Kaman Corporation

a day, and thank you for standing by. Welcome to the Command Corporation first quarter 2021 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to turn the conference over to your speaker today, Jamie Coogins. Vice President, Investor Relations, and Corporate Development. Please proceed.

Good morning. I'd like to welcome everyone to Command's first quarter 2021 earnings call. Conducting the call today are Ian Walsh, Chairman, President, and Chief Executive Officer, and Rob Starr, Executive Vice President and Chief Financial Officer. Before we begin, I'd like to note that some of the information discussed during today's call will consist of forward-looking statements setting forth our current expectations with respect to the future of our business, the economy, and other future events. These include projections of revenue, earnings, and other financial items, statements on plans and objectives of a company or its management, statements of future economic performance, and assumptions underlying these statements regarding the company and its business. The company's actual results could differ materially from those indicated in any forward-looking statements due to many factors, the most important of which are described in the company's latest filings with the Securities and Exchange Commission, including the company's first quarter 2021 results included on Form 10-Q and their current report on Form 8-K filed yesterday evening together with our earnings release. We also expect to discuss certain information that are non-GAAP measures, as defined in applicable SEC rules and regulations. Reconciliations to the company's GAAP measures are included in the earnings release filed with yesterday's 8K. With that, I'll turn the call over to Ian Walsh.

Thank you, Jamie. Good morning, everyone, and thank you for joining our first quarter 2021 earnings call. I'd like to begin today's call with a brief summary of the quarter, followed by operational updates in our key product categories and an update on a couple of our R&D efforts. I will then turn the call over to Rob for a more detailed discussion of our financial results for the quarter. Relative to our internal plan and the guidance we detailed on our fourth quarter call, we are off to a good start in 2021 with sales of 171.6 million and earnings per diluted share of 29 cents. These results ran modestly ahead of our expectations, particularly on the profit line, which benefited from the timing of customer deliveries, a favorable closeout of option 14 of our JPF-USG contract, and strong cost control efforts. Compared to the prior year, net sales declined 17.2%, with organic sales down 14.5%. This was expected as we anticipated fewer deliveries this quarter for our JPF program, and our commercial aviation products faced a tough comp versus Q1 2020, which was minimally impacted by the pandemic. These declines were partially offset by recoveries in demand for our medical industrial products. Our first quarter adjusted EBITDA with 17.1 million, or 10% of sales, up 70 basis points sequentially, but down 260 basis points from the prior year period, which again was minimally impacted by the pandemic. The lower year-over-year profit performance was largely the result of lower sales volume on our higher margin commercial and general aviation products coupled with an unfavorable mix of JPF deliveries in the current quarter. Recall that in 2020, first quarter JPF volume was weighted to our higher margin DCS orders. Despite lower sales, our first quarter results benefited from our comprehensive cost control efforts with adjusted SG&A as a percentage of sales remaining flat sequentially. Turning to our product offerings and beginning with our specialty bearings products. As anticipated, sales were down compared to the first quarter of 2020 due to the impact of COVID-19. Our self-lubricating bearings continue to be impacted by pandemic as they are sensitive to commercial aerospace volumes. This headwind was partially offset by recoveries in our industrial bearings led by strong performance from our miniature bearings and engine aftermarket components. And we expect the strength in these two product categories to continue through the remainder of 2021. Furthermore, as commercial airline traffic begins to rebound and as vaccination rates rise in the United States, we anticipated significant ramp in sales for our commercial bearings products, which will be weighted towards the second half of the year. Sales for our springs, seals, and contacts remained relatively flat this quarter when compared to the prior year, but are well ahead of the pandemic lows as evidenced by sequential increase in sales of 36%. Importantly, medical sales in the first quarter of 2021 for these products are now at or approaching pre-pandemic levels, and our order rates support an expected increase and elective surgeries, which we expect to benefit our medical and plannable products through the balance of the year. Similar to bearings, we continue to expect improved performance for these products through the balance of 2021, particularly in the second half. Turning to our joint programmable fuse program, we delivered approximately 8,100 fuses during the quarter. Below the 10,000 units we delivered in the prior year with less favorable profit contribution due to the mix of USG and DCS fuses. We are on plan to deliver 30,000 to 35,000 fuses this year, consistent with historical delivery levels for this product. Looking at our KMAX program, we delivered one aircraft during the period, and for the full year, we continue to expect to sell four aircraft in total. We remain optimistic about the prospects for both our manned and unmanned KMAX programs, and in April, we completed the first test flight of our new unmanned helicopter, the KMAX Titan. Our results for the first quarter represent a strong start to 2021. As we look ahead, we have continued confidence in our performance with an expected ramp up as we move through the year based on a meaningful recovery in our commercial aviation business in the second half. Before turning the call over to Rob, I would also like to provide an update on some of our R&D initiatives. As we outlined initially as part of our industrial distribution divestiture in 2019, we saw a tremendous opportunity to refocus our efforts to build a lean and efficient command that drives shareholder value through innovation, which has been at the core of our culture throughout a rich 75-year history. We have diligently been investing in various R&D projects, and I'm pleased to provide an update on two exciting opportunities we have been working on. First, during the quarter, we opened our new production cell for products manufactured using our proprietary titanium diffused hardening process, or TDAH. With our unique TDAH process, we're able to provide highly efficient, high-load components using this lightweight material that provides both improved durability and weight reduction for our customers. While our initial efforts are focused on marketing this technology to our core aerospace and defense customers, we are encouraged by initial feedback from prospective industrial and medical customers. We believe this type of innovation will prove to be a meaningful driver and strong differentiator for Command, and I would like to congratulate our development team for its incredible efforts in bringing this product to market. Second, we continue to make investments in the development of our unmanned autonomous cargo technology. As mentioned earlier, we completed the first test flight of our new unmanned autonomous K-Max Titan in April. This system is designed for rugged applications with lift capability of up to 6,000 pounds. This test advances our position as a leader in unmanned lift, allowing both our commercial and military customers the ability to operate autonomously in any location or weather. In addition to our heavy-lift aircraft, we recognize the opportunity we have to leverage our core software technology, and we've begun development of a new airlift application, which will serve a much wider addressable market. This next-generation, purpose-built UAS addresses medium-duty lift requirements and is expected to provide a potential for substantially higher unit volumes. To support this effort in coordination with our customers, we have committed an incremental 3.5 million in additional R&D spend in 2021. Although it is a bit early to disclose specifics, we believe each of these initiatives has the capability to be meaningful contributors to our overall product portfolio in the coming years, and we look forward to updating investors on developments in the coming quarters. Now I will turn the call over to Rob for a closer look at the numbers.

Rob? Thank you, Ian, and good morning, everyone. Today, I will walk you through our first quarter results before turning to our outlook for the remainder of 2021. During the first quarter, net sales from continuing operations were 171.6 million, down 17.2% when compared to 207.3 million in the prior year. Organic sales, which excludes sales associated with our former UK operation, decreased 14.5%. As expected, our first quarter results were impacted by the adverse effects of COVID-19 on our commercial aerospace products and lower JPF DCS volumes, partially offset by an increase in our industrial markets and favorable performance on our JPF USG contract as we close out our option 14 contract. As Ian has commented, we are pleased to see both our medical and industrial end markets begin to recover as economic activity rebounds and COVID-19 vaccines continue to roll out. Turning to our end markets, defense sales were down 20.2% in the first quarter of 2021 compared with the year-ago period and down 10.7% sequentially. The decrease was driven by fewer overall deliveries of our joint programmable fuse and the mix of USG and DCS sales. This result was in line with our expectations as the prior year included higher volumes of DCS fuses and reflects the quarterly fluctuations we normally see in our JPF program. As expected, sales in our commercial business and general aviation markets were 24.2% lower when compared to the year-ago period and down 15% sequentially. While we continue to forecast sales of our commercial aviation products to recover through the first half of the year, we expect a more meaningful rebound in the back half of 2021. In addition, our diverse product portfolio and broad range of platforms we support in general and business aviation are expected to partially offset these declines. Sales in our medical end markets were relatively flat compared to the prior year period and increased sequentially 22.8%. We anticipate continued recovery in this market over the course of the year and are encouraged by the order rates we have seen for these products. Finally, sales in our industrial end markets were up 9.5% from the year-ago period and 5.8% sequentially, driven by improved demand for our miniature bearings. We have seen strong order rates for these products as overall global economic conditions continue to improve. Gross margin for the quarter was 30.8% compared to the 32.7% in the prior year period. The 190 basis point decrease over the first quarter of 2020 was primarily driven by the sales mix of JPF, which was weighted more heavily to our higher margin DCS sales in the prior year. SG&A for the period decreased 16 million from the first quarter of 2020, and more importantly, decreased $4 million sequentially. As a percentage of sales, SG&A was 26.2%, a 10 basis point decrease from the fourth quarter of 2020. Restructuring and severance expenses in the period was $1.4 million compared to $1.8 million in the first quarter of 2020, as we continue to take actions to manage our cost structure and drive improved profitability. Adjusted EBITDA from continuing operations in the first quarter was 17.1 million or 10% of sales compared to 26.2 million or 12.6% of sales in the first quarter of the prior year. Sequentially, our efforts to maintain gross margin while controlling SG&A allowed us to improve our adjusted EBITDA margins on the lower sales volume we saw in the first quarter. We continue to closely manage our cost structure and are continually evaluating our business for cost reduction opportunities while ensuring we continue to make incremental IR&D investments on some of our key programs to drive future growth. On a consolidated basis, we recorded operating income of $5.6 million compared to an operating loss of $4.4 million in the first quarter of the prior year. This result was impacted by lower TSA costs and the absence of non-recurring costs associated with our ball seal acquisition. As mentioned previously, with the sale and distribution we agreed to provide certain services during the transition period. We have substantially completed all of these activities during the first quarter of 2021 and expect final closeout of this agreement in the near term. We recorded diluted earnings per share from continuing operations of 29 cents on a gap and net adjusted basis compared to a diluted loss per share of one cent or 48 cents earnings on an adjusted basis in the prior year. The adjustments in the current quarter included restructuring, severance and severance costs associated with the sale of our distribution and the finalization of the loss on our sale of our UK composites business. During the quarter, we had free cash flow usage of 7.1 million compared to a usage of 61 million in the prior year period. When adjusted for the 25 million retention payment made to ball sale employees in the first quarter, we generated adjusted free cash flow of 18 million. Our results benefited from improved collections in the quarter, more specifically, the receipt of approximately $53 million in payments on outstanding JPF receivables. Our full-year outlook for 2021 remains unchanged from our prior expectations, inclusive of the $3.5 million of additional R&D expenses associated with the development of our unmanned technologies Ian mentioned earlier. We are encouraged by our performance in the first quarter and see positive signs which provide confidence in the expected recovery in the back half of the year. With that, I will turn the call back over to Ian.

Thanks, Rob. While the end markets we serve continue to recover from the impact of the global pandemic, we performed well in the first quarter and delivered results above our internal expectations. We remain focused on implementing our operational excellence model across all our businesses. This is designed to drive improved EBITDA margin, free cash flow, and return on invested capital, and we are starting to see positive results. We are poised to meaningfully improve consolidated performance as the year progresses, particularly in the back half of the year as volume of many of our highest margin products begin to accelerate. As a result, we are on the path to a leaner cost structure with higher profitability and with an even stronger portfolio of businesses and product lines. Our continued R&D development efforts will allow us to accelerate our growth strategies in the coming years. I will now turn the call back to Jamie.

Thanks, Ian. Operator, may we have the first question, please?

Operator? Hi, Steve? Oh, hi. I didn't hear her announce me. Yeah, so good. Thanks. Ian, you said each of the three initiatives you mentioned could be meaningful contributors over time. Can you rank those by timing and market opportunity to just help us frame up reasonable expectations for the benefits?

Yeah, see if I can. And you said three. I was talking about two. I'm not sure what the third is.

The TTH and the Titan, right. Sorry. Yep.

Yep. So TTH right now is, like I said, we've got the first cell certified. This has been in work for several years. Very strong engineering around it, proprietary level of material science. This year is very marginal. We're just introducing a certain customers. We've got some little bit of incremental sales in there, but nothing significant. I would say that's more of a medium term. That's in the next two to three years to really see that ramp up significantly. When it comes to the other two, which KMAX, the Titan program, that testing and development and funding by the Marine Corps is in work this year. Like I said, we just had our first successful test flight. We've got a big demo later in the year. Timing-wise, hard to tell, but probably by the end of next year is when we want to see significant, or not significant, but kind of better level of funding to take it to the next level of development and operational prove-out. The other opportunity to me is something that Again, this is not concept stuff. We are already in the development phase. I think that's also a situation where we're funding that internally this year and next year with the intent that the services will then partner with us by the end of next year going into year three and four. So within a five-year window on that opportunity, we'd expect to see sales.

Got it. And this may be a tough question to answer, but as you've come to understand the portfolio and and just how you're thinking about potential M&A. How are you thinking about longer-term organic growth? Is this steady, low single-digit growth with some M&A on top, or do you envision this portfolio being more mid- to high-single-digit growth, given your end-market exposures? Just trying to get a sense for reasonable expectations.

No, I understand. I think it depends on the market, and it's hard to tell right now in the segments that we're in. So, for example... I think everybody understands kind of where defense sits and the cycles that that goes through. I think for us, it's relative to the two initiatives I just talked about. That's going to drive some, I think, higher level sales for us in that near to longer term, longer term being that three to five year window. The commercial business, I think, is going to recover very nicely. Again, you know, we're still waiting for Q2 to see how things play out, but we're very optimistic and very encouraged about what we're seeing so far. I think what we're going to see, you know, stronger low double-digit growth is in the medical side. If you look at kind of the trends right now and the market reports we're getting, you know, we've got a little bit of content on pacemakers, for example, but we've got significant content on neurotransmitters. And that's a segment that, again, our businesses feel very comfortable is going to be growing anywhere from a 9-11% range over the next five years. And industrial, I think, somewhere in that same neighborhood, quite frankly, that's where we're going to see better growth in the next three to five years.

That's really good detail. And I guess just as you net that out, does that bring the portfolio back to kind of low to mid-single digits just organically on a normalized basis?

Yeah, I kind of predict more of a kind of higher single-digit performance on average.

That's great. And last one for me, more near term. You said bearings and spring seals and contacts should have a much better back half. Do you expect that both 3Q and 4Q can be up year over year, or is that more likely just 4Q given how you see the ramp?

I've got to look at the numbers a little bit closer. I think we're probably going to be year over year –

know perhaps a little bit better depending on on how the ramp goes um but that's hard to tell right now yes steve this is rob i i think um you know we're certainly you know the second half relative to first half we're expecting a very significant ramp in particular on the commercial markets uh if you look at our order rates uh sequentially uh in those markets you know relative to where we were in the fourth quarter seeing you know very significant levels of growth both in our medical and commercial markets, you know, really across all of the units within our specialty bearing. So we're very encouraged by that. So, you know, I think, you know, just following up on what Ian was mentioning, you know, we do expect to see, you know, kind of year-over-year improvements in the back half of the year. And, you know, some of that will also come down to timing of KMAX deliveries. Right. That will also play a meaningful role. And as you know, you know, given the sale point there, that can move the needle, you know, plus minus.

All right, thanks. Thank you, Steve. Thanks, Steve.

Thank you. Once again, ladies and gentlemen, if you wish to ask a question at this time, please press star then one on your touchtone telephone. Our next question comes from Pete Skibitsky with Olympic Global. Your line is open.

Hey, good morning, Ian and Rob and Jamie. Hey, guys, I just want to get a little bit better feel for the second quarter because So, you know, we've got this kind of 11% sequential drop in backlog here. Part of it was JPF, I guess, running off. I think part of it, another big chunk looks to be bearings kind of running down. Are you expecting backlog to grow in the second quarter and, you know, because new bearings orders coming in? And are you expecting sales to be up sequentially also from the first quarter?

Yeah, Pete, this is Rob. A couple things. You know, our current expectation is to see improvement Q2 over Q1. You know, that is our expectation. The other thing to keep in mind is, you know, as we transition our portfolio over time, you know, towards, you know, on the bearing side, as well as, you know, when we think about our business with Ball Seal on that market, those are much shorter lead cycle businesses in general. So what I can tell you is that sequentially, You know, we did see auto rates up very significantly in both of those, and, you know, we don't see anything to not expect that to continue as we roll through the balance of the year. As a matter of fact, for Q2, you know, we feel pretty good about the outlook for that quarter, you know, just given the visibility we have, right? We're sitting here in early May. You know, we have not rolled up April results as yet, but certainly in our reviews with the P&L leads, You know, we remain confident in our forecast, which is why we're holding the outlook at this point.

Okay. Okay. So the lead times are so short on these bearings and medical products that you could book and ship it within the quarter, and we would never even see it at the end of quarter backlog is what you're saying.

That's correct. I mean, you know, there are certain orders that certainly – We'll go over quarter ends, but, yes, we absolutely see, you know, within quarter orders and shit. Yes.

Okay. And the other one, you know, I feel like I'm reading a lot about the Biden administration, you know, having done its review of Middle East weapon sales. It seems like they're looking to kind of lift restrictions pretty quickly here from what I'm seeing. Are you guys seeing that? Are the restrictions on your – Fused orders to the Middle East, do you expect it to be lifted? And, you know, would that be upside to revenue this year? Or can you guys have a good sense of what's going on?

Yeah, I think we're seeing the same things, Pete. And, again, you know, certain countries are different relationships, not to go into each country per se. But to your point, and I've seen this before, this exact same cycle, and I know I said this the last time, You know, my expectation is that you go through about an eight- to nine-month window of kind of everybody kind of pausing, cranking down on things, and then they start to re-loosen up because there are significant relationships we have. You know, certain countries have already reorganized and they're reestablishing relationships with new administrations. So I'm encouraged by that. Again, these are orders that haven't been canceled. They've just been technically on hold. So, you know, I would be, you know, my sense is that, This year, I think it's probably 50-50, depending on what happens. But certainly by next year, those things will start to open up again.

Okay, okay. That's helpful. I appreciate it. Now, just last one for me, I guess. Do you guys have a sense of – obviously, we've still got a lot of 737 MAXs that Boeing has to deliver from its own inventory. Do you guys have a sense of – you know, if there's a lot of your own product still in the supply chain that needs to be shipped still? Or do you get the sense that for your product in particular, the supply chain, you know, the destocking has occurred, and so, you know, particularly for narrow-body aircraft, you're going to see that strong demand come through kind of in the back half of the year. Is that how you guys are thinking?

Yeah, Pete, this is Rob. I mean, we have seen a level of sequential improvement in our 737 MAX orders. you know, granted at lower levels than where we had been certainly before the pandemic and before Boeing had their issues with 737 MAX. We do anticipate as Boeing begins their rant towards 31 a month, which they expect to achieve, you know, in the early part of next year, that we will see certainly a back half of the year improvement in 737 MAX. And we have very good content on that platform. And to your point, The rebound in commercial, whether it be Boeing, whether it be Airbus, is going to play, in particular, as the narrow bodies. I think people are generally expecting kind of flat, let's call it on 787 or A350, about five per month. Those expectations have not changed. Boeing is, I think, hopefully going to be able to clear up their 787 issues relatively quickly. as it relates to some of the surface issues that they're working with Spirit on. I mean, that shouldn't be a long-term issue. So we remain very encouraged by, you know, how things are playing out. And, of course, you know, how the pandemic plays out, how the vaccine rollout unfolds and what that really means will be a large factor in how this plays out through the balance of 2021.

All right. Okay. Thanks for the call, guys.

All right. Thanks, Pete. Thanks, Pete.

Thank you. Our next question comes from Seth Seisman with JPMorgan. Your line is open.

Great. Thanks very much, and good morning, everyone. I guess on the on the JPF, it looks like, you know, the deliveries in the quarter kind of, you know, annualized to something that's in the guidance range. As we move through the year, you know, A, kind of how does the mix change, and then B, having reached the end of one of the lots, when do you expect the next order to come in?

First part of your question, to your point, the first quarter was a different mix. The rest of the year will be a shift. It will be more DCS, which is nice. We've got line of sight to all of that. Like you said, option 14 ended last year. Option 15 is in play. That goes into 2022. Option 16 that we're working on this year will take us into 2023. And that's just USG side, FMS. And we still have a range of opportunities that we're working on for DCS. DCS, again, is, you know, and I've said this before, it's a little bit different dynamic. Still encouraging because those orders are lower volumes. The cycle time around those is shorter. We're trying to, you know, they try to keep it under congressional notification level. So plenty of folks in the pipeline are We talked about the administration, their position on that. We anticipate that loosening up a little bit. So, yeah, you'll see that shift be favorable in the second half of the year.

Right. And are those options 15 and 16, remind me, are those in the backlog?

So, yeah, so option 15 is in the backlog. Option 16 is not. We currently expect the option 16 award to occur in the second half of this year. And as you mentioned, that'll take production to 2023. Right.

Okay. Okay. Great. And then, um, one thing I guess, since, um, you know, since the medical piece of the business, uh, a lot of incremental piece that came in with ball seal, you know, right around the time of the pandemic and, um, you know, back up to almost flat year on year, when you think about where, where sort of a normal run rate is, um, for, for that business. where is that relative to sort of this, you know, low 20s per quarter that we saw in Q120 and Q121?

Yeah, so, you know, Seth, good question. I would say certainly, you know, as we indicated, we're kind of back to kind of let's call it pre-pandemic levels. There is still some work to be done. You know, there is still, even though the elective surgeries and other procedures are are rebounding. They're still below what we would have forecasted, let's call it a year ago, right? You know, just given there is still some reluctance for people to visit their physicians, you know, COVID is still very much a factor. You know, when we bought Ball Seal, and we certainly continue to view it this way, you know, over the long term, we expect that business to deliver, you know, let's call it high single digit growth year over year. And so to me, that is really the long-term perspective. We have the right BD efforts, product development efforts. So we feel very confident with that business long-term where it's going.

Yeah, and Seth, just, you know, talking with the teams recently and looking, we've actually got a cycle of strategic business reviews coming up, which is going to be exciting for us this month. But, you know, the market in the U.S. seems to be recovering a lot faster. The Pacific Rim, Asia Pacific, actually is also a very strong growing market, the addressable market for Ball Seal. is massive. So we're excited to see them really amp up their top line over the next couple years.

Great. Thanks. And then maybe just as the last one, what are you seeing out on the M&A landscape? Is it, I guess, kind of how difficult is it to make progress on transactions before We see kind of more normalized type of numbers from companies coming out of the pandemic. And, you know, how does the pipeline look?

For us, you know, certainly the M&A piece is important for us. We've redefined slightly our filters. We're really looking hard at, I think, a lot of great opportunities. Our funnel, to your point, is is relatively full. And so we've got some exciting opportunities out there, certainly some things in the near term that we're very excited about. We continue to assess them. We want to make sure that they're hitting all the right criteria around free cash flow and conversion and that EBITDA margin and that ROIC over time. So we're not going to just go after anything for the sake of going after something. We really want it to fit into the strategy of our business, which is really in the highly engineered parts, which we've talked about. And, again, the pipeline so far looks great, and we continue to assess it, and we're excited about what's to come.

Excellent. Thanks very much.

Thank you, Seth. Thanks, Seth.

Thank you. Once again, if you wish to ask a question at this time, please press star, then 1, or your touchtone telephone. Our next question is a follow-up from Steve Barger with KeyBank Capital Markets. Your line is open.

Hey, thanks. Going back to the orders that are on hold, if that opens up, do you have the capacity to ramp up right away, or would it take you a while to work those back into the production schedule?

We do. We have the capacity. The folks at both of our sites have done a very nice job. Certainly our facility down in Florida, massive lean effort. We've kind of redone the lines. So the efficiency and productivity is very strong right now. And should those orders come in, we do have the ability to ramp up.

Okay. And I know you've been adding resources to the M&A team, and you just said you've reworked some of the filters. Can you just talk about what some of those filters or gating factors are that you're having the team focus on for deals that are going to take it to the next level of diligence?

Yeah. In terms of the filters, we really looked at it from – I mean, the criteria we currently had was solid. We went through an exercise that I described before, a very strong exercise. We really looked at the portfolio of our businesses. We looked at the things that really provide a total shareholder return statistically relative to our peer groups. We've mapped that into our filters. So depending on what side of the business we're looking at or what type of business, we really wanted to understand what it takes to get the top quartile performance over a five-year window. And that's really the center target for us. And there's plenty of, I think, opportunities that fit that criteria, which we're looking at right now. And again, back to the price of those, the multiple around it, the synergies that we think we can achieve. Those are all part of it. We have improved the capability of our M&A team to look at those things, and we'll see how it plays out here in the near term.

And I know you can never predict the timing of M&A, but it's clearly a focus for you, right? Is it fair to say you'd be disappointed if you can't close a deal in the next few quarters?

I think that's fair. Yeah. Steve, just one thing that I would just want to make sure that's very, very clear is, you know, our broader capital deployment priorities are unchanged, right? We've been very clear that M&A will play a very integral role. And as Ian mentioned, we will retain our discipline there. So, you know, the pipeline is active. But, you know, we are also looking at, you know, internal investments. Obviously, return on capital to shareholders, you know, continues to play an important part of the overall return picture for our investors. So, you know, we remain just, you know, highly disciplined in this effort.

Understood. Thanks. Thanks, Steve.

Thank you. And I'm proud to show no further questions at this time. I'll turn the call back over to Jamie Coogan for closing remarks.

Great. Thank you for joining us on today's conference call. We look forward to speaking with you again when we report our second quarter results.

This concludes today's conference call. Thank you for participating. You may now disconnect.