RBC Bearings Incorporated (RBC) Q4 2023 Earnings Report, Transcript and Summary

RBC Bearings Fourth Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. I would now like to turn the conference over to your host, Josh Carroll with Investor Relations. Please go ahead.

Thank you, operator. Good morning and thank you for joining us for RBC Bearings fiscal 2023 fourth quarter earnings conference call. With me on the call today are Dr. Michael Hartnett, Chairman, President, and Chief Executive Officer; Daniel Bergeron, Director, Vice President and Chief Operating Officer; and Robert Sullivan, Vice President and Chief Financial Officer. Before beginning today's call, let me remind you that some of the statements made today will be forward-looking and are made under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected or implied due to a variety of factors. We refer you to RBC Bearings' recent filings with the SEC for a more detailed discussion of the risks that could impact the company's future operating results and financial condition. These factors are also described in greater detail in the press release and on the company's website. In addition, reconciliation between GAAP and non-GAAP financial information is included as part of the release and is available on the company's website. With that, I will now turn the call over to Dr. Hartnett.

Thank you, Josh, and good morning and welcome to all. Net sales for the fourth quarter of fiscal 2023 were $394.4 million versus $358.9 million for the same period last year, an increase of 9.9%. For the fourth quarter of our 2023 sales of industrial products represented 69% of our net sales and aerospace products 31%. Gross margin for the quarter was $166.5 million, or 42.2% of net sales. This compares with $137.5 million or 38.3% for the same period last year. Adjusted operating income was $88.6 million, 22.5% of net sales, compared to last year's $71.9 million and 20% respectively. Adjusted EPS came in at $2.13 a share. Adjusted EBITDA was $121.1 million, 30.7% of net sales compared to $104.4 million and 29.1% of net sales for the last -- same period last year. On the industrial businesses, during the period, the industrial sales growth was 7.4% against some strong comps from last year. Dodge was our leader with 9.2% expansion rate on a combined OEM and distribution sales. The latter showed a low-teens expansion rate for Dodge. Overall, the industrials were up high single digits, with sector growth mitigated somewhat by Europe. On aerospace and defense, overall, we saw a rate of expansion of 16% with aero OEM up 25%, and aero commercial distribution up 42.8%. The demand drivers here continue to be the large plane builders and their supply chain in support of production for Boeing and Airbus 737, 787, A320 and A330 principally, as well as other producers of business jets and a myriad of subcontractors needed to support the industry. Additional volume increases were felt from our space initiatives and we saw demand for products to support the new field for -- of [aerotaxis] beginning to trickle in. As mentioned in previous calls, we expect to see increased demand, creating double-digit growth from the plane builders for many quarters to come as they continue to aggressively expand build rates. We continue to add resources and planning to support these increased rates, as well as we expect expanded work statements. To summarize, for the period, RBC saw growth in revenue of 9.9% and an adjusted EBITDA expansion of 16% against the same quarter last year. Regarding our first quarter of 2024, we are expecting sales to be somewhere between $380 million and $390 million range. And I'll now turn the call over to Rob for more detail on the financial performance.

Thank you, Mike. SG&A for the fourth quarter of fiscal 2023 was $59.6 million compared to $54.5 million for the same period last year. As a percentage of net sales SG&A was 15.1% for the fourth quarter compared to 15.2% the same period last year. Looking forward SG&A as a percentage of net sales is expected to be between 15.75% and 16% of sales in the first quarter, including approximately $3 million to $4 million of stock-based compensation expense. Other operating expenses for the fourth quarter of fiscal 2023 totaled $20.7 million compared to $23.7 million for the same period last year. For the fourth quarter of fiscal '23, other operating expenses included $17.7 million of amortization of intangible assets, $2.5 million of restructuring costs associated with our South Carolina operations, and $0.5 million of other items. For the fourth quarter of fiscal 2022, other operating expenses consisted primarily of $17.2 million of amortization of intangible assets, $5.7 million of costs associated with the Dodge acquisition, and $0.8 million of other items. Operating income was $86.1 million for the fourth quarter of fiscal '23 compared to operating income of $59.3 million for the same period in fiscal 2022. Excluding approximately $2.6 million of restructuring costs associated with our South Carolina operations offset by $0.1 million of acquisition related costs, adjusted operating income was $88.6 million or 22.5% of sales for the fourth quarter of fiscal 2023. Excluding approximately $12.5 million of acquisition costs, adjusted operating income for the fourth quarter of fiscal 2022 was $71.9 million or 20% of sales. Interest expense for the fourth quarter of fiscal 2023 was $21.7 million, compared to $13.6 million for the same period last year. We anticipate interest expense between $20 million and $21 million for the first quarter of fiscal 2024, including approximately $1 million of costs associated with the amortization of deferred financing fees. For the fourth quarter of fiscal 2023, the company reported net income of $49.2 million compared to $31.5 million for the same period last year. On an adjusted basis net income was $67.7 million for the fourth quarter of fiscal 2023, compared to $61.7 million for the same period last year. Net income available to common stockholders for the fourth quarter of fiscal 2023 was $43.4 million, compared to $25.7 million for the same period last year. On an adjusted basis net income available to common stockholders for the fourth quarter of fiscal '23 was $61.9 million, compared to $56 million for the same period last year. Diluted earnings per share attributable to common stockholders was $1.49 per share for the fourth quarter of fiscal '23, compared to $0.89 per share for the same period last year. On an adjusted basis, diluted earnings per share attributable to common stockholders for the fourth quarter of fiscal '23 was $2.13 per share, compared to $1.93 per share for the same period last year. Turning to cash flow, the company generated $71.4 million in cash from operating activities in the fourth quarter of fiscal '23, compared to $46.9 million for the same period last year. Capital expenditures were $12.4 million in the fourth quarter of fiscal '23, compared to $8 million of capital expenditures for the same period last year. We paid down $70 million on the term loan during the period, leaving total debt of $1.4 billion as of April 1, 2023 and cash on hand was $65.4 million. Cumulatively, since November 2021, we have now paid $400 million on the term loan. I would now like to turn the call back to the operator for the question-and-answer session.

Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Kristine Liwag with Morgan Stanley.

Looking at margins, I mean, you guys printed 42.2%. This is one of the highest you've ever had, if not the highest. Can you talk about what drove this margin improvement? How much of this is from synergies? And last quarter, you were already at the -- you already had significant synergies from Dodge. How much is left to get to your final target of $70 million to $100 million per year by year 5?

Kristine, it's Dan. We had a good mix in the quarter. And you're right on the synergy side. Since owning Dodge, over this period of time, we've added 7 percentage points to their gross margin contribution. And I think on the COGS side, that will start to slow for a little for the next 12 months, then pick up again at some of our longer-term projects that we're working on the synergy side will kick in. On the top line sales side, I think we're a little behind target of where we'd like to be on our synergies. So I think we still have some good upside over the next 3 to 4 years to get to that target as we train our sales teams on both sides of RBC and Dodge to cross-sell each other's products around the world. And that's working well, but it takes time to get everybody trained up. And on SG&A, I think we're definitely ahead of where we thought we were going to be. We were able to move Dodge off of ABB's IT systems and picked up my savings on doing that. I'm getting them on to their own system and on the back of RBC's IT group also. And so we picked up some lay synergy there. So going into this year, Rob gave you guidance for Q1. Hopefully, we can do a little better than that. We'll see what happens. But I think we are definitely ahead of where we thought we would be coming into the real first year of our integration with Dodge.

Okay. And then following up on just the what -- how much synergies have already been harvested? Like from the $70 million to $100 million, can you just give us a run rate of how much of that has already been done?

Yes, I'd say on average, that run rate is anywhere is from $45 million to $56 million.

Great. And then in terms of commercial aerospace, you talked about the significant step-up for aircraft production rates, Mike. And so can you level set us in terms of where you are in production rates Boeing trying to hold on to 31 per month for the MAX and there's discussion of moving up to 38 per month around now is this summer and then to 42 by year-end? Is that where you're tracking? Are you above or below where they are? Is there some sort of inventory that needs to get depleted before you get on that rate ramp? And also, any color you could provide on the 787 as well as you get towards 10, the A320 and the A350?

Yes. First, let's -- those are a lot of answers. Let's see. In terms of Boeing's content and where we are relative to the buildup, what we do is we look, as you do at their skylight chart and determine are they -- first of all, are they producing themselves to their chart, and we think they are. We kind of monitor that pretty closely. And then we look at based upon if they're going to go to, say, 38 planes a year or whatever, and they're going to do it in January. We know that we have to have our product six months ahead of time because if they're going to build 38 planes, the bearings can't show up and the hardware can't show up the day that they want 38 planes to exit their plant. So we kind of offset set the lead time on their chart by six months and determine what our production requirements are in order to have that product available in six months. So we're pretty much aligned. We know what our mix per plane is. And as a result of knowing what that mix per plane is, we can kind of back calculate their rate and our rate and are they -- do they correlate? And they correlate very well. We've done a lot of work to make sure that we're completely in cadence with their buildup. Now in terms of inventory in the system. Right now, I would say, thank God, there's inventory in the system because stepping up production rates, 25% a year, is a big order for a company like us who actually have to make it from raw material to finished goods. So we're doing the best we can to meet their rate expectation. And we know by the end of the year, that whatever inventory is in the system for the 37 and the 87 is going to be pretty much squeezed out of the system. So we're going to be commando by about December. And so we're going to have to produce very well at their production rates, December and beyond. And the difficulty in doing that is material. Lead time for these aircraft steels are 50 weeks and the deliveries after 50 weeks are not completely certain. So maybe you expect to get it in 50 weeks and you get it in 55 weeks or something like that. So steel availability is a problem and there's some steels that are not available at all. And they're important alloys and they're highly used in the aircraft industry. And I think the aircraft people are going to have some difficulty all the way around, not only in bearings, but in structures to determine how to substitute other steels for the steels that have already been specified for use.

And so Mike, in terms of these deals, is there a Boeing master agreement or an Airbus master agreement that could help with sourcing? I mean that seems like a fairly important input to have uncertainty over considering the production rate volumes that are in that guideline. .

We talk to them all the time. I'm sure other people have the same discussions, not just people making what we make. And this specialty steel producers are, to some extent, unwilling to produce the chemistry needed. Some of them have gone bankrupt or have been restructured. Actually, Airbus just bought one of them and because of this situation and this situation exists in the United States, too. So I think it's something that -- what's that?

Sorry, Mike. So with this uncertainty, how are we going to see the 50%, 60% volume increases that the OEMs want in two, three years? I mean the environment you're describing seems fairly dire for a really important input, and we've got this massive volume ahead of us to meet those rate ramps. How do you think this gets resolved? And does that put at risk these production rate increases?

It certainly is a big consideration on these production rate increases, and it needs to be resolved and exactly how it gets resolved is there needs to be some material substitutions for some of these alloys in the design. And so -- and we can't do that. That's Boeing's design. So they're going to have to double time their engineering department to provide materials that are modern and available.

Our next questions come from the line of Pete Skibitski with Alembic Global.

And Mike, just one clarification. When you talk about steel and steel alloys, are you also including sort of aluminum alloys and nickel alloys? Or is it strictly steel in these alloys?

Well, I mean, it's steel and it's alloys. And it's alloys are nickel and chrome and manganese and that sort of thing. But it's -- yes, that's -- I'm talking about steel. We don't have the aluminum worry that other people have, but we do have the steel worry.

Okay. Okay. Got it. And I guess I just wanted to ask about the top line in the fourth quarter. You guys beat your own revenue guide pretty handily. Was there a particular market segment that surprised you there or a share gain maybe or something else?

Well, I think -- as I said in the last conference call, it's really hard for us to project Dodge's revenue because of -- they really don't work with an order book like the rest of RBC does. So RBC has a backlog of a year in order book. So we're very -- we're very confident in our outlook for what we're going to produce and what's going to generate for revenues. With Dodge, they have a much different business model where they're sort of GDP-driven. I mean, you tell me what the GDP is going to be, and I'll tell you what Dodge's revenues are going to be. So in this particular quarter, their business was stronger than we had anticipated when we did our last conference call, and it continues to be strong.

Okay. That's fair. And to that point, I mean, you've seen ISM PMIs below 50 now for a couple of quarters in a row, right? So I'm wondering, are you guys kind of seeing out there market softness at all? Or I'm wondering if there's market softness, but you're kind of offsetting it with pricing gains and market share gains, things like that? Or actually are just the end market just stronger than you might expect for where the PMIs are right now? And you talked about Europe being weak as well.

Yes. Well, I mean, in the industrial business, it's very end market-dependent, right? And right now, there's a lot of consolidation going on in these -- with these industrials that are our peers, and so I'm sure that's creating some service level problems. But on the other hand, there's the -- and -- very end market-dependent. And our end markets are -- if you start with oil and gas, it's very strong. Semicon is soft, but it's not dead. Mining is steady and the demand is very acceptable. Aggregate is very good. Grain is very good. Infrastructure is good. Wind is not as breezy as it was last year. General distribution is very good. And it's -- these industrial markets are surprisingly strong that we serve despite the news of the day and what the economy is doing.

Yes, Okay. Last one for me, and I appreciate the color. You guys have been talking a lot -- you expect to grow this year, but you've also been talking about additional defense plans. You did just do a restructuring in South Carolina. I don't know if that was just a pure kind of cost takeout or not. But how does kind of all that roll up into your CapEx projection for fiscal '24?

Yes. I think we'll be right in that 3%, 3.5% of revenue range. I'd be surprised if it bulges more than that. There's nothing to make a bulge right now on the horizon.

Okay. Okay. And the South Carolina restructuring, was that just a pure cost reduction at Dodge? How to think about that?

Yes. It was kind of a combination of some cleanup at the Dodge level as well as one of our legacy RBC plants, just clean up down there. So nothing out of the ordinary.

Our next questions come from the line of Steve Barger with KeyBanc Capital Markets.

Thinking about your 1Q revenue guide. As I look at the comps, it seems like we'll see another double-digit organic for aero, maybe single digit for industrial. So first, is that how you see it? And second, is that how you're thinking about the year as well?

Yes and yes.

Got it.

Yes and absolutely yes.

Absolutely yes single-digit industrial or just that's that you expect solid growth for the full year?

Yes. I mean it will be single-digit industrial, I expect, maybe a little bit better, certainly not into the double digits, maybe the upper singles. And the aerospace will be strong. It will be sort of at least mid-teens. And marine, marine will be a contributor, and they haven't been this past year, but the knots are getting untied and that material will start to flow.

That sounds good. So with that in mind, you drove 174 basis points of gross margin expansion last year, which was the best performance in 10 years. You talked about -- or Dan talked about the Dodge COGS benefit starting to slow this year. Can you talk through total company gross margin expansion plans that you see? What's your target? What are the big levers for expansion? Just how are you thinking about gross margin for FY '24?

Well, I'd love to say that we're going to grow 0.5 point to 1 point. I can't tell you what the details of that growth are going to be. That's probably more an objective than a plan. But I don't see we're going to see we're going to have any deterioration in gross margin.

I mean just the volume alone should give you pretty good leverage, right? What's the offset?

Yes, just the aircraft volume going through the plants, which is we're seeing quarter-to-quarter better absorption of our overheads because we've had some of those plants on a slow cadence. And so that's that by itself is going to accrue to the benefit. On the other hand, we -- the Dodge business is heavily dependent upon subcontractors and purchase parts and those variances have -- we're crazy last year, and they're under control this year. They seem to be normalizing. On the other hand, counter to that, we're working to in-source some of that product from Asia to the United States and to Mexico into our Mexico plants. So still there will be some start-up expenses on based on learning curve that we'll probably have to absorb, but it's absorbable. And over the longer term, we'll get better absorption in the Mexico plants just by doing that. So yes, I think, overall, there should be some expansion. I wouldn't say that we're going to see the same year that we saw last year.

Yes. Understood. Going back to Pete's question about PMI being sub-50 for six or seven months now, but really strong industrials, not just from you, that's what we heard through earnings season in general. What are your thoughts on the divergence? Why -- you study cycles, what do you think is going on?

That's a good question. I study our sectors pretty well, and I kind of know what's going on there, but I don't know -- I mean, we're not into automotive and heavy truck and all that sort of thing in any major way. And so those markets are -- as you can see, haven't been robust, they've been acceptable, consumer goods is not our thing. But what we do is produce the basic food stuffs in aggregate to keep the economy moving. And we're -- if you look at the Dodge business, it's a very low beta business in terms of -- in terms of its demand profile across the years. So I think we're a little bit -- I wouldn't say immune, but a little bit different than the normal industrial business that's servicing automotive and consumer products.

Our next questions come from the line of Seth Weber with Wells Fargo.

This is Larry Savitzky on for Seth this morning. You guys mentioned the areas of strength, industrial strength in terms of end markets. Have you seen any change in industrial customer appetite due to macro concerns quarter-over-quarter? Anything that's a concern to you guys?

Well, we're thinking about that. No, I guess the overall answer is no. We haven't seen any concern. I think the only soft spot that we've seen in the industrial side was the reversal of Amazon's decision to build all those warehouses. So I think that kind of kicked the legs out of a few stools in the industry. And our business softened up last year at this time in that sector, but we've completely been able to overcome and restructure around it.

Okay. Okay. And then on supply chain, you mentioned steel availability is still a problem. How has the dynamics with the supply chain, how they change quarter-to-quarter or year-over-year? I mean, are things loosening up a little bit for you guys? Or is it still pretty tight out there?

Well, it's pretty much normalized. For most steels, for 80% of our steels, which are in production and -- the planning lead time has expanded. And so we just have to expand our planning lead time to accommodate it. So as long as you can get ahead of that game, you'll do fine. And we're ahead of the game. And on the specialty steels, those are still hard to get. I mean those are -- that's a problem that still needs to be solved.

Yes. And you expect that to go on for a couple of quarters?

I don't -- I think new suppliers have to be -- will be tooled. I mean I think there's got to be some new people entering this market that can produce these things. It's capital intense, but a lot of people already have this capital. And if they realize that there's decent volume and decent profitability in these alloys, I think the problem will get solved.

Our next questions come from the line of Joe Ritchie with Goldman Sachs.

This is Vivek Srivastava for Joe Ritchie. My first question is on industrial inventory at distributors. Could you provide some color on the destock risk, especially on the industrial distributor side? And maybe any color by end market where there's more destock risk right now versus less? And any color on the time line of when this stuff can happen?

Yes. Well, yes, I think the industry at large is, as far as we could see, there hasn't been any overstocking situation. I think during the pandemic it was hard to get the materials. And so now I think most of our distributors are happy to have to be able -- happy to get able to get these materials and put them on their shelf. 50% of their sales is from break-fix. So when something is broken in the marketplace and somebody needs an immediate repair, it's a profitable sale for them if they have it in inventory. So they don't like not to have it in inventory. Now there's been some inventory liquidation over the past six to nine months is a couple of our major customers consolidated -- and during the consolidation, stores were closed and inventories were combined, and we definitely saw a drop in revenues from some major customers as this occurred. And that was probably -- it seemed to have been completed around the December, January time period, which may have been part of the reason why our fourth quarter was stronger than we had anticipated. But that's the only mechanism that we saw that was unusual in place over the last 12 months.

Got it. That's super helpful. And then just maybe on your backlog. It looks like sequentially, backlogs were pretty strong and maybe it's driven by aero. Any indication you can provide on how the industrial side of the backlog on RBC is pending? And what are you seeing from order trends on the industrial side?

Yes, sure. Most of the sequential increase was driven from our defense business, be it Sargent or actually one of our legacy businesses. The Dodge backlog is actually down $10 million, which is not a bad thing because as we've talked about, they are not a business that traditionally carries a significant backlog. But the orders have remained strong, holistically in the industrial side of the business. .

That's helpful. My last one, just across like some of your peers talk about having portfolio outside of just bearings and broadly across the industrial drivetrain could help with gaining more traction with the customers. Just any indication on how much of your portfolio maybe is outside of bearings, more on the industrial drivetrain side? And like what is your counter to some of those claims that peers probably have more products across the drivetrain that can gain more share?

Yes. I would think that maybe 25% to 30% of our sales are products that are not bearings. They're either systems, gearbox systems or their valves or their rods that go into structural components for aircraft. So yes, I'd say we haven't made those calculations but -- so I'm extrapolating what I know about the business, but I'd say it's 25% to 30% of our revenues are outside the direct bearing line.

Our next questions come from the line of Michael Ciarmoli with Truist.

Nice results and margins here. Maybe, Mike, just a lot of this talk on supply chain in aero. I mean, as you look at the year, you said double-digit aero growth. I mean, how do you risk-adjust that for not getting access to supply? I mean, is there a -- is there a big threat there to meeting your objectives for the year? And I mean I think we keep you in in some cases, bearing lead times are stretching out like three years. But how do we just think about the risk of you guys executing if you don't get that supply?

Well, we do get the supply. It's -- more than 90% of our bearing products, probably 95% of our bearing products use materials that are readily available. There is that other 5% of not only bearings but structural components that are more difficult to get. And I think it's a bigger problem for somebody like Boeing, who uses these materials widely across their aircraft line than it is for RBC.

Okay. Okay. That helps. So you're -- okay. So if you're exposed, it's about 5% of your product and where you're seeing some of that tightness on alloys?

Yes, maximum 5%

Okay. Okay. And then just back to the gross margins. I know you called out some of these learning curves and start-ups, but you got a little bit of, I guess, volume step down in the first quarter. But what else is driving the gross margins to step down? I know you guys were pretty enthusiastic a couple of quarters ago calling out a new floor and now we're going to see -- I mean, still phenomenal margins. But is there anything else to read into? I mean, is it just conservatism? And again, I know you called out some of the subcontractors purchasing parts, some of the moves. But is that kind of the driver? Or how should we think about that in the first quarter?

You mean for the revenue projections for the first quarter?

The gross margin projection, 41% to 41.5% stepping down sequentially from what you just did this quarter.

Yes. Yes. Well, I think that's probably a little conservatism playing a role there. There's no supporting mathematics behind that estimate, believe me.

Okay. Okay. That's good to know. And what about you talked about the synergies. I think you talked about the COGS kind of slowing down. But I guess going back to when you made this Dodge deal, you did talk about, I guess, $200 million or so of material and supply you could source in-house. I mean -- is that -- where are we there? And I think you maybe said beyond the next 12 months, that kicks in. Can you give any color in terms of how much runway is left on that?

Yes, we're right at the beginning of that. I mean, that's -- we've only been doing this for a little bit over a year plus a quarter. So yes, we're right at the beginning of sort of looking at that mix, identifying what part of that mix could be best made in some of our lower-cost plants what part of that mix needs to be made in order to support the volume demands that we see. And also, at the same time, as we got into that, we found a lot of areas of growth potential that could be achieved. If we made this product or we made that product or we in-sourced certain materials that our supply chain had always had problems producing. So if we in-source -- capitalize and in-source those materials, we could see upside to our revenues and our margins. And so it's sort of the outside the synergy concept. But clearly, there's plenty of upside in the Dodge product offering to take advantage of by incorporating some of these product strategies.

Okay. Okay. That's good to know. And then I mean -- again, the margins have been fantastic here. But if we look at -- I think you kind of said mid-30% EBITDA margin target by year 5, and certainly, it sounds like you've got runway and levers to pull starting with that COGS. I mean, so you're still confident in that mid-30% EBITDA margin.

That's a good goal. I mean you need to have a -- what do they say, a humongous goal. So I think we're making our way towards it. Let's put it that way.

Okay. Fair enough. Last question, I'll get out of the way. I guess the implied defense, you didn't give the defense revenues, but I guess they look to be down 7%. I mean, I know you talked about marine not being a contributor presumably lapping some easy comps, get some of that product flow in on the subs. So should we expect a pretty good rebound in defense next year or this year for fiscal '24?

Yes. Probably it comes in later in the year because first of all, I think the marine business gets its mojo going and it looks like it's on track for that. And at the same time, we have a lot of key product. It has to be replaced. It was used in the Ukraine situation. And so that will probably start phasing in at the end of the year.

Our next questions come from the line of Pete Skibitski with Alembic Global.

Just one follow-up for me, guys. I don't think all the data is out yet, but it looks like probably fiscal '23 ended up as a big inventory build year for you guys. And I imagine some of that is safety stock, maybe some is to support the growth. Just wondering if you expect inventory to build at a similar level in fiscal '24 than it did in '23.

Pete, it's Rob. So inventory build for the year was about $70 million, a little more than $70 million. Some of that was at the Sargent business where, as we talked about in the past, we do get reimbursed for some of that material purchase on the marine program. The rest of it was Dodge, primarily. And I don't expect that level of growth in the next fiscal year.

Okay. Okay. What drove the Dodge growth? Just curious.

Supply chain, when you can't get it from supplier A, you order it from supplier B, and then supplier A delivers and supplier B delivers.

Ladies and gentlemen, there are no further questions at this time. I would now like to turn the call back over to Dr. Hartnett for any closing remarks.

Okay. Well, that's the end of our conference call. We thank you for participating and look forward to speaking to you again in the July, August timeframe. Good day.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.