Mistras Group, Inc. (MG) Q4 2014 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Fiscal 2014 Fourth Quarter and Year-end Mistras Group, Inc. Earnings Conference Call. My name is Chantalay, and I will be your facilitator for today's call. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. At this time, I would like to turn the conference over to your host for today, Mr. Sotirios Vahaviolos. Please proceed, Sir.

Chantalay, thank you very much, and good morning to all. Welcome to the Mistras Group Earnings Conference Call. This is Sotirios Vahaviolos, Founder, Chairman and CEO of Mistras Group. Also joining me today is Jon Wolk, the company's Executive Vice President and CFO. In today's call, we will review Mistras' financial results for the fourth quarter and entire fiscal year 2014 that ended on May 31 and discuss our prospects going forward. I will start by saying I'm very pleased with Mistras' return to strong organic growth. Both our total company and especially our services segment had very strong 17% organic revenue growth in the fourth quarter. Services finished the entire fiscal year at the high end of our revenue guidance with 12% organic growth. We achieved these strong results in an environment, where others in our space get very low or negative growth. During fiscal year 2014, we announced new multi-year contracts with major integrated energy companies in Alaska, France and in the Canadian oil sands region. The Alaskan contract helped us to propel organic revenue in the second half of the fiscal year 2014, while the French, Canadian and other contract wins in 2014 will drive growth in fiscal year '15 and beyond. The results of the fourth quarter of the previous fiscal year 2013 sounded an alarm for change in our organic revenue strategy. Contrary to industry forecasts, it was wise to expect less from turnarounds and Gulf projects in 2014. Accordingly, in fiscal year 2014, we focused on the plan to renew this important aspect of our business, while making the investments necessary to secure important new contracts and new markets and improve our processes and in some cases, our people. Specific investments made during fiscal year 2014 to achieve our growth and profitability plans included: investing in the infrastructure, people, processes and equipment to startup contracts with large customers in Alaska, France and Canada; adding business development staff to new markets; strengthening our executive team with the new operationally focused CFO, who in turn hire new controllers with a similar mindset in 3 of our largest international subsidiaries; adding IT personnel to drive processes and system enhancements to improve operational efficiency and most importantly, electronic billing. All of these investments were made to enable Mistras to continue to grow its strong run and maintain recurring revenue base that comprises approximately 70% of total revenues and to improve profit margins going forward. We're pleased with our rebounded organic revenue growth, but we are not satisfied with our profitability results. Profit was adversely impacted by contract startups investments, by harsh winter weather during the third quarter and by severance and office closure costs in the fourth quarter. These items combined to reduce EBITDA by approximately $4.5 million, primarily in the gross margin line. Improving profitability is key for fiscal year '15 and beyond. As a management team, we understand that and are committed to doing it. I will talk more about that in a few moments. But first, I will turn it over to Jon, who will cover the company's summary financial results. Jon?

Thank you, Sotirios. I remind everyone that the remarks made during this conference call will include some forward-looking statements. The company's actual results could differ materially from those projected. Some of the factors that could cause actual results to differ are discussed in the company's most recent annual report on Form 10-K and in other reports filed with the SEC. Also, the discussions during this conference call will include certain financial measures that were not prepared in accordance with U.S. GAAP. Reconciliations of those non-U.S. GAAP financial measures to the most directly comparable U.S. GAAP financial measures can be found in the company's report on Form 8-K filed yesterday. These reports are available on the company's website in the Investor section and on the SEC website. Now I will summarize the company's financial results for the fourth quarter and entire fiscal year 2014. Revenues for the fourth quarter of fiscal year 2014 grew 24% above prior year, while revenues for the entire fiscal year grew by 18%. Our 24% revenue growth in the fourth quarter was driven by 26% growth in our Services segment, of which 18% was organic growth. These gains were noteworthy in an environment, where competitors have grown at a much slower pace if at all. Products & Systems revenue grew 40%, while international revenues grew by 11%, mostly organic. For the fiscal year, our 18% revenue growth was driven by our services and international segments. Services revenues grew 17%, 12% of which was organic. International revenues grew 32%, driven almost entirely by the prior year acquisition of our German subsidiary. Our fourth quarter gross profit percentage -- gross profit dollars grew 20% over prior year on a revenue gain of 24%. Gross margin percentage was 25.9% in the fourth quarter compared with 26.7% in the prior year. The decline in gross profit percentage was due to a lower mix of work in the Services segment and to the continued investment in Canada, which more than offset an improvement in the International segment. For the entire fiscal year, the company's gross profit grew by 17% compared with revenue growth of 18%, and the gross margin rate declined modestly to 27.7%. The decline was driven by the third and fourth quarter items that Sotirios described earlier. Operating expenses, excluding acquisition-related costs and the prior year's goodwill impairment, were 20.7% of revenues in Q4 compared with 21.2% in the prior year. The quarter's favorable leverage was achieved despite resilient severance cost and costs associated with closing of small number of U.S. locations. Operating income excluding acquisition-related items in Q4 was $9.3 million, 16% higher than in the prior year, despite the inclusion of nearly $2 million for startup costs and rightsizing initiatives. Net income in Q4 was $6.4 million or $0.22 per diluted share. This included the beneficial impact of acquisition-related items of $0.05 per diluted share, plus the impact of the startup cost and rightsizing initiatives that reduced earnings by approximately $0.04 per diluted share. The company's adjusted EBITDA of $19.2 million during the fourth quarter was 16% higher than in prior year despite being adversely impacted by nearly $2 million or 12% of the prior year's EBITDA due to these same items. Finally, a few comments on the company's balance sheet and cash flow. Mistras generated $37 million of operating cash flow during fiscal year 2014. The company used $15.5 million of cash for capital expenditures net of equipment sales and also made noncash outlays to lease $10.9 million of capital equipment. The company's aggregate capital investment during fiscal year 2014 was $26.4 million or 4.2% of revenue. The company's free cash flow defined as cash provided by operations less cash used for capital expenditures was $21.4 million. The company's debt and capital lease obligations net of cash was $87.6 million at May 31, 2014, compared with $70.2 million at May 31, 2013, a ratio of 1.2x adjusted EBITDA. As of May 31, 2014, Mistras had an undrawn revolver balance of $59.6 million. And with that, Sotirios, I'll turn it back over to you.

Thank you, John. And now let me take the opportunity to brief you on some key developments and activities within each of our business segments. First, our Services segment. Our downstream business remains robust as several refiners have commissioned Mistras to conduct thorough inspection of their high-temperature piping circuits that are susceptible to premature failures due to a unique corrosion damage mechanism. Mistras has developed a comprehensive pre-engineering systematic approach, specifically to address this critical inspection requirement. We have inspection teams actively working at 7 refineries, and were recently awarded a new multimillion contract at 3 additional refineries. We are actively pursuing additional downstream energy companies that are also susceptible to this issue and require this very specialized inspection capability. Our midstream business continues to benefit from the shale oil and natural gas exploration activities with key multimillion dollar contract awards in the quarter that will commence through the fall and new proposal activity is vigorous. Our new contract awards are with both existing and a new Tier 1 energy customers and are the result of our reputation for delivering quality inspection services in this very demanding environment. Also we were awarded 5 new projects from both existing and new energy customers for our PCMS inspection data management software, combined with our risk-based inspection, RBI, data collection, analysis and deployment services. We are providing prebuilt Engineering Services and advanced implementation software tools from our AIMS group for the Gulf Coast-based LNG capital project and it has begun construction, and are optimistic regarding the timing of the commencement of the order size that that has been approved. Our in-house lab inspection service locations are growing to support the outsourcing of inspection of critical components for the commercial aerospace sector. Several of our labs are in close proximity to aerospace OEMs and sub suppliers and our advanced systems technology and product specifications enable us to meet their demands for cost-effective inspection, fast turnaround and high-quality standards. In our Power Generation sector, we're gaining market share with our one source, Engineering, Products & Systems and advanced inspection offerings, supplied to nuclear, fossil and alternative energy producers. The shift by many energy companies to consolidate their audit services providers has allowed us to capture new multi-year, fleetwide agreements with 2 of the nation's leading electric energy producers for their nuclear and fossil plants. We're also engaged to provide inspection services for a capital project in the mid-Atlantic region for a large natural gas combined cycle plant. We're excited about further opportunities in this sector. In our Products & Systems segment, we are encouraged by the improving industrial markets that have been suppressed due to the efforts of new government regulations or funding constraints. We were recently awarded a multimillion dollar contract for our structural alert system to provide 24/7 acid integrity monitoring of a large span bridge located in the United States. This project will also leverage our products and installation services. There are least 30 other bridges with similar problems throughout the U.S. Products & Systems also received orders for advanced inspection systems from companies in the automotive and industrial gas industries. And now let's discuss the International segment. We had a strong year in the U.K., led by growth in the wind energy sector. Mistras utilizes Rope Access services to provide inspection, maintenance and monitoring of critical areas for our clients and OEMs. Services employs advanced NDT trained Rope Access personnel for inspection and multi-year 24/7 monitoring and maintenance services for a large wind farm located in the North Sea. During fiscal 2014, we opened a new location in Aberdeen to expand in the offshore market. The ongoing recovery of the U.K. economy has enabled us to grow our NDT business by inspecting new oilfield equipment. We continue to actively work in the civil sector to inspect new builds and monitor aging bridges and viaducts. We're extremely proud of the 2 awards, we recently received from the Institution of Civil Engineers and the Chartered Institution of Highways and Transportation for the cutting-edge solution that we deployed to monitor the Tame Valley Viaduct box girder structure. Our solution acts as a real-time safety system that provides critical alerts if strains exceed important thresholds, improving public safety, while also saving millions in reduced strengthening cost. As a result of our prime relationship with EDF Electricity de France and its providers, Mistras Group is well positioned to provide engineering, monitoring and NDT solutions to the nuclear projects being constructed in the U.K. throughout all stages of their construction. Our French operations performed well during our largest customer's major turnaround at a key refinery during the fourth quarter, receiving an award for the best professional service provider during the turnaround. Our general operations have seen an increasing volume of quotations in their destructive testing laboratories, and we have achieved several important qualifications and certifications. And we attempt to position Mistras to perform additional work for Airbus. We won new business to provide advanced NDT services in Germany, where we had previously been focused solely on destructive testing business. We provided our customers with world-class skill sets by utilizing a combination of global resources and local personnel. And our wind turbine engineering teams continue to grow their business by supporting their clients in every phase, from planning through installation and ongoing operation. In the Benelux region, we have extended our capabilities to address one of the largest European markets for refineries and petrochemical plants. By combining forces between our DAS lab and our newly opened Belgian lab, we'll now position to perform additional and advanced NDT services to this important market. And we're excited about opportunities in securing future evergreen contracts. Lastly, for EMEA, we put in place a number of process improvement initiatives that are being led by our new controllers that will harmonize internal functions, analyze our business and focus on execution to improve profitability. In Brazil, the difficult economic conditions caused us to reassess our staffing levels and make headcount reductions during the fourth quarter of fiscal year 2014. Our now leaner Brazilian team is concentrating on our core business, which includes advanced NDT, computed radiography and Rope Access services, which are supplement -- complemented by our continuous automated routine inspection for railroads. And with that, I would like, Jon to introduce our outlook and guidance for fiscal year 2015. Jon?

Thank you, Sotirios. To those of you who have listened to these calls before, you will not be surprised to learn that we are very excited about our fiscal year that commenced on June 1. There are many reasons for our optimism. Here's a brief listing of the top 5. First, our new focus on the Canadian oil sands region is very exciting and we will begin to earn a return on this investment during fiscal year 2015. Second, we have changed the company's emphasis to growing profits at a faster rate than revenues. We have revised our company-wide compensation plans to be almost entirely focused on this top priority. Third, we will see improvements in our international operations, from the ERP conversions that we are currently undertaking, from the controllers that we have added, from improvements in the business cycle and from staffing reductions in Brazil. Fourth, our pipeline of business opportunities in our Products & Systems segment is stronger, now, than in any time in the last 2 years, and we expect this segment to rebound in fiscal year 2015. And fifth, we have the team in place to update our existing timekeeping and billing processes to make them electronic instead of manually driven. Because we are essentially adding middleware to our existing ERP system, this conversion will not be very costly and will entail low conversion risk. Although this initiative will be more impactful in the following fiscal year, it is an important step for us and worthy of mentioning now. Market growth was positive during our fiscal year 2014, even though turnaround seasons were not as robust as expected. Our planning assumption for fiscal year 2015 is that we will encounter a similar market environment. Our revenue growth will continue to outpace the market and will be in a range of $680 million to $705 million, representing growth over fiscal year 2014 of approximately 9% to 13%. This revenue range excludes the impact of acquisitions that are made in the new fiscal year and of any large capital projects that are often mentioned for the Gulf region. We expect that our adjusted EBITDA will be in the range of $78 million to $84 million, growing at a range of 11% to 19% over fiscal year 2014 results. Taking the midpoint of our EBITDA and revenue guidance for fiscal year 2015, we expect that our margin of EBITDA to revenue will improve by roughly 40 basis points over fiscal year 2014. We expect that this margin will be more consistent throughout the year and that the Canadian revenue upside will help margins to be accretive in the second half of our fiscal year. We are focused on the initiatives that we have outlined in this call. We are very focused on driving margin improvements in fiscal year 2015 and beyond. And we have taken and will continue to take actions to transform our company. We expect that fiscal year 2015 will begin a multi-year upswing in company margins of over 200 basis points, and our team has powerful incentives to make this happen. And now Sotirios will make the closing remarks.

Thank you, Jon. In closing, we're excited about our market position and growth and confident that we're making the right investments that will enable us to maintain our leadership position and expand our portfolio of tangible value-added solutions. Our confidence comes from the strong customer adoption of our one source model that strategically focuses on customer safety and economics. For example, our solutions focus on helping refinery operations reach first quartile performance and power companies to avoid unplanned outages. This clearly sets us apart in the NDT space and provides us with a very distinct competitive advantage, as proven by our results and our high customer retention record. Our unique attributes with global presence, combined with a growing market, will drive profitable revenue growth in all our business segments. Our stable business model focuses on run-and-maintain evergreens of recurring revenues, combined with our initiatives to capture strategic capital projects worldwide, such as those in the Gulf Coast and increased focus to achieve higher profitability will be very impactful for the company in fiscal year '15 and beyond. As I conclude this conference call, let me thank our 5,300 loyal employees, our loyal customers and our valued shareholders. That concludes our prepared remarks, Chantalay, and we would like to now open the floor for questions. Chantalay?

[Operator Instructions] Your first question comes from the line of Matt Duncan of Stephens Inc.

So looking at the organic growth assumption in the guide, Jon, can you break out for us how much acquired revenue is assumed in your guidance? Trying to see what the organic growth assumption is there.

Yes, Matt, I'd place the organic growth assumption, probably about 6% to 10% out of the 9% to 13% that we're talking about.

Okay. And so we look at the 17% organic growth you had this quarter. Is there any reason that, that would slow meaningfully, or are you guys just trying to be a little bit conservative to start out the year? I see you ramping the Alaska win quite nicely in the back half. You got the big wins in Canada and France, but you've alluded to that this should ramp through this year as well?

We'll prefer Matt, to really be a little bit more conservative and see if that will continue.

Okay, fair enough. In terms of the severance charges that you guys had in the quarter, it sounds like it was Brazil and a couple of small U.S. locations. Jon, what are the annual savings attached to those cuts?

I think in Brazil, we expect, I think on a net basis, that we should be able to improve operating income in that subsidiary by something approaching $1 million. In the U.S., the savings from the facilities might be of a similar amount.

Okay. And the last thing for me and then I'll hop back in the queue. As we look at the EBITDA margin in your guidance, is there going to be a material difference in EBITDA margins in the second half of the year versus the first half of after you start to ramp the business up in Canada?

I think what will happen, Matt, is that last year's first half of EBITDA margin was relatively stronger and certainly than in the second half, we had items that reduced it. But also there's some seasonality in there, too. I think that we'll probably be more consistent in the EBITDA margin through the year. First half might be a bit higher than second half. But I think certainly, we'll be accretive in the second half, not necessarily in the first half.

So Jon, why would that not ramp in the back half? If you're ramping revenues up in Canada for -- to better cover the cost of all the people you've added there, why would we not see a margin improvement in the back half?

I think we will. That's what I've just tried to say. I was -- I apologize. But our expectation is that we will have margins ramping in the back half certainly relative to the 2014 back half.

That's what you meant by accretive, right?

That's right.

Your next question comes from the line of Andrew Wittmann of Baird. Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division: I want to get a little bit of a better sense on the incentives that you're putting in place to drive cost out to grow the bottom line faster than the top line. Can you talk about what some of those metrics are? And how deep in the organization that they drive and when they kind of became effective?

Yes. Andy, it's Jon. Really, they're in effect for the new fiscal year, that started June 1. And it goes across our business segments and to us in corporate as well. We're majority focused, now on obtaining profit levels and profit margin levels, whereas in the past, it was more of a balanced spread across various metrics. Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division: Is that at the executive level, or does this go down to the GMs? It sounds like it's a...

It goes down to GMs and below. It comes down all the way down to the project managers.

That's right. So certainly the GMs, the people in the field, project managers, so Sotirios is saying everybody has got skin in the game here to make sure that the profit margins are at certain levels. Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division: Got it. Jon, can you talk about how much investment is going to the income statement that's driving some of these long-term cost initiatives? You said it's kind of middleware, so it's not that costly. But are there other things that may be artificially depressing the margin outlook that maybe we could strip out if we think about kind of a normalized earnings?

I think, Andy, the bulk of that was really the startup cost in Canada. Certainly, the $4.5 million that we've called out in the second half of fiscal year 2014, the majority of that was either startup cost in Canada or the weather impact in the third quarter. The middleware initiative going forward into fiscal year 2015, that will be less than $1 million of impact, we believe, in terms of incremental cost rate, that's included in the run rate. It might approach $1 million, but I don't think it will exceed that. And we expect that we should be getting some benefit from that initiative as fiscal year 2015 goes on. So it might be about a push.

Yes. Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division: Okay. That's helpful. Maybe just one final operational question. Sotirios, I think you talked about the midstream getting better. I guess I'd be curious as to what kinds of services you're being asked to do there? And specifically how the work levels that you are seeing today compare to what you saw a year ago and where you think they might be 1 year from now, just to get a sense of where that progression is on pipeline type work?

Andrew, it is really standard NDT but one thing that's exciting for us, people start to using more and more our PCMS software, which is really very important to us. So therefore, we're going back to the one source solution, okay? And we basically -- the same thing happens also with engineering because we also do some engineering type of work for them also because they're small companies and they don't have the engineers that the large companies have. Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division: Got it. This is run-and-maintain work, so this isn't like pipeline instruction wells inspection type of work, or what's the incremental driver for the growth?

It would be both. Actually, for the new pipelines of course, it will be a onetime event, but some of the terminals, actually, is run-and-maintain type of work. Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division: Got it. So last year, fiscal '13 was like 10% of total company revenue. Is that growing as a slice of the pie, or is it those that are growing faster than the whole company or kind of in line with that?

I think it's growing. It's growing, especially as I said because we offer in our one source solutions. But I do not recall, really, what the percentage is. But I know for sure, it's growing.

[Operator Instructions] Your next question comes from the line of Tahira Afzal of KeyBanc Capital Markets.

So you guys have been -- have delivered on really a lot of your market gain strategy so far. As you look into the next year, can you talk about other strategies that maybe perhaps not building into your numbers right now but where you see some opportunities to continue to grow, whether it be through market share gains, or a more regional and end-market exposure?

Well, first of all, Tahira, as we've discussed, because of what we show in the Gulf and other places, we are trying to do a little bit of diversification. So the first thing we're very excited, of course, is the Power Generation business. That also is very, very, very well, this scenario that we were not really participating in a big way. But I think we're doing it now. And then the other thing is that we have -- we continue to really work on the capital projects. In some cases and I mentioned, the customer has already has given us the pre-engineering, which is the software, which is really beginning. But at the same time, we hope that there would be other capital projects not only in here but also around the world.

All right. Okay. And then I know you've made some pretty good contracts with Southern Company. If you look at the AP1000 technology that Westinghouse is using internationally, that's being used fairly rapidly being deployed in China. Can you talk about, really looking at the nuclear side and for the AP1000 whether you can follow them in other regions as well?

Yes. The only thing we can basically say, Tahira, is that Westinghouse has been a customer of ours back from the old days -- from the old days. And we provide them typically with instruments. We provide them with Loose Parts Monitoring and the Leak Monitoring Systems in nuclear power plants, as we do other manufacturers of nuclear power plants at this point.

At this time, there are no additional questions in the queue. And I would like to turn the call back over for closing remarks.

Okay. I would like to thank everyone for listening, and we wish all of you a great day. Thank you very much for listening. There was somebody else.

There are 2 other people in the queue. Your next question comes from the line of to Toby Reeks of Morgan Stanley.

Can I give you just 2 questions? One is the building blocks around the 200 basis points of margin progression, I guess, not just sort of getting scale in the business, but in the core business, how are you doing that? And then the second is, your comments on, sort of about growth next year, the guidance is excluding large capital projects. Is there increasing visibility on any of these large capital projects, or is it really just the same?

Let me answer that one first and then Jon will answer the financial. As I mentioned on my text here is that, there is a visibility. As a matter of fact, we already sold the software to one of -- the pre-engineering software to one of the capital projects. There's actually a second capital project that might start, that we're also in a very good position. And of course, there's a lot of small capital projects in Power Generation, okay? And we mentioned one that we had already obtained, where they built new plants. Okay, that's also very attractive to us. And that's a result, as I've said, about diversification last year. Oil and gas business is very important to us, I guess, it has always been, but we like to expand to other areas.

Yes. And Toby, this is Jon. With regards to the 200 basis points in improvements. Really, we think that this 200 basis points is very attainable, not necessarily easy to attain but very attainable. And it really comes down to the initiatives that I listed out as some of the reasons that we're very optimistic about fiscal year 2015. We are focused on profitability to a much greater extent I think, than we really ever have been before. As we enter the fiscal year, Sotirios said in his remarks, as we started 2014, we're quite concerned about making sure that we could resume our growth trajectory. And we feel we've done that. And we've positioned the company to continue doing that. We're really focused now on driving the margin that should come with that growth. We've made lots of investments in '14. We think that several of those will pay off beginning in '15. The other thing is, is that the mix of revenues and profits that we think will come, by focusing on the Canadian oil sands will be certainly accretive to us. We think that it's an opportunity to add high value to the customers in that region and that, we'll earn better than company-wide margins in that region. And finally, this focus on processes is really, it can't be underestimated. We have a great ERP system here. But we do an awful lot of manual work to get data in and out of that ERP system. And by making those processes electronic we'll enable G&A leverage that the company has not been enjoying as it's been growing. We haven't really been getting scale in our back-office. And by making these initiatives, we think that, that's going to enable the scale to be achieved in the future.

Toby, the other thing also, we're talking about new capital projects. As you know, we are monitoring a lot of bridges in the United Kingdom, okay? Now, the new bridge monitoring contract that we received has a lot of potential because there are similar problems to about 30 of them. But of course, the government has to put money in the infrastructure because right now, basically, the awards that we got we didn't get from the government, we got it really from the local DOTs, Department of Transportations. So that can really, really increase. If they do the same thing that they did in United Kingdom, it would help us a lot in the infrastructure area. And I think, as you know, we're the leaders in that area. And we command respect by all people in the bridge business around the world.

Okay. It always makes me feel safer when I drive over Hammersmith flyover. Good to know you're monitoring it.

Okay, you mentioned. Not me, okay.

Your next question comes from the line of Andrew Wittmann of Baird. Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division: Just a commentary on the ramp in the second half on the profitability. I think it's probably, fair to get you on record as to what you're seeing and what's driving the confidence that the second half is going to be better than the first? Is that just the ramp in the large projects? And how is that ramping going?

I think the ramp in large projects has a lot to do with it, Andy. We've been making investments in Canada. And I think that as the year goes on, as we start to get the uplift from those investments, not only from the large customer that we previously spoke about, although not named, as well as other customers in the region, too, because we think that there is, just an awful lot of potential there, but it doesn't start immediately, it's an organic startup. It's not like we're buying on the existing book of business. So it's going to take a little bit of time to build. As the year goes on, I think we'll see more and more returns from that. The other thing is that the process improvements should start to bear some fruit as we get to the back half. The first half of the year, we'll be making investments with no return. In the back half I think we might start to get some return from them.

At this time, there are no additional questions.

Okay. I would like -- I guess, to say the same thing again, right? I would like to thank everyone for listening, and we wish you all a great day. Thank you very much for listening.