Q4 2024 Transcat Inc Earnings Call
Operator: Greetings and welcome to Transcat Incorporated's fourth quarter fiscal year 2024 financial report. 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 call, please call 1-866-333-4255 and 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, Tom Barbato. Thank you.
Greetings and welcome to Trans Cat incorporated fourth quarter fiscal year 'twenty 'twenty four financial results at this time all participants are in a listen only mode.
Question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Speaker Change: Minder This conference is being recorded.
I would now like to turn the conference over to your host Tom Barbados. Thank you you may begin.
Thomas Barbato: Thank you, Operator, and good morning, everyone. We appreciate your time and your interest in Transcat.
Thomas Barbato: Thank you operator, and good morning, everyone. We appreciate your time and your interest in Trans Cat with me here on the call today is our president and CEO, Lee Rudow, and our Chief operating Officer, Mike West.
Thomas Barbato: With me on the call today is our President and CEO, Lee Rudow, and our Chief Operating Officer, Mike West. We will begin the call with some prepared remarks, and then we'll open up the call for questions. Our earnings release crossed the wire after markets closed yesterday. Both the earnings release and the slides that we will reference during our prepared remarks can be found on our website, transcat.com, in the investor relations section. If you would, please refer to slide number two.
Thomas Barbato: We will begin the call with some prepared remarks, and then we'll open up the call for questions.
Thomas Barbato: Our earnings release crossed the wire after markets closed yesterday, both the earnings release and the slides that we will reference during our prepared remarks can be found on our website transcatheter com in the Investor Relations section.
Speaker Change: If you would please refer to slide number two as you are aware, we make forward looking statements during the formal presentation and Q&A portion of this teleconference.
Thomas Barbato: As you are aware, we make forward-looking statements during the formal presentation and Q&A portion of this teleconference. These statements apply to future events, which are subject to risks and uncertainties, as well as other factors that could cause actual results to differ materially from where we are today. These factors are outlined in the news release, as well as in the documents filed by the company with the SEC. You can find those on our website, where we regularly post information about the company, as well as on the SEC's website at sec.gov.
Speaker Change: Statements apply to future events, which are subject to risks and uncertainties as well as other factors that could cause the actual results to differ materially from where we are today.
Speaker Change: These factors are outlined in the new news release as well as in the documents filed by the company with the SEC you can find those on our website, where we regularly post information about the company as well as on the Sec's website at SEC Gov. We undertake no obligation to publicly update or correct any of the forward looking.
Thomas Barbato: We undertake no obligation to publicly update or correct any of the forward-looking statements contained in this call, whether as a result of new information, future events, or otherwise, except as required by law. Please review our forward-looking statements in conjunction with these cautionary factors. Additionally, during today's call, we'll discuss certain non-GAAP measures, which we believe will be useful in evaluating our performance. However, you should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We've provided reconciliations of non-GAAP measures to compared GAAP measures in the tables accompanying the earnings release. With that, I'll turn the call over to Lee. Thank you, Tom.
Speaker Change: <unk> contained in this call whether as a result of new information future events or otherwise except as required by law.
Speaker Change: Please review our forward looking statements in conjunction with these precautionary factors.
Speaker Change: Additionally, during today's call, we will discuss certain non-GAAP measures, which we believe will be useful in evaluating our performance you should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We've provided reconciliations of non-GAAP to comparable GAAP measures.
In the tables accompanying the earnings release.
Lee D. Rudow: With that I'll turn the call over to Lee. Thank you Tom.
Lee D. Rudow: Good morning, everyone. We appreciate you joining us on the call today. Fiscal 2024 was another strong year for Transcat. Our excellent operating results included double-digit organic service growth, significant and continued gross margin expansion, and dynamic growth in EBITDA and operating cash flow. We fortified our strong position in core markets by enhancing our differentiated value proposition and expanding our addressable market. It was a great year, and we're very proud of the team, their continued hard work, and their accomplishments.
Lee D. Rudow: Good morning, everyone. We appreciate you joining us on the call today.
Speaker Change: 2024 was another strong year for Trans Cat are excellent operating results, including double digit organic service growth significant and continued gross margin expansion and dynamic growth in EBITDA and operating cash flow.
Lee D. Rudow: We fortified our strong position in core markets by enhancing our differentiated value proposition and expanded our addressable markets.
Lee D. Rudow: It was a great year and we're very proud of this team their continued hard work and their accomplishments.
Lee D. Rudow: In fiscal 2024, we generated double-digit organic service growth of 11% and total service growth of 17%. Consolidated revenue is up 13% to $259 million. Demand for our products and services remains strong.
Lee D. Rudow: In fiscal 2024, we generated double digit organic service growth of 11% and total service growth of 17%.
Lee D. Rudow: Consolidated revenue was up 13% to $259 million of demand for our products and services remains strong.
Lee D. Rudow: Consolidated gross margins expanded 270 basis points to 32.3% driven by organic service revenue, inherent leverage in our service operating model, improved productivity in our labs, and a higher rental mix in our distribution sector. Adjusted EBITDA, a key metric for us given our acquisition strategy, grew 27% from the prior year to $38.6 million. The Creed of Acquisitions played an important role in fiscal 2024 as we acquired three companies, TIC-MS, StairQual, and Axiom Test Equipment.
Lee D. Rudow: Consolidated gross margins expanded 270 basis points to 32, 3% driven by organic service revenue inherent leveraging our service operating model improved productivity in our labs and a higher rental mix in our distribution segment.
Speaker Change: Adjusted EBITDA, a key metric for us given our acquisition strategy grew 27% from prior year to $38.6 million.
Speaker Change: Creative acquisitions played an important role in fiscal 2024, as we acquired three companies kick M. S stair claw and axiom test equipment.
Lee D. Rudow: The acquisitions expanded our addressable markets, widened the breadth of our service offering, and allowed us to leverage our existing infrastructure. As always, the key differentiator of Transcat's acquisition strategy is the effectiveness of the integration process that enables us to quickly achieve growth synergies and capitalize on compelling, cross-selling organic growth opportunities. In fiscal 2024, service gross margins continued to expand. Marggins expanded 160 basis points to 33.8 percent. Service margins benefited from our differentiated suite of services, which continues to resonate throughout our highly regulated and expanded addressable market. Transcat customers continue to recognize and value Transcat's role in serving markets where the cost of failure is high and risk mitigation is a top priority.
Speaker Change: The acquisitions expanded our addressable markets.
Speaker Change: Why isn't the breadth of our service offering and allows us to leverage our existing infrastructure.
Speaker Change: As always the key differentiator of transcripts acquisition strategy is the effectiveness for integration process that enables us to quickly achieve gross synergies and capitalize on compelling cross selling organic growth opportunities.
Speaker Change: In fiscal 2020 for service gross margins continued to expand margins expanded 160 basis points to.
Speaker Change: The 33, 8%.
Speaker Change: Service margins benefited from our differentiated suite of services, which continues to resonate throughout our highly regulated expanded addressable markets.
Speaker Change: Our customers continue to recognize and value trans gets rolled servicing markets, where the cost of failure is high and risk mitigation is a top priority.
Lee D. Rudow: I'll touch upon the fourth quarter results for our service segment. In the fourth quarter of fiscal 2024, our service segment recorded its 60th straight quarter of year-over-year growth. We generated 18% total service growth and 13% organic service growth driven by recurring revenue streams and high year-over-year retention. Increases in productivity driven primarily by automation and process improvement drove year-over-year increases in the fourth quarter service gross margin by 170 basis points to 35.7 percent. Turning to distribution, revenue grew 5% and benefited from the high-performing Axiom acquisition.
Speaker Change: I'll touch upon the fourth quarter results for our service segment.
Speaker Change: In the fourth quarter of fiscal 2020 for our service segment recorded 60, <unk> straight quarter of year over year growth.
Speaker Change: We generated 18% total service growth and 13% organic service growth driven by recurring revenue streams and high year over year retention.
Speaker Change: Increases in productivity, driven primarily by automation and process improvement drove year over year increases in the fourth quarter service gross margin by 170 basis points to 35, 7%.
Speaker Change: Turning to distribution for that full fiscal 2020 full year revenue grew 5% and benefited from the high performing axiom acquisition.
Lee D. Rudow: Gross margins expanded 420 basis points from the prior year. In the fourth quarter, distribution revenue grew 8%, and gross margins expanded 510 basis points, again, driven by the increased mix of Reynolds. With that, I'll turn things over to Tom Barbato for a more detailed look at the fiscal 2024 financial year.
Speaker Change: Gross margins expanded 420 basis points from prior year.
Speaker Change: In the fourth quarter distribution revenue grew 8% and gross margins expanded 510 basis points again, driven by the increased mix of the rental business with that I'll turn things over to Tom Barth beta for a more detailed look at the fiscal 2020 for financials.
Thomas Barbato: Thanks, Lee. I'll start with slide 4 of the earnings deck posted on our website, which provides detail regarding our revenue on a consolidated basis and by segment for the fourth quarter and full year. Fourth quarter consolidated revenue of $70.9 million was up 14% versus the prior year on service segment strength and solid revenue performance in our distribution business. Looking at it by segment, service revenue growth remained very strong at 18%, with 13% of the growth coming organically and the other 5% from acquisition. As Lee mentioned, demand for our core calibration business remains strong.
Thomas Barbato: Thanks, Lee I'll start on slide four of the earnings deck posted on our website, which provides detail regarding our revenue on a consolidated basis and by segment for the fourth quarter and full year.
Thomas Barbato: Fourth quarter consolidated revenue of $70 9 million was up 14% versus prior year, Our service segment strong strength and solid revenue performance in our distribution business.
Thomas Barbato: Looking at it by segment service revenue grew.
Thomas Barbato: Growth remained very strong at 18% with 13% of the growth coming organically and the other 5% from acquisition as Lee mentioned demand for our core calibration business remains strong.
Thomas Barbato: Turning to distribution revenue of $24 2 million was up 8% versus the prior year, we continue to see growth in the higher margin rental business, which also benefited from the axiom test equipment acquisition.
Thomas Barbato: Turning to distribution, revenue of $24.2 million was up 8% versus the prior year. We continue to see growth in the higher-margin rental business, which also benefited from the Axiom test equipment acquisition. Finally, on a full year basis, total consolidated revenue was $259.5 million, an increase of 13% compared to the prior fiscal year. Our service business saw very strong demand throughout the year, resulting in year-over-year growth of 17%.
Thomas Barbato: Finally on a full year basis total consolidated revenue was $259 5 million, an increase of 13% compared to the prior fiscal year.
Thomas Barbato: Our service business saw very strong demand throughout the year, resulting in year over year growth of 17% distribution segment revenue grew 5% driven by strong rental performance.
Thomas Barbato: Distribution segment revenue grew 5% driven by strong rental performance. Turning to slide 5, our consolidated gross profit for the fourth quarter of $24 million was up 26% from the prior year, and our gross margin expanded 300 basis points. The Service Gross Margin expanded 170 basis points to 35.7%. The service margin increase further demonstrates our ability to leverage high levels of technician productivity and our differentiated value proposition. Distribution segment gross margin of 30.3% was up 510 basis points.
Thomas Barbato: Turning to slide five our consolidated gross profit for the fourth quarter of $24 million was up 26% from the prior year and our.
Speaker Change: Gross margin expanded 300 basis points.
Speaker Change: Service gross margin expanded 170 basis points to 35.7 35, 7% the.
Speaker Change: The service margin increased further demonstrates our ability to leverage high levels of tech technician productivity and our differentiated value proposition.
Speaker Change: Distribution segment gross margin of 33% was up 510 basis points.
Thomas Barbato: For the full year, our consolidated gross profit increased 23% to $83.8 million, and our gross margin improved 270 basis points to 32.3%. Our service gross margin was 33.8%, which represented an increase of 160 basis points compared to the prior year. The Distribution Segment Gross Margin of 29.5% was up 420 basis points as the segment benefited from significant growth in the higher-margin rental.
Speaker Change: For the full year, our consolidated gross profit increased 23% to $83 8 million and our gross margin improved 270 basis points to 2032, 3%.
Speaker Change: Our service gross margin was 33, 8%, which represented an increase of 160 basis points compared to the prior year.
Speaker Change: Distribution segment gross margin of 29, 5%.
Speaker Change: Was up 420 basis points as the segment benefited from significant growth in our higher margin rental business.
Thomas Barbato: Turning to slide 6, Q4 net income of $6.9 million increased 88% from the prior year, and our diluted earnings per share increased to $0.77 from $0.48. Net income includes a non-cash adjustment of $2.4 million for the amended NEXA earn-out agreement. We report adjusted diluted earnings per share as well to normalize for the impact of upfront and ongoing acquisition-related costs. Q4 adjusted diluted earnings per share was $0.66, up 10% from the same quarter of the prior year.
Speaker Change: Turning to slide six Q4, net income of $6 9 million increased 88% from prior year and our diluted earnings per share increased to 77 from 48 cents.
Speaker Change: Net income includes a noncash adjustment of $2 4 million for the amended next earn out agreement.
Speaker Change: We reported adjusted diluted earnings per share as well to normalize for the impact of upfront and ongoing acquisition related costs.
Speaker Change: Q4, adjusted diluted earnings per share was <unk> 66 cents.
Speaker Change: Up 10% from the same quarter of the prior year.
Thomas Barbato: Full-year net income increased 28% from the prior year, or $0.23 per share, and benefited from $800,000 of interest income driven by the proceeds from our successful secondary offering earlier in Q2 of fiscal 2014. Moving to slide 7, where we show our adjusted EBITDA and adjusted EBITDA margin, we use adjusted EBITDA, which is non-GAAP, to gauge the performance of our business because we believe it is the best measure of our operating performance and ability to generate cash.
Full year net income increased 28% from prior year or 23 cents per share and benefited from $800000 of interest income driven by the proceeds from our successful secondary offering earlier in Q2 of fiscal 'twenty four.
Speaker Change: Flipping to slide seven where we show our adjusted EBITDA and adjusted EBITDA margin, we use adjusted EBITDA, which is non-GAAP to gauge the performance of our business.
Speaker Change: Because we believe it is the best measure of our operating performance and ability to generate cash as we continue to execute on our acquisition strategy. This metric becomes even more important to highlight as it does adjust for onetime deal related transaction costs as well as the increased level of noncash expenses that will hit our income statement from acquisition PERC.
Thomas Barbato: As we continue to execute on our acquisition strategy, this metric becomes even more important to highlight, as it does adjust for one-time deal-related transaction costs, as well as the increased level of non-cash expenses that will hit our income statement from acquisition purchase expenses. With that in mind, fourth quarter consolidated adjusted EBITDA of $11.7 million was up 30% from the same quarter in the prior year. An adjusted EBITDA margin expanded by 200 basis points.
Speaker Change: <unk> accounting.
Speaker Change: With that in mind fourth quarter consolidated adjusted EBITDA of $11 7 million was up 30% from the same quarter in the prior year and adjusted EBITDA margin expanded 200 basis points, both segments had adjusted EBITDA growth and EBITDA margin expansion compared to last year.
Thomas Barbato: Both segments had adjusted EBITDA growth and EBITDA margin expansion compared to last year. Full-year EBITDA was $38.6 million, which is up 27% compared to the prior year. Driven by the significant year-over-year profit improvement in both segments, there's always a reconciliation of adjusted EBITDA to operating income, and net income can be found in the supplemental section of this presentation. Moving aside, slide eight, operating free cash flow of $19.3 million, was significantly improved versus the prior year.
Speaker Change: Full year, EBITDA was $38 6 million, which was up 27% compared to the prior year driven by the significant year over year profit improvement in both segments as always a reconciliation of adjusted EBITDA to operating income and net income can be found in the supplemental section of this presentation.
Speaker Change: Moving to cite slide eight operating free cash flow of $19 3 million significantly improved versus the prior year full year capital expenditures were $2 million higher than prior year, primarily to support the growth in rentals.
Thomas Barbato: Full year capital expenditures are $2 million higher than the prior year, primarily to support growth and rent. Capital expenditures in total continue to be centered around service segment capabilities, rental pool assets, technology, and future growth projects. The spend was in line with expectations. Slide nine highlights our strong balance sheet. At year-end, we had a total net cash of $31 million with a leverage ratio of 0.1. We had $80 million available from our credit facility at Quarter End.
Speaker Change: Capital expenditures in total continues to be centered around service segment capabilities.
Speaker Change: Rental pool assets technology and future growth projects.
Speaker Change: Spend was in line with expectations.
Speaker Change: Slide nine highlights our strong balance sheet at year end, we had total net cash of $31 million with a leverage ratio of 0.1 X, we had $80 million available.
Speaker Change: From our credit facility at quarter end and as previously announced we acquired Bechtel rental tools for $50 million just after the end of fiscal year paid in combination of <unk> 32, and a half million dollars in company stock and $17 5 million in cash.
Thomas Barbato: $50 million just after the end of fiscal year, paid in the combination of $32.5 million in company stock and $17.5 million in cash. Lastly, we expect to file our Form 10-K on May 28. With that, I'll turn it back to you, Lee. All right.
Speaker Change: Lastly, we expect to file our Form 10-K, I may 28.
Lee D. Rudow: I'll turn it back to you Lee Alright, Thank you Tom.
Lee D. Rudow: As I stated at the start of the call, Fiscal 2024 was an excellent year for Transcat. Our strategy is to drive meaningful and consistent differentiation into the highly regulated markets we serve. We want to continue to enhance the value we provide for our customers, which as always includes a concentration of life sciences. We'll continue to leverage our competitive advantages, which include strong leadership and execution, to fortify and grow Transcat's position in the highly regulated markets that we expect to continue to benefit from the recurring revenue streams and to generate organic service growth in the high single-digit to low double-digit range. We expect our high-margin rental business to continue to grow. We expect to continue to leverage continuous process improvement and automation to enable further sustainable margin expansion in our service operation.
Lee D. Rudow: As I stated at the start of the call fiscal 2024 was an excellent year for Trans Cat, our strategy is to drive meaningful and consistent differentiation in a highly regulated markets. We serve we want to continue to enhance the value we provide for our customers, which is always because the concentration of life Sciences will continue to leverage our <unk>.
Lee D. Rudow: Head of advantages, which include strong leadership and execution to fortify and grow trans fats position in the highly regulated markets that we serve we.
Lee D. Rudow: We continue we expect to continue to benefit from the recurring revenue streams and to generate organic service growth in the high single digit to low double digit range, we expect our high margin rental business to continue to grow.
Lee D. Rudow: We expect to continue to leverage continuous process improvement and automation to enable further sustainable margin expansion and our service operation.
Lee D. Rudow: On the acquisition front, we expect our robust and diverse acquisition pipeline to continue to be a key component of our go-forward growth strategy. We expect to continue to acquire and integrate strategic acquisitions that enhance the value we bring to our customers through expanded capability. We expect acquisitions to be accretive and to effectively drive synergies. We expect to continue to expand our addressable markets in areas we believe are strategic and are a good fit for our core operating strengths. The recent acquisition of Becknell is a great example of that.
Lee D. Rudow: On the acquisition front, we expect a robust and diverse acquisition pipeline to continue to be a key component of our go forward growth strategy we.
Lee D. Rudow: We expect to continue to acquire and integrate strategic acquisitions that enhance the value we bring to our customers through expanded capabilities, we expect acquisitions to be accretive and to effectively drive synergies we.
Lee D. Rudow: We expect to continue to expand our addressable markets in areas. We believe are strategic and a good fit for our core operating strengths. The recent acquisition of back now is a great example of that the acquisition further diversifies our portfolio of services within regulated spaces and increases Trans cats durability.
Lee D. Rudow: The acquisition further diversifies our portfolio of services within regulated spaces and increases Transcat's durability. FNEL is essentially a rental platform with a growing service component. It operates in a regulated environmental space with synergistic growth opportunities with large instrumentation users. Becknell is a highly profitable company led by a creative team of strong leaders with a demonstrated track record. We love that.
Speaker Change: And now is essentially a rental platform with a growing service component. It operates in a regulated environmental space with synergistic growth opportunities with large instrumentation users back now is a highly profitable company led by creative team of strong leaders with a demonstrated track record we loved that.
Lee D. Rudow: We're excited about the promotion of John Cummins, former owner of Nexa Enterprise Asset Management, to vice president of Global Strategic Partnerships. In his new position, John will launch our integrated Transcat TS3 initiative, which stands for Transcat Single Source Solution. This is an important next step for growth and differentiation. It's about looking ahead, anticipating, and adapting to the market and opportunities. It's about being different, or better, or both.
Speaker Change: We are excited.
Speaker Change: About the promotion of John Cummins, former owner of next enterprise asset management, Jean Vice President of global strategic partnerships and his new position Jamba launch our integrated Trans Cat T. S. Three initiative, which stands for Transcatheter single source solutions.
Speaker Change: This is an important next step for growth and differentiation. It's about looking ahead, anticipating and adapting to the market and opportunities, it's about being different or better or both.
Lee D. Rudow: Essentially, TS3 is the integration of Nexus Asset Management and Lifecycle Services with Transcat's core calibration services to provide a comprehensive, full suite of services to be sold to high-level decision makers for new capital projects and existing operations. As a result, one company, Transcat, will be able to offer commissioning, decommissioning, validation, CMMS, calibration, reliability, and many other critical services to the life science manufacturing market, This is a unique approach, capitalizing on both Transcat's very strong brand and our position in the market.
Speaker Change: Essentially T. S. Three is the integration of <unk> asset management, and lifecycle services with Trans Cats core calibration services to provide a comprehensive full suite of services to be sold to high level decision makers for new capital projects and existing operations, one company trance cat will be.
Speaker Change: To offer commissioning decommissioning validation CMS calibration reliability. Many other critical services to life science manufacturing market among others.
Speaker Change: This is a unique approach capitalizing on both trans cats, very strong brand and our positioning in the market.
Lee D. Rudow: Transcat's Single Source Solutions Program will launch midway through the fiscal year. We're excited to get started. And, of course, in addition to all these expectations, we expect to generate continued and sustainable long-term value for our shareholders. And with that, Operator, please open the line for questions.
Speaker Change: <unk> single source solutions program, we launched midway through the fiscal year, we're excited to get started.
Speaker Change: And of course in addition to all these expectations, we expect to generate continued and sustainable long term value for our shareholders and with that operator. Please open the line for questions.
Operator: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd 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 start button. One moment, please, while we poll for questions. Our first question comes from Greg Palm with Craig Hallam. Please proceed with your question.
Speaker Change: Thank you at this time well be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tailwind to Kate Your line is in the question queue. You May press star two if you'd like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the darkies one moment. Please while we poll for questions.
Speaker Change: Our first question comes from Greg Palm with Craig Hallum. Please proceed with your question.
Danny James Eggerichs: Thanks. This is Danny Yeager at John for Greg today.
Danny Acreage: Thanks. This is Danny acreage on for Greg today, Congrats on the good results again.
Danny Acreage: Thank you.
Danny James Eggerichs: Congratulations on the good results again. Thank you. Wanted to kind of start on the service side, obviously, saw good growth again and a seemingly pretty good outlook for fiscal year 25 as well. I guess as we're talking about the margin there, I think a quarterly record at 35.7, and you kind of talked about some of the internal initiatives going on, the process improvements, and the automation. Just kind of wondering where we are in terms of those kinds of internal initiatives.
Speaker Change: I wanted to kind of start on the service side, obviously saw good growth again in a seemingly pretty good outlook for our fiscal year 'twenty five as well I guess as we're talking about the margin there I think a quarterly record that 35.7 in and you've kind of talked about some of the internal initiatives going on.
Speaker Change: On the process improvements and the automation just kind of wondering where we're at.
Speaker Change: In terms of those kind of internal initiatives and and how much. Further you know we can we can kind of pull out of that margin moving forward.
Lee D. Rudow: Right. So, things continue to progress. You know, we like the work that we're doing both in automation. I think that's important.
Speaker Change: Right. So so things continue to progress.
Speaker Change: We like the work that we're doing both in automation I think that's important were certainly no further along than if you were to use.
Lee D. Rudow: We're certainly no further along than if you were to use an analogy of a baseball game, we're probably in the fourth or fifth inning of that initiative. Process improvement, we're probably, you know, not even in the fourth or fifth inning. We're probably closer to third or fourth. So, I think there's runway on both of those initiatives, but there are other things as well. We're always developing our operational leaders. So, you know, the actual leadership in our labs, both at the management level and the assistant management level, we're working on all these things that will eventually make their way into the margins.
Speaker Change: Analogy of a baseball game, we're probably in the fourth or fifth inning of that initiative process improvement were probably you know not even in the fourth or fifth inning, we're probably close to a third or fourth so I think theres runway on both of those initiatives, but but there are other things as well, where we're always developing our operational leaders. So.
You know the actual leadership in our labs, both at the management level. The system management level. We're working on all of these things that will eventually make their way into margins. So.
Lee D. Rudow: So, I think, you know, we're looking at, we've sort of established that we're in the mid-30 range at this point. I think we'll get above that over time. As systems continue to improve and some of these other programs I mentioned mature, we'll get into the mid to upper 30s. And, you know, beyond that is a possibility, but it might be too premature to talk about it. But I think we've got runway to keep getting better. I mean, I guess essentially that's the message.
Speaker Change: So I think we're looking at.
Speaker Change: We've sort of established that were in the mid 30 range at this point I think we'll get above that over time, our systems continue to improve in some of these other programs I mentioned mature will get into the mid to upper Thirty's and you know I.
Speaker Change: Beyond that as a possibility, but it might be too many too premature to talk about it but I think we've got runway to keep getting better I mean, I guess essentially that's the message.
Danny James Eggerichs: I got it. That's helpful.
Speaker Change: Got it that's helpful and I guess, maybe just sticking with margins are maybe on the distribution side so over over 30% over the last couple of quarters here and that's obviously before are back now contribution. So I think maybe previously it was kind of a 28% to 30% range, but now as we kind of layer in that.
Danny James Eggerichs: And I guess maybe just sticking with margins, maybe on the distribution side. So over 30% over the last couple quarters here, and that's obviously before BACnL contribution. So I think maybe previously, it was kind of a 28 to 30% range. But now as we kind of layer in that higher-margin business as well, how should we think about the progression of the distribution margins going forward?
Speaker Change: That a higher margin business as well how should we think about the progression of the distribution margins going forward.
Thomas Barbato: Yeah, yeah, Danny, it's Tom. You know, obviously, we're well entrenched in the low 30s, and we would, you know, expect with the addition of Bucknell for that total margin to get into the, you know, kind of mid-30s. And, you know, we could provide some additional guidance as we go forward. We're still digesting it back now, but we've got a pretty good idea of what impact it's going to have, obviously. But, you know, you can think of it in that kind of the mid, mid thirties, right?
Thomas Barbato: Yeah, Dan its Tom.
Thomas Barbato: Yes, obviously.
Speaker Change: You know, we're well entrenched in the low thirties, and we would expect with the addition of back now for that total margin to get into the into the.
Speaker Change: You know kind of mid thirties.
Dan: And we could provide some additional guidance as we as we go forward, we're still digesting back now.
Dan: But we've got a pretty good idea of what what impact that's going to have obviously, but.
Dan: You can think of.
Dan:
Dan: Think of it in that kind of that mid <unk> mid <unk> range.
Danny James Eggerichs: Okay, great. And just just following up on that. That's an entirely kind of new market that you're entering in on that rental side over there and kind of oil and gas. Is that correct?
Speaker Change: Okay, Great and just just following up on that on that back now that's that's an entirely new market that that youre entering into on that rental side over there and kind of the oil and gas is that correct.
Thomas Barbato: It is, but we think about it a little bit differently, right? We believe that, you know, the business isn't, and we've done a lot of diligence around this, that the business isn't really tied to, you know, the oil and gas industry so much as it's tied to the regulations around the work that has to be done. As Lee mentioned, there's environmental regulation around that industry of decommissioning oil wells, and Becknell's providing and renting equipment to support those, you know, really important activities. So it's really more about the regulation, regulated end markets that we serve, and, you know, from that standpoint, we see it as more of the same than something different.
Speaker Change: It is but when you think about it a little bit different Lee right is that you know we believe in that you know the business isn't we've.
Speaker Change: And we've done a lot of diligence around this that the business isn't really tied to you know the oil and gas industry is so much as it's tied to the regulation around.
Speaker Change: The work that has to be done.
Speaker Change: As Lee mentioned, there's environmental regulation around that industry, decommissioning oil wells and technology, providing and renting equipment to support.
Speaker Change: Those really important activities. So it's really more plays with you know the regulation regulated end markets that we serve and you know from that standpoint, we see it as more of the same then something.
Speaker Change: Something different.
Danny James Eggerichs: Okay, I got it. Appreciate it. I'll leave it there.
Speaker Change: Okay got it appreciate it I'll leave it there.
Danny Acreage: Thanks Danny.
Scott Christian Buck: Our next question is from Scott Buck with H.C. Wainwright. Please proceed with your question. Hey, good morning guys. Thanks for taking my question.
Speaker Change: Our next question is from Scott Buck with H C. Wainwright. Please proceed with your question.
Scott Christian Buck: Hey, good morning guys. Thanks for taking my question. Can you tell us what percentage of distribution segment revenue is coming from rentals post the Bucknell acquisition?
Scott Christian Buck: Hey, good morning, guys. Thanks for taking my question.
Thomas Barbato: Yeah, post-acquisition. It's about 35% of the overall business distribution business.
Scott Christian Buck: Can you tell us what percentage of distribution segment revenue is coming from rentals are post a duck no acquisition.
Scott Christian Buck: Hum.
Speaker Change: Yeah Post post acquisition.
Speaker Change:
Speaker Change: It's about it's about 35% of the overall business distribution business.
Lee D. Rudow: Okay, perfect. That's helpful. And the second one, I want to ask about acquisitions. I'm curious, just given, and I think we saw it a little bit with Becknell, the strength of your equity, does that change the way that you view potential acquisitions and, you know, maybe in terms of size or how you would, you know, how you would finance deals?
Speaker Change: Okay perfect. That's helpful. And then second one I want to ask about acquisitions I'm curious just given and I think we saw a little bit with pech now this.
Speaker Change: Drinks of your equity does that change the way that you view potential acquisitions and you know maybe in terms of size.
Speaker Change: Or how you would you know how you would finance deals.
Lee D. Rudow: So this is Lee. I would say yes and no. I mean, you know, we did the offering. We put ourselves in a position so that if we found an opportunity that was a little bit larger than what we had done in the past and was a good strategic fit, we'd be in a position to execute upon it. I think as we go forward, we continue to look at the strength of our stock, we look at our cash position, and, you know, each deal will present a different opportunity, and we'll look at them on an individual basis.
Lee D. Rudow: So this this is lee.
Speaker Change: I would say, yes, and no I mean, it's good yeah, we did the offering we put ourselves in a position. So that if we found an opportunity that was a little bit larger than what we had done in the past and was a good strategic fit that we'd be efficient to execute upon it I think as we go forward. We continue to look at the strength of our stock we look.
Speaker Change: Our cash position and you know well will each deal will present, a different opportunity and we'll look at them on an individual basis, but.
Lee D. Rudow: But I like the position we're in; our capital structure allows us to execute our strategy, and that's the key, and I, you know, I see us being in a good position to do just that. So I think it depends on each individual situation, you know, how we'll approach it. Equity will always be on the table, you know, as a potential tool. So I hope that answers your question, Scott. Yep, no, that makes sense. I appreciate it.
Speaker Change: But I like the position we're in our capital structure allows us to execute our strategy and Thats the key and I you know I.
Speaker Change: I see us being in a good position to do just that so I think it depends on each individual situation you know how we approach it equity will always be on the table as a potential tool.
Scott Christian Buck: So I hope that answers your question Scott Yeah, no that makes sense I appreciate that and then last one Tom just on Opex for twenty-five how should we be thinking about you know general growth there versus.
Scott Christian Buck: Yep, no, that makes sense. I appreciate that. And then last one, Tom, just on OPEX for 25, how should we be thinking about, you know, general growth there versus the, you know, strength that you've seen on the top line?
Scott Christian Buck: Versus the strength that you've seen on the top line.
Scott Christian Buck: Yes.
Scott Christian Buck: Yeah.
Thomas Barbato: Yeah, Scott, I think, you know, if you look at, you know, kind of the Q4 numbers, it's kind of a jumping off point. I think you could continue to expect some level of reasonable growth going forward from there. You know, in order to be able to continue to grow at the rate we are organically, we need to, you know, continue to invest in the appropriate level of sales resources to support that future growth.
Scott Christian Buck: Yeah, Scott I think you know.
Speaker Change: If you if you look at kind of Q4 numbers as kind of a jumping off point.
Speaker Change: I think you could continue to expect some you know.
Speaker Change: Level of reasonable growth going forward from there.
Speaker Change: In order to in order to be able to continue to grow at the rate. We are organically, we need to continue to invest in the appropriate level of selling resources.
Speaker Change: To support that future growth.
Thomas Barbato: So I would use Q4 as a jumping off point for some level of kind of modest growth from there. And, you know, you would expect that growth to continue through the fiscal year.
Speaker Change: So I would use Q4 as a jumping off point.
Speaker Change: You know some some level of kind of modest growth from there.
Speaker Change:
Speaker Change: And you know you would expect that growth to continue through the fiscal year.
Scott Christian Buck: All right, perfect. That makes sense. I appreciate the time, guys. Thank you.
Speaker Change: Alright, perfect that makes sense I appreciate the time guys. Thank you.
Scott Christian Buck: Thanks Scott.
Edward Randolph Jackson: Our next question is from Ted Jackson with Northland Securities. Please proceed with your question.
Speaker Change: Our next question is from Ted Jackson with Northland Securities. Please proceed with your question.
Edward Randolph Jackson: Thanks. I'm gonna beat some dead horses because everyone's asked all my questions, basically. Congratulations on the quarter.
Scott Christian Buck: Thanks.
Speaker Change: The Beacon dead horses, because everyone's asked all my questions basically.
Edward Randolph Jackson: Can we go back over to rental? One of the comments that were in the press release that I thought was, you know, at least worth exploring a little bit was, you know, the efforts in terms of trying to bring rental into, you know, kind of other parts of your customer base. And maybe my first question would be, you know, could you unpack that a little bit and talk about what you see with that and how that effort is going to unfold, kind of what verticals and, you know, kind of where, what kind of penetration do you think you can get out of it? And then I've got a follow-up.
Speaker Change: Congrats on the quarter can we go back over into the rental one of the comments that was in the press release that I thought was you know at least worth exploring a little bit was.
Speaker Change: The efforts in terms of trying to bring rental into.
Speaker Change: You know kind of other parts of your customer base and maybe my first question would be you know.
Speaker Change: Could you unpack that a little bit and talk about what you see with that and Oh how.
Speaker Change: That effort is going to unfold kind of what verticals and you know kind of where what kind of penetration do you think you can get out of it and then I've got a follow up.
Lee D. Rudow: Yeah, Ted, let me make sure I understand the question. So are you saying what sort of additional cross-selling opportunities there are for the rental business to our service customers? Is that essentially it?
Speaker Change: Yeah, I mean, let me make sure I understand the question. So are you, saying, what what sort of additional cross selling opportunities are for the rental business into our.
Speaker Change: Our service customers is that essentially.
Yes.
Lee D. Rudow: So one example I'll give you and something that we liked in the Becknell deal, so clearly, this is a company that rents equipment for the decommissioning of this regulated decommissioning space for oil wells. But when we looked at their customer base, of course, you're going to see Halliburton and Schlumberger, you're going to see Baker Hughes, and these are historically large, large users of instrumentation, all And so it's not just the service component and the rental component; it's also the instrument component.
Speaker Change: So one example, I'll give you an end and something that we liked in the deck Nell deal. So clearly this is a company that rents equipment for the decommissioning of this regulated decommissioning space with oil wells, but when you when we looked at their customer base of course, you know youre going to see Halliburton and Schlumberger Baker Hughes and these are.
Speaker Change: <unk> large large users of instrumentation, all process equipment calibrated pressure gauges and so it's not just the the service component and the rental component and it's also the interest rate component. So I think that wherever theres instrumentation theres opportunities for calibration growth as well, sometimes internally here, we say.
Lee D. Rudow: So I think that wherever there's instrumentation, there's opportunities for calibration growth as well. And sometimes, internally here, we say all roads lead to calibration. And so when we look at an acquisition, we like to check that box if we can. And I think with Becknell, for example, we were able to do that. Time will tell. You have to execute well, you have to cross sell well, but we're certainly on the right track.
Speaker Change: All roads lead to calibration and so when we look at an acquisition, we we like to check that box. If we can and I think with like back now for example, we were able to do that so time will tell you have to execute well you have to cross sell well, but we're certainly capable of doing that and that's what I would expect from the company.
Lee D. Rudow: And I would just say going the other way, right? I mean, there's always a focused effort on renting to our existing customer base, right? And it helps solve customer problems. It builds goodwill with those customers. And obviously, it provides us a path to some really attractive margin business. So that's something that we do as a regular part of our normal course of doing business and our sales efforts.
Speaker Change: And I would just say going the other way right I mean, there's always a focused effort on you know renting to our existing customer base right and you know it helps solve customer problems.
Speaker Change: It it builds goodwill with those customers and <unk>.
Speaker Change: Obviously it provides us a path to you know some really attractive margin business. So that's something that we just we do as a regular part of our normal course of.
Speaker Change: Doing business in our sales effort.
Edward Randolph Jackson: Is there any case to be made that, you know, I mean, you know, buying equipment in your distribution business, you know, that's capex and renting is more of an opex, turning it into a variable that with interest rates higher and people managing and looking at, you know, the capital expenditures and, you know, just a little more detail that there's an underlying lift maybe for some of your rental business because of the change in, you know, the interest rate environment and such?
Speaker Change: Is there any case to be made that you know I mean buying equipment in your distribution business, you know, that's capex and rent things more than opex, turning it into a variable that with interest rates higher and people managing and looking at you know the capital expenditures in Q4.
Speaker Change: A little more detail that there's underlying lift maybe for some of your rental business because of the change in the.
Speaker Change: The interest rate environment and such.
Lee D. Rudow: Yeah, there certainly could be. And as we look at our company, and you've heard us, Ted, through the years, talk about being recession-resistant. It's all part of how we build our value proposition. So our suite of services, which includes rentals, certainly has that OPEX and CAPEX component to it. So life sciences in general tends to lend itself to some resistance. And so when we start, we look at the back of the business and what they do in the cost control and optimization portion.
Speaker Change: Yeah. So there certainly could be and as we look at our company and you've heard us Ted through the years talk about being a recession resistant. It is all part of how we build our value prop. So our suite of services, which includes rentals certainly has that app that opex capex component to it so life Sciences in general.
Speaker Change: <unk> tends to lend itself to some resistance and so when you start.
Speaker Change: You look at the next of business and what they do on the cost control optimization, a portion and all these services together are coordinated and lead towards some sort of resistance to economic cycles, and we love that part of the business and we're going to keep making sure that that we enhance it and it's part of our value prop.
Lee D. Rudow: And all these services together are coordinated and lead towards some sort of resistance to economic cycles. And we love that part of the business. And we're gonna keep making sure that we enhance it, and it's part of our value proposition.
Edward Randolph Jackson: Okay, and then just shifting over to Becknell for those of us that actually haven't really incorporated that into their forecast at this point. You know, it's about a 20 million dollar revenue business. I assume we would be kind of sort of layering that into this fiscal year with maybe an adjustment for the first quarter because it's not quite a full quarter. Is there any seasonality to that business that should be taken into account? How do we think about that in terms of how their top line flows through over the course of a 12-month cycle?
Okay, and then just shifting over to backfill for those of us that actually I haven't really incorporated that into their forecast at this point no. It's about $20 million revenue business I assume there we would be kind of.
Speaker Change: Sort of layering that into.
Speaker Change: This fiscal year with maybe an adjustment for the first quarter, because it's not quite a full quarter is there any seasonality to that business that should be taken into account. How do we think about that in terms of like how you know their top line flows through over the course of the 12 month cycle.
Thomas Barbato: Yeah, so... Ted, I'll take that one. So think of it as a, you know, kind of high teens revenue business. And I think your point's correct, right? There should be an adjustment for the first quarter of this year because, you know, we acquired them, you know, partway through April. There is some seasonality to that business, but it's actually almost somewhat complementary to the seasonality of Transcat's business, right, because their lowest revenue is in calendar Q1, which is traditionally Transcat's highest quarter.
Speaker Change: Yeah. So.
Edward Randolph Jackson: Ted I'll I'll take that one so.
Ted: Think of it as a you know kind of high teens revenue business.
Speaker Change: And I think your point's correct right there should be an adjustment for for the first quarter.
Speaker Change: Of this year, because we acquired them part way through April.
Speaker Change: There is some seasonality to that business.
Speaker Change: It's actually almost like somewhat complementary to the seasonality of Transcatheter business right. Because they are their lowest revenue was in calendar Q1, which is traditionally transcripts highest quarter. So.
Thomas Barbato: So I guess if there's going to be seasonality, that's kind of a good fit. But Q1 is definitely, you know, the lightest. Calendar Q1 is definitely the lightest quarter for their business. And it's that way for all the businesses operating in the Gulf. You know, there's weather concerns in the winter. There's some other reasons behind that. But if you need more detail on that, we can discuss it
Speaker Change: I guess, if theres going to be seasonality, that's kind of a good fit.
Speaker Change: But but Q1 is definitely you know the lightest calendar Q1 is definitely the lightest quarter for their business and it's that way for.
Speaker Change: All of the business operating in the golf you know, there's there's weather concerns and the winter. There's there's some other reasons behind that.
Speaker Change: But but if you need more detail on that we can we can discuss it offline.
Edward Randolph Jackson: Okay, and then I'll step out of line, but you've gotten into this business. It sounds pretty interesting. Is there another opportunity for you there in terms of M&A, like pipeline? I mean, is there an area, is this something that you can grow through further M&A? And obviously, I'm sure you'll be trying to do it on an organic basis, but I mean, it did kind of put you in a brand new market, and it's intriguing.
Speaker Change: Okay, and then then I'll step out of line, but you know you've gotten into the into this business. It sounds pretty interesting is there are there opportunity for you there in terms of M&A pipeline in munis Aaron area or is this something that you can grow through further M&A M&A and obviously I'm sure you'll be trying to do it on an organic basis, but you know I mean, it did kind of puts you in a brand new market.
Speaker Change: It's intriguing.
Lee D. Rudow: Yeah so this is Lee, Ted, and I think anytime we make an acquisition and we state that it expands our addressable markets, somewhere we have in mind that you know there's potential growth you know beyond the acquired company and it you know that remains to be seen but we and we certainly have to execute against that but I think your point is we're in a space that that if we operate well in and develop a demonstrated track record to grow organically then we would also look down the inquisitive path as well that would be a normal course of action for us so so yes we will keep looking at this market both organically and through acquisition and try to make the best decisions you know to match our strategy you know to go forward
Speaker Change: Yeah. So this is Lee Ted and I think anytime we make an acquisition and we state that it expands our addressable markets.
Lee D. Rudow: Somewhere we have in mind that you know theres potential growth beyond the acquired company in it.
Lee D. Rudow: That remains to be seen but we and we certainly have to execute against that but I think your point is we're in a space that.
Speaker Change: If we operate well in and develop a demonstrated track record to grow organically than.
Speaker Change: And then we would also look at down the Christa path as well that would be a normal course of action for us. So so yes, we will keep looking at this market both organically and through acquisition and tried to make the best decisions you have to match our strategy as we go forward.
Edward Randolph Jackson: Okay, well, thanks for the time and congrats on the quarter. It is our pleasure.
Speaker Change: Okay, well, thanks for the time and congrats on the quarter.
Lee D. Rudow: Our pleasure. Thanks, Ted.
Speaker Change: Pleasure, Thanks, Pat Thanks, Ed.
Operator: As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. One moment, please, while we poll for questions. Our next question comes from Martin Yang with Oppenheimer. Please proceed with your question.
Speaker Change: Yes.
Speaker Change: As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad one moment, please while we poll for questions.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Martin Yang with Oppenheimer. Please proceed with your question.
Zhihua Yang: Hi, good morning. Thank you for taking my question. First question on CapEx for Fiscal 25. Is there anything incremental on a year-over-year basis, especially relating to Becknell?
Zhihua Yang: Hi, Good morning. Thank you for taking my question first question on Capex for fiscal 'twenty five is there anything incremental on a year over year basis, especially relating to back now.
Thomas Barbato: Yeah, um... Martin, great question. Obviously, we saw an increase in CapEx this past year with the Axiom acquisition. I think we should expect to see a similar increase in 2025 with the Bechnell acquisition, right? I mean, the key to growing a rental business is you've got to have the assets in place to be able to rent. The returns on those assets are very good, and you see that in the margin profile of that business. But yeah, I would expect a similar increase in rental revenue, and then the majority of the business remains about the same.
Zhihua Yang: Yeah.
Zhihua Yang: Martin Great question obviously.
Speaker Change: We saw an increase in Capex this past year with the with the axiom acquisition.
Speaker Change: I think we should expect to see a similar increase in 25 with the <unk> acquisition right I mean, the key to that.
Speaker Change: The key to growing our rental business is you've got to have.
Speaker Change:
Speaker Change: The assets in place to be able to to be able to rent.
Speaker Change: The returns on those assets are are very good and you.
Speaker Change: See that in the in the margin profile of that business, so, but yeah I would expect a similar a similar increase to support rentals and then.
Speaker Change: The majority of the remainder of.
Speaker Change: The business remains about the same.
Zhihua Yang: Well, should we think about the similar increase in terms of dollar amount or percentage growth? Thanks. Next question, TS3, maybe you could give us a little more detail on the new brand positioning, you know, with a more integrated service. Are you trying to approach customers who were maybe not easy to win without such an offering? You know, overall, you know, is this new positioning relating to, you know, trying to get customers that are harder to reach without it?
Speaker Change: Should we think about the similar increase in terms of dollar amount or percentage gross dollar amount.
Speaker Change: Thanks next question.
Speaker Change: T S. Three maybe can you give us a little more detail on the new brand positioning.
Speaker Change: You know with <unk>.
Speaker Change: Our integrated service are you trying to approach customers who were.
Speaker Change: Maybe not easy to win without any such offering.
Speaker Change: Overall.
Is this new positioning relating to.
Speaker Change: Trying to get customers that.
Speaker Change: Harder to reach without it.
Lee D. Rudow: Yeah, I think that's the right way to characterize it. So when we take a look at our value proposition that we've built over the years, both organically and through acquired companies. We look at the strength of that, and we're in a unique position now, as a result of those activities, to be able to present something that is really so comprehensive that if we get to the right level at the right time with the right decision makers, which is what TS3 is all about, we really do have a compelling approach to servicing highly regulated customers.
Speaker Change: Yeah, I think that's the that's the right way to characterize it. So when you take a look at our value proposition that we've built over the years, both organically and through acquired companies.
Speaker Change: We look at the strength of that and it's you know we're in a unique position now as a result of those activities to be able to present something that is really so comprehensive that if we get to the the right level at the right time with the right decision makers, which is with tier three is all about we really do have.
Speaker Change: Compelling approach to just servicing highly regulated customers.
Lee D. Rudow: And historically, we've always had nice growth, but it's been in the low, mid, and high ranges of what we would call opportunities. We have a transactional business. We've got a business that is anywhere from a couple hundred thousand dollars to, let's say, low seven figures or a million dollars.
Speaker Change: And you know historically, you've always had nice growth, but it's been at the low mid and high ranges of what we would call opportunities. We have a transactional business. We've got a business that is anywhere from a couple of hundred thousand dollars to let's say low seven figures or a million dollars, but now with this value prop if you get in the right place at the right time, there should be we believe in.
Zhihua Yang: But now, with this value prop, if you get in the right place at the right time, there should be, we believe, an opportunity to do something different and do something large. And it takes a different approach, and it takes a different game plan. But that's what TS3 is about, a single source solution that can really save the customer a lot of time and money over time and get their work done properly with all the other features like risk mitigation. And that's what it's about. So I think you've characterized it well.
Speaker Change: The opportunity to do something different and do something large and it takes a different approach and it takes a different game plan, but that that's what T. S series about a single source solution.
Speaker Change: Can really save the customer a lot of time and money over time and get and get their work done properly and all the other features like risk mitigation.
Speaker Change: And that's what it's about so I think I think you've characterized it well.
Lee D. Rudow: Got it. A quick follow-on on the way you're describing large. Is there potential for, what I'm thinking is, two verticals. One is more service offered to customers. The other is maybe the duration of the contract or relationship with the customers. You know, is any one of the two or others that gives you confidence that you can maybe grow the potential size of the business you engage with?
Speaker Change: Got it a quick follow on the.
Speaker Change: The way you're characterizing large.
Speaker Change: Is there a potential for what I'm thinking is two vertical is one that is more service offer to customers. The other is maybe the duration of the.
Speaker Change: The contract or a relationship with the customers.
Speaker Change: Is any one of the two others that gave you confidence that you can.
Speaker Change: Maybe.
Speaker Change: Roll the potential size of the business you're engaged with.
Lee D. Rudow: I think the potential is there for both, to grow the length of these contracts and to grow the size of these contracts over time. The goal would be both based upon our ability to do something unique and to do it well and to add value. When you do those things, when you have that combination going for you at a fair price, you're gonna have a really good relationship with your customers.
Speaker Change: That's a bit I think the potential is there for both gross to grow.
Speaker Change: You know the length of these contracts and to grow the size of these contracts over time.
Speaker Change: Goal would be both based upon our ability to do something unique and to do it well and add value. When you do those things when you have that combination going for you at a fair price you're gonna be you could have a really good relationship with your customer and I think that's going to ultimately make its way to the length of the contract and the <unk>.
Lee D. Rudow: And I think that's going to ultimately make its way to the length of the contract and the size of the contract. So you've got to execute well, Martin, but assuming you do that, I would agree that, you know, both are potentially, you know, our goal.
Speaker Change: These are the contracts so you've got to execute well Martin, but assuming you do that I would agree that you know both or potentially.
Speaker Change: Our goals.
Zhihua Yang: Got it. Thank you. That's it for me.
Speaker Change: Got it. Thank you that's it for me.
Speaker Change: Okay. Thank you.
Lee D. Rudow: We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Lee Rudow for closing comments.
We have reached the end of the question and answer session I'd now like to turn the call back over to Lee redo for closing comments.
Lee D. Rudow: Okay, well, thank you all for joining us on the call today. We certainly appreciate it. We'll be presenting at the Craig Hellam Investment Conference in Minneapolis on May 29th.
Lee D. Rudow: Okay, well. Thank you all for joining us on the call today, we certainly appreciate it we'll be presenting at the Craig Hallum investment conference in Minneapolis on May 29th Youre welcome to join US there otherwise feel free to check in with US anytime we look forward to talking with everyone again after our first quarter take care.
Lee D. Rudow: You're welcome to join us there. Otherwise, feel free to check in with us anytime. We look forward to talking with everyone again after our first quarter. Take care.
Operator: This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.
Speaker Change: This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.
Speaker Change: Yeah.