defense production in earlier quarters, which is what's happening right now too.
Speaker Change #232: For some of the mitigation, but on the other hand.
Speaker Change #232: A few years ago.
Speaker Change #233: We started working in space.
Speaker Change #234: And in 'twenty.
Speaker Change #234: 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. 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?
Speaker Change #235: We shipped.
Speaker Change #236: $20 million into the space World.
Speaker Change #236: And.
Speaker Change #236: So our our business on space products is accelerating.
Speaker Change #236: We see that getting to $40 million.
Speaker Change #237: See that probably getting to $30 million this year.
Speaker Change #237: So space is starting to.
Speaker Change #237: Become a.
Speaker Change #237: A.
Speaker Change #238: Significant component of our A&D sales.
Speaker Change #238: So.
Speaker Change #238: That's that's part of the mitigation defense as part of the mitigation and increasing our spares.
Speaker Change #239: Sales is another part of the mitigation so.
Speaker Change #239: We have.
Michael J. Hartnett: 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 #240: What do we have.
Speaker Change #241: Half a dozen of significant divisions that are <unk>.
Working on various mitigation.
Speaker Change #241: Techniques.
Speaker Change #242: <unk> to offset any shortfall of the.
Speaker Change #242: For the second quarter that we might see from from the Boeing.
Speaker Change #242: The production reduction.
Speaker Change #242: The reduction in <unk>.
Speaker Change #243: I suspect I suspect they'll get a long way towards the goal.
Speaker Change #244: Okay. That's really helpful. Thank you.
Jordan Leonet: Great, that's really helpful. Thank you.
Speaker Change #244: Okay.
Speaker Change #244: 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: 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 #244: Okay.
Michael J. Hartnett: Okay, well, thank you. Well, that completes our call for today, and I appreciate everybody participating and listening to our presentation. [inaudible] Thank you. You know, obviously, we've delivered another year of solid growth. Great Cash Flow Conversion. [inaudible] We look forward to talking to you again in July. Ladies and gentlemen, thank you for your participation.
Michael J. Hartnett: Okay, well thank you.
Michael J. Hartnett: Well that completes our call today.
Michael J. Hartnett: And I appreciate everybody.
Michael J. Hartnett: Participating and listening listening to our.
Speaker Change #245: Our presentation.
Speaker Change #245:
Speaker Change #245: Obviously, we've delivered another year of solid growth.
Speaker Change #245: And.
Speaker Change #246: Great cash cash flow conversion.
Speaker Change #246: And.
Speaker Change #246: We look forward to talking to you again in July.
Speaker Change #247: 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.
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 #247: Okay.
Speaker Change #247: [music].
Speaker Change #247: Yeah.