Mayville Engineering Company, Inc. (MEC) Q1 2020 Earnings Report, Transcript and Summary

Good day, and welcome to Mayville Engineering Company's First Quarter 2020 Earnings Conference Call. Today, all participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that today's event is being recorded. At this time, I would like to turn the call over to Nathan Elwell, Investor Relations. Please proceed.

Thank you. Welcome, everyone, and thank you for joining us on today's call. A few quick items before we begin. First, please note that some of the information that you will hear during this call will consist of forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended. Such statements express our expectations, anticipations, beliefs, estimates, intentions, plans and forecasts. Because these forward-looking statements involve risks, assumptions and uncertainties, our actual results could differ materially from those in the forward-looking statements. For more information regarding such risks and uncertainties, and please see our filings with the Securities and Exchange Commission, including our filing on Form 10-K for the period ended December 31, 2019. We assume no obligation and do not intend to update any such forward-looking statements except as required by federal securities laws. Second, this call will involve a discussion of certain non-GAAP financial measures. Reconciliation of these measures to the closest GAAP financial measure is included in the earnings press release, which is available at mecinc.com. Joining me on the call today is Bob Kamphuis, Chairman, President and Chief Executive Officer; and Todd Butz, Chief Financial Officer; and Ryan Raber, Executive Vice President of Strategy, Sales and Marketing. First, Bob will provide an overview of our performance, then Todd will review our financial results and guidance. With that, I'll hand the call over to Bob.

Thank you, Nathan. Good morning, everyone, and welcome to our first quarter 2020 earnings call. While the first quarter of 2020 got off to a positive start, and we were on track delivering results in line with our internal expectations through January and February. Of course, March introduced a whole set of new COVID-19 pandemic-related challenges, which impacted our performance. But overall, we generated net sales of $108.6 million and adjusted EBITDA of $11.4 million. These figures also speak to the preparation and adjustments late last year and into this year to continuously realign our cost structure with new demand levels and managing the ongoing production schedule changes from our key customers in the commercial vehicle, construction and agricultural markets. I'm encouraged by the strides that we made to improve our operating performance on a sequential basis despite market demand challenges. We have been able to effectively adjust our cost structure and coupled with a small sequential improvement in demand helped us generate a 700 basis point increase in manufacturing margin from this – in this quarter compared to the fourth quarter of 2019. We are also realizing tangible benefits from last year's capital investments in automation and technology, which have already led to stronger labor productivity. I've said this before, but it's especially true now, we are committed to focus our attention on factors within our control. The positive impacts of these investments reinforce our confidence that they will be important to best position MEC for sustained future success. The new challenge for everyone in 2020 is how we navigate the ongoing impact of the COVID-19 pandemic. At MEC, we are used to responding to change. Agility, adaptability and realignment are part of our business culture. This crisis has created a broad sense of uncertainty and complexity for our customers that we must and will respond to as their plans unfold. On the topic of controlling what we can, I'm especially proud of how well our company-wide safety and operations teams have executed to ensure precautions and procedures have been implemented to protect the health of our employees at our facilities across the U.S. While we must remain vigilant in our efforts, I'm pleased to say that we have not had any MEC employees test positive for COVID-19 at this point in time. From the first stages of the breakout, we have steadfastly communicated with our teams as we've implemented safety protocols and emphasized extreme hygiene. This means that all of our 21 facilities across the U.S. remain operational, albeit at lower production levels. Our employees are able to social distance somewhat naturally as a result of being separated in their respective work cells and with increased use of technology and automation, which means fewer people are needed and social distancing is naturally accomplished. We have made every effort to increase cleanliness in our workstations and common areas and have cleaning crews on call ready to disinfect any equipment or facilities when and as needed. Of course, everyone who can work from home is doing so, the well-being of our employees will continue to be one of our top priorities as we navigate through these challenges. As MEC has proven time again over the years, our agility and adaptability, coupled with our commitment to succeed by providing service, quality and reliability to our customers, along with a strong balance sheet, is what will help us weather this storm, grow our market position and come out the other side stronger over the long term. However, as you would expect, this pandemic will continue to impact our performance in the months ahead. In the first quarter specifically, our net sales were negatively affected by the customer shutdowns related to COVID during the last two weeks of the quarter. Nevertheless, MEC and many of our customers remain and continue to maintain the essential services designation, and we stand ready to assist our customers in any way that we can as we have over the past 75 years. We continue to be attentive to our customers' needs and remain in constant communication with them. However, there is no doubt that as a result of the uncertainty our customers are facing, there's much more uncertainty regarding production schedules. Combined with the overall economic uncertainty, we are temporarily withdrawing our 2020 guidance. At this time, our aim is to provide updated guidance as the economic outlook becomes clearer from our customers. Todd will discuss our expectations related to guidance in more detail in a couple of minutes. While we lack the usual level of certainty from our customers, we still have visibility. And in the near term, and it's important to remember that our orders follow production schedules and no contracts or customer relationships have been lost. That means when our customers' volumes come back, our volumes will come back with them, and we are ready to service their needs. Despite the short-term disruption, we made positive traction across our end markets during the quarter. We want to take a few moments to update you on the progress that we are making with several key programs and customer relationships. We continue to see increased volume with certain military projects for light vehicles, and we are encouraged by the order flow so far in 2020. Last quarter, we added a new blue-chip customer and are assisting their team with warehouse conveyors and package management. I'm pleased to say that we continued to grow and expand our relationship with this customer during the first quarter and are excited about the long-term potential of this partnership. We were also able to launch quickly the outsourcing projects secured from one of our largest powersports customers at the end of 2019. Overall, we continue to see growth in outsourcing opportunities as a result of reshoring efforts by our OEM customers to manufacture and source products and components where they are sold and avoid supply disruption. The pandemic has placed pre-existing supply chain disruption directly in the spotlight, and we will benefit from that. In the commercial vehicle market, our customers are focused on their next-generation products. Our active involvement in this process helped us secure some key wins late in 2019 to position our organization to grow market share over the long run. While the commercial vehicle end market, in particular, had presented us with its fair share of volume challenges, the long-term upside potential of this market for our organization remains very positive. Our commitment to cross-selling in both 2020 and in future years has not changed. And we look forward to the opportunity of utilizing the greater organization's extensive capabilities with the prior DMP customer base. With the legacy MEC business and DMP business now operating as one company, I'm excited about the long-term growth proposition for our entire organization. So although the current pandemic has added an extra level of complexity in the short term, I'm very encouraged by the opportunities and the long-term potential to expand market share and form new partnerships with new customers in new industries as a result of these endeavors. Throughout our industry, COVID-19 has already had a wide-reaching impact, especially on our small competitors. As such, we will maintain our open attitude towards potential M&A opportunities. Our approach remains the same. We will carefully evaluate and maintain our disciplined approach, examine both current and future market dynamics and assess each potential opportunity with a rigorous ROI focus. On the CapEx front, and in light of the current economic environment, we continue to find the right balance between methodically determining which capital expenditures are absolutely essential in the near term, while remaining committed to our longer-term vision of implementing flexible redeployable automation for our competitive benefit. As a reminder, and as a result of implementing the higher-than-normal capital expenditures related to investment in automation and technology during 2019, we had previously forecasted lower capital expenditures in 2020. As you also know, last fall, we announced a share repurchase program for up to $25 million through 2021. We have already begun to utilize the capital available under this program, but will exercise caution related to share buybacks in order to conserve cash as we navigate through this short-term adversity. Finally, I just want to reiterate that we maintain a very strong financial position. The new five-year credit agreement we completed in September 2019 provides ample liquidity for a strong balance sheet. The combination of a strong financial health, the solid free cash flow that our business generates and the benefits that we continue to see from our capital investments means we are better positioned than most to weather this and any economic storm. Now I'll hand the call to Todd to discuss our financial results and guidance.

Thanks Bob. I'll begin with a look at our first quarter financial performance before providing commentary on our balance sheet, liquidity and our thoughts on guidance. As noted in our press release, we recorded first quarter net sales of $108.6 million as compared to $143.7 million for the same prior year period, a decline of approximately 24%. This decline was mostly attributed to the continued impact of market demand changes, which began last year and were most evident in the commercial vehicle, agricultural and construction end markets served. In addition, net sales were adversely impacted during late March due to certain customer plant shutdowns caused by the COVID-19 pandemic. Manufacturing margins were $11.8 million for the first quarter of 2020 as compared to $19.6 million for the same prior year period. The decline of $7.8 million was mostly driven by lower sales volumes due to the aforementioned market demand changes, the impact of customer shutdowns at the end of March along with inventory and health care reserves, specific to the estimated potential impacts of the COVID-19 pandemic. These factors were modestly offset by strong labor productivity improvements, driven by a recent investment in new technologies and automation as well as our cost reduction efforts completed in 2019. Manufacturing margin percentages were 10.9% of net sales for the first quarter of 2020 as compared to 13.6% for the same prior year period. The direct impact of lower net sales to manufacturing margins was approximately 780 basis points, driven largely by under-applied overhead of fixed costs due to the aforementioned declines in market demand and the impacts of COVID-19. This decremental impact was largely offset by strong labor productivity gains created through our investments in new technology and automation, CII improvements and the 2019 cost-cutting measures, which combined, positively impacted manufacturing margins by 510 basis points. Additionally, manufacturing margin percentage increased 700 basis points when compared to the fourth quarter of 2019. The significant sequential increase is attributable to improved sales demand in the first quarter as compared to the fourth quarter of 2019, coupled with the company's effective cost reduction actions. Depreciation expenses were $5.6 million for the first quarter of 2020 as compared to $5 million for the same prior year period. This increase was driven by the accelerated investments and new technologies and automation made in 2019. Amortization expenses were $2.7 million for the first quarter of 2020, which are equivalent to the same prior year period. Profit sharing, bonuses and deferred compensation expenses were $1.3 million for the first quarter of 2020 as compared to $1.8 million for the same prior year period. The decrease was driven by lower bonus accruals and modest declines in deferred compensation expense. Other SG&A expenses were $5.6 million for the first quarter of 2020 as compared to $6.7 million for the same prior year period. The first quarter of 2019 included $1.8 million of onetime IPO and DMP acquisition-related expenses. Excluding these onetime items, other SG&A increased by $0.7 million, primarily due to the costs associated with being a public company, which were slightly offset with synergies achieved through the integration of DMP. Interest expense was $0.8 million for the first quarter of 2020 as compared to $2.8 million for the same prior year period. The $2 million decrease is due to our overall lower debt level at the end of the first quarter of 2020, coupled with substantially lower interest rates obtained from the more favorable credit agreement we entered into in September of 2019. Income tax expense was $0.7 million for the first quarter of 2020 as compared to $0.8 million for the same prior year period. Federal income tax expenses will be offset against our net operating loss carryforward of approximately $13.8 million until totally utilized. The NOL, which does not expire, is primarily driven by the onetime IPO and DMP acquisition expenses incurred in 2019. We continue to anticipate our long-term effective tax rate to be approximately 26%. EBITDA and EBITDA margin percent were $9.8 million and 9.1%, respectively, for the first quarter of 2020 as per the $13.7 million and 9.5%, respectively, for the first quarter of 2019. The $3.9 million decrease in EBITDA was primarily driven by the declines in net sales due to the aforementioned declines in market demand changes, slightly offset by cost reductions and synergies. Adjusted EBITDA and adjusted EBITDA margin percentage, which excludes stock-based compensation, were $11.4 million and 10.5%, respectively, for the first quarter of 2020 as compared to $16.8 million and 11.7%, respectively, for the same quarter in 2019. Now I'd like to address our balance sheet and liquidity figures. Cash flow provided by operating activities was $2.6 million during the first quarter of 2020 as compared to $1.5 million used during the same prior year period. The $4.1 million cash flow increase was primarily driven by a lower increase in our accounts receivable balances as compared to the first quarter of 2019. Capital expenditures were $2.4 million during the first quarter of 2020 and as compared to $8.2 million for the same prior year period. The decline was mostly driven by the timing of certain new technology and automation investments that were pulled ahead into late 2019 after originally being scheduled for the first quarter of 2020. CapEx for the full year is still expected to range between $12 million and $15 million, which is significantly lower than the $26 million in CapEx for 2019. Total outstanding net debt was $74.8 million as of March 31, 2020, resulting in a leverage ratio of approximately 1.6x, which is significantly lower than our covenant threshold of 3.25x under our credit agreement. This five-year agreement provides access to $200 million of liquidity through revolving loan plus an additional $100 million through to an accordion feature. Additionally, at the end of March, the company drew down on the revolver and deposited $13 million into a money market account to ensure short-term liquidity in the most extreme circumstances. Now I'd like to briefly discuss our outlook for the fiscal year 2020. Based on the uncertainty of the overall economic climate due to the COVID-19 pandemic and consistent with most of our top customers, we are withdrawing guidance. What we can say today is that based on the disruptions we've already seen and expect to continue at least until the summer, means that our bottom end of our original guidance range is no longer achievable. At this time, our goal is to provide updated guidance when the economic outlook becomes clearer. With that said, I will now turn the call over – back over to Bob for closing remarks.

Thank you, Todd. Despite the ongoing market demand, pandemic-related challenges, we are encouraged by the strides that we were able to make during the quarter to continually realign our cost structure and explore new business opportunities. We are confident in the long-term strength of our business model. The combination of our market-leading position, our strong financial footing and our domestic focus will be instrumental in our organization emerging from this situation in a stronger competitive position. Although, the situation is providing new and unique challenges for our team, MEC's long-standing track record of agility, adaptability in providing service, value and reliability to our customers has enabled us to navigate all manner of difficult situations during our 75 years of operation. We will weather this storm as we have all the others. We take pride in our business being considered essential, and we stand ready to help our customers in any way that we can in the months ahead. Our team is thinking about all of our stakeholders and shareholders during these difficult times. We are all in this together, and we will stay strong and get through the short-term adversity. With that said, we'd like to open the call for questions. Operator, please go ahead.

We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Mig Dobre with R.W. Baird. Please proceed.

Hey good morning, guys. It's Joe Grabowski on for Mig this morning.

Good morning.

I guess my first question is probably on everyone's mind. Can you tell us how April trended, sales, order intake? Any color you can give us on April?

Sure. I can tell you that with the employee or customer shutdowns that have gone on, especially significant in the month of April and some bleeding into May, we saw probably less than half of our capacity being utilized by our customers. So it was a tough month. It will be I think the worst month that we will see. But nonetheless, we weathered through it quite well. We did the layoffs, furloughs, vacation, all types of cost-conserving measures, certainly in the supply side, the indirect spending that goes into a business. We've watched our pennies very closely here. And, I think, we'll wind up doing okay in the month of April.

I believe you said in fourth quarter that your overall utilization was around 70%. So is that kind of the way to think about it, if fourth quarter was 70% and April was less than 50%?

I would put that the April number probably at more in the 40% range.

Okay. All right. That's helpful. And then sort of a related question. I know normally, you guys have several months of visibility into production schedules from your customers. Has that changed in the current situation? Has sort of the visibility into your customers' production schedules been truncated just maybe based on their lack of visibility or plant shutdowns or anything?

No, I guess, the right way to answer that is our visibility is still the same, and it's long and it's good. The problem is that things are changing very rapidly. So the tool is still there. The tool is still being utilized, but data is changing from our customers very rapidly.

No, that makes sense. It's certainly an unusual time right now. And I guess, just my final question, you guys compete against a lot of small fabricators. Are you hearing anything about maybe some of your smaller competitors having financial difficulties? Or maybe kind of when we come out on the other end of this, so there'll be consolidation, market share opportunities, anything along those lines?

Yes. It's probably a little too early to predict that. However, we do believe that with the additional support that the government has given to small businesses, they probably extended their life by a short period of time. We still think that we will see that shakeout happening. But with the benefits coming from the federal government, that's probably been delayed by a little bit. But we're seeing edges of that happening.

Got it. Okay, thanks for taking my questions. Good luck.

You’re welcome. Thank you.

Our next question comes from Stephen Volkmann with Jefferies. Please proceed.

Great. Good morning, guys.

Good morning, Steve.

Bob, can you help me just triangulate this right so that we don't get too far off in one direction or another. You're talking about kind of running things, maybe 40% of capacity in April. What would that have been in the first quarter or fourth quarter, just some sort of way to start to judge that?

Yes. I think first quarter probably would be in the 60-ish range.

That's great. And then a lot of your customers that we cover are talking about things kind of starting to ramp up as we speak here. Do you see that kind of instantly or would there be a couple weeks of a lag because there's some inventory work in process or something?

What we are seeing is even though some of them are starting up there, ramping up during the first weeks, and I still think that perhaps there's some supply disruption from others that they're dealing with. So as they're opening up, they're dealing with a lot of smaller issues, they're not jumping right up to the former volume levels.

Right. Okay. And then maybe this is more of a Todd question, but you've talked about a number of different cost-saving measures that you've done. Just how should we think about the decremental margin on the lower production in the second quarter?

So when you look at decremental margins and you strip out some of the impact of volume, we're actually seeing some – historically, I'd say that, that number was 17.5%. We're seeing actually that decremental margin be a little bit lower in a normalized situation because of all the cost-saving measures. But the second quarter will be the one that's a bit unique being that, as Bob stated, April kind of low water point, meaning that a lot of our customers are shut down, we're at 40% capacity, and we've done layoffs and other cost-preventative measures. I would put that probably more in that maybe 20% to 22% range for the second quarter. But as you look at decremental going forward, I do believe because of the cost structures we've already made and more on the way, as we kind of work our way through this, I think we'll see a better decremental margin going forward.

Okay. Good. That's helpful. And then just one final quick one more broadly. Bob, have you seen people come to you over the last, say, few weeks and say, we need another source of supply or we need a closer source of supply? Are those conversations actually happening already?

Yes. I'm going to let Ryan Raber answer that. He works with that every day.

Hey, Steve, we definitely have seen that. I think it started probably about a month ago, filtering kind of the issues that were happening in specifically China and India. So we did fill some short-term voids when, let's say, material was delayed on the water kind of pre-OEM shutdown that allowed us to kind of supplement their demand. But in the recent times, we've seen not only, I'll say, the reshoring type activities of the potential to shorten that extended supply chain, but also as OEMs ramp back up, as Bob alluded to, we don't feel like we've seen the full effects of what that might be doing to some of the small competitors we have. So it's – the quote flow and the quote activity for us has been stronger, I'll call it, in the last six weeks than we had going back into January and February and even into fourth quarter.

Great. That’s great. Thanks guys.

The next question comes from Andy Kaplowitz with Citigroup. Please proceed.

Hey, good morning guys. It's [indiscernible] on for Andy today. How are you?

Good morning.

So lots of good color on how things are evolving. I guess, one thing we've heard from some of the industrial companies and sort of hearing from you in terms of reramping when the time is right and making sure their supply chains are ready and able to handle that. So given that focus that the OEMs have, how is the nature of your conversations with your customers changed over the past few months? And given the changes they're seeing and their low visibility that has impacts on you, what information are they giving you? And what can you do to be prepared or return to, call it, normalizing production over time?

Sure. Well, we've been getting updates continuously, including plant shutdowns that are happening quickly or ramp-ups that they would like to – they're typically telegraphing the ramp-ups with more time, lead time. We have an excellent communication program we've set up internally here for our people, some of whom are on furlough. And when it ramps up, they know that to watch the board at our intranet at MEC to see what's happening and whether they need to report to work very quickly. So we're using our internal communication to be really effective. I guess any points, Ryan, that you'd want to add around change?

Yes. So we are in continuous communication with our customers, and that can be over e-mail, I would say, for the most part, at least a weekly touch point at a leadership level. Obviously, looking at things like hard shutdowns, but as importantly now, what is the ramp-up plan when they return to work. So they've been pretty transparent about build rates, kind of pre-COVID, post-COVID. We're, as Bob said, really reviewing that on a daily basis amongst the sales and operations teams and adjusting the workforce and capacity accordingly. It tends to be a pretty dynamic situation right now. There's potential for supply chain constraints that many of the OEMs talk about that we're keeping a watchful eye on at this point. We have not caused any problems and in many cases, have been able to, I'll say, bail them out in some emergency situations with our prototype capability, but that's sometimes daily hourly conversation that we're having.

We're really exercising our agility story internally. Our production planning process, our communication with our shop floor, with our supply base, it's been showing all the strengths that we hoped it would.

That's great to hear. It sounds like your customers are well served. I guess just thinking about cash flow. I know you're not providing guidance at this point, but can you give us some color on just how you're thinking about free cash flow conversion in this environment? I think – previously, I think you talked about a 50% plus conversion of adjusted EBITDA as your free cash conversion target. So directionally, how should we be thinking about free cash conversion, just given all the moving pieces here?

Well, when you look at the free cash flow conversion, I really do not expect to see much change off of that 50% utilization. And the reason being is as these changes happen, certainly, receivables come down. We've done furloughs, which is a cash favorable impact on our payrolls. We're able to pull back on the capital. As Bob mentioned on the call, it's really – we're taking all extra scrutiny as to when we spend capital. So we're able to preserve that cash flow and really should represent, again, all 50% or better of EBITDA for the full year. So I think all the levers are in place for us to continue to execute very well. Certainly, the amount of free cash flow will be diminished by the decline in our EBITDA.

That’s great. That’s helpful. Thanks guys. I’ll get back in queue.

Thank you.

Our next question comes from Jon Braatz with Kansas City Capital. Please proceed.

Good morning, everyone.

Good morning, Jon.

Bob, a question. You've talked a little bit about furloughs and layoffs. And obviously, you're continuing to spend money on automation and so on. When things return to normal, hopefully, return to normal soon. But how would the level of workforce – level of your workforce be compared to maybe where you were last year? Are you going to be able to come out of this COVID-19 with fewer employees, fewer people on the manufacturing line?

Yes. That's why we invested in the automation and we're seeing the benefits we expected, including the benefits of, I'll say, taking up a smaller footprint, allowing even more throughput in our factories with less floor space utilization. So that raises some interesting things, considerations to look at for even further opportunities.

Okay. Any number you want to – you could provide us with how much you might think the employment roles might be down or is that too soon to?

I think it's too soon to say that. But that's one of the reasons that we invest.

Yes, sure. Okay, Bob. Thank you much.

You’re welcome, Jon.

[Operator Instructions] The next question comes from James Maxwell of Tocqueville. Please proceed.

Good morning.

Hi, James.

Good morning.

Question about the working capital. I guess I was surprised to see such a use of working capital in the first quarter and I'm wondering whether you can get that back in the second quarter and whether the cash flow will be stronger in the second quarter because of that?

Yes. So certainly, I mean, the first quarter was really driven by receivables. Sales increasing from the fourth quarter of last year. And as you look in the second quarter, I would expect to see the positive inflow from the receivables balances. Certainly, we'll see a little decline when you think of accounts payable because purchasing and things of that nature are going to decline. But in general, we should see a very favorable cash conversion here in the second quarter because of all those factors put together, coupled with all the cost-saving measures we put into place.

Okay, great. And I just wanted to make sure, it sounded like maybe M&A activity was ongoing, yet the share repurchase had been suspended. Is – I would think, obviously, with the share price so low, the return would be better on the repurchasing your own shares than making acquisitions.

Sure. Well, let me address that in a minute. I guess on the repurchase of shares, we have about 30% of our shares in the float, right, 20% to 30%. So we don't want to reduce that float by much. The rest of it is in the 401(k), where our employees can buy or sell and then portion locked up in the ESOP yet. So we're kind of taking a careful approach to that. It doesn't mean we won't do any, but we also want to preserve our cash to see if there's better returns out there and comparing those returns to some of our internal investment returns as one of the previous questioners asked about those returns. We see very good returns on that capital spending as well, especially with automation. So we're trying to measure all of those things, including, I'll call it, opportunities that nice bolt-on small acquisitions might have in this period of time. So it's trying to balance all of that. But I would say we're looking at all of it, but we're not looking at doing nothing on any of it. So a little bit of everything.

Okay. And lastly, is there any more detail you can provide on the blue chip customer, how potentially large this customer could become or what they do, what industry they're in?

Sure. Ryan, do you want to answer that?

Yes. I mean, we've got quite a few new opportunities that are in the works, and I'll say, definitely more than one outside of the traditional markets that we would publish. So one of the benefits of the agile capacity and assets we have is they're not dedicated to a given market. So things like the packaging and warehouse management that we talked about, obviously, we think the current pandemic probably drives additional online ordering and other things that will drive that into the future. We've had some health care opportunities that we've been able to secure in recent time and in the topic kind of reshoring, there are folks that are reevaluating in those extended supply chains as they come from the Asia market, kind of going back originally, if you think about the impacts of the tariffs of last year, now we roll into this pandemic. There's been a lot of stress introduced into that space where, I think, folks are finally kind of coming to grips that they like the domestic supply chain, the improvement in lead time and having somebody in their backyard is certainly a benefit. So it's been a strong first quarter and really a strong past six weeks here on the quote flow and new customer, new industry opportunities.

Okay. Thank you.

At this time, we are showing no further questioners in the queue, and this ends our question-and-answer session. I would now like to turn the conference back over to Bob Kamphuis, Chairman, President and CEO, for any closing remarks.

Okay. Well, I'll just close by saying thank you all for your time today. We look forward to updating you on our progress in the months ahead. Everybody stay healthy and safe, and thanks for following MEC.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.