RBC Bearings Incorporated

Good day, and thank you for standing by. Welcome to the RBC Barron's fourth quarter 2022 earnings 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 this session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Josh Carroll, Investor Relations. Please go ahead.

Good morning, and thank you for joining us for RBC Barron's Fiscal 2022 Fourth Quarter and Full Year Earnings Conference Call. With me on the call today is Dr. Michael Arvin, 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 Barron's 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. Now, I'll turn the call over to Dr. Hartman.

Okay, thank you, Josh, and good morning and welcome. I'll present the highlights of our fourth quarter, and following me, Rob and Dan will discuss some of the details of this summary. RBC's bearings net sales for the third quarter of fiscal 2022 For the fourth quarter of 2022, we're $358.9 million versus $160.3 million for the same period last year, an increase of 123.9%. For the fourth fiscal quarter of 2022, sales of industrial products represented 71% of our net sales and aerospace products represented 29% of revenues. Adjusted gross margin for the quarter was $144.3 million or 40.2% of net sales. This compares to $67.2 million or 39.1% for the same period last year. Adjusted operating income was $70.4 million, 19.6% of net sales. This compares to last year's $32.5 million or 20.3%, a 116% increase. Adjusted diluted EPS was $1.26 a share, and cash EPS was $2.15 per share for the three-month period. Revenues adjusted diluted EPS and cash EPS for the full year were $942.9 million, $3.89 per share, and $6.51 per share, respectively. Five months of Dodge Industrial Revenue, which was our period of ownership, were $291.9 million, and RBC's revenues, net of Dodge Industrial's revenues for the full year, were $651 million. Adjusted EBITDA for the fourth quarter was $104.4 million, 29.1% of net sales, compared to 45.9 million and 28.6% for the same period last year, a 127% increase. It's very clear we are thrilled with the record performance of the business this quarter and with the overall speed of integration and management cohesion of these two extraordinary and complementary businesses. Now let's talk a little bit about our sectors, industrial and aerospace. During the period, demand for industrial products continued to exceed both our capacity and that of some of our suppliers. We have worked through these constraints tirelessly over the past many months and see some relief as we head into our second quarter. The problem will continue to test us during the next few months and will reduce impact on our revenues. Our industrial businesses were up about 300% on a quarter-over-quarter basis, mainly because of the Dodge acquisition completed in November. The base for classic RBC industrial businesses expanded approximately 16% for both the OEM and distribution, with both OEM and distribution expanding in the mid-teens range. As stated earlier, the total industrial revenues were $253.9 million, and demand from all industrial markets served was very strong. Turning now to aerospace and defense, the fourth quarter fiscal 2022 net sales were up by 8.8%, led by aircraft OEM, which expanded at 21%. We are experiencing a sea change in demand for aircraft OEMs, from both Boeing and Airbus as they increase their build rates for the single aisle on the 737 and the A320 ships. This is complemented by the introduction of new products that we are supplying for both of these planes. Looking ahead, each successive quarter stands more robust than the last, reflecting the rate increases planned by the major builders. Consequently, we're seeing a stepped increase in demand from our commercial plane manufacturers. This will impact successive quarters this year and through next fiscal year and beyond. We are currently adding to our installed capacity to accommodate these higher volumes of single aisle production and for the new products that we're producing for these fleets. We look forward to the increased build rates of the widebody jets next year as our content per plane is several multiples of those for the narrowbodies. Increased production rates for the 787 and 777 freighter planned for 2023 and beyond are welcome and will be meaningful to us for the next several years. On defense, our defense OEM business revenues were down about 2%, which is more reflective of timing on shipments than demand for these products. OEM demand for defense priority programs is substantial in building for us today. These products are normally complex and highly engineered and requiring longer engineering and manufacturing cycles, hence lumpier revenues through the quarters. The defense and aircraft market sectors were about flat with last year, although we have seen a plurive MRO defense products in recent demand for MRO defense products in recent weeks. I'm sure that doesn't surprise anyone. Following this activity, we're expecting to see increased spending from the military in the quarters ahead as we are still within production lead times in the fiscal year. Any defense bolts would show up as soon as our fourth quarter. Regarding our fourth quarter, we are expecting sales to be between $355 and $365 million. And I'll turn now the call over to Rob for more detail on the financial performance.

Thank you, Mike. Expanding on gross margin that Mike already covered, gross margin for the fourth quarter of fiscal 2022 was affected by a $6.8 million inventory step-up related to the Dodge acquisition. This is not expected to impact future quarters. SG&A for the fourth quarter of fiscal 2022 was $56 million compared to $27.4 million for the same period last year. As a percentage of net sales, SG&A was 15.6% for the quarter of fiscal 2022 compared to 17.1% for the same period last year. Other operating expenses for the fourth quarter of fiscal 2022 totaled $23.7 million compared to $5.3 million for the same period last year. For the fourth quarter of fiscal 2022, other operating expenses included 5.7 million of costs associated with the Dodge acquisition, including 4.7 million of costs associated with transition services. There's also 17.2 million of amortization of intangible assets and 0.8 million of other items. Other operating expense for the same period last year consisted mainly of 2.5 million of amortization of intangible assets, 1.5 million of costs associated with a cyber event, 1.0 million of restructuring costs and related items, and 0.3 million of other costs. Operating income was 57.8 million for the fourth quarter of fiscal 2022, compared to operating income of 29.7 million for the same period in fiscal 2021. On an adjusted basis, operating income was 70.4 million for the fourth quarter of fiscal 2022, compared to adjusted operating income of $32.5 million for the fourth quarter of fiscal 2021. For the fourth quarter of fiscal 2022, the company reported a net income of $32.2 million compared to net income of $25.0 million for the same period last year. On an adjusted basis, net income was $42.0 million for the fourth quarter of fiscal 2022 compared to $27.4 million for the same period last year. Net income available to common stockholders for the fourth quarter of fiscal 2022 was 26.5 million compared to net income of 25.0 million for the same period last year. On an adjusted basis, net income available to common stockholders for the fourth quarter of fiscal 2022 was 36.3 million compared to 27.4 million for the same period last year. Diluted earnings per share was 92 cents per share for the fourth quarter of fiscal 2022 compared to 99 cents per share for the same period last year. On an adjusted basis, diluted earnings per share for the fourth quarter of fiscal 2022 was $1.26 per share compared to adjusted diluted earnings per share of $1.08 per share for the same period last year. Diluted cash earnings per share was an adjusted $2.15 for the fourth quarter of fiscal 2022 compared to $1.36 for the same period last year. Adjusted net cash net income and adjusted cash earnings per share excludes non-cash expenses for depreciation and amortization of fixed and intangible assets, stock compensation, and amortization of deferred financing fees, net of the tax impact. We believe that adjusted cash net income and adjusted cash earnings per share are useful in assessing our financial performance by excluding items that do not affect the cash available to common stockholders. Turning to cash flow, the company generated $46.9 million in cash from operating activities in the fourth quarter of fiscal 2022 compared to $41.9 million for the same period last year, and $180.3 million in cash from operating activities for the 12-month period fiscal 2022 compared to $152.5 million for the same period last year. Capital expenditures were $8 million in the fourth quarter of fiscal 2022 compared to $3 million for the same period last year. Total debt as of year end was $1.69 billion, and cash on hand was $182.9 million. I would now like to turn the call back to the operator for the question and answer session.

Thank you. As a reminder, to ask a question, you'll need to press star 1 on your telephone. To draw your question, press the pound key. Our first question comes from Christine Lewag with Morgan Stanley. Your line is open.

Hey, good morning, guys.

Good morning.

So looking at your gross margins in the quarter, I mean, 40% plus gross margins, pretty impressive. I was wondering if you could talk about what were the key drivers into that, how much was on pricing versus synergies from the deal?

Yeah, well, where do we start? First of all, you know, on the RBC market, side of the business, the classic RBC side, we had some favorable mix. And, you know, that was positive. On the Dodge side, I would say where the synergy was, first, you know, let's talk about pricing. You know, obviously, with what's going on in supply chain, there's shortages and there's inflationary impacts that are meaningful. And so we've been able to price the product in accordance with neutralizing the inflationary impact that we've been experiencing. And so for the most part, that's been pretty neutral. We've been on our game in terms of understanding what that pricing impact needs to be and what the inflationary impact is. And metrics have been good. Systems have been clear. And the right action has been taken. So we've sort of trimmed the ship just the way the ship needed to be trimmed during the period. So we're pretty happy with that. We're pretty happy with the people that were in the middle of managing that. I think in terms of synergy, I think one of the more important and more immediate synergistic elements of the Dodge acquisition is that we pretty much moved them into sort of the RBC's operating management schedule where basically we kind of review plant by plant what the forecast is, what the product build is going to be, what the, you know, expenses are going to be, what the efficiencies of the plant are, what the needs of the capital requirement for the plant might be, and so on and so forth. And we do that sort of monthly with every one of the RVC plants and now every one of the Dodge plants. And that's had the effect of sort of keeping people sort of focused on the important elements of running the business. And so that focus has created an environment where the details of running the operations are clear and the actions that need to be taken are clear. And the Dodge folks have responded extraordinarily well to this process. probably better than any acquisition we've ever had in the past, and they embraced it. And so I think that that really helped their operational efficiencies quite a bit during the period. So that's, you know, in terms of synergy, that's the most immediate thing that we could do that we did do in order to sort of gain the efficiency needs that we thought would be inherent in the business um i think in in terms of other synergies um clearly it's very early in the game for us and uh you know this the rbc um side of the business the the most impactful supply chain issues we've had to date are with dodge and and so the rbc resources have been applied to assist in remedying some of those supply chain constraints. And so some of the RBC production sites will be effective in the future in taking over some of that supply responsibility.

That's really helpful. And then so when we think about your next fiscal year, Is that 40% gross margin a good starting point for the year?

Well, I think we're going to live in that neighborhood. I think Rob and Dan have kind of their own opinion about that. I'll let them speak to it. But I think we're going to live in that neighborhood.

Yeah, you know, Christine, it's Dan. Right now we're targeting internally at least 50 BIPs by the end of the year, and it will be lumpy. quarter to quarter as it always is, but I think that's definitely an achievable number for us.

Wow, that's great to hear. And if I could sneak one more in, in terms of integration with Dodge, you've now owned the business for a few quarters now. What have been the surprises that you've seen as you're doing the integration? And are there any unexpected negatives that you've had to address?

Yeah, well, you know, I think the biggest surprise that we've had, there's no question about it. You know, certainly we started the acquisition process sort of last August, I think, right, where we had a signed agreement and we started working through the details of everything and learning more about the business. And, you know, we've had enough experience with acquisitions to know, you know, what goes bang in the night and what to watch out for. We've never had an acquisition where the problem was we had too much business.

Wow, that's a good problem to have.

Of all the things that we anticipated, we didn't really have that teed up. But it became clear as we moved towards the closing date that there were the demand for their product was just overwhelming and beyond anything we expected or experienced. Obviously, what does Mike Tyson say? You go into a fight with a strategy and that goes out the window as soon as somebody punches you in the face. We went into the acquisition with a certain strategy, but we had a We had to put a lot of it on ice while we dealt with the more immediate problem of getting product to our customers.

Great. Thank you for that color. That's wonderful to hear about. I mean, this is your largest acquisition. If that's the biggest problem we have, that's a great problem. I'll pass it on to the next analyst.

Thank you. Our next question comes from Pete Skibinski with Alembic Global. Your line is open.

Hey, good morning, everyone. So, Mike, it sounds like your message of last quarter, which was, I think, you know, your demand signals and adjustment were through the roof. It sounds like that message is continuing. You know, some people are talking about a recession, right? And you're talking about adding capacity. So, Do you feel pretty confident that that demand is going to remain strong for the foreseeable future, at least for another year or so? And maybe you can give us a sense of how much capacity you're looking to add?

Well, yeah, I mean, it's a question that has lots of answers because we have lots of divisions that have lots of needs. And so I'll try to keep it to the, you know, top of the Pareto here. You know, in terms of Dodge capacity, you know, it's hard for us to predict what the industrial economy is going to do for the rest of the year. Now, you know, having said that, you know, we employ all sorts of economists that are specialists in the industrial world who give us projections on what the future looks like. And all of those projections that we've seen to date have been positive for the industrial business. You know, we see, you know, we see on the aircraft business, you know, we look at Boeing's build-out rate and Airbus' build-out rate, and, you know, it doesn't look like a short-term recession, if that is in the cards, will really impact that build-out rate. Remember, one of the key things that are driving the need for the Boeing 737 MAX is its fuel efficiency. And now with fuel prices where they are, that's even more justification for the plane operators to to buy more MAX machines. So I think the aircraft business is going to be really solid. And I think the defense business is really good today. And we're actually talking about the need for probably building another plant to support the defense business because our capacity is strained very much in that area right now.

Okay, that's great. Do you have an estimate for the capex spend that you're expecting in fiscal 23?

Yeah, we're going to hover right around that 2.5% to 3% of sales as we move forward.

Okay, okay. Last one for me. Mike, did you guys see in industrial, did you see any negative impact from the shutdowns in China? No.

Yeah, we actually have a plant in China and so, you know, we're having, you know, our revenues are, it's a small plant, you know, our revenues are modestly impacted by that shutdown right now. We are seeing, we are having, we do have suppliers in China that are part of the supply chain. We actually have to fly hardware over to keep some of our lines running in some of the plants. And so we're doing that. It's just the cost of doing the business.

Okay. So excluding the plant you have in China, some of the product that you export as end sales into China, it sounds like you didn't see a meaningful decline in demand there.

No, that's correct.

Okay.

Okay.

Okay. Thanks, guys.

Yep.

Thank you. Our next question comes from Joe Ritchie with Goldman Sachs. Your line is open.

Hey, good morning, guys. Nice end to your fiscal year. Thank you. So my first question, I want to understand the supply chain comment. It sounded... like there was an expectation that things would get better in the next few months. Would you maybe just kind of provide some color around your visibility on where you're being impacted today and then also visibility on things improving?

Yeah, let's see. Where are we being impacted today? Well, obviously, maybe it's not obvious, but we've been impacted with steel. shortages of steel, we've been impacted with shortages of bearings, we've been impacted with shortages of bearing components, and we've been impacted with shortages of castings. So those have been sort of the high watermark in what we've felt to date, and we believe much of that has either been repaired already or a repair is in the process of being implemented, and so the impact should be mitigated going forward. But even to date, it's had really impactful – it's impacted our fourth quarter revenues by a significant amount.

Okay, great. That's helpful, Color. I also want to go back to the recession question, fully recognizing that the demand levels that you're seeing right now are still very strong. I guess, you know, you got a new asset. I'm just curious, when you kind of think about, you know, scenario planning, if in fact we were to go to see some sort of downturn, How should we think about what the playbook is for the new company with obviously clearly a new asset that you haven't experienced a recession with before?

Well, yeah, I think unlike RBC, Dodge, half of their cost of sales is variable materials. So, you know, as the If there's a decline in revenue, there's a pretty much immediate decline in half of your cost base. So then the rest of your cost base is pretty much labor and variable supplies to run the plant and some salaries to run the operation. And so that is budgetable. and it can be mitigated by relieving out some of the budgetary allowances in your quarter. So if you're running $10 million through a plant and your variable cost of supplies, tooling and hardware and oil filters and other is 5% of your revenues. Well, if your revenues go down 2 million, then it's 5% of 8 million rather than 10 million. So you have to get on that and you have to put some metrics in place that allow you the visibility that the local management is doing what they need to do in order to in order to back down their requirements. I think the rest of the plant cost is normally in labor. And there you can flex schedules. You can reduce the number of workdays per quarter. I mean, there's all sorts of menu items that can be chosen in order to reduce the overall plant cost. And so I would say that the new acquisition is it's a little bit easier to manage than an existing RBC plant because it has so much variable material in their cost of sales.

That was super helpful. Thanks very much. Yep.

Thank you. Our next question comes from Steve Barger with KeyBank Capital. Your line is open.

Hey, good morning, guys. Hi, Steve. I got on the call a little late. Did you say what the organic growth rate for Dodge was versus last year?

I didn't say.

Could you?

Yeah. So compared to March of last year, Dodge grew at about just under 8% year over year.

Got it. Thank you. And do you expect a similar contribution from Dodge in 1Q, somewhere in that low 180 million range?

Yes.

Perfect.

You had the $8 million in transaction costs and almost $5 million in transition. Can you tell us what's in those two categories? And do you expect to incur costs at that level in one queue?

So to answer the second part of the question first, we don't expect it to continue at that level. Within the $8 million or roughly thereabouts, you have the inventory step-up, the purchase price amortization of that $6.8 million. So that's going to, you know, that should go away after this quarter. That's what we're anticipating. And then there's a million dollars of other ancillary costs as associated with legal accounting, things like that, that were associated with the acquisition. And then the other costs would be the transition services agreement, which runs, you know, it kind of waters down over time through November. So we expect that that should start to decline a little bit in the Q1 period and more in Q2 and Q3.

Got it. And so it sounds like maybe half of that was cash costs. If the inventory step up was non-cash and I'm just trying to get to how, what rule of free cash flow would have looked like, uh, post these integration costs.

That's a fair way of looking at the 6.8 of inventory is non-cash the TSA and the, and the other components are primarily cash.

Got it. And, um, what do you expect for SG and a inflation in 23 or, You know, for the next few quarters, should we think this $56 million run rate is kind of sustainable?

I mean, we're kind of thinking SG&A is going to, you know, fluctuate between 15.5% to 16.5% of sales over the coming period.

All right. And then one more for me. You said supply chain affected 4Q revenue by a significant amount. Mike, can you tell us how much revenue was delayed, and did you build in a similar delay? or push out into the one key range?

Yeah, I can only say it was a significant amount, and it's probably an eight-figure kind of an amount. And, yes, we expect that to be – we're building that into our plan in the first quarter.

Got it. Yeah. And honestly, I mean, every prediction that anybody's made about when supply chain gets fixed has been wrong, but you know, as you just think about it, do you, is there, is it reasonable to think that as you go into the back half of your fiscal year, you're running at that higher rate or the revenue delays kind of go away?

Yeah. We've, we've, we've built, uh, we've built our, our annual plan with, um, seeing these revenue delays being substantially mitigated. And I think it's reasonable because, you know, we've brought on other suppliers and we've done all sorts of things to, and we're bringing on some of the RBC capacity to support the Dodge business that was available to us. And so I think, you know, it will definitely be mitigated. It's hard to say. exactly how much, but it'll be mitigated.

So the demand is there, and if it is mitigated, then in the back half you're running some number 10 digits higher per quarter on a run rate basis.

Is that fair?

That's fair.

Perfect. Thanks.

Thank you. And our next question comes from Seth Weber with Wells Fargo. Your line is open.

Hey guys, this is Larry Stavisky on for Seth. Just to clean up the last questions, you're looking for $180 million or so in revenue from Dodge in the first quarter?

Thereabouts.

Yeah, okay. And then how do you, I think, I'm not sure if I missed it, but how do you envision the cadence in terms of the seasonality between both Dodge and the and the legacy business, you know, in terms of, I know you're only giving first quarter revenue guidance, but any color on, you know, the normal seasonality X, you know, having these, you know, the shortages pushed out, revenue shortages from 4Q pushed out?

You know, I think the seasonality that we're dealing with, you know, couple of issues there I mean you have a lot of the seasonality or a certain amount of it is driven by you know the vacation schedule in the summer and and obviously the holidays in the third quarter so you know that's that's sort of built-in seasonality that drives your capacity and so you know we're going to probably have to do a workaround on some of that offsetting the seasonality is, you know, the, you know, Dodge's, some of the core businesses are extraordinarily strong, and there's macro effects impacting them that'll pull demand through, and I think some of those macro effects are things like the infrastructure bill is, we haven't even felt the effects of that, but it's, the timing is such that that'll start to show up. And that particular sector is already very busy. And then, you know, the grain shortages driven by the Ukraine is going to create, you know, demand for farm goods here. And that's another big issue with Source for Dodge. You know, we have the defense programs, which are just Defense OEM programs, which are just very demanding on us right now, and we're trying to address the needs of those programs. And we have the aircraft build rate, the step-up rate, and frankly, we're concerned about being able to meet the cadence and get our plant staffing properly and so on and so forth, and We've been worried about this for some time, but it's upon us now, and, you know, we hope we've got this right.

Okay. Okay, that makes sense. Okay, thank you, guys. I'll pass it on.

Thank you. Our next question comes from Elizabeth Grenfell with Bank of America. Your line is open. Hi. Good morning, everyone.

Good morning. Good morning. Oh. I just wanted to confirm, so I think the initial expectation was for synergies with the Dodge acquisition of around $70 to $100 million, and I was wondering if that was still the target or if that had moved around a bit. And then within that, I think part of it was using Dodge's sales force and just the greater magnitude of the sales force that they have. I was wondering how that's playing out and the impact there. And then I have one final question for you.

Yeah, that's still our range by year five, to be in that range. We've already, you know, on all these synergies that we identified back in October and November, all those programs have been initiated. But as Mike said, some of them are accelerating quicker because of the needs of the current business right now. Like we're trying to find as much capacity within RBC to be able to help out our Dodge business. friends down in Greenville. And on the sales side, we've started working with our sales teams. There's a lot of interaction going on, and so we're seeing some benefit from that. So I think we're on target and probably ahead of target from where we thought we would be, you know, with just five months under our belt here.

Okay. And one clarification question for both gross margins and the SG&A as a percentage of sales. For the gross margins, it's Can you clarify what you're expecting for the first quarter versus the full year?

Yeah, so we're expecting gross margins to, you know, we're looking at a 50 basis point increase throughout the course of the year. It should be pretty similar in Q1. It's just going to be, it's a little bit lumpy throughout the year as it always is, but that's for a full year trend what we're expecting.

Yeah, so we ended fiscal year 22 at 39.4%, so we're opening close to 40% for the full year. As Rob said, it gets lumpy. It gets a little lumpy in the third quarter because it's our weakest quarter from a sales and production standpoint. And our fourth quarter is always our strongest quarter because we have more production base in there and get better utilization.

And in the SG&A, the 15.5 to 16.5, that's for the full year?

That's correct, yep.

Thank you very much.

Thank you. And our next question comes from Michael Ciamoli with Twist. Your line is open.

Hey, good morning, guys. Thanks for taking the questions. Nice results here. Just quickly, maybe some housekeeping. For 23, is $400 million in cash flow and trying to get under that three-time leverage, are those still the right metrics we should be looking for?

Our intention of getting to that $400 million by the end of fiscal 23 that we put out there was still the target for dividend.

Yeah, and our target still is by fiscal 23 is to pay down at the minimum $400 million of debt. And I think all the way through this quarter already, we paid down about $100 million through fourth quarter. Yes. Okay. And so we'll continue every quarter reducing that, allocating our capital. to get to our target and get that leverage down.

Okay, perfect. And then can I hear correctly, are you guys adding capacity for commercial aerospace? Did I hear that correctly? Yes, that's correct. Is that – I mean, I would have thought, did you have the capacity? I know you were adding a lot of capability and capacity before the MAX and before the downturn. Are you bringing in new capacity, or are you kind of ramping back up the tooling and maybe labor that you already had, or is this kind of fresh additional capacity?

Well, for the most part, it's fresh additional capacity because they're building these single aisles at a rate that's beyond 2019. And their intention, particularly if you look at Airbus, I mean, their intention is to go to 65 planes a month on the – on the single aisle, and when you start layering back the bill of materials of what we supply, we have to add capacity because we're the sole supplier of a lot of hardware on that plane, and we're obligated to produce. So, yes, we're adding capacity.

Okay, okay. Any color on what kind of capacity, what capability you're adding?

You know, let's see. For the most part, it's probably on engine components. Okay.

Got it. Okay. And then just the last one I had. you know, as it relates to the integration, I know you originally called out potentially 200 million of kind of internal component sourcing, obviously supply chain complicating a lot of material availability, but any sort of thoughts there on, you know, look at your internal supply chain, external supply chain, and think about, you know, do we move some of that in-house if you have the opportunity or where things stand kind of with realizing some of those kind of savings?

Yeah, well, there's no question that we have to onshore some of Dodge's business. And so we're going to work on that. We're working on that. And that'll take a little bit of time. So in some cases, it'll take time. In some cases, we already have the capacity available. And it's a matter of getting the materials and the engineering drawings and beginning the production. So it's a little mixed, but it's one of the major synergies that we identified last year when we were looking at the acquisition.

Got it. Perfect. All right. Thanks, guys.

That's all the questions I show. I'd like to turn the call back to Dr. Hartnett for final remarks.

Okay. Well, thanks for your questions and your interest. Those were some interesting discussions we just had. And we appreciate it, appreciate you calling in, and look forward to talking to you again in July. Good day.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.