Earnings Call Transcript - ISSC Q4 2021

Operator, Operator

Good morning and welcome to the Innovative Solutions and Support Fourth Quarter and Fiscal Year 2021 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Mr. Geoffrey Hedrick. Please go ahead.

Geoffrey Hedrick, Chairman of the Board

Good morning, this is Geoff Hedrick. I'm Chairman of the Board. Joining me today are Rell Winand, our CFO; and Shahram Askarpour, our President. We will discuss the fourth-quarter performance for fiscal 2021 and the 2021 completion. I would like to turn it over to Rell for the Safe Harbor message. Rell?

Rell Winand, CFO

Thank you, Geoff and good morning, everyone. I would remind our listeners that certain matters discussed in the conference call today, including new products and operational and financial results for future periods, are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially, either better or worse from those discussed, including other risks and uncertainties reflected in our company's 10-K which is on file with the SEC and other public filings. Now, I'll turn the call back to Geoff.

Geoffrey Hedrick, Chairman of the Board

Thank you, Rell. We finished the 2021 fiscal year, positioning us for strong top and bottom line growth going forward. The strength of our growing OEM demand provides us an excellent foundation for the growing demand in the retrofit section in this segment. The autothrottle is now developing in our military sector on King Air and larger multi-engine aircraft and our Turbofan autothrottle program doubles the market opportunities. We are expanding our sales force and planning an expansion of our strategic marketing. Our growth has been affected by the lack of salespeople and exacerbated by the pandemic. Our recent emphasis has produced a new strong, experienced GA's sales director and we are in the process of finding individuals for the other two market segments, military and air transport. I will now turn it over to Rell for the financial analysis. Go ahead, Rell.

Rell Winand, CFO

Thank you, Geoff and thank you all for joining us this morning. Let me mark that the fourth-quarter revenues were $6.9 million, up 9% from $6.3 million a year ago. As a result, we saw sequential revenue growth in every quarter this year. Revenues were generated in each of our general aviation, commercial air, and military markets with ongoing recurring revenue from our PC-24 and King Air autothrottle production programs. Gross margins for the quarter were 57.6%, up from 54.3% in the year-ago quarter, with the increase attributable to product mix as well as the favorable leverage achieved by the growth in revenues. Margins remain in line with historical averages. Total operating expenses for the fourth quarter of fiscal 2021 were $2.1 million, down both sequentially compared to the third quarter of this year as well as from $2.3 million in the fourth quarter of last year. Compared to a year ago, research and development expense was marginally lower, at 10% of quarterly revenues. R&D was in line with our historical averages and continues to reflect our strong commitment to innovative and new product development. Selling, general, and administrative expenses were down from the year-ago quarter. The decrease reflects lower professional fees and benefits expense in the quarter. We believe quarterly operating expense levels will increase as the company expands its sales and marketing efforts this fiscal year. For the quarter, we generated operating income of $1.9 million or 27% of revenue. We recorded taxes of approximately $356,000 in the quarter. The company recognized a tax benefit in the fiscal third quarter of fiscal 2021 due to the reductions of the deferred tax assets valuation allowance. Therefore, income tax expense will be recognized on a go-forward basis. The company anticipates the tax rate should be in the 21% range. Bottom line, net income was $1.5 million or $0.09 per share for the quarter, up from $1.2 million or $0.07 per share in the year-ago quarter. Quickly looking at results for the year, total revenues were $23 million, our third consecutive year of revenue growth. For the year, net income was $5.1 million or $0.29 per share, which includes $1.1 million or $0.06 per share in tax benefits, reflecting the release of a deferred tax valuation allowance. As a result, this was our most profitable year in over a decade. The company remains in a strong financial position. We generated $4.6 million of operating cash in fiscal 2021, with $800,000 of operating cash flow in the fourth quarter. At fiscal year-end September 3, we had $8.3 million of cash on hand and that is after dispersing approximately $20 million of cash dividends in fiscal 2021. The company is debt-free. I would make one additional note on the balance sheet. That's due to the ongoing global supply chain challenges, as a result, among other things, the ongoing COVID-19 pandemic. We are maintaining slightly higher than normal levels of inventory, simply as an added measure of precaution. However, to date, we have managed to largely avoid production disruption as a result of the supply chain challenges even amongst an increase in production volume. We believe that the company has sufficient cash to fund opportunities for the foreseeable future. Now, I'd like to turn the call over to Shahram. Shahram?

Shahram Askarpour, President

Thank you, Rell. Good morning, everyone. Fiscal year 2021, Innovative Solutions and Support made good progress in virtually every aspect of its business. Revenues were up consecutively year. Margins expanded compared to fiscal 2020, driven by improved productivity and efficiency despite the extraordinary measures undertaken to ensure the safety of our employees, customers, and vendors in response to the COVID-19 pandemic. While we recognize the pandemic continues to impact our supply lines and many industries are reporting labor shortages, we have experienced few disruptions. Nevertheless, we remain vigilant to quickly identify and resolve any issues that may arise. So, let me provide additional information around some of our revenue-generating programs that are driving our success. The company has three OEM production contracts that continue to provide a level of stable recurring revenue. The general aviation market seems to be improving. And as a result, Textron is reporting increased demand for King Airs, in which we are the supplier of production autothrottle. Consequently, we are somewhat optimistic we may see some increase in revenue from these programs. Our strategy has been to use our King Air autothrottle as a foundation to branch out to adjacent airframes as well as expand beyond turboprops into the business jets market, where our products are equally valuable. I'm happy to report that we are expanding our autothrottle market to retrofit any appropriately equipped Embraer Phenom 100 and 300 business jets. The Pilatus PC-24 program is also making steady progress. Like Textron, Pilatus also reported a nice increase in the number of PC-24s delivered over the first nine months of 2021. The Textron and Pilatus OEM production contracts are, therefore, expected to provide a steady level of recurring revenue with some potential for growth in fiscal 2022 as well as thereafter. Our government contract on the KC-46 continues to run at expected production rates. In addition to our OEM business, we continue to grow our retrofit business, primarily flat-panel displays for air cargo conversions. We have a competitive advantage in that many air cargo operators are buying used 705 and 767 aircraft for conversion, aircraft on which we believe we have the best cockpit upgrade on the market. For some terms of perspective, the only other competitive cockpit upgrades on the market takes 4x longer to install, costs significantly more, and reliability is much lower. In addition to OEM applications, our autothrottle is an ideal retrofit option. We are adopting a much more aggressive approach to the autothrottle retrofit market, having hired a dedicated business development professional and expanding our reach beyond Textron's own service centers to target independent fixed base operators and our maintenance and operations center network. I should also briefly mention our two big recent announcements. The European Union and Canada certification of our King Air Autothrottle opens up new geographic markets, while our expansion into the business jet market provides the base to expand into another adjacent market. Finally, Eclipse continues to show interest in technology upgrades of their cockpits; we are in ongoing discussions regarding additional needs. New orders in the fourth quarter of fiscal 2021 were $6.5 million, bringing the new orders for the year to $28.5 million. Backlog as of September 30 was $9.1 million, a 250% increase over the course of the last 12 months. Fiscal 2021 was a good year that has us well positioned for continued success. While end markets have not fully recovered to pre-pandemic levels and various safety and other protocols have been an obstacle, our emphasis on price for performance across various markets has enabled us to deliver strong returns. Before we open for questions, let me once again applaud the ongoing efforts of our employees to integrate new safety protocols into our standard operating procedures, which has enabled us to maintain productivity without jeopardizing health, safety, and well-being. I'd like now to turn the call over to questions.

Operator, Operator

Thank you. At this time, we will open the floor for questions. The question comes from David Campbell with Thompson, Davis & Company. Please go ahead.

David Campbell, Analyst

Good morning, everyone, Geoff and Rell, Shahram. Great presentation and impressive results for the quarter, although you didn't quite meet my targets, which is typical since I always aim high. Let me address at least one of your questions. Your sales and new products are rising, significantly enhancing your chances of generating new revenue. So why do you need more salespeople? You're performing very well.

Geoffrey Hedrick, Chairman of the Board

I believe we are significantly understaffed, and the opportunities available to us far exceed what we are currently able to capture. This is mainly due to the lack of personnel actively working in the field. To achieve our revenue goals of generating $25 million to $30 million this coming year, trying to do this with just one person in the field is not feasible. Therefore, we are seeking intelligent, capable individuals to manage our three market segments. Keep in mind that we have the bizjet segment, which is now being handled by our new General Aviation Marketing Director. We also need similar support for the military and air transport segments. While we have inherited a fair amount of business, we are looking to expand in both the military and air transport areas. There are substantial opportunities that remain untapped, and we require more salespeople to pursue them.

David Campbell, Analyst

Yes. The salespeople, they're likely to come from the existing competing companies? Or will they likely be people that have no experience in the business?

Geoffrey Hedrick, Chairman of the Board

No, they come from existing companies. In the case of the military, we may hire a retired Air Force or Navy officer, such as a colonel or commander with extensive flight test experience, for opportunities at Patch River. The commercial air transport personnel would also come from within the industry. For instance, there have been many acquisitions and the merging of companies has left many people seeking new roles. That's what we aim to tap into. Our past efforts in this area have been successful.

David Campbell, Analyst

Okay. Last question for now. Your backlog was down from the previous quarter which I think was $9.5 million, and now you're down to $9.1 million. That's strange that the backlog is going down when the revenue opportunities are going up. So can you try to explain that?

Geoffrey Hedrick, Chairman of the Board

The shipments go up, the backlog goes down. So when we have bad shipping quarters, our backlog easily goes up. It's a relatively small amount, David. Obviously, it's something that you keep an eye on. And if it was consistent in subsequent quarters, we had an equivalent, we would be concerned but I'm not concerned in this case. It's gone up massively over the past year. So I'm delighted for that.

David Campbell, Analyst

All right. Thanks for the help. I appreciate it.

Geoffrey Hedrick, Chairman of the Board

Thank you, David. You sound good, by the way.

David Campbell, Analyst

I'm still in here. I'm working away.

Geoffrey Hedrick, Chairman of the Board

I'm reminded that people mention I'm working because I joked that the reports of my death are greatly exaggerated.

David Campbell, Analyst

No, Jeff, don't forget here. You're coming up to see me.

Geoffrey Hedrick, Chairman of the Board

Yes, I will, I will do it.

Operator, Operator

Our next question comes from Roger Nedrow , private investor. Please go ahead.

Unidentified Analyst, Analyst

Yes, good morning. Thanks for the good call today. You paid out a nice dividend at the end of last year, is with an 8-point some million dollar balance on the cash on the balance sheet, are they anticipated to pay out a dividend again this year?

Geoffrey Hedrick, Chairman of the Board

Not really. We have not anticipated that. But I want to ensure that whatever dividend we paid out this year took into account our confidence in the tax situation for our stockholders. Right now, we plan to make investments and want to keep a reasonable amount of cash on hand. In the near future, we don’t see an opportunity for a dividend, but that may change. The company consistently generates cash, and as we do, we are happy to distribute it. We have distributed over $100 million in cash over the years, and we usually do that. However, there is nothing planned right now to answer your question.

Unidentified Analyst, Analyst

Okay, thank you. Keep up the good work.

Geoffrey Hedrick, Chairman of the Board

Thank you.

Operator, Operator

Our next question comes from Michael Friedrich , private investor. Please go ahead.

Unidentified Analyst, Analyst

Good morning, everyone. I didn't hear a whole lot in the call about what was happening with the large air cargo company, online retailer that was retrofitting and building a large fleet. Is all of that still on target and still continuing to go well?

Geoffrey Hedrick, Chairman of the Board

Yes. We have just under 100 aircraft completed. Some of those aircraft were purchased from other sources that had already undergone the upgrade. The key point is that we are demonstrating excellent reliability and acceptance in the field. Everything is progressing well, and we are committed to taking very good care of our customer.

Unidentified Analyst, Analyst

Okay. And remind me again how large their fleet could be when they're done?

Geoffrey Hedrick, Chairman of the Board

Well, I mean, a speculation on. If you want to know my speculation, I think it could be bigger than what is now the biggest fleet which would be FedEx. It's about 700. I remember, I built equipment for FedEx when they had seven airplanes. So their growth has been spectacular. I suspect this has to come to about the same or more simply because it has huge resources behind it. And importantly, the profile for business, as you know, has changed. I mean I personally buy an enormous amount online now. I mean it's safely driving to the store, honestly. So they're going to move those packages around and there's a limit to how many trucks you can put on the road. So I think the growth is inevitable. And I think we're on a hall of the race.

Unidentified Analyst, Analyst

Okay, great. Thanks for that.

Operator, Operator

Our next question comes from Glenn Remington , private investor. Please go ahead.

Unidentified Analyst, Analyst

Good morning. Thank you for taking my call. I really like just starting my journey with this company but I've read quite a bit. I think I understand the notion of what you're building there. I'm wondering if you could speak a little bit to the notion of future-proofing with all this conversation about alternative fuels, electrification, whether it's R&D or whether it's software baked in for future adaptation. I'd be curious what your feedback would be on the 5, 10 going forward with all these alternatives that everybody seems to want to talk about.

Geoffrey Hedrick, Chairman of the Board

From my perspective, electric airplanes may be suitable for short distances in urban areas. However, they are not well-suited for longer distances for a simple reason: an electric airplane weighs the same upon landing as when it took off, which means it has to carry that significant weight throughout the flight. In contrast, a fuel-based airplane reduces its weight by burning off at least 30% during the flight, lessening the load it carries. I doubt I will witness a significant change in this during my lifetime. I was surprised by how quickly electric cars have emerged, so I can't predict the future with certainty. I don't believe the challenges of electric airplanes differ greatly from those of electric cars. Currently, some airlines are exploring various alternative fuels, and if they can be made cost-effective, that would be great. However, fuel remains a major operational expense for airlines, so any increase in per-unit fuel costs is undesirable. In summary, I believe electric airplanes will be limited to relatively short flights in urban areas, while longer flights will continue to rely on large airplanes with bigger engines that have become more fuel-efficient over the years. There is a strong incentive for operators to optimize their equipment's efficiency, and they invest significant amounts of money to do so because it directly impacts operating costs. I expect this trend to persist, but I do not foresee any major transitions.

Unidentified Analyst, Analyst

Really excited about the safety and efficiency aspects. I just want to say thank you for your hard work and I'm very excited with your company.

Geoffrey Hedrick, Chairman of the Board

Well, that's very kind of you to say that. It means a lot to us, trust me.

Operator, Operator

Our next question comes from Rick Teller , private investor. Please go ahead.

Unidentified Analyst, Analyst

Good morning. I didn't quite catch what Shahram said there because my sound was a bit inconsistent. Did you mention something about collaborating with Embraer on possible retrofits? That would be a whole new category of aircraft. Did I hear that correctly, or did I misinterpret it?

Shahram Askarpour, President

Yes, I believe we mentioned that we are working on the Embraer aircraft. Embraer produces an excellent airplane, and the Phenom 300 has been a standout success. It is ideal as it does not come with an autothrottle, and we can offer distinct safety features and streamline workflow. Currently, our focus is on securing retrofit installations, which is different from original equipment manufacturer (OEM) setups. In OEM, you can integrate parts during the initial build where appropriate, while retrofits may involve adapting existing setups that include components in less-than-ideal locations. Our company has been performing retrofits for 33 years, so we understand the complexities involved. There is a significant opportunity here, particularly with aircraft like the Embraer that can benefit from our autothrottle technology. We are also exploring prospects in both military applications and the general aviation sector, including turbofans, such as those used in the Embraer. Does that clarify your question?

Unidentified Analyst, Analyst

Yes, it does. Are you in talks with any other OEMs about including autothrottles in their new models?

Shahram Askarpour, President

We are always in discussions, but not necessarily substantial ones. The truth is that the retrofit market is significantly larger than the OEM market. We really value the OEM market and are pleased to be part of it, but for certain programs, the retrofit opportunity is much greater, and that is where we want to concentrate our efforts. For instance, the installation of our autothrottle in the King Air used to take over 100 hours of labor, whereas we originally estimated it would take about 40 to 50 hours. However, thanks to recent developments and improvements in procedures, we have reduced the installation time to under 20 hours. This presents considerable savings for operators. Furthermore, having owned an airplane for 35 years, I understand that owners dislike being without their aircraft, even for a short time. Therefore, we are focused on reducing the disruption caused by retrofit installations. This goal is quite different from the usual OEM challenges, as retrofits often require adjustments that aren't necessary in new builds. Does that make sense?

Unidentified Analyst, Analyst

Yes. Yes. And the fact that you're expanding potential retrofit markets to things like Embraer and presumably other manufacturers, I guess that would be behind the new focus on working with fixed base operators and other things other than the Textron system.

Shahram Askarpour, President

Yes, the Textron program is a wonderful program. I actually admire them for showing the responsibility and clarity of implementing this as quickly as they did in their production. They did a great job. And I really commend them for doing that. They recognize that there's a real safety feature. They talk about 100 people a year die. That's a humbling challenge, trust me. At any rate, what we have now is working with FBOs and trying to get them up to speed so that they can turn airplanes quickly, and we're looking at new kinds of airplanes. For instance, the Embraer is not a prop airplane, it's a turbofan airplane with a different kind of engine. And so we have broadened out our applications.

Unidentified Analyst, Analyst

Okay, good. Well, thank you.

Shahram Askarpour, President

You're welcome.

Operator, Operator

Our next question comes from Roger Goldman , private investor. Please go ahead.

Unidentified Analyst, Analyst

Good morning, Geoff and team. It's great to hear about another year of progress. My dad would be proud. I want to mention something about electric airplanes. My son Jake, who is also a shareholder, works at a company called Beta Technologies, which specializes in eVTOL. They are located in Burlington, Vermont, and their approach differs significantly from others in the industry. While many companies seem focused on going public over the future of aviation, Beta is genuinely interesting. It might be worth checking out their website, as they have airplanes that are already in the air.

Geoffrey Hedrick, Chairman of the Board

Where are they in Vermont?

Unidentified Analyst, Analyst

Burlington.

Geoffrey Hedrick, Chairman of the Board

I had a house up there for 45 years.

Unidentified Analyst, Analyst

Okay, so you're familiar with the area, but there are a few points to mention. First, advancements in battery technology are occurring rapidly. Secondly, they have a distinctive battery setup and believe they have secured a partnership with UPS. The government is also a client, and many of their planes are already in the air, pending FAA approval. Their focus is on package delivery rather than individual customers because package delivery offers three times the potential revenue compared to customer delivery. I suggest having someone on your team review their website, and I can facilitate an introduction if needed. It may not require extensive time, but it’s worth keeping an eye on. Additionally, I’m pleased to hear that you're increasing your marketing and sales efforts. I’ve always believed there's significant potential to accelerate the presence of your product lineup in the market. It sounds as though you're expanding your market scope significantly, and the enhancement of sales, marketing, and some branding initiatives is excellent. I commend you on that. Lastly, I want to reiterate a question I ask annually: you have substantial cash reserves and credit lines. While I understand your cautious approach regarding dividends, I would again advocate for a short-term dividend to benefit the shareholders.

Geoffrey Hedrick, Chairman of the Board

A shareholder compliment me and said that his net cost for the stock was zero or less than that.

Unidentified Analyst, Analyst

Yes, I know.

Geoffrey Hedrick, Chairman of the Board

Honestly, the company is open to providing dividends. However, the decision we made for this year was based on practical reasons. While having some cash is beneficial, $8 million is not a substantial amount. A figure like $40 million or $50 million would be more significant. We will likely keep a reserve of $8 million to $12 million on hand. If we experience a substantial cash inflow, we will consider a dividend. Our focus isn't solely on accumulating cash; rather, we view it as a resource to be utilized.

Unidentified Analyst, Analyst

No, I understand. I always look at cash plus available credit, particularly in this interest rate environment. If interest rates were different, I would feel differently.

Geoffrey Hedrick, Chairman of the Board

Yes, I understand that. Right now, I prefer to focus my energies on developing a market that I believe will provide a better return on obtaining cheaper cash from the banks.

Unidentified Analyst, Analyst

Okay, I get it. Again, the most important point I'm making, Geoff, is well done on raising your ambitions for the company.

Geoffrey Hedrick, Chairman of the Board

Well, thank you, we appreciate that. We appreciate your support. Listen, our shareholders are really important to us. We'll talk about them and think about them a lot. So appreciate your interest, appreciate your support.

Operator, Operator

Our next question comes from Glenn Remington , private investor. Please go ahead.

Unidentified Analyst, Analyst

Yes. So, thank you. I had one other question. I noticed in the release and following along for a while now. There was a lot of mention about approvals in additional regulatory jurisdictions for your products. And I guess in simple terms, I'm curious that the bureaucratic overhead costs to achieve those are captured in this year's books but the future sales won't have the burden of those costs spread out against them. So I'm wondering if it's more of a one-time business development investment. And then in the future, the sales just stand on their own.

Geoffrey Hedrick, Chairman of the Board

It is essentially a one-time effort in business development. Each country has its own certification authority, which isn't too cumbersome, but you do have to handle the necessary paperwork and navigate the global bureaucracy. Once you complete this process, there may be some minor maintenance required in select cases. However, the positive news is that after obtaining authorization in Canada and Europe, you won't need to repeat this process annually. This allows you to market your products on a global scale or within those regions.

Unidentified Analyst, Analyst

Perfect. Thank you very much.

Geoffrey Hedrick, Chairman of the Board

You're welcome.

Operator, Operator

I'm curious why dividends are being paid instead of keeping the cash on hand to buy back some shares. We're all here to make money, and while dividends are nice, as one of the largest shareholders, I see a lot of potential for profit based on the dollar amount. I'd prefer to see the stock price increase, especially since it hasn’t moved in 14 years. Despite experiencing the biggest bull market in a decade, the stock remains stagnant and hasn’t exceeded $8 since 2007. As a shareholder, I’m not pleased with the current situation and would rather not hold the shares if I’m not seeing any benefit. The quarter was good, and the year is looking positive, but nothing tangible has changed.

Geoffrey Hedrick, Chairman of the Board

Something must have happened because our shareholder mentioned that their net investment is either zero or negative. This likely relates to the over $100 million that was distributed. As you know, I am also a shareholder. We have conducted a stock buyback in the past, including a significant one a few years ago. My concern is that the stock has limited liquidity. If I engage in a buyback, it would further reduce this liquidity. Therefore, I’ve been advised that it may not be a good idea. We would like to think that when we distribute dividends, shareholders can also consider purchasing stock. There’s no straightforward answer. We chose to distribute the dividend, and if capital gains increase by 30%, it might be more appealing to have cash rather than a stock that could rise. Additionally, a question arises whether, with higher capital gains, the stock price will increase as quickly. I'm not in a position to make those kinds of judgments. I prefer to manage the business in a practical manner. I appreciate your interest, and do I foresee a buyback? Not at this moment, but I’m certainly open to it; I have done it before.

Unidentified Analyst, Analyst

Okay. So as far as the additional employees, are you saying that without these employees, you're not going to be able to grow the way you want to or we're going to kind of stay at this change?

Geoffrey Hedrick, Chairman of the Board

But at this moment, we expect growth of 20% to 30%. While it may not be on the level of Apple or NVIDIA, I believe it represents solid growth that we should concentrate on. Up to now, we've never pursued an acquisition. I would prefer not to take on debt for an acquisition or add any extra burden. I would like to maintain some free cash in the business, and $8 million is not a significant amount. I understand opinions may differ, but I want to share my perspective. I'm not suggesting this will limit growth, as we will focus on our growth and do our utmost to optimize it.

Unidentified Analyst, Analyst

I am not sure if I heard you correctly, but earlier in the call, you mentioned that you had worked on around 100 planes for your online retailer this quarter.

Geoffrey Hedrick, Chairman of the Board

It's short of a 100, I don't know what it is today but it's somewhere between 80 and 100.

Unidentified Analyst, Analyst

And that was reflected in this quarter's earnings report?

Geoffrey Hedrick, Chairman of the Board

And that was what?

Unidentified Analyst, Analyst

That was reflected in this quarter's report?

Geoffrey Hedrick, Chairman of the Board

On airplanes, a significant number of them were already completed. For instance, American Airlines modified several 767s with our equipment installed. The airline purchased these planes, some of which were converted from passenger use to freight, and some already had our flat panel display system in the cockpit. About half of these airplanes were brand new and were successfully completed this quarter. The process of completion extended over time as they previously leased them from other companies and have now transitioned to owning them and leasing them back.

Unidentified Analyst, Analyst

One last question. Since the first quarter, your trend in new orders has been increasing, but this quarter saw a decline. Is that a seasonal issue or something else?

Geoffrey Hedrick, Chairman of the Board

It's typical seasonality because, from my experience in the business, I would prefer everything to grow uniformly. However, it often appears as a sawtooth pattern where the first quarter is affected by the delivery of equipment and year-end sales. We implement price increases at the start of a new fiscal year, leading some customers to place orders and take delivery at the end of the year, which tends to skew the results favorably towards the year's end.

Unidentified Analyst, Analyst

Okay, thank you.

Geoffrey Hedrick, Chairman of the Board

You're welcome.

Operator, Operator

This concludes our question-and-answer session as well as our conference call. Thank you for attending today's presentation. You may now disconnect.

Geoffrey Hedrick, Chairman of the Board

Thank you.