Q1 2025 RBC Bearings Inc Earnings Call
www.larryweaver.com
Operator: Greetings. Welcome to RBC Bearings' Fiscal 2025 First Quarter Earnings Call. At this time, all participants are in listen-only mode. The 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, Rob Moffitt, the Director of Investor Relations. Please go ahead.
Speaker Change: Greetings. Welcome to RBC Bearings Fiscal 2025 First Quarter Earnings Call. At this time, all participants are in listen-only mode. A 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. As a reminder, this conference is being recorded.
Speaker Change: I would now like to turn the conference over to your host, Rob Moffitt, the Director of Investor Relations. Please go ahead.
Ron Moffitt: Morning, and thank you for joining us for RBC Bearing's fiscal first quarter 2025 earnings call. I'm Ron Moffitt, Director of Investor Relations. And 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; and Rob Sullivan, Vice President and Chief Financial Officer.
Ron Moffitt: Morning and thank you for joining us for RBC Bearings fiscal first quarter 2025 earnings call. I'm Ron Moffitt, Director of Investor Relations and with me on the call today are Dr. Michael Hartnett, Chairman, President, Chief Executive Officer.
Speaker Change: Daniel Bergeron, Director, Vice President, Chief Operating Officer, and Rob Sullivan, Vice President and Chief Financial Officer.
Ron Moffitt: Before beginning today's call, let me remind you that some of the statements made today will be at floor level and are made under the Private Securities Litigation Reform Act of 1995. However, actual results may differ materially from those projected or implied due to a variety of factors. We refer you to RBC Bearings' recent filings with the SEC for a more detailed discussion of the risks that could impact the company's future operating results and financial condition. 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 turn the call over to Dr. Hartnett.
Speaker Change: Before beginning today's call, let me remind you that some of the statements made today will be board-loving and are made under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected or implied due to a variety of factors.
Speaker Change: We refer you to RBC Bearings' recent filings with the SEC for a more detailed discussion of the risks that could impact the company's future operating results and financial conditions.
Speaker Change: These factors are also described in greater detail in the press release and on the company's website.
Michael Hartnett: Thank you, Rob, and good morning to 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 Rao for some detailed color on the numbers. Then I'll finish with some high-level thoughts on the industry, RBC's positioning, and some on our fiscal 25 outlook. First quarter sales came in at $406.3 million, a 5% increase over last year. Strong performance from our aerospace and defense sector showed a 23.7% expansion. Where are you?
Michael Hartnett: industrial business contracted slightly at 3.5%, in Aerospace and Defense. However, sales expanded approximately $30 million quarter to quarter, year over year, with $149.1 million the quarterly result. The defense sector led with a 38.1% expansion rate. Unquestionably, we can expect continued strong showings from our A&D sector through the balance of the year. On the industrial side, we held our own against our peers, showing a small contraction of 3.5% in sales from $257.2 million. Weakened sector performance was seen in oil and gas.
Thank you, Rob, and good morning to everyone, and thanks for joining us.
Speaker Change: 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. Then I'll finish with some high-level thoughts on the industry, RBC's positioning, and some in our fiscal 25 outlook.
Speaker Change: First quarter sales came in at $406.3 million, a 5% increase over last year.
Rob: Strong performance from our aerospace and defense sector showed a 23.7% expansion, where our industrial business contracted slightly at 3.5%.
Speaker Change: In aerospace and defense, sales expanded approximately $30 million quarter to quarter.
Rob: year-over-year with $149.1 million the quarterly result. The defense sector led with a 38.1% expansion rate.
Speaker Change: Unquestionably, we can expect continued strong showings from our A&D sector through the balance of the year.
Speaker Change: On the industrial side, we held our own against our peers, showing a small contraction of 3.5% in sales, sales were $257.2 million.
Michael Hartnett: Semiconductor Machinery in Some General Industrial Markets. We currently expect and plan for these markets to strengthen in the second half of the year. Adjusted gross margin for the quarter came in at $184 million, 45.3% of sales, and almost two full percentage points above last year. Clearly, our manufacturing plants are executing extremely well. We are operating well within our sweet spot in this regard. Many completed synergies and improvement projects contributed to this performance.
Speaker Change: Weakened sector performance was seen in oil and gas, semiconductor machinery, and some general industrial markets. We currently expect and plan for these markets to strengthen in the second half of the year.
Speaker Change: Adjusted gross margin for the quarter came in at $184 million, 45.3% of sales, and almost two full percentage points above last year.
Speaker Change: Clearly, our manufacturing plants are executing extremely well.
Speaker Change: We are operating well within our sweet spot in this regard and many completed synergies and improvement projects contributed to this performance.
Michael Hartnett: Still many more productive concepts and plans are in the breach and or active today, and these are very productive and promising areas for us to prosper. I'd like to acknowledge and thank our teams for this Quarters Performance. Clearly, it is they who are the reason for RBC's continued success.
Speaker Change: Still, many more productive concepts and plans are in the breach and or active today.
Speaker Change: And these are very productive and promising areas for us to prospect.
Speaker Change: I'd like to acknowledge and thank our teams for this quarter's performance. Clearly, it is they who are the reason for RBC's continued successes.
Michael Hartnett: As a result, adjusted net income was $2.54 a share, and adjusted EBITDA was 33% of revenue. Obviously, we're very pleased with this performance, and we really can't think of a better way to start our fiscal year.
Speaker Change: As a result, Adjusted Net Income was $2.54 a share, and Adjusted DA was 33% of revenues. Obviously, we're very pleased with this performance, and we really can't think of a better way to start our fiscal year.
Michael Hartnett: Net cash provided by operating activities was $97.4 million versus $61.7 million last year, a 57.9% increase. This allowed us to reduce debt another 60 million during the period, bringing the EVA-DA to net debt ratio to approximately 2.1 times, another sweet spot. Overall, we expect more of the same performance from the Aerospace and Defense Group through the year end. Some ups and downs in this regard as a result of the normal seasonal impacts of holidays, vacations, and supply chains.
Speaker Change: Net cash provided by the operating activities was $97.4 million versus $61.7 million last year.
Speaker Change: a 57.9% increase. This allowed us to reduce debt another $60 million during the period, bringing the EBITDA to net debt ratio to approximately 2.1 times. Another sweet spot.
Speaker Change: Overall, we expect more of the same performance from the Aerospace and Defense Group through the year-end. Some ups and downs in this regard as a result of normal seasonal impacts of holidays, vacations, and supply chain.
Michael Hartnett: On the industrial side, we are planning to see strengthening in the second half of the year and are setting our plans today accordingly. RBC is well positioned to support additional demand from both industrial and aerospace defense customers, as well as space customers. We have the production capacity, the trained and skilled workforce forces in place, and are in the process of augmenting plant capacities to accommodate additional business awards. I'll now turn...
Speaker Change: On the industrial side, we are planning to see strengthening in the second half of the year and are setting our plans today accordingly.
Speaker Change: RBC is well positioned to support additional demand from both industrial and aerospace defense customers.
Speaker Change: As well as space customers. We have the production capacity, the trained and skilled workforce forces in place.
Speaker Change: and are in the process of augmenting plant capacities to accommodate additional business awards.
Rob: I will pass the call over to Rob for more details on our financial performance. Thank you, Mike. As Dr. Hartnett indicated, this was another strong quarter for RBC. Total sales growth of 5% in the quarter was surpassed by adjusted EBITDA growth of 11.3% and adjusted EPS growth of 19.2%. Along with that, we had free cash flow growth of 61% year over year. This was driven in large part by strong gross margin expansion, with first quarter gross margin as a percentage of sales coming in at 45.3%, an expansion of roughly 190 basis points year over year.
Speaker Change: I'll now turn
Speaker Change: The call over to Rob for more details on our financial performance.
Rob: Thank you, Mike. As Dr. Hartnett indicated, this is another strong quarter for RBC.
Rob Moffitt: Total sales growth of 5% in the quarter was surpassed by adjusted EBITDA growth of 11.3% and adjusted EPS growth of 19.2%.
Rob: Along with that, we had free cash flow growth of 61% year over year. This was driven in large part by strong gross margin expansion with first quarter gross margin as a percentage of sales coming in at 45.3%, an expansion of roughly 190 basis points year over year.
Rob: The two biggest drivers here continue to be the ongoing tailwinds from Dodge Synergies and increased utilization of our aerospace manufacturing. We also saw tailwinds from strong plant efficiency expedites in a favorable mix. On the SG&A line, we continue to make investments in our future growth. This includes Salesforce additions to support the international expansion that we have highlighted as part of our Dodge strategy and the resources needed to support that growth, including IT infrastructure and back office support.
Speaker Change: The two biggest drivers here continue to be the ongoing tailwinds from Dodge Synergies and increased utilization of our aerospace manufacturing assets.
Speaker Change: We also saw tailwinds from strong plant efficiency expedites in a favorable mix.
Speaker Change: On the SG&A line, we continue to make investments in our future growth. This includes Salesforce additions to support the international expansion that we have highlighted as part of our Dodge strategy, and the resources needed to support that growth, including IT infrastructure and back-office support.
Rob: With that said, the rate of growth on the SG&A line moderated versus the year-ago period, and we were able to extract a modest amount of leverage this quarter. Going forward, we expect SG&A as a percentage of sales to increase in Q2 and Q3 before normalizing in Q4. This led to adjusted EBITDA of $134 million this quarter, up 11.3% year-over-year, and an adjusted EBITDA margin of 33%, which is up almost 190 basis points versus last year's 31.1%. The IVIDA margin is a new record for RBC, eclipsing our recent peak of 31.7% in the second quarter of fiscal 24.
Speaker Change: With that said, the rate of growth on the SG&A line moderated versus the year-ago period, and we were able to extract a modest amount of leverage this quarter. Going forward, we expect SG&A's percentage of sales to increase in Q2 and Q3 before normalizing in Q4.
Speaker Change: This led to adjusted EBITDA of $134 million this quarter, up 11.3% year-over-year, and adjusted EBITDA margin of 33%, which is up almost 190 basis points versus last year's 31.1%.
Speaker Change: The IVIDA margin is a new record for RBC.
Rob: The achievement of this milestone was a multifaceted effort, with credit deserved across multiple layers of the company, including the Dodge team for their efforts in extracting synergies, and to our operations and plant management teams for running at very high levels of plant efficiency during the quarter. Interest expense in the quarter was $17.2 million. This was down 16% year-over-year, reflecting the ongoing repayment of our terminal. The tax rate in our adjusted EPS calculation was 22.4%, a moderate year-over-year headwind versus last year's 22%.
Speaker Change: eclipsing our recent peak of 31.7% in the second quarter of fiscal 24.
Speaker Change: The achievement of this milestone was a multifaceted effort, with credit being deserved across multiple layers of the company, including the Dodge team for their efforts in extracting synergies, and to our operations and plant management teams for running at very high levels of plant efficiency during the quarter.
Speaker Change: Interest expense in the quarter was $17.2 million. This is down 16% year-over-year reflecting the ongoing repayment of our term loan.
Speaker Change: The tax rate in our adjusted EPS calculation was 22.4%, a moderate year-over-year headwind versus last year's 22%.
Rob: All together, this led to adjusted diluted EPS of $2.54, representing 19.2% of year-over-year growth, an impressive result on revenue growth of 5%. In terms of cash, free cash flow of $88.4 million ran at a 144% conversion rate and grew 61% on a year-over-year basis. This was fueled by strong net income growth and improved working capital performance. As usual, we used a meaningful portion of the cash generated to continue to pay down our term loan.
Speaker Change: All together, this led to adjusted diluted EPS of $2.54, representing 19.2% of year-over-year growth, an impressive result on revenue growth of 5%.
Speaker Change: In terms of cash, free cash flow of $88.4 million ran at a 144% conversion rate and grew 61% on a year-over-year basis.
Speaker Change: This was fueled by strong net income growth and improved working capital performance. As usual, we used a meaningful portion of the cash generated to continue to pay down our term loan. We repaid $60 million of the loan this quarter and continue to expect to repay $275 to $300 million total for the year.
Rob: We repaid $60 million of the loan this quarter and continue to expect to repay $275 to $300 million total for the year. The balance on the term loan at the end of the quarter was $615 million, leaving net debt at $1.05 billion and trailing net leverage of 2.1 times.
Speaker Change: The balance on the term loan at the end of the quarter was $615 million, leaving net debt at $1.05 billion and trailing net leverage of 2.1 times.
Rob: We continue to expect trailing net leverage to be well below the two times mark exiting the fiscal year, leaving ample room for a return M&A should the right deal come across our path. As a reminder, our Series A mandatory convertible preferred stock is expected to automatically convert on October 15, 2024, using Q1 results as an approximation.
Speaker Change: We continue to expect trailing net leverage to be well below the two-times mark exiting the fiscal year, leaving ample room for a return M&A should the right deal come across our path.
Speaker Change: As a reminder, our Series A Mandatory Convertible Preferred Stock is expected to automatically convert on October 15, 2024.
Operator: The net impact of this conversion is expected to be slightly accreted to earnings per share, although assuming conversion at the current share price. It will be more meaningfully accretive, however, to pre-cash flow, as the conversion will remove the cash dividend payment, thereby reducing our future total cash outlays by approximately $23 million on an annualized basis. This is roughly 9.5% of Fiscal 24's total free cash flow. In closing, this was another strong quarter for RBC.
Speaker Change: Using Q1 results as an approximation,
Speaker Change: The net impact of this conversion is expected to be slightly accreted to earnings per share, assuming conversion at the current share price.
Speaker Change: 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 24's total free cash flow.
Operator: We remain focused on leveraging our core strengths in engineering, manufacturing, and product development to drive organic and inorganic growth, continued margin excellence, and high levels of free cash flow conversion. With that, Operator, please open the call for questions.
Speaker Change: In closing, this was another strong quarter for RBC. We remain focused on leveraging our core strengths in engineering, manufacturing, and product development to drive organic and inorganic growth, continued margin excellence, and high levels of free cash flow conversion. With that, operator, please open the call for Q&A.
Operator: Operator, please open the call for Q&A.
Operator: Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the 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 key.
Speaker Change: Thank you. Ladies and gentlemen, we will now be conducting a question and answer session.
Speaker Change: If you'd like to ask a question, please press star 1 on your telephone keypad and a confirmation tone to indicate your line is in the queue. You may press star 2 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 star keys. One moment please while we poll for questions.
Operator: One moment, please, while we poll for questions. Thank you. And our first question is from the line of Kristine Liwag with Morgan Stanley. Please proceed with your question. Hey, good morning.
Speaker Change: Thank you. And our first question is from the line of Kristine Liwag with Morgan Stanley . Please proceed with your questions.
Kristine Liwag: Hey, good morning, everyone. Good morning, Kristine.
Kristine Liwag: You know, with the industrial and market kind of starting to decline here, can you provide more content in detail about what you're seeing in the different end markets and exactly how far away we are from a trough and what we'd have to see to see improvement? Because it seems like, you know, the issue in the quarter was just a little bit of weakness in the top line. But that said, I mean, you know, with a 45% gross margin for the business, that's still pretty incredible performance. Yeah, well, I, you know, I, when we're looking at industrial markets,
Kristine Liwag: Hey, good morning, everyone.
Speaker Change: Morning, Kristine.
Speaker Change: You know with industrial and market kind of starting to decline here can you provide more content in detail about what you're seeing in the different end markets and exactly how
Speaker Change: How far away we are from a trough, and what we've had to see to see improvement. Because it seems like, you know, the issue in the quarter is just a little bit of weakness in the top line. But that said, I mean, you know, with a 45% gross margin for the business, that's still pretty incredible performance.
Michael Hartnett: Yeah, well, I you know, when we're looking at the industrial markets, Christine, there are a few things where we saw, you know, a substantial amount of softness, and we've seen that continued for almost 12 months now. And that's in Semiconductors, in oil and gas, and on the semiconductor.
Speaker Change: Yeah, well, you know, when we're looking at the industrial markets, Kristine, there's a few things that, where we saw, you know...
Speaker Change: A substantial amount of softness, and we've seen that continued for almost 12 months now. And that's in semicon and oil and gas.
Speaker Change: and on the semicon.
Operator: Hello, I think that line dropped. All right, gentlemen. Ladies and gentlemen...
Speaker Change: Hello, I think the line dropped.
Operator: We're experiencing technical difficulties. We'll resume momentarily. Please remain on the line, ladies and gentlemen. Our call will resume momentarily. Please remain on the line. Our conference will resume momentarily.
Operator: All right, gentlemen. Ladies and gentlemen, this is the operator. Please stand by.
Speaker Change: All right, gentlemen.
Speaker Change: Ladies and gentlemen, this is the operator. Please stand by. We're experiencing technical difficulties. We'll resume momentarily.
Speaker Change: Please remain on the line, ladies and gentlemen. Our call will resume momentarily.
Speaker Change: www.larryweaver.com
Speaker Change: Please remain on the line. Our conference will resume momentarily.
Speaker Change: Ladies and gentlemen, please continue to stand by, the event will resume momentarily.
Speaker Change: Again, please continue to stand by, the event will resume momentarily.
Speaker Change: ♪♪
Speaker Change: Once again, ladies and gentlemen, we thank you for your patience. Please continue to stand by. The event will resume momentarily. Thank you. Thank you.
unknown: [inaudible]
Operator: Ladies and gentlemen, thank you for standing by. Gentlemen, you may continue. Kristine, please continue with your questions.
Speaker Change: [inaudible]
Speaker Change: Ladies and gentlemen, thank you for standing by. Gentlemen, you may continue. Kristine, please continue with your questions.
Kristine Liwag: Where did I lose you, Kristine?
Michael Hartnett: Great. Mike, you were talking about semiconductors where you've seen the weakness in oil and gas, and that's where the line drops.
Speaker Change: Where did I lose you, Kristine?
Kristine Liwag: Great, Mike you were talking about semiconductors is where you've seen the weakness in oil and gas and that's where that line dropped off.
Michael Hartnett: Yeah, okay, so those are the two majors. The oil and gas is sort of a problem. We have a major customer who had a planning problem and bought too much a year ago and is now sort of liquidating that position. We expect him to get better as the year progresses. And as for the rest of the business, you know, there's a slight downward bias on the rest of the market. Some positive, some negative, but overall, a bias down.
Mike: Yeah, okay, so those are the two majors. The oil and gas is sort of a, well, we have a major customer and we had a planning problem.
Speaker Change: We expect him to get better as the year progresses. And the rest of the business, you know, there's a slight downward bias on the rest of the market.
Speaker Change: Some positive, some negative, but overall, overall, a bias down.
Kristine Liwag: Great. And just to follow up on terms of, you know, where we're seeing the weakness, are these mostly on new builds? Or was the slowdown in buying also in the aftermarket if there was a little bit of an overage in buying before?
Speaker Change: Great and just to follow up in terms of you know where we're seeing the weakness are these mostly on new builds or was the slowdown in buying also in the aftermarket if there was a little bit of an overage in buying before?
Michael Hartnett: Yeah, I think it's, by and large, it's slowed down in the end, and the various industrial sectors that support the effort. I see.
Speaker Change: Yeah, I think it's, by and large, it's slowed down in the aftermath.
Kristine Liwag: and the various industrial sectors that support the aftermarket.
Michael Hartnett: I see. And then, as you look at the recovery for each of these end markets, which quarter do you think industrial revenue could potentially peak? And do you have any visibility into that?
Speaker Change: I see. And then as you look at the recovery for each of these end markets, which quarter do you think industrial revenue could potentially draw? And do you have any visibility into that?
Michael Hartnett: If I had the visibility, I would probably know what stocks to buy and which stocks to sell. But I don't have that kind of visibility. What we do have is economic models that sort of give us a general overall direction, and those economic models are telling us, have been telling us that You know, it's flat through our third quarter and very strong in our last quarter. And that's sort of how we're, you know, piloting the ZIP today.
Speaker Change: If I had the visibility, I would probably know, you know, what stocks to buy and which stocks to sell, right? But I don't have that kind of visibility. What we do have is economic models that sort of give us general overall direction and
Speaker Change: And those economic models are saying, have been telling us that, you know, it's flat through our third quarter and very strong in our last quarter.
Speaker Change: And that's sort of...
Speaker Change: How we're, you know, piloting the, uh, piloting the ship today.
Kristine Liwag: Well, great. Thank you for the color. I'll get back in queue. Thanks.
Speaker Change: Well, great. Thank you for the color. I'll get back in queue.
Michael Ciarmoli: Thank you. Our next question is from the line of Michael Ciarmoli with Truist Securities. Please proceed with your question.
Speaker Change: Thank you. Our next question is from the line of Michael Cimarroni with Truist Securities. Please proceed with your question.
Michael Ciarmoli: Hey, good morning guys. Thanks for taking the question. Maybe just to stay on industrial, I guess the quarterly results on revenue came up short of your guidance. Was that, was the industrial weakness the biggest driver of that delta, or did anything else kind of materialize?
Michael Cimarroni: Hey, good morning guys. Thanks for taking the questions.
Michael Cimarroni: Maybe just to stay on industrial, I guess the quarterly results on revenue came up short of your guidance. Was the industrial weakness the biggest driver of that delta, or did anything else kind of materialize?
Michael Hartnett: No, that was the biggest driver. It's just, you know, it's all about consumption rates and industrial consumption rates. Our estimates of those rates at the beginning of the quarter and the actual consumption that we see during the quarter create a bearing.
Speaker Change: No, that was the biggest driver. It's just, you know, it's, uh,
Speaker Change: It's all about, you know, consumption rates and industrial consumption rates, our estimates of those rates at the beginning of the quarter and the actual consumption that we see during the quarter creates a variance.
Michael Ciarmoli: Got it. Got it.
Speaker Change: Got it. Got it. Do you have, you know, that, I guess, ever since the acquisition of Dodge and...
Michael Hartnett: Do you have, you know, that ever since the acquisition of Dodge and, you know, the amount of industrial revenues that go through aftermarket distribution now is pretty, pretty sizable at the company level. I mean, do you have the level of visibility into the distributors to know if there's really going to be a more pronounced D stock in any of these industrial sectors? Or, you know, do you even have some sort of minimum-maximum thresholds where you have, you know, a certain base level of demand that you're shipping to in the industrial panel?
Speaker Change: The amount of industrial revenues that go through aftermarket distribution now is pretty sizable at the company level. I mean, do you have the level of visibility into the distributors to know if there's
Speaker Change: Are you really going to be a more pronounced D-stock in any of these industrial sectors, or do you even have some sort of min-max thresholds where you have a certain base level of demand that you're shipping to in the industrial panels?
Michael Hartnett: Well, we probably have, you know, we probably have probably the same information that you have. I mean, some of these are public companies, and they publish quite detailed information on what their situation is. And basically, I don't think there's any, you know, much destocking going on. I think, I think part of the, Year-to-Year Comp. Unknown Speaker.
Speaker Change: Well, we have, you know, we have probably the same information that you have. I mean, you know, some of these are public companies and they publish.
Speaker Change: quite detailed information on what their situation is, and basically I didn't, I don't think there's any, you know, much de-stocking going on. I think, I think part of the year-to-year comp
Michael Hartnett: The other thing that I wanted to point out about Delta there was that a year ago, we were still benefiting from a recovering supply chain and Cleaning Up Backlog. Those are products that have been on the order book for an extended period of time. But as a result of supply chain difficulties, we couldn't complete those orders. And so last year, we probably benefited from some number that might be as high as 10 million dollars of that backlog reduction. And this year, we, you know, supply chain is normal, and And so we're just, you know, living on, you know, economic consumption. Got it. As do our distributors. I mean, I don't think there's any serious feedback going on anywhere. Okay, okay.
Speaker Change: Transcription by CastingWords
Speaker Change: Delta there was that a year ago, we were still benefiting from a recovering supply chain.
Speaker Change: and Cleaning Up Backlog. Those are products that have been on the order book for an extended period of time, but as a result of supply chain difficulties, we couldn't complete those orders. And so last year, we probably benefited from
Speaker Change: some number that it might be as high as $10 million of that backlog reduction. And this year we, you know, supply chain is normal. And, and so we're just, you know,
Speaker Change: Living on the, you know, economic consumption rate.
Speaker Change: As is our distributors. I mean, I don't think there's any serious feedback I can go from anywhere.
Michael Hartnett: Okay, okay. Do you think as you look out for the remainder of 25, I mean, you had a tough comp year over year in the first quarter for industrial, but they certainly did better. Do you think industrial growth is going to be for fiscal 25? Or do you think it's going to be, you know, sort of those single-digit kind of pressure all year?
Speaker Change: Okay, okay. Do you think, as you look out for the remainder of 25, I mean, you had a tough comp year over year in the first quarter for industrial, but they certainly did easier. Do you think industrial grows for fiscal 25?
Speaker Change: or do you think it's going to be, you know, sort of a single-digit kind of pressure all year?
Michael Hartnett: Our plan today has it growing. Okay. And, you know, that's, you know, that. We're expecting, as I said, a recovery in Semicon, expecting a milder recovery in oil and gas. And then the rest of it is about, you know, industrial economic consumption.
Speaker Change: You know I
Speaker Change: Okay and you know that's you know that's
Speaker Change: We're expecting, as I said, a recovery in, some recovery in semicon, expecting a milder recovery in oil and gas.
Speaker Change: And then the rest of it is about the, you know, industrial economic consumption rate.
Michael Ciarmoli: Okay, okay, got it. And then just real quick, and then I'll jump off here.
Speaker Change: Okay, okay, got it. And then just real quickly, and then I'll jump off here. Any more detail on the...
Michael Hartnett: Any more detail on the The Year Over Year Growth Rates by Channel and Aerospace, Aero OEM, and Aftermarket Distribution? I think you've called out the defense already.
Speaker Change: The year-over-year growth rates by channel and aerospace, aero OEM, aftermarket distribution, I think you've called out defense already.
Rob: Yeah, I think Rob can give you those. He's looking at them now, so I'll turn the call over to Rob.
Speaker Change: Yeah, I think I think Rob can give you those
Rob: Yeah, they were very consistent. Like they were both, you know, right around at 23.7 per OEM and 23.9 per distribution. So very consistent.
Rob: He's looking at it now, so I'll turn the call over to Rob. Yeah, they were very consistent. Like, they were both, you know, right around that 23.7 per OEM, 23.9 per distribution. So, very consistent. Okay.
Michael Ciarmoli: Okay, perfect. All right, guys, I'll jump.
Michael Ciarmoli: Alright guys, I'll jump back in the queue. Thanks.
Speaker Change: Okay, perfect. All right, guys, I'll jump back in the queue. Thanks.
Pete Skibitski: Our next question is from the line of Pete Skibitski with Olympic Global. Please proceed with your questions.
Speaker Change: Our next question is from the line of Pete Skibitski with Olympic Global. Please proceed with your questions.
Pete Skibitski: Hey, good morning guys, nice performance. Unknown Speaker, Hey, Mike, just on, you know, the torrid growth and defense. I think you said 38%. Was there, you know, a few programs that are helping to drive that? Or, you know, because you're just growing just so much above the market above all the OEMs? So I'm just wondering if you could give us more color and what's driving that. It's like the fourth quarter in a row of that type of really strong growth.
Pete Skibitski: And I don't know if you talk about pricing and all in terms of, you know, pricing, maybe finally catching up with past inflation, because I, I know you're on a lot of LTA as well. So just if you could comment.
Pete Skibitski: Hey, good morning, guys. Nice performance.
Pete Skibitski: Hey, Mike, just on, you know, the TOR and growth and defense, I think you said 38%.
Michael Hartnett: and Michael Hartnett.
Pete Skibitski: Was there, you know, a few programs that are helping to drive that, or...
Speaker Change: You know, because you're just growing just so much above the market, above all the OEMs. So I'm just wondering if you could give us more color on what's driving that. It's like the fourth quarter in a row of that type of really strong growth.
Speaker Change: I don't know if you can talk about pricing at all in terms of, you know, pricing maybe finally catching up with past inflation, because I know you're on a lot of LTAs as well. So just if you could comment there.
Michael Hartnett: Yeah, just to get the pricing thing out of the way, I don't think we're seeing any benefit from that right now. You know, a lot of our contracts roll over in 25 and 26, so we're really still living with prices that were probably set in 21, maybe 20, maybe 19.
Speaker Change: Yeah, just to get the pricing thing out of the way, you know, we're not seeing, I don't think we're seeing any benefit from that right now. You know, a lot of our contracts roll over in 25 and 26, so, you know, we're really still living with prices that we're probably set.
Speaker Change: In 21, maybe 20, maybe 19.
Michael Hartnett: So that's basically a headwind for us. But there are several major programs that we're involved with right now that are going to continue to drive that kind of. I think the year-to-year comps will become more difficult because... This started about a year ago.
Speaker Change: So, um...
Speaker Change: So that's basically, that's Bedouin for us. But there are several major programs that...
Speaker Change: that we're involved with right now, that...
Speaker Change: are going to continue to drive that kind of
Speaker Change: Expansion, and it's a...
Speaker Change: I think the year-to-year comps will become more difficult because...
Michael Hartnett: But when you talk about, you know, the need to build submarines. That's not going away for, you know, five or ten years, probably ten years. That's going to be very demanding on us. Missile Demanding, Joint Strike Fighter Demanding, Long Range Bomber Demanding, so there's just a lot of really big programs, that we're working on, and also the cancellation of the FARA program, for the Scout Helicopter that impacted the Corsi and Lockheed as a result benefited the other ships that were on tremendously because, you know, the other ships were sort of in some extent a hiatus like the CH-47, the Apache.
Speaker Change: This started about a year ago.
Speaker Change: But when you talk about, you know, the need to build submarines,
Speaker Change: That's not going away for, you know, five or ten years, probably ten years. That's going to be very demanding on us.
Speaker Change: Missile Demanding, Joint Strike Fighter Demanding, Long-Range Bomber Demanding, so there's just a lot of really big programs that we're working on and also the the cancellation of the FARA program
Speaker Change: for the Scout helicopter that impacted the Corsi and Lockheed as a result benefited the other ships that were on tremendously because you know the other the other ships were sort of in
Speaker Change: To some extent a hiatus, like the CH-47, the Apache.
Michael Hartnett: The Blackhawks, those are, you know, major important platforms for us. And the rest of the world doesn't know whether to buy those platforms or not based upon whether the DOD money was heading. And that environment has cleared, and there's a lot of interest in those platforms. So, you know, it's kind of a perfect loan for us on the defense side.
Speaker Change: The Blackhawk, those are, you know, major important platforms for us, and the rest of the world doesn't know whether to buy those platforms or not, based upon where the DOD money was heading.
Pete Skibitski: Yeah, okay. It makes sense.
Speaker Change: And that environment has cleared, and there's a lot of interest, foreign interest in those platforms. So, you know, it's kind of a perfect bloom for us on the defense side.
Michael Hartnett: Just one follow-up for me, maybe on the commercial side. It sounds like Boeing is at about, on the max, they're at about 25 per month now in June and July. Can you guys just remind us where you were over the past couple of quarters? I think they've been maintaining you in the 30s or so. Does that sound about right?
Speaker Change: Yeah, okay. It makes sense. Just one follow-up from me, maybe on the commercial side.
Speaker Change: It sounds like Boeing is at about, on the max, they're at about 25 per month now in June and July . Can you guys just remind us where you were over the past couple of quarters? I think they've been maintaining you like in the 30s or so. Does that sound about right?
Michael Hartnett: Yeah, that sounds about right. I think they're, I think... Our planning now is probably at a 33 grade. Although they've indicated they'll be at 38 by the end of the year, and the new CEO has agreed with that, I hope when he goes up to his office, he agrees with it even further. [inaudible] You know, so, yeah, I think we have a very modest expectation built into our planning with regard to Boeing demand and, And that seems to be. That seems to be the way we're playing it now.
Speaker Change: Yeah, that sounds about right. I think they're... I think...
Speaker Change: Our planning now is probably...
Speaker Change: at a at a 30-degree range.
Speaker Change: Although they've indicated they'll be at 38 by the end of the year.
Speaker Change: And the new CEO has...
Speaker Change: has agreed with that.
Speaker Change: I hope when he goes up at his office he agrees with it even further.
Speaker Change: You know, so, so yeah, I think we think we have a very modest
Speaker Change: expectation built into our planning with regard to Boeing demand and
Speaker Change: And that seems to be...
Michael Hartnett: Yeah, and if they make that 38 percent a rate by the end of the year, I imagine you're, potentially, you could accelerate, I guess, you know, into fiscal 26, it sounds like.
Speaker Change: That seems to be the way of playing it out.
Speaker Change: Yeah, and if they make that 38 a rate by the end of the year, I imagine you're, potentially you could accelerate, I guess, you know, into fiscal 26, it sounds like.
Michael Hartnett: Yeah, well, you know, I think they've got to get, you know, the FAA to approve a step up to 38, assuming they can get to 38. And, and so, obviously, on our part.
Speaker Change: Yeah, well, you know, I think I think they've got to get, you know, the FAA to approve, you know, a step up on 38, assuming they can get to 38. And, and so
Michael Hartnett: For the most part, have to be available six months ahead of time. That's our planning cycle ahead of the aircraft assembly rates, so you know that's kind of moved. That moved April into October, on the 38th. So we should be really, really, conservative, using a 30-foot planning length.
Speaker Change: You know obviously our parts
Speaker Change: For the most part, I have to be available six months ahead of...
Speaker Change: That's our planning cycle ahead of the aircraft assembly rates. So, you know, that's kind of moved.
Speaker Change: [inaudible]
Jordan Lyonnais: Right, right. Okay. Appreciate it. Thank you. Our next question is from the line of Jordan Lyonnais with Bank of America. Hey, good morning. On M&A, could you guys give any color?
Speaker Change: Right, right. Okay. Appreciate it. Thank you.
Speaker Change: Our next question is from the line of Jordan Lyonnais with Bank of America. Please proceed with your questions.
Jordan Lyonnais: Our next question is from the line of Jordan Lyonnais with Bank of America. Hey, good morning. About M&A...
Jordan Lyonnais: Hey, good morning. On M&A, could you guys give any color on deals in the pipe, what you're seeing, any changes in size or scope into if you're looking at anything to get more capacity if the A&E side keeps growing at this rate?
Speaker Change: Well, I, you know, I think it...
Speaker Change: We're seeing A&D-like companies coming to market.
Michael Hartnett: We're seeing A and D companies like companies coming to market. (Inaudible) We're investigating the fit with RBC. We really have nothing to report at this point.
Speaker Change: And we're, you know.
Speaker Change: We're investigating the fit with RBC. We have really nothing to report at this point. Obviously, if one of those companies does come to market, they'll likely come to market with their own capacity, so they probably won't tax ours.
Michael Hartnett: Obviously, if one of those companies does come to market, they'll likely come to market with their own capacity, so they probably won't tax ours. But there's just a lot going on in the A&E world, and we can either... We're very pleased with our growth in that sector and the outlook for that sector for the next several years. So we're being cautious and conservative about what we take on.
Speaker Change: But there's just a lot going on in the A&E world and we can either
Speaker Change: We're very pleased with our growth in that sector and the outlook in that sector for the next several years. So we're being cautious and conservative about what we take on.
Steve Barger: Our next question is from the line of Steve Barger with KeyBank Capital Markets. Please proceed with your question.
Speaker Change: Got it. Thank you.
Speaker Change: Our next question is from the line of Steve Barger with KeyBank Capital Markets. Pleased to see you with your questions.
Steve Barger: Thanks. Hey Mike, seeing gross margin above 45% with industrial down three and a half is a great performance. Thank you.
Steve Barger: Thanks. Hey Mike, seeing gross margin above 45% with industrial down three and a half is great performance.
Speaker Change: Thank you. Was that all mixed in aerospace, or was there something unusual in there?
Michael Hartnett: Um, no, you know, aerospace. Um, contributed.
Mike: No, you know, aerospace...
Michael Hartnett: You know, its margin is improving. I think it's As I said, we have a lot of contracts that we're working our way through that were inked in 1920 and 21 that are a little bit of a headwind. We're becoming more efficient in the execution of those contracts just because there's more volume and there's more absorption as a result of that. We also have better methods and a little better capitalization here and there to execute some of those designs. I would say it was a very solid performance on the industrial side that really, really carried the day.
Speaker Change: contributed. You know, its margin is improving. I think it's, as I said, we have a lot of contracts that we're working our way through that we're
Speaker Change: that were inked in 1920 and 21 that are a little bit of a headwind.
Speaker Change: We're becoming more efficient in the execution of those contracts just because there's more volume and there's more absorption as a result of that. We have also better methods and a little better capitalization here and there to execute some of those designs.
Steve Barger: So industrial margins were up even against the negative 3.5% organic.
Speaker Change: I would say it was very solid performance on the industrial side that really carried the day.
Speaker Change: So, industrial margins were up even against negative three and a half percent organic? Yes, that's right.
Michael Hartnett: Yes, that's right.
Steve Barger: And what in industrial drove that? Because that's a pretty big absorption headwind to overcome, isn't it? Like what was in the mix that made that so rich? [inaudible]
Speaker Change: And what in industrial drove that? Because that's a pretty big absorption headwind to overcome, isn't it? Like what was in mix that made that so rich?
Michael Hartnett: Well, you know, we've been talking about synergies for a long time, and we're starting to see it. They did have a favorable mix this quarter. I can't say that we're going to see margins like that forever, but we saw it in the first quarter. You know, I think the neighborhood that we'll probably end up living in is more like 44% when the year's all done. But we'll see. That's hard to predict.
Speaker Change: Well, you know, we've been talking about synergies for a long time and we're starting to see it. They did have a favorable mix this quarter. I can't say that we're going to see margins like that forever, but we saw it.
Speaker Change: in the first quarter. You know, I think the neighborhood that we'll probably end up living in is more like 44% when the year's all done.
Steve Barger: So, you know, there's a lot of synergies that went on, the mixed results were favorable, and plan efficiencies were absolutely better. There's no question about that. I mean, they're operating in their sweet spot, and we've had some method improvements. And we've had an improvement in the Supply Chain Cost Structure. So, you know, everybody sort of has a role when they come to work in the morning, and a little piece of each one of these issues, and cumulatively, it makes a difference.
Speaker Change: But we'll see. That's hard to predict.
Speaker Change: So, you know, there's a lot of synergies that went on, mixed was favorable, plant efficiencies were absolutely better, there's no question about that, I mean, they're operating in their sweet spot, and we've had methods improvements, and we've had...
Speaker Change: We've had improvement in supply chain cost structure.
Speaker Change: Everybody, you know, everybody sort of has a role when they come to work in the morning and a little piece of each one of these issues and, you know, cumulatively it makes a difference.
Michael Hartnett: So, I guess you're guiding fiscal 2Q gross margin down one or 200 basis points against what is obviously a tough comp. But is there any specific thing causing that sequential decrease?
Speaker Change: So, so I guess you're guiding fiscal 2Q gross margin down one or 200 basis points against what is obviously a tough comp, but is there any specific thing causing that sequential decrease?
Michael Hartnett: I mean, I think you have fewer production days in Q2 and Q3, you know, that's been pretty consistent over time. So you have a little bit of a headwind there. And then you couple that with the favorable mix we had in the first quarter, it just adds up to, you know, This is where we're seeing things in the future and the right way to look.
Speaker Change: I mean, I think we have fewer production days in Q2 and Q3. You know, that's been pretty consistent over time, so you have a little bit of a headwind there.
Speaker Change: And then you couple that with the favorable mix we had in the first quarter.
Steve Barger: And the right way to look at it is probably more on a year-over-year basis, right? And you'll notice that the range is capped.
Speaker Change: This is where we're seeing things in the Q2.
Speaker Change: and the right way to look got it it's probably more on a year-over-year basis right and the range
Steve Barger: And then on the revenue side, you know, aerospace is up 24% against the 21% comp. You talked about all the things that are going right there. Do you expect 20% plus growth again in 2Q?
Mike Hartnett: and Mike Hartnett.
Speaker Change: Understood. And on the revenue side, you know, aerospace was up 24% against the 21% comp. You talked about all the things that are going right there. Do you expect 20% plus growth again in 2Q?
Speaker Change: You know.
Michael Hartnett: We're not planning for it, but I can't say that it won't happen.
Speaker Change: We're not planning for it.
Steve Barger: Well, I guess the question then is, you know, you expect industrial to recover in the back half. Do you think that's up sequentially from a revenue standpoint, or is that more likely down given some of the softness that you're seeing right now?
Speaker Change: But I can't say that it won't happen.
Speaker Change: Well, I guess the question then is, you know, you expect industrial to recover in the back half. Do you think that's up sequentially from a revenue standpoint, or is that more likely down given some of the softness that you're seeing right now? Yeah, that's more likely down.
Michael Hartnett: Yeah, that's more, but that's more likely down.
Steve Barger: Understandable. All right. Thanks very much. Yes.
Speaker Change: Understood. All right. Thanks very much. Yep.
Joe Ritchie: Our next question is from the line of Joe Ritchie with Goldman Sachs. Please proceed with your question.
Speaker Change: Our next question is from the line of Joe Ritchie with Goldman Sachs. Please proceed with your questions.
Vivek Srivastava: Thanks, this is Vivek Srivastava on behalf of Joe. I just want to start with a more long-term question. Your EBITDA margin this quarter was 32.9%, the highest we've seen. You've previously talked about the mid-30s long term EBITDA margin, which is not far away from where you are today. So just wondering what kind of updated long-term margins you have your eyes set on and just how to think about the margin improvement path from here. Once the industrial businesses do start inflecting positively
Speaker Change: Thanks. This is Vivek Srivastava on for Joe. I just want to start with a more long-term question.
Vivek Srivastava: Your EBITDA margin this quarter, 32.9%, the highest we've seen. You previously talked about mid-30s long-term EBITDA margin, which is not far away from where you are today.
Speaker Change: So, just wondering what kind of updated long-term margins you have your eyes set on and just how to think about the margin improvement path from here once the industrial businesses do start inflecting positively.
Michael Hartnett: You know, we're thrilled with the 33% that we achieved this year. We are far ahead, coming out of the gate, of what we talked about in Q1. We talked about where we're seeing gross margins in Q2. Our mission is to continue to squeeze the lemon, to expand margin every quarter as best as our ability allows. So we're not... We're not looking to put out a long-term guidance, but we are telling you that we're continuing to strive to seek out that EBITDA margin. And I think, you know, we have opportunities in different areas.
Speaker Change: You know, we're thrilled with the 33% that we achieved this year.
Speaker Change: You know, we are far ahead, you know, coming out of the gate of what we talked about in Q1. We talked about, you know, where we're seeing gross margins in Q2. You know, our mission is to continue to squeeze the lemon to expand margin.
Speaker Change: every quarter for our ability, so we're not, you know,
Speaker Change: We're not looking to put out long-term guidance.
Speaker Change: But we are telling you that we're continuing to strive to seek out that EBITDA margin and I think, you know, we have opportunities in different pockets to do so.
Vivek Srivastava: That's helpful. And maybe just to follow up on that, as your margin continues to improve industrial growth, your long-term target, probably close to two times GDP, is reinvesting within the industrial business, something that could potentially accelerate a bit more from here to return to that two times GDP growth target.
Speaker Change: that's helpful and maybe just a follow-up on that as your margin continues to improve
Speaker Change: Industrial growth is your long-term target, probably close to two times GDP.
Speaker Change: Is reinvesting within the industrial business something that could potentially accelerate a bit more from here to return to that two times GDP growth target?
Vivek Srivastava: Can you clarify? I'm sorry.
Vivek Srivastava: Yeah, just given you're getting such strong margins right now, will reinvesting back in the business for growth be something that could potentially accelerate from here on? Well, I think those are two different things that we're doing.
Speaker Change: Can you clarify? I'm sorry.
Speaker Change: Yeah, just given you're getting such strong margins right now, will reinvesting back in the business for growth be something that could potentially accelerate from here on?
Michael Hartnett: Well, I think those are two different things that we're reinvesting in the industrial business for cost reasons. In other words, we're trying to reduce our cost of sales by putting in capital equipment that will make our plants more efficient and incorporate. Manufacturing processes that we don't have in-house today and are very expensive to buy in the outside world. So that's ongoing, and we're making not insubstantial investments in those kinds of machinery. Unknown Speaker And so we're reasonably confident that that'll accrue to gross margin over time.
Speaker Change: for
Speaker Change: cost reasons. In other words, we're trying to reduce our cost of sales by putting in capital equipment that will make
Speaker Change: are plants more efficient and incorporate manufacturing processes that we don't have in-house today and are very expensive to buy in the outhouse.
Speaker Change: So that's ongoing and we're making not insubstantial investments in those kinds of machinery.
Speaker Change: And so that's...
Speaker Change: That's why we're reasonably confident that that'll accrue to gross margin over time in terms of in terms of growth, you know
Michael Hartnett: In terms of growth, you know, the industrial business is probably running over a billion dollars per year now. So in order to really impact that kind of number and to get the internal growth mechanism performing at a measurable level, it requires some pretty big projects. And ultimately, and so we have our eye on some pretty big projects, but ultimately, those bigger projects take time to implement. And so we've just got to work through that. And that's that sort of ongoing.
Speaker Change: The industrial business on an annual rate now is probably running over a billion dollars. So in order to really, you know, impact that kind of number.
Speaker Change: to get
Speaker Change: to get the internal growth mechanism performing at a
Speaker Change: measurable level requires some pretty big projects.
Speaker Change: And ultimately, and so we have our eye on some pretty big projects, but ultimately those bigger projects take time to implement. And so we've just got to work through that, and that's sort of ongoing right now.
Vivek Srivastava: That's very helpful, Karar. Thanks for that. Maybe one last question from me, just on the backlog: notice that in the press release, you provided backlog beyond 12 months, but we didn't see backlog due within 12 months. Just wanted to understand the rationale behind that and just any color on the backlog due within 12 months.
Speaker Change: That's very helpful, Kair. Thanks for that.
Speaker Change: May be one last question from me. Just on the backlog, notice that in the press release,
Speaker Change: You provided backlog beyond 12 months, but we didn't see backlog due within 12 months. Just wanted to understand the rationale behind that and just any color on the backlog due within 12 months.
Michael Hartnett: Yeah, we made a strategic decision and communicated last quarter that from here on out, we were just going to be presenting the full-on backlog because that's such a significant part of our business, especially on the defense side at this point. We think that's the more appropriate way to look at our overall backlog.
Speaker Change: We made a strategic decision and communicated last quarter that from here on out we were just going to be presenting the full-on backlog because that's such a significant part of our business, especially on the defense side at this point. We think that's the more appropriate way to look at our overall backlog position.
Vivek Srivastava: Very helpful. I'll pass it on. Thanks.
Timothy Thein: Thank you. Our next question is from the line of Tim Thein with Raymond James. Please proceed with your question.
Speaker Change: Very helpful. I'll pass it on. Thanks.
Speaker Change: Thank you.
Timothy Thein: Yeah, thanks. Good morning.
Speaker Change: Our next question is from the line of Tim Thein with Raymond James. Please receive your questions.
Timothy Thein: Just, I guess, one for me is on gross margins and there is a lot obviously discussed here in terms of the outlook for the second quarter, but I was thinking, you know, in terms of, I believe, the expectation coming into the year was that you may see more of a lift in the back half of the year as you better absorb some of that aerospace fixed capacity and the Dodge synergies, you know, kick in even more. But, you know, A, the industrial economy obviously being weaker, does that change the outlook in terms of, you know, on the Dodge side?
Tim Thain: Yeah, thanks. Good morning. Just, I guess, one for me is on the gross margins and...
Speaker Change: A lot, obviously, discussed here in terms of the outlook for the second quarter, but thinking, you know, in terms of, I believe, the expectation coming into the year was that
Speaker Change: You may see more of a lift in the back half of the year as you better absorb some of that aerospace fixed capacity.
Speaker Change: and that the Dodd synergies, you know, kick in even more. But as, you know, A, the industrial economy obviously being weaker, does that...
Speaker Change: Does that change the outlook in terms of, you know, on the DOD side? And then, I guess, related to that, was there some maybe pull-ahead that, maybe some of those benefits that...
Timothy Thein: And then, I guess... Related to that, was there some maybe pull ahead that maybe some of those benefits that we're expecting more in the later part of the year, maybe they came earlier as a contributor in the first quarter. So I guess, simply stated, do you still have the expectation still that there's room for more, even more of a second half lift from some of these drivers?
Speaker Change: We're expecting more in the later part of the year. Maybe they came earlier as a contributor in the first quarter. So I guess.
Speaker Change: Simply stated, do you still, is the expectation still that there's there's room for more, even more kind of a second half lift from some of these drivers?
Michael Hartnett: Yeah, well, right now, we continue to expect the second half half lift. You know, one of the things that attracted us to it when we bought it is when you when you're looking at The Revenue Performance at Dodge over a series of years, you know, through various economic cycles. It's a very low beta company.
Speaker Change: Right now we continue to expect a second half lift. You know, one of the things that attracted us to Dodge when we bought Dodge is when you look at the
Speaker Change: The revenue performance at Dodge over a series of years.
Speaker Change: You know through various economic cycles It's a very low beta company
Michael Hartnett: You know, it's so integrated into the U.S. infrastructure that when you're pouring your cereal in the morning, we actually have something to do with that. You know, when you drive your car over a street or a bridge to get to work, we actually have something to do with that road. So, you know, we are, and whatever we supplied only lasted a few years before nature had its way with it, and we had to replace it.
Speaker Change: You know, it's so integrated into the U.S. infrastructure.
Speaker Change: That, you know, when you're pouring your cereal in the morning, we actually had something to do with that.
Speaker Change: You know when you're driving your car over over a street or a bridge
Speaker Change: to get to work, we actually had something to do with that road. So, you know, we're, we're, we're, we're, and whatever, whatever we supplied only lasted a few years before nature had its way with it. And we had to replace it. So.
Michael Hartnett: So, you know, Dodge has a very strong recurring revenue driven by human consumption in North America. And, and so, you know, whether the economy is expanding or it's contracting slightly, Dodge's business is probably going to perform well through those cycles. In terms of what we expect for the rest of the year, you know, we expect the semiconductor industry to pick up, and we expect oil and gas to recover, and if there's more tension in the Middle East that interferes with the production of oil and gas, it will, we will definitely feel the acceleration in our business. So that's it. That's sort of where the thing fits right in.
Dodge: So, you know, Dodge's has a very strong recurring revenue driven by
Timothy Thein: Got it. Yeah. Okay. All right. Thanks a lot. I appreciate it.
Michael Hartnett: Human Consumption.
Michael Hartnett: in North America. And so...
Michael Hartnett: you know, whether whether the economy is expanding or
Michael Hartnett: In terms of what we expect for the rest of the year, you know, we expect the semicon to pick up and we expect oil and gas to...
Michael Hartnett: to recover. And, and if there's, if there's more tension in the Middle East that interferes with the production of
Michael Hartnett: of oil and oil, it will, we will definitely feel the acceleration in our business. So, that.
Michael Hartnett: That's sort of where the thing sits right now.
Speaker Change: Got it. Yeah. Okay. All right. Thanks a lot. Appreciate it.
Michael 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 any closing remarks.
Speaker Change: 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 any closing remarks.
Michael Hartnett: Okay, well, I'd like to thank everyone for participating today, and we look forward to speaking with you again in the fall.
Dr. Hartnett: Okay, well I'd like to thank everyone for participating today and we look forward to speaking again to you in the fall. So good day.
Operator: This will conclude today's conference. Thank you for your participation. You may now disconnect your lines at this time.
Speaker Change: This will conclude today's conference. Thank you for your participation. You may now disconnect your lines at this time.