Good morning, and welcome to the Park, Ohio, fourth quarter and full year 2025 results conference call. At this time, all participants are in a listen-only mode. After the presentation, the company will conduct a question-on-answer session. Today's conference is also being recorded. If you have any objections, you may disconnect at this time. Before we get started, I want to remind everyone that certain statements made on today's call may be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. A list of relevant risks and uncertainties may be found in the earnings release as well as in the company's 2024 10-K, which was filed on March 6, 2025 with the SEC. Additionally, the company may discuss adjusted EPS, adjusted operating income, and EBITDA as defined on a continuing operations or consolidated basis. These metrics are not measures of performance under generally accepted accounting principles. For reconciliation of EPS to adjusted EPS, operating income to adjusted operating income, and net income attributable to Park Ohio common shareholders to EBITDA as defined, please refer to the company's recent earnings release. I will now turn the conference over to Mr. Matthew Crawford, Chairman, President and CEO. Please proceed, Mr. Crawford.

Great. Thank you, Daryl. And welcome everyone to our end of 2025 fourth quarter conference call. I am very proud of our Park Ohio team throughout 2025, and especially during the fourth quarter. Strong cost management combined with the benefit of improved productivity in key locations, offset demand volatility in many industrial markets caused by tariffs and general economic uncertainty. This uncertainty also delayed new business launches throughout the year and some new business awards in a few cases. Also during the fourth quarter, we made cash management a priority and met our debt reduction goal of $40 million. Most importantly though, we focused on our long-term goals regarding asset allocation, durable growth, and deleveraging. Regarding asset allocation, we continue to invest above our maintenance capital levels as we improve productivity and lower our cost to serve through automation, information technology, and vertical integration. While we continue this journey through 2026 and beyond, we're beginning to see the positive impacts on new business and improved profit flow through. Our growth capital investment, which represented more than a third of our total capital expense, will not only underpin our significant growth in 2026, but is also targeted in products and services where we have above average margins and a sustainable competitive advantage. Lastly, while we are still above our target net debt leverage ratio, our cash performance in the fourth quarter and the investment we have made toward 2026 growth, including additional working capital should put us in a good position to take a step forward in this area. So, we start 2026 extremely excited to be rewarded with above average growth and with solid incremental operating leverage in all profitability metrics. Thank you for your support and thank you to all of our outstanding partners in our business. Now over to Pat to cover the quota results.

Thank you, Matt, and good morning. Overall, we are pleased with our accomplishments in 2025, many of which will support future your sales growth and drive improved operating margin and free cash flow. Our accomplishments during the year included the following. First, we refinanced our $350 million senior notes with new senior secured notes, maturing in 2030. In addition, we amended our revolving credit agreement to extend maturity date by five years. The refinancing completed during 2025 provides us with the capital structure to support our sales growth and investment in future years. Second, we invested our over $12 million in information technology during the year and began the implementation of new ERP systems in supply technologies and in our industrial equipment group. We expect significant benefits from these investments, including lower working capital levels, lower operating costs, and improved information flow to and from our supply base and our customers. In supply technologies, we broke ground on a new state-of-the-art North American distribution center, which will be operational this year. This important investment will significantly improve how we service our customers and provide best-in-class warehouse operations with lower costs, lower working capital, automated sorting and kitting, and additional value-added services. Also in our fastener manufacturing business, we invested in automation equipment to improve plant floor productivity and operating margins in several locations. Our capital investments in this business are focused on increasing production capacity to meet the strong demand for our self-piercing and clenched products. In assembly components, we've won new business during the year, holding over $40 million of incremental annual sales, which will launch in the second half of this year and continue through 2027. We also implemented product price increases as well as plant floor improvements to increase profitability in 2026. And finally, in our industrial equipment business, we achieved record annual bookings totaling $217 million, including a record $47 million induction heating order placed by a leading steel producer. As a result, our backlogs were $180 million at December 31st, an increase of 24% over the prior year levels. Before I discuss our fourth quarter and full year results, I want to comment on our 2026 guidance. As outlined in our press release, we expect consolidated revenues to grow to $1.675 to $1.71 billion, an increase of 5% to 7% over 2025 consolidated revenues driven by sales growth in each business segment. We expect adjusted earnings per share to increase to $2.90 to $3.20 per diluted share, an increase of 7% to 19% year-over-year. EBITDA, as defined, to range from 8% to 9% of net sales, and we expect full-year free cash flow to range from 20 to $30 million. In our supply technology segment, demand in power sports, industrial equipment, and heavy duty truck end markets are expected to recover from low production levels in 2025, and we expect continued sales growth from electrical distribution customers supporting the AI data center expansion and continued strong growth from semiconductor aerospace, defense, and agriculture and markets. Also, our faster manufacturing business will continue to expand its products into new applications and will benefit from the continued use of lightweight materials and electrification. In our assembly components business segment, sales of our molded and extruded rubber and fuel-related products are expected to grow year-over-year, driven by increased production volumes on business launched in 2025 and improved customer pricing. In our engineered product segment, revenues are expected to be at record levels in 2026, driven by strong new equipment backlogs in many in markets, including oil and gas, steel and aerospace, and continued growth in global aftermarket demand. In addition, our forging equipment business recently won a new equipment order with an narrow space customer and strong aftermarket order activity will drive an increase in 2026 revenues our engineered product segment is also seeing increased order activity from customers supporting the expansion of AI data centers for example we recently were awarded new business for power generation products including transformers and power generators used to control and regulate power to data centers and we are actively responding the strong demand for our forged products from turbine generator customers who could also provide power for data centers. Turning now to our fourth quarter and full year results, our fourth quarter was highlighted by operating cash flow of $49 million and free cash flow of $36 million. We use our free cash flow and excess cash to reduce long term debt by $40 million during the quarter. Our full-year operating cash flow increased to $42 million from $35 million in 2024 with the increase driven by lower working capital usage compared to 2024. CapEx totaled $40 million in 2025 with investments and information technology totaling over $12 million during the year. Consolidated fourth quarter net sales were $395 million and increased 2% year-over-year. The sales growth was driven by higher sales in our supply technologies and assembly component segments. In engineered products, demand was stable year-over-year as growth in our industrial equipment group offset lower sales levels in our forged and machine products group. Full-year sales totaled $1.6 billion, a decline of 4% from 2024 levels, with a decline occurring primarily in North American industrial end markets. Our fourth quarter gross margin of 17.3% was 70 basis points higher than a year ago, resulting from higher sales levels and implemented profit improvement initiatives across several of our businesses. Full-year gross margins were 17% in 2025, which were comparable to 2024 gross margins despite the lower sales. Including special items in both periods, fourth quarter adjusted operating income increased 4% to $20 million, compared to $19 million in the 2024. Special items in the fourth quarter included a non-cash write-off of certain assets in our forage to machine products group, totaling $8.9 million to align our investments in tooling and production assets with current business levels. Our effective tax rate was 12% in 2025, which is lower than the U.S. statutory tax rate due to research and development tax credits recognized during the year. We expect a more normalized tax rate in 2026 ranging from 18 to 20 percent. Adjusted earnings per share in the fourth quarter was 65 cents for diluted share compared to 67 cents in the fourth quarter of 2024, with the decrease due primarily to higher interest expense in the 2025 quarter. Our full year adjusted earnings per share was $2.70 compared to $3.59 in 2024. And with respect to our segment results, in supply technologies, fourth quarter sales were $187 million compared to $182 million in the 2024 period. And operating income increased 31% to $21 million compared to 60. Operating income margin was up 240 basis points and was 11.1% of sales compared to 8.7%. The improved year-over-year fourth quarter results in 2025 were driven by higher sales and favorable impact of cost control measures taken during the quarter. Full-year sales in this segment were $748 million compared to $776 million in 2024, in 2024, driven by lower customer demand in certain end markets, primarily in North America, including power sports, heavy duty truck and bus, and industrial and agricultural equipment, offset by continued strong demand in data center, electrical, and semiconductor end markets. Full year operating income in this segment was $72 million compared to $75 million in in 2024, operating margin was 9.7% in both periods due to our efforts to reduce variable operating costs given lower demand. In our assembly component segment, fourth quarter sales were $92 million, up 2% from $90 million a year ago. Adjusted operating income was stable at approximately $4 million. Full year sales in this segment were $381 million compared to $399 million last year. year, lower unit volumes on certain auto platforms and production delays and new business launches impacted revenues during the year. Full-year adjusted operating income was $22 million in 2025 compared to $27 million in 2024, with the decrease driven by the lower unit volumes. We expect our operating margins in this segment to improve, resulting from expanding our rubber mixing production, plant floor automation, and improved margin flow through from increased sales. In engineered products, fourth quarter sales were approximately $116 million in both 2025 and 2024. We continue to see strong sales in our industrial equipment business, which grew 5%, but was offset by lower sales in our forged and machine products business. Fourth quarter adjusted an operating income decreased to $3 million due to the lower profitability and the forged and machine products group. Full-year sales in this segment were $471 million compared to $482 million in 2024. The decrease was driven primarily by the closure of a small manufacturing operation in 2024 and lower demand from the railcar end market, which impacted our forged and machine products group. group. We continue to see growth in our industrial equipment business in 2025, driven by 7% growth in our aftermarket business. Adjusted operating income was $17 million compared to $21 million last year, with a decrease driven by lower sales levels and lower profitability in our forest group. We expect significant improvement in operating profits in this segment in 2026, metrics based on our strong new equipment backlogs, aftermarket demand, and operational improvements made in several of our plans. I'll turn the call back over to Matt.

Great. Thank you, Pat. Before I go over to questions, I do want to emphasize Pat's comments around the fourth We would turn to growth in the fourth quarter. Year over year, we were down a bit. But as I mentioned, things were a bit choppy earlier in the year regarding tariffs and global uncertainty in the industrial market. So, we're getting back to growth in the fourth quarter is great. We plan on building on that in 2026 meaningfully. I also want to point out that we continue to absorb some expenses related to some of the IT transformation, new business launches, et cetera. So, I think we'll begin to see payback in 2026 and be able to build on that going forward So, some of the improvements I think are being masked by that. but we're very excited to demonstrate a big step forward in 2026. With that, I'll turn it over and ask some questions or answer some questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your question. Our first questions come from the line of Steve Barter with KeyBank Capital Markets. Please proceed with your questions.

Hi, good morning. This is Jacob Moore. I'm for Steve Barter today. Thanks for taking our questions. I wanted to start with a guide, specifically the 5% to 7% sales growth. I see at least one mention of pricing in the slide, so can we just begin with your assumptions for price versus volume in that overall sales number, and then maybe you could finish with a bi-segment view of growth contributions for the year?

This is Pat. The price increases that are included in our 2026 sales guidance is primarily in our assembly components group. I would say it's a small part of the increase that we're seeing in revenues. We will see an increase in revenues relating to tariffs and the recovery of such tariffs with our customer base and our supply technology segment. But I would say the majority call 75% of our growth in 2026 will be a result of production volume increases from our customers. And then relative to improvements in gross margin by business, I'm going to refrain from giving any type of guidance on segment profitability in 2026 other than we expect expect improved flow through in each of the business segments based on the increase in revenue that we're guiding to. So 2025, and really for the last year and a half, our operating margins in both assembly components and engineered products group are below our expectations, and we expect improvement in each of those segments.

Jacob, I just want to add to that, while I completely agree with Pat's comments, there are tactical pricing discussions going on across the business. As you can see, a lot of our backlogs are very strong. So we are quoting new business in multiple areas, and we're also, you know, making sure that we dissect our customer base and our current pricing models and standards coming into the new year. So every one of our business continues to be evaluated, and I can think of a dozen in different pricing conversations going on right now. Much more tactical, I think, than we would have seen in the past. So I think to Pat's point, the growth leans heavily towards new business or expanded current relationships. That doesn't mean a percent or two, and our model is $25 or $30 million in price increases. And those are happening consistently across the board on a more tactical basis.

Understood.

That's really helpful. and I kind of wanted to dig into sales growth by segment as well if you could comment on that once again we will not comment on individual business segments but I would say as I mentioned in my comments that our guidance on increased revenues are across the board and so they vary across the board engineer products will be a record sales levels in 2026 we see continued growth in assembly components based on new business that we've already launched. That new business will be at full production levels in 2026. And then in supply technologies, we have seen nice growth in the AI data center space. Our business is focused on the switchgear manufacturers and those customers that provide digital infrastructure around data centers. we're seeing nice growth in that business. For example, a year ago, two years ago, we had very little revenue in that space. Today our revenues are approaching $150 million annually with that in markets.

Now, Jacob, I think that to Pat's point, we'll see it across the board, AI and defense and power management really affecting engineer products and supply technologies, but we've talk consistently about the large, the $40 million in new business that we've launched inside of assembly components. So without commenting specifically, I think it should be relatively broad based. I think it also depends, we've had significant backlogs in engineered products. As we can clear those backlogs, that should be a tailwind as well.

That's really good caller. I appreciate it. And if I could just follow up with the last one here on free cash flow. I know you're guiding to $20 to $30 million. The last couple of years have been in the low single-digit millions. I know that you've been investing, and you highlighted that, but it sounds like you still have a lot to juggle this year, too. So I want to ask, what makes you confident that you've turned the corner, that the asset base can start to consistently produce cash flows, and what's your confidence level in that guidance?

Great question. Pat can give you a better answer. But I do want to comment, I talked earlier about volatility going back a couple of years in the supply chain. Then I've talked I think about volatility in demand last year related to tariffs and global uncertainty. These last couple of years have been really difficult to manage supply chain issues, demand issues. it has been not the best environment to predict the business needs of your customers and to manage your suppliers. So, we have been heavy consistently and I think we've been transparent on that on working capital. I think as we come into 2026, whether it's some of the productivity tools we've talked about, or whether it's just a little better visibility. Yeah, I commented, that I think back in the second quarter call of last year, that while the sales were relatively stable year over year for the business, and let's use supply technologies as a kind of a last mile person that's a good proxy for the economy, there was total turmoil under the hood in terms of end markets, and aerospace and defense and AI was holding it up. Other key markets, most of the other key markets were down. So, that was a very difficult environment. We predict something slightly more better visibility and we are more prepared, I think, to handle it.

So I think we can, I think, manage the business a little better on the cash side because of And again, we're also going to begin to benefit from some of these data management tools as But it was a tough year last year to manage these things on top of investing heavily in I would add that, you know, our free cash flow estimates are a result of obviously increased profits, but also lower your working capital usage relative to every dollar of sales increase. So we still have some embedded working capital that we expect to harvest in 2026, but we expect that as a percentage of sales, our growth will not require us to invest in as much working capital as we have in the past.

Thank you very much. I'll jump back in queue.

Thank you. Our next question has come from the line of Dave Storms with Stonegate. Please proceed with your questions.

Good morning, and thank you for taking my questions. Good morning, Dave. I wanted to just go back to the guide here and maybe just get your thoughts on general cadence for 2026. Should we expect that it will be a maybe more typical seasonal year, or is there anything that we should keep an eye out for that might throw that off?

I think we would expect a similar trend of sales in each business segment as we have in the past. So I don't see anything that would change the look of the individual quarters in 2026.

Perfect. Thank you. And then just wanted to kind of turn to the record backlog you have in EP. Is there anything more you can tell us about that? Is that maybe unexpected burn rate? Are there any outsized contracts in there that are gonna demand a lot of focus, margin profile, anything like that would be very helpful?

I don't think there's anything unusual in there. I would say that our expertise in managing large power has provided more opportunity across the industrial segment, including things like data centers and AI. So the breadth of opportunity I think has grown in what 30 years ago was largely focused on the steel market and some related forming markets and hardening markets. So I would say that the breadth of managing large power has increased the opportunity, if you will. So I would say that that is a tailwind in the business. Because we are a global leader on the technical side in managing large amounts of power in industrial spaces. So, we have names on our customer list that we just wouldn't have seen five years ago and trying to do things that they weren't trying to do five years ago in battery steels and high strength steels and so forth, as well as new energy markets and things like So, I do think that that is a particular tailwind. And, you know, I also think we've talked a lot about durable sales. We love our aftermarket business there and we continue to reinforce and support what increasingly is a global effort to upgrade the industrial space. I know our team and including Pat here was just in Europe. I mean, we are absolutely seeing green shoots and the reinvestment of the industrial space over there. Whether that means new facilities, which we don't see as much of there, but certainly upgrading old facilities. So I think those markets are continuing to show life globally.

And then maybe one more for me. You've mentioned a couple times now, and we've talked about this in the past, the automation and information systems improvements. Just would love to get an update on how you think those are going, how much more runway you have there, and just any further your thoughts on that?

Yeah, no, that's a great question. We are attacking this piece and lowering our cost to serve on multiple fronts. And I say it a lot because it's really something we didn't focus on as much when we were growing so quickly over the years. First, I'll start with data management. Our efforts, enterprise-wide in some cases, but more often by the different segments, to invest in tools, I think, that begin with creating really clean data. You know, a lot of people want to talk about AI, and we have some tremendous use cases going on, both on the sales funnel side and on the productivity side. But the reality of it is the journey begins with really getting clean, usable data. So, you know, I'm very excited at the strides we're taking to manage data better and give the tools to our – I've talked a lot in the past about the strength of our management teams increasingly and giving them the tools to have the visibility to do everything from manage pricing and manage cash flow and working capital the way that we discussed. The opportunity is huge, particularly in a business like supply technologies. So, I would say that I think on the automation side, you know, we continue to attack vigorously costs in the business that a few years ago weren't a big deal. So for example, a warehouse space, warehouse space has been explosive in terms of costs. So opening up, as Pat mentioned, a new distribution center, a larger one allows us to have increased increased volumes and velocity, which allows us to invest in automation tools. Our flagship fastener manufacturing facility up in Toronto just invested several million dollars in finishing and packing equipment. This isn't just about doing things more cheaply, it's about doing more. So we are really looking at those kinds of investments too, which aren't just robotics. They're about really stripping long-term costs out of the business model while growing. It's not about, it is about productivity today, but it's really about getting the flow through we talked about on the next $100 million in sales. And then lastly, you didn't mention it, but I will, when we talk about durable sales at higher margins, the vertical integration piece, particularly assembly components, we have a wonderful footprint in the US, Mexico, China, a global footprint, and with very competitive position products with tremendous know-how. And I think it's critical that we continue to invest in the whole value stream. So as we look at improving material science and mixing capabilities in the rubber side, this is going to be really important to controlling our value stream.

Thanks for that commentary, and good luck in the next quarter.

Thank you. Thank you. Our next questions come from the line of Jim Dallin. Please proceed with your questions.

Good morning, gentlemen.

Hey, Jim.

Two big-picture questions. Pat mentioned the data center business running at a rate of $150 million. Could you expand that and give us your top five end markets across the entire company and what percentage of the total those top five might be, for example, steel, automotive, energy, et cetera?

Well, I'll take the least exciting one, Jim, because that'll make – Pat, I'll give Pat a second to think. You have known us when automotive, light truck, and auto was north of a third of the business. Today, I'll give Pat a chance to think, but that number probably hovers closer to about 20%, a little over 20%. So we have meaningfully culled the herd, so to speak, and gotten rid of some business that were too focused, I think, not just on the automotive space, too much on the North American automotive space, and I think also were more capital intensive. So we have moved out of those businesses today. While that's still our biggest market, I want to be very clear that that is a business that today not only is global in nature, we compete very successfully in Asia, for example, but also I think is a business that is extremely well diversified into products where we either have IP or we have business process or hard assets that put us in a very, very durable competitive position. So, that is still our biggest market, but we really like where we are relative to the customer mix and the products that we're supplying. And while we don't see it in the margins yet, Jim, that is probably our biggest opportunity as we've repositioned that business and invested in that business for growth. Are we looking to be 50% or 40% or even 30% OE automotive? We like, but we like where we are today and we're going to continue to invest in those positions that we have great accretive margins.

You know, we're very fortunate to be a very diversified industrial company. Matt talked about the auto side of the business as that has decreased over the years. But within that block of business that we have, we're very diversified in terms of products, products in terms of customers, in terms of the type of auto platform that we're providing our products to. Once you get beyond that, heavy duty truck, semiconductor, power sports, steel, AI data center related, electrical, oil and gas are the top markets that would follow. And each of those individual markets do not represent more than 15% of our revenue base. So no one end market is really dominating our revenues from that perspective. We're very diversified.

It's kind of following that same line of question. In broad terms, what percentage of the business is going for OEM application versus aftermarket?

I would say that supply technology is 95% OE. Obviously, we don't always track perfectly what the OE does with that because we do sell their service arms too. So tracking exactly what goes into their service areas versus their direct OE business can be difficult, but you can think of that as primarily an OE supplier. I think you can all, whether that be on the aerospace side, even the MRO side, I guess, is still in some cases going into assemblers. I think on the automotive side, again, the vast majority is OE. We do sell aftermarket, both direct aftermarket on the extruded hose side. We also sell, obviously, customers that use them as service parts. But again, in both those cases, I would say that. But I think on the equipment side and the forging business side, you know, the equipment side is a bit more discreet in terms of, you know, their building capacity or improving capacity or investing in productivity inside their plants. And then the aftermarket, which is $150 million part of that business, is obviously all aftermarket. So and that's, again, one of the exciting parts of the business model. So, you know, while I would say general, the first two are largely OE-based, I think that the engineer products business is a bit more complex and skews a little bit more towards not being entirely OE.

Okay. One last from me. How did China do last year versus the previous year?

China continues to be a good market for us. First, we have, I think, in a couple of different ways. First, I think that we have really reshaped, I talk a lot about allocation of capital. While we have invested less money, we generate cash in China and we generate cash, exporting cash out of China, we have really focused on the businesses we have there that we can be successful in. So, the products we sell there today, the service and the customer we service are often sometimes Chinese companies, but in most cases, global companies that are looking for global partnerships. So, you know, that gives us a little buffer from a competitive standpoint. It's a tough market to do business in, no mistake, but it is a growing market. It's a market in which we have accretive margins, and again, it's not one that we're necessarily we're pulling back from, albeit more often, we will see that as a jumping off point for Southeast Asia and other areas of even faster growth.

Thank you.

Thank you. Our next questions come from the line of Steve Barger with KeyBank Capital Markets. Please proceed with your questions.

Hi, thanks for letting me jump back in. I just wanted to ask about the other part of your strategy that I haven't touched on yet, which is reshaping the portfolio. I know, Matt, you've talked about it a little bit already today, but I just wanted to ask you a little more directly, is the current portfolio the set of assets that you want to be in longer term?

I think we're constantly tweaking and thinking about how we want to allocate capital. I think we made the big moves over the last couple of years, and I think I've often said I really like the businesses we're in. Each of them, I think, has real opportunity for growth, and not only growth, but durable growth at accretive margins. Having said that, I think that we're not operating at the highest level across the So we will continue to fine tune that as we go forward. But again, I think that from a revenue perspective, I think that the core businesses we have are fantastic.

We've discussed on prior calls, and I know Matt has highlighted that the allocation of capital strategy, that we are allocating capital to our best products, our highest margin businesses, and to the extent that there's businesses that are not going to get fed the same amount of capital, those are the businesses that we'll make decisions on going forward. But right now, we are happy with...

That's really good, caller. And then just the last thing from us, and it's maybe one for each of you. Pat, what do you see as the variables or watch items that could drive upside or downside to your 2026 outlook? And for Matt, what programs, initiatives, or trends are you most excited about this year and why?

Those are some big questions, Jacob.

So let me just comment and say, I think that, as I mentioned earlier, we have a little better visibility this year going into the planning year. I would say only half joking that last year, pretty early in the year, the economic uncertainty and tariff, the specter of tariffs changed our ability to plan the business and made some of our business plans almost irrelevant by the end of the first quarter. So, I think this year, I think we – a lot of the inventories that were really overbuilt in the – or pre-bought or pre-built in the beginning of last year, a lot of that inventory is cleared in some of our traditional markets, a lot of the transportation markets in particular. I'm not talking auto. You know, some of the markets have been at historic lows. For example, the train market and the track market, you know, some have been reasonably soft, the heavy duty truck market. So there are a number of markets that we have some exposure to that have been sort of bumping along the bottom. So I think those businesses are in a position, those markets are in a position to stabilize, perhaps a little upside. side, that should allow us to benefit from some of the faster growing areas of the business that Pat has recognized. What do I think the risk is? It's less, I think, on the customer side this year and more on the macro side. You know, it is somewhat surprising to me that the markets, with the exception perhaps of the oil market, have been as calm as they have been, and most of our key customers have been insulated from that, but it's hard to imagine that inflationary cycle that burns through this global economy or here in the US because of the war, ongoing war on two fronts wouldn't in some way impact our business. It may help on the aerospace and defense side, but it probably will create some challenges and some demand chaos as we saw last year. So those are a couple of things we're thinking about, and that's one of the reasons we continue need to invest well above our historic norms is because we want to be in a better position to respond to that kind of activity.

Jacob, this is Pat, the answer to the question directed at me, obviously, higher production levels in the end markets that we serve will drive higher levels of profitability. But I think more importantly than that, because our guidance reflects where we think the end markets are going to be, better throughput of our products through our plants. Whether that be in our capital equipment business, the more we can push through the plant, the more efficiently we push through new equipment orders through our plant will drive profitability. The same is true in our manufacturing plants and assembly components. The more efficient we become, the better absorption we're able to obtain, and the higher levels of profitability will result. So those are the two areas that we're focused on, and that will drive any upside that we might see in our 26 guide.

Thank you very much. I know we had a lot for you today, so I really appreciate all of you.

No, no. Thank you. We have reached the end of our question and answer session. I'll now hand the call back over to Matthew Crawford for any closing comments.

Thank you, everyone. Appreciate your attention and your patience as we transform this business going forward. Have a great day.

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