Allient Inc. (ALNT) Q4 2018 Earnings Report, Transcript and Summary

Greetings, and welcome to the Allied Motion Technologies Fourth Quarter and Full Year 2018 Financial Results. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Craig Mychajluk, Investor Relations for Allied Motion Technologies. Thank you. You may begin.

Yes. Thank you, and good morning, everyone. Certainly appreciate your time today as well as your interest in Allied Motion. Joining me on the call are Dick Warzala, our Chairman, President and CEO; and Mike Leach, our Chief Financial Officer. Dick and Mike are going to review our fourth quarter and full year 2018 results and provide an update on the company's strategic progress and outlook, after which we will open it up for Q&A. You should have a copy of the financial results that were released yesterday after the market closed. If not, you can find it on our website at www.alliedmotion.com. On the website, you'll also find slides that accompany today's discussion. If you are reviewing those slides, please turn to Slide 2 for the safe harbor. As you are aware, we may make some forward-looking statements on this call during the formal discussion as well as during the Q&A. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated on today's call. These risks and uncertainties and other factors are provided in the earnings release as well as other documents filed by the company with the Securities and Exchange Commission. You can find these documents on our website or at sec.gov. I want to point out as well that during today's call, we'll discuss some 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 provided reconciliations of non-GAAP to comparable GAAP measures in the tables accompanying the earnings release and slides. With that, please turn to Slide 3, and I'll turn it over to Dick to begin. Dick?

Thank you, Craig, and welcome, everyone. 2018 was a year in which we made significant progress towards achieving our long-term strategic goals and objectives. For the full year 2018, revenue grew 23% driven by 15% organic growth and net income nearly doubled to a near record level. For the fourth quarter, revenue was up 13%, bookings were up 17% and our backlog grew 31% to nearly $132 million, marking the seventh consecutive quarter of reaching a new backlog record. Organic growth was realized in all our served markets. In addition to the strong positions we have in medical, vehicles and aerospace, we are capitalizing on the automation trend with industrials as manufacturers continue to advance towards smarter, more efficient factories with Industry 4.0. An important component of our strong performance in 2018 was in the vehicle market, which achieved improved sales for the fifth consecutive quarter. We certainly benefited from a strong environment for our business, and we believe that our approach has helped us to enhance the value we've been able to extract from our markets. As you know, strategic acquisitions are a key component of our growth strategy as long as the price is right. We began 2018 with the acquisition of Maval Industries original equipment business in January. Their product line complemented our steering solution so that we can now offer a fully integrated power steering system to our served markets. Overall, this acquisition has met our expectations. More recently, we completed the acquisition of TCI in early December of 2018. Their rotation technologies and capabilities enable more efficient and longer life solutions for motion devices in a wide variety of demanding applications. We believe their core technology will be a valuable addition to our expanding suite of control motion solutions and will provide good growth opportunities as we begin to leverage the capabilities of the combined companies. If you turn to Slide 4, we show some of TCI's product offerings and review why we see this adjacent technology as a great complement to our own. They are a leading developer and manufacturer in the U.S. of active electronic and passive magnetic products to resolve power quality and harmonic issues associated with industrial power conversion. Their solutions are used in oil and gas, HVAC, water and wastewater and general industrial end markets. Approximately half of their revenue in 2018 was generated through their well-established distribution channel. As we move forward, we plan to leverage this channel as well using our international footprint to accelerate TCI's global market penetration. TCI has been delivering above-market growth and has a beneficial margin profile, making it an ideal strategic fit for us, and we are excited to have them as part of Allied Motion. With that, Mike, let me turn it over to you for a more in-depth review of the financials.

Thank you, Dick. Please refer to Slide 5. As a reminder, results include the acquisition of Maval in January 2018 and just a few weeks of TCI operations as we closed that acquisition on December 6. Fourth quarter revenue was $74 million, up 13%. We achieved solid organic growth of approximately 5% in the quarter, which excludes a $1.2 million unfavorable FX headwind. Demand was broad based with strong growth in all of our major served markets, particularly within industrial and vehicle. 2018 revenue reached a record $311 million, up 23%. This was driven by extremely strong organic growth of 15%. We achieved double-digit growth in all of our major served markets. Consistent with 2017, full year sales to U.S. customers comprised 53% of total sales, with the balance of sales to customers primarily in Europe. Slide 6 shows the change in our revenue mix by market for the full year as well as the annual growth. As mentioned, Vehicle had a very strong year with 30% growth, fueled by the rebound in the power sports market and aided by our acquisition of Maval. Also notable is the 21% growth in Industrial, which continues to reflect our success that adding new business around the increasingly favorable trends of factory automation and robotics. The recent TCI acquisition is reflected in Industrial and in distribution. Given that much of TCI's business is through distribution, we felt it was the right time to start sharing that breakout here along with our other major markets. Although still a small contributor, we foresee distribution as an important area with significant long-term growth potential. Slide 7 provides detail on our operating performance. Fourth quarter gross margin was 29.2% compared with 31.4% for the fourth quarter of last year. The short period of higher gross margins from TCI did help to partially offset the impact of the expected lower-margin profile of Maval. The larger driver of the gross margin decline was product mix. It was not any one item or business line but rather a number of small shifts across the organization. Favorable margin contribution that happened in Q4 of 2017, such as revenue generated from nonrecurring engineering charge, did not repeat in Q4 of 2018. Margin in the quarter were consistent with those seen in the previous 3 quarters. Operating costs and expenses outpaced the rate of revenue growth in the quarter. These costs included additional engineering personnel to support the company's growth, higher incentive compensation given our strong annual performance, $413,000 of business development expenses and incremental intangible asset amortization of $140,000 related to the TCI acquisition. As a result, operating income decreased $1.8 million and operating margin was 4.5%. Full year gross margin was 29.4% compared with 30% in 2017. The change was largely due to the fully expected lower-margin profile of Maval, partially offset by higher volume and operational efficiencies throughout the organization. Our business model is delivering some of its operating leverage potential. Despite lower gross margin, significant growth-related spending and an incremental expenses related to the TCI acquisition, operating margins in the year remained steady. We will continue to prudently invest a portion of our growth in our people, especially around engineering talent. We believe that the bulk of our needed operating structure is in place and can handle a much larger base of business. Interest expense was up approximately $200,000 for the quarter and full year due to the additional debt to fund acquisitions. If you look at Slide 8, you can see our strong bottom line results. The tax benefit in the fourth quarter is a result of various discrete tax benefit items that we do not expect to be repeated. The effective tax rate of the year decreased to 23% from 50.2% as 2017 was impacted by U.S. tax reform, which included a transition tax on the deemed repatriation of foreign earnings. We anticipate the effective tax rate for fiscal 2019 to range between 25% and 28%. Net income for the quarter was up due to the tax changes. Full year net income nearly doubled to $15.9 million or $1.70 per diluted share. Adjusted EBITDA for the quarter was $7.8 million or 10.5% of sales. Full year adjusted EBITDA increased 23% to $38.4 million, while adjusted EBITDA margin increased 10 basis points to 12.4%. We use adjusted EBITDA as an internal metric and believe it is useful in determining our progress and operating performance. This is a non-GAAP measure, so please be advised to review our reconciliation and the related disclosures in our release and at the end of our slides. Slide 9 provides an overview of our balance sheet and cash flow. Reflected in the numbers on the slide is the 2 acquisitions made in 2018. Maval and TCI were both funded with the combination of cash and debt. Directly related to the TCI acquisition, we exercised a $50 million accordion feature of our existing revolving credit facility. That facility expanded from $125 million to $175 million and carries a current effective interest rate of 3.75%. As a result, at year-end, debt, net of cash, was approximately $114 million or 52.8% net debt-to-capitalization, up from 30.1% at the end of 2017. Capital expenditures were in line with expectations at $14.3 million for the year and included numerous investments for productivity improvement and growth initiatives. We expect our fiscal 2019 CapEx to range between $15 million and $18 million, which reflects additional support for the significant project wins that will begin ramping up by year-end, the next generation of off-road capabilities and incremental investments for TCI. Inventory turns were down to 3.5 at the end of 2018. We did increase inventory levels fairly significantly this past year in support of our strong sales pipeline and in part due to the tightened supply chain and necessary inventory stocking to support customer demand. Timing also played a role as we believe some customers were aggressively managing their own working capital and inventory levels around year-end, resulting in delaying shipments of inventory in December. DSO was 56 days, which is up some, but expected given payment terms with certain large customers. I'll now turn the call back over to you, Dick.

Thank you, Mike. We'll now turn to Slide 10. Our focus on delivering market-leading solutions to an innovated and expanding markets, combined with our One Allied approach to efficiently manage opportunities, enables us to provide a better value proposition to our customers and to improve our own operating efficiencies. Strong organic growth in all of our major served markets this year is a testament to our successful efforts to diversify and strengthen our base of business. Diversifying our sources of revenue enhances our competitive position by creating a more robust foundation and increases the avenues for organic growth. To support this growth, we significantly enhance our technical capabilities by adding key technical resources in many areas of our business. Fourth quarter orders grew 17% to $85 million. And absent unfavorable FX, this level was close to the record order level we achieved in the second quarter of 2018. Record backlog at year-end of nearly $132 million included $5.6 million from TCI. Keep in mind that TCI is more of a book-to-bill type business, and their typical book to ship time is measured in just weeks. As a reminder, the $225 million in vehicle market awards we announced in 2017 and early 2018 are not yet included in our reported backlog numbers. These programs are on track, and we will begin shipments on these contracts in late 2019. And as we do, we will begin recording the sales and moving the planned shipments into our reported backlog numbers. Moving on to our outlook slide. Our focus on becoming a global leader of solutions for controlled motion applications has gained traction, and our One Allied approach to managing opportunities and guiding customer interactions is becoming ingrained in our culture. This cultural shift has led to increased shipments in all of our major served markets, significantly broadening our scope of business and expertise and has positioned us for continued growth in 2019. That said, we have begun the first quarter this year with a robust level of orders and sales. All signs point to continued near-term growth, and we are very confident that we will be able to execute that. With an enhanced value proposition for our customers, record backlog and a strong pipeline of opportunities, we feel positive about our continued growth prospects of the future. Further, enhancing and developing operational efficiencies and driving continuous improvements in all business areas through the implementation of AST, or Allied Systematic Tools, remains an integral element of our culture. We successfully generated organic growth. And while fostering organic growth remains an emphasis, strategic acquisitions are an equally important element of our overall growth strategy. We will continue to be consistent in our disciplined approach to ensure that all acquisitions are a strategic fit and are supported by solid economics as well. Lastly, our long-term goals are to continue the rate of growth we have demonstrated over the last several years through both acquisitions and organic expansion. Over time, we believe we can enhance our margin profile as we further expand our multi-technology solution opportunities and drive continuous improvement through utilization of AST in all aspects of our business. Now before we turn the call back over to the operator to ask the questions, I would like to emphasize one of the statements we made here and maybe clarify it a little bit further about our first quarter and how we mentioned that we've had -- we have a strong start to our first quarter. Largely, as you know, we don't give any guidance. Given the dip in the fourth quarter and as we mentioned during the year in several conference calls, we talked about that our concern was that the market was overheated, extended lead times for materials, that we may have seen some increased order levels that would adjust later in the year. I can tell you that right up and through until November, we haven't seen any adjustments occurring. But in December, they did hit. I can also tell you that, that has turned around right away. Coming right of the chutes here, we have seen a very strong start to the year and in the first quarter. And that's about as far as I'm going to take it, but at least to give you some perspective on what we feel is going to occur here in a few weeks when the quarter does close. So now operator, I will turn it over to you for questions.

[Operator Instructions]. Our first question comes from the line of Greg Palm with Craig-Hallum Capital Group.

I guess, first, I'd like to say congrats on really incredible year. Lots to be proud of, achievements and accomplishments. I just want to start by congratulating you guys again. Interesting, the stock just went green in the last couple of minutes based on those comments, Dick. So appreciate the added color there. I guess, just firstly, on the actual revenue results in the quarter, they suggest a pretty sharp pullback in vehicle, and based on our math, specifically contribution from your largest consumers. So I assume that this was more of an inventory issue, but just wanted to get your thoughts there.

Yes, Greg. I think -- well, the comments I made, there was a significant adjustment that did occur in that area, so you are correct. And again, coming right of the chutes, first of the year, it was apparent that adjustment was made and it's over and behind us. And business was picking up at, I'll say, at levels above what we saw in the previous year.

Got it. And in terms of your confidence on Q1, are you specifically seeing a rebound in that specific segment? Or is it across the board? Maybe a little bit more color on exactly what you mean there.

Pretty much across the board. There -- but I think the major impact or about half of that impact was in that one segment that we did discuss here. But pretty much, we are seeing some organic growth in pretty -- again, pretty much across the board.

Good stuff. Obviously, that implies that it really was just kind of a near term, one quarter phenomenon. So I guess, shifting gears a little bit to TCI. I think what really jumped out at me in the recent filing was the growth rate there. I mean, it implies something like 30% growth on a stand-alone basis, if my math is accurate, which really is incredible. So what drove that? Anything onetime there? And I guess, just kind of expectations going forward. I mean, is this a double-digit growth business? It sounds like there's potential of taking that business more international, which would imply that there is. But wanted to get some more color around what your expectations are for that business, specifically.

Sure. I'll start, and if Mike wants to jump in and add to it, feel free, Mike. But I'd say to you that the strong growth that they saw, they are -- they have an element of their business in oil and gas that's a pretty important element. And that was fairly strong for this -- for 2018. But they did see also industrials are important for their business, too. And with the automation that you see going on in factories and additional CapEx, equipment, material handling vehicles, et cetera, there is a demand for the TCI product. So that was also an area that we saw some improvement. You are 100% correct, they're a U.S.-based business. And one of the exciting elements of the business that we saw was the opportunity to leverage the Allied footprint globally to assist in developing some international business or more international business. But they are primarily a North American-based business. So I think we also look at the technology and we see -- and we know based on products that we design and we're working on today, regulatory requirements are going to demand better -- higher level of quality -- power quality and less harmonics and even at the device level and, of course, at the factory and industrial level. So this is an expanding market. From a technology standpoint, it absolutely lines up with our core underlying technology/know-how. And we are quite excited about bringing them on board. Very fine company, great team of people, well run. And again, we just -- I'd just like to again take the opportunity to welcome them because we are excited about the potential they could bring. Mike, do you have anything to...

It seems like -- and safe to assume here at least looking at that as a growth business going forward, though, correct? I mean, am I reading you right with all the opportunities ahead?

Yes. Well, I think we will say to you that as they continue to expand their markets, we are working hard or they have been working hard in expanding markets that make them less vulnerable to a cyclical oil and gas market, okay? So it will take a little bit of time, but they'd already started on that and have made significant progress. So I think they will still be subject to any jerkiness that you see in the oil and gas markets or in the oil and gas price, for example. And -- but on the other hand, they're making very good progress in diversifying the business. And I think together, we can help that.

Yes, understood. And going back to that 8-K, you put some good details on a pro forma basis, what the combined company looks like. And I know 9 months ended September did something like $270 million in revenue, $24 million in operating income, so 9% operating margin. As we look forward, obviously, that sales figure for 2019 will be significantly higher. And what I'm trying to figure out is if that 9% operating margin figure is a good starting point for the combined company, call it maybe a base case scenario? I know you don't give guidance. I just want to make sure my math is kind of lining up with what your expectations are.

Yes. I would say to you that, I mean, it's fair to assume. I mean, again, the pro forma did give you the information as how the combined company would look here on an annualized basis. And I think we also believe that we have many areas to improve and through the implementation of AST. And we've expanded our capabilities in that area. I did mention -- Mike mentioned a great detail in his part of the presentation and I discussed it just briefly about the significant adds that we made and I talked about technical adds. And technical adds, including lean experts, AST -- enhancing our AST capabilities and also quality engineering as well as materials procurement on a global basis and a high level. So we've really added some key resources to our foundation here that position us for that next level of growth and allow us to streamline and manage things on a more strategic basis rather than a reactive basis. So I cannot stress enough of the significant adds we have and we've incurred that are already in our cost structure for 2018 that we will begin leveraging into 2019.

And are you expecting any synergies specific with the acquisition or maybe it's more kind of operational efficiencies that you can bring to the table?

Yes. I think the synergies, we have some opportunity certainly from an operating standpoint and to leverage, as I mentioned, the Allied footprint. So we do see some opportunities there. We also -- when we look at the synergies that they bring -- you know, Greg, the way we look at acquisitions are on a stand-alone basis. And this acquisition was done on a stand-alone basis without valuing synergies when we looked at the model itself. But these synergies we do see are accessing the footprint that the combined companies have, and that means distribution channel as well as manufacturing capabilities. So we also -- given the core technology is the same, is similar, I mean, laminations, so steel and wire and so forth, they add a significant more volume again. And we do think the strategic purchasing initiatives will allow us to leverage some of that. They were already making good strides in smart automation, I'll call it. And I think the continuation of that is necessary and will be supported by our company, for sure. So I hope that answers your question.

[Operator Instructions]. Our next question comes from the line of Dick Ryan with Dougherty & Company.

Dick, in the news release, you mentioned, and you addressed a little bit of this, kicked off Q1 robust order patterns. But you said you're going to return to levels experienced earlier in 2018. Just clarification, but I'm assuming that's ex TCI, that's kind of the core AMOT and Maval business.

Correct. Yes, good question. Yes, to clarify that, I was looking at our organic growth with a direct comparison quarter-over-quarter for the first quarter of 2019 versus '18. The growth is ex TCI, and TCI will be on top of that.

Yes. Okay, great. And you kind of covered the integration of TCI. But what, if any, organizational structures are there incorporating them into the -- underneath the AMOT umbrella given that there is kind of adjacent opportunities but certainly sounds like areas that you haven't been involved with in the past?

Quite frankly, when I look at the team there and why this was an exciting acquisition for us is that the trend certainly in the future and currently today, but the trend in the future with additional regulation about power quality and harmonic distortion mitigation. And our opportunity to leverage the electronic side of it is our motion control electronics. We'll look at the 2 teams and see how we can develop a solution that's fairly unique in the market. Having both capabilities is really what we'll be looking at here. But the team itself in a stand-alone business basis is an excellent team. And from an integration standpoint, I have to tell you that there's not a lot that has to be done. There's things that are occurring at TCI, business practices that they've adopted that I think can help other operating units within Allied and vice versa. We have a strong AST team. We've enhanced the capabilities this past year, and I think we will work hard to leverage that. And together, I think we'll see some good improvements. Also, I have to say, from the day we started -- from the first day of the acquisition, meeting with the team in Germantown, Wisconsin and talking about them being a part of Allied, I felt very good about their excitement about becoming a part of Allied and what they could do with the resources we have to expand their business internationally. So I think it's -- so far, it's one of those acquisitions that right out of the chutes, the integration issues are minimal.

Okay, great. So are there regulatory requirements in Europe that will help you open doors with their solutions? Or is it going to be a different go-to-market strategy if the regulations aren't there?

Well, the regulations are not just in Europe, they're in the U.S. And we're seeing more and more regulations around our quality. And we have -- we view certain emerging markets as good opportunities for us. But I chose not to discuss those right now because we are working on some strategic objectives here to look at those markets that we think we could add value to them. So let me say again, part of the acquisition process is looking at some emerging markets that we thought this technology would give us the better chance to win in. But the regulatory requirements are around the world. Europe seems to be the leader, and that's not unusual in terms of safety and regulatory requirements. And then North America follows. And we see those, and you see it more and more. And sometimes, it's state by state, community by community. And of course, Asia, too, with the need for clean power and so forth, we feel that it's only going to increase. It's not going to decrease.

Our next question comes from the line of Josh Goldberg with G2 Investment Partners.

I just had a couple of questions about, I guess, the fourth quarter inventory adjustment and then the -- obviously, the bounce back here, which is they're great. Clearly, your business in industrial is going through a, in my mind, a real change of character. Meaning it's not just fulfilling orders that the regular customers needs, but really working with them on this new industrial automation and factory 4.0. And I think that everything you've done in the last 12 months has really catapulted you into more of the modular customer -- product customers as well as some of these secular trends. As some of the new investors might be online or just sort of long-term investors, how confident are you that you're in some sectors, albeit not in a huge way yet, that show very strong year-over-year growth? And I think the reason why is when you go from close to 20% organic growth down to 5% in one quarter, people are nervous maybe there was some inventory and that the long-term growth is more 5% or 6% GDP plus. And I think you guys are growing faster than that underneath the hood. So I just wanted to hear from you what your thoughts are on that.

Okay. Thank you, Josh. And if we don't -- don't hesitate to jump in if we -- you'd settle out there for us to interpret that -- the questions that you actually have about that. But I think one is if I understand what you're talking about, we agree with you that the opportunity in industrials is expanding. And I think the macro trends are showing that there's a shortage of people everywhere, and smart automation is being applied. Smart automation and since the volume continues to go up, the costs are being driven down and they're being applied in many, many, many more places. So we agree 100% that, that's an exciting area. And we've added, as I mentioned, resources. We've been adding through the year. We've added market specialists. We'll call it market specialists. It's a combination of marketing/technical capabilities to support our efforts in our selected key markets. We've added engineering talents, especially in the electronics of engineering and software capabilities. And as we look at electronics and software, it's probably, and I'll just say this and I said it before in the past and especially a couple of years ago, that you should no longer look at Allied Motion as being a motor company because we do have integrated solutions that include multiple technologies. So that has been our focus. And electronics is really an integrated piece. Gearing is an integrated piece. So it's very important, a cultural shift within the company to continually think about the value proposition we bring. And 60% of our product is being sold with some sort of integrated electronics. Now that gives us additional opportunities, of course, to expand off the core business. But we think it kind of puts us in a fairly unique position to service those markets. We also have a -- we may look at automotive. And that's been a question about well, geez, automotive is part of your Vehicle and a lot of the wins we announced there, why is that so critical for us? The reason is it gives us core -- critical mass. It allows us to take the solutions that we're providing there. And yes, that's a lower-margin business, but we can take those same solutions and we can apply them in adjacent markets, and it really gives us a very cost-competitive solution as well as a, from a quality standpoint, 0 defects. And it's so important in the markets that we're servicing now. This automation trend in all areas, the electrification that we're seeing certainly plays well for us. And now adding TCI with the capabilities to add -- more things become electric, more power demand occurring there, it again just -- it gives us the opportunity to tailor some unique solutions for our markets, building off of a base core platform solutions but tailoring specifically for those customers and applications and markets that give us a competitive advantage. So I hope that answered your question. And I know you asked about the organic growth level and so forth, whether we feel we can grow faster than the market. That is part of our strategy, and it's always been part of our strategy that we're looking to double the normal market growth rates within the industry.

Just building on that. So I understand -- is it fair to say that -- when you described robust activity, obviously, you were not pleased with the fourth quarter at 5% growth. So -- and the fact that the inventory went up almost $10 million -- over $10 million would signal that, that was not a typical Allied Motion quarter. I know you don't want to give guidance, but it would seem to me that your commentary about how strong things came back gives us comfort that you're seeing that type of growth here in the first quarter. And I guess, the other question I had was on this new vehicle awards. You really haven't given us much color on when they're going to hit rather than just the second half of this year. And I think people are conservative in how much they're going to recognize this year. Do you have any color on that for us at this point?

Sure. I'll be happy to provide some answers. So I think that's a good point because, as a reminder, these are long-term contracts. They all extend out over multiple years. And these -- I would also say, these aren't the end. Our expectations are for that market development, that we have several others that we're focused on. And we are really focused. We will pick and choose the ones that we want to go after. But we'll -- once we pick and choose, we will go after it hard. So the investments we're making in anticipation of -- also to satisfy some of these contracts that are -- start to go into production as well as the future ability to attract even more is I think that's what's exciting about it. But saying all of that, so late 2019, we would begin to start shipping at very small levels, and they'll ramp through 2020. And into 2021 and '22, you'll see that going for more. So it's a slow ramp. So I wouldn't build too much into it this year. Lines are being installed, are being tested and we've already delivered initial levels of preproduction units, offered production equipment and so forth, so that there is light test and certification and validation, but all signs are we're on track and we're moving.

Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Warzala for any final comments.

Thank you, operator. And again, thank you for the questions. And I just would like to say you know we've been very careful about guidance, any guidance in the past. And we did feel it was important to give you a little color here because it wouldn't have been fair to you given the impact that we saw and I'll say very late in the fourth quarter, and it really was an inventory adjustment. We had concerns all year. And we were kind of smiling in November, saying we're just not going to see it. It's going to happen -- but it did hit. And as I did say, it has turned around. We knew it right away that it was turning around. So internally, we weren't very concerned about it. And our concern was if we did see it continue, then obviously we would have had a greater concern and made some different adjustments. But -- so we did share some information with you, and we think it's only fair. We're so far down in the quarter right now. But I would say, don't expect that in the future. So just to be safe. Anyways, but thank you for joining us on today's call and your interest in Allied. And for those of you who are interested, we will be attending the upcoming Roth conference in Dana Point, California on Tuesday, March 19, which is next week. As always, please feel free to reach out to us at any time, and we look forward to talking with you all again after our first quarter results. Again, thank you for your participation, and have a great day.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.