Greetings, and welcome to RBC Bearings Fiscal 2024 Fourth Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Josh Carroll with Investor Relations. Please go ahead.

Good morning, and thank you for joining us for RBC Bearings fiscal 2024 fourth quarter earnings conference call. With me on the call today are Dr. Michael Hartnett, Chairman, President and Chief Executive Officer; Daniel Bergeron, Director, Vice President and Chief Operating Officer; Rob Sullivan, Vice President and Chief Financial Officer; and Rob Moffatt, Director of Investor Relations. Before beginning today's call, let me remind you that some of the statements made today will be forward-looking and are made under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected or implied due to a variety of factors. We refer you to RBC Bearings recent filings with the SEC for a more detailed discussion of the risks that could impact the company's future operating results and financial condition. These factors are also described in greater detail in the press release and on the company's website. In addition, reconciliation between GAAP and non-GAAP financial information is included as part of the release and is available on the company's website. With that, I will now turn the call over to Dr. Hartnett.

Okay. Thank you, and good morning, everyone, and thanks for joining us. I'm going to start today's call with a quick review of our quarter and fiscal year and hand it over to Rob for some detailed color on the numbers. And then, I will finish with high-level thoughts on the industry and our fiscal 2025 outlook. In the fourth quarter, we delivered a strong finish to what was a historic year for RBC. Net sales came in at a higher end of our quarterly guidance range at $413.7 million, delivering roughly 5% year-over-year growth, capping out a strong fiscal 2024 with revenues of $1.56 billion and growth of about 6.2% year-over-year. 2024 was another year where 70% of our revenues were sold, single or primary sourced, that's a key component of our business profile and over half of our revenues continue to come from the maintenance and repair-related side of the market. These offer attractive margins and non-cyclical growth, and obviously, a continually growing installed base. In the Aerospace and Defense segment, we reached an important milestone with fiscal 2024 sales surpassing their pre-COVID peak, coming in at $519 million for a year-over-year growth of 20.7%. We expect more growth to come in fiscal '25 and beyond, but more on that later. Within the segment, Commercial Aerospace was up 12.0% year-over-year in the quarter and 20.3% for the full fiscal year, with defense revenues up 29% in the quarter and 21.6% for the full year. Additionally, growth in A&D was fairly balanced throughout the year, with distribution and aftermarket sales up 23.4% and OEM sales up 20%. On the industrial side, trends remain flattish, with fourth quarter sales down 0.4% and full-year sales up 0.2%. Broadly speaking, aftermarket sales remained stronger than OEM in both periods and end markets continue to be mixed with some growing and others down. During the quarter, we saw strength in power generation, waste, and water management, while weakness was seen in multi-industry, aggregate, cement, and oil and gas. Delivering strong organic growth relative to our peers is a key part of RBC's playbook, and in fiscal '24 that was no exception. Adjusted gross margins for the quarter came in at $178.3 million or 43.1% of sales, an expansion of 90 basis points over fiscal 4Q '23. And for the full year, we came in at $670.5 million or 43.0% of sales, an expansion of 180 basis points versus fiscal 2023 and a new all-time record for RBC. Our success here is driven by multiple factors, with ongoing synergies from the Dodge acquisition being the biggest contributor, coupled with improving utilization of our aerospace asset base and an ongoing pursuit of growth in higher-margin end markets. For comparison, our adjusted gross margin as a percentage of sales for FY for the third quarter of '22. In the first quarter, following the Dodge acquisition, was 37.6% compared to 43.1% exiting fiscal 2024, that's a 550 basis point expansion on the gross margin line. At the time of the acquisition, we said we were targeting $75 million to $100 million of synergies over five years. We estimate that we have achieved somewhere between $70 million and $80 million in just over two years since the closing, with more to come. And you can add, we have already repaid $625 million of the term loan that was taken to make the acquisition. The Dodge transaction and what we've accomplished with Shubin and Sargent acquisitions before that has been absolutely transformative for RBC. Over the past five years, net sales have gone from roughly $700 million to over $1.56 billion, growing at a 17.3% CAGR. Even more impressive is EBITDA, which has grown 19.8% CAGR and free cash flow, which has compounded at an amazing 29.2% CAGR over the past five years. I'd like to use this opportunity to express how proud I am of the team for delivering this kind of performance, along with yet another year of strong operating results in fiscal 2024 and for creating much of our own success with company-specific rolls and margin-focused initiatives. We have a lot to be proud of and what's been accomplished. And as always, we will be aiming a little higher in the upcoming year. With that, I'll turn it over to Rob for more details on the financial results.

Thank you, Mike. Dr. Hartnett indicated fiscal 2024 was another year of strong organic growth in Aerospace, continued growth over market industrial business. Total sales growth of 4.9% in the quarter, a 6.2% in the full year was surpassed by adjusted EBITDA growth of 7.4% in the quarter and 11.1% in the year, and by free cash flow growth of 18.4% in the quarter and 35.1% for the full year. This was enabled in part by solid progress on gross margin expansion with fourth quarter gross margin as a percentage of sales coming in at 43.1%, an expansion of roughly 90 basis points year-over-year and the full year coming in at 43%, an increase of roughly 180 basis points. Strength in the gross margin line was derived from the Dodge synergies, increased utilization of our aerospace assets, and our ongoing pursuit of a higher margin mix. We leveraged the healthy operating environment to make additional investments in SG&A aimed at positioning the business for continued growth. This includes investments in our IT infrastructure and our overall headcount, including sales force and back office personnel. That should enable the company to be able to secure and process higher volumes of orders for fiscal '25 and beyond. Even with the SG&A investments, adjusted EBITDA margins expanded, with the fiscal fourth quarter coming in at 31.4%, an expansion of roughly 70 basis points year-over-year. In fiscal '24, it came in at an all-time record of 30.9%, an expansion of nearly 140 basis points. This is the first time our full-year adjusted EBITDA margin crossed the 30% mark. Based on what we see for fiscal '25 and beyond, it should serve as a base for additional expansion. In terms of EPS, there seems to be a bit of confusion this morning on tax in the quarter. Although our effective GAAP tax rate was 16.8% for Q4, the effective tax rate for our adjusted net income and adjusted EPS is 21.2%. This is reflected in the reconciliation within the press release. I mention this because it's important to note that the strength of our performance in Q4 was primarily driven by our operating performance. Free cash flow also outgrew the top line, with $69.9 million generated in the quarter, delivering growth of 18.4% year-over-year and $241.5 million for the full year, representing 35.1% of year-over-year growth in free cash flow conversion of 115%. We used that free cash flow to continue to reduce debt from the Dodge acquisition, paying down $225 million on the term loan, coming in at the high end of our internal target for the year. This brings total net debt to $1.1 billion and net leverage to 2.3 times on a trailing basis. One item that you will want to take into account for your models in fiscal '25 is the planned conversion of our Series A mandatory convertible preferred stock, expected to automatically convert on October 15, 2024. Using Q4 results as an approximation, the net impact of this conversion is expected to be slightly accretive to EPS, assuming conversion at the current share price. It will be meaningfully accretive, however, to free cash flow as the conversion will remove the cash dividend payment, reducing our future total cash outlays by approximately $23 million on an annualized basis. This is roughly 9.5% of fiscal 2024 total cash flow. Importantly, the removal of this cash can further accelerate the pace at which we are reducing the term loan. Altogether, the combination of healthy growth, margin expansion, solid cash generation, and continued debt reduction capped off a strong fiscal 2024 and leaves the company well positioned heading into fiscal '25 and beyond. With that, I'll now turn the call back to Mike for some closing thoughts.

Okay. Thank you, Rob. Before we turn the call over to Q&A, I wanted to spend some time on our outlook and how we're thinking about fiscal '25. To start, we are guiding first fiscal quarter net sales to $415 million to $420 million, representing year-over-year growth of 7.2% to 8.5%. This outlook largely reflects an environment that's similar to the past quarter, where demand in A&D is strong and industrial end markets are uneven, with some markets stronger and others softer, and overall industrial demand supported more by aftermarket sales than OEM. In terms of the full year, our outlook for commercial aerospace remains positive. Passenger miles traveled are back above pre-pandemic levels and continue to grow, driving plane utilization levels up and retirements down. New plane demand remains robust and continues to be throttled by supply chain shortages. As I've said before, the only constraint in commercial aerospace right now is not demand, but supply. On the OEM side, I'm sure many of you have been following the headlines and build rates at Boeing lately. Over the long term, I'm confident that Boeing will successfully navigate the current challenges it's facing and emerge stronger by the end of 2024. We believe that headwind, however, can be mitigated in the short term by stronger-than-expected requirements from other markets, including international airframe producers, space, defense, and the aftermarket. As for RBC, we fully expect Boeing requirements to rebound by mid-Q3, remembering our products are needed approximately six months before an airplane is assembled, and industry lead times are typically 50 to 60 weeks for our products, depending upon material composition. Altogether, this points to A&D revenue expected to be up low double-digits in fiscal '25 on top of fiscal '24's record base. It will likely be back-end loaded, I think that's probably obvious. On the industrial side, we believe some tough comps we've seen in pockets of the OEM business should start to abate as we progress through the year, and aftermarket should continue to grow. What's important here is the growth over market. We believe the combination of our ongoing organic sales initiatives, coupled with our Dodge revenue synergies should continue to drive growth, and our target of 2 times GDP is still our target for fiscal '25. In terms of gross margin, I mentioned earlier, we made tremendous amount of progress in fiscal '24 and are well ahead of schedule on the Dodge synergies. Going forward, we expect a higher mix of Dodge synergies to be derived from revenue growth as we continue to work to integrate the sales effort and drive new product development. With that in mind, we expect 50 basis points to 75 basis points of gross margin expansion in fiscal '25, driven by a combination of moderating Dodge tailwinds, ongoing absorption of our aerospace capacity, and higher margin new products being introduced to the market. Altogether, this paints a picture of another year of strong free cash flow generation, setting the stage for term loan reductions of another $275 million to $300 million, leaving us on track for our five-year goal of fully repaying the debt generated from the Dodge acquisition. Our current net leverage is 2.3 times on a trailing basis, and even lower on a forward basis, and that's before the $275 million to $300 million of further debt reduction planned for fiscal '25. This leaves us well positioned to more seriously evaluate M&A opportunities, and the team has been active in growing that pipeline. We expect at our current rate to be well under 2 times EBITDA by the end of fiscal '25. Our principal bias here is to manage the company towards a balanced mix of aerospace and defense, and industrial end market exposure over the long term. To conclude, fiscal 2024 was a record year for RBC. We delivered another year of solid growth, fully further mitigated by margin expansion and strong free cash flow conversion. We are ahead of schedule on our Dodge synergies and are on track for our deleveraging and return to acquisitive growth. We look forward to fiscal '25 and we expect more of the same. With that, I'll turn it over to the operator for questions.

Thank you. The floor is now open for questions. Today's first question is coming from Kristine Liwag of Morgan Stanley.

Hey. Thanks for all the detail. Mike, you touched on the Dodge revenue synergies in your prepared commentary. Can you provide more color on how that strategy is going? How's the integration of your two sales teams been progressing? I think, from what you recall, Dodge has something like 10 times the salespeople as legacy RBC Bearings. I'm not sure if that's still the case today. But how would this be implemented? And when you start measuring results, what kind of revenue synergy target do you think you can extract from this?

I guess my 2 times GDP growth was just too simple, Kristine?

Well, Mike, 2 times GDP growth for legacy RBC Bearings had historically been your target. So I was thinking that our revenue synergy from the deal would be incremental.

I believe there is significant revenue synergy potential as we explore various options being developed. One aspect is reaching a larger global market for Dodge. RBC will benefit from Dodge’s strengths, particularly in Europe, India, Mexico, and Canada, where we see promising opportunities for Dodge in 2025. If Dodge has prospects, RBC should equally benefit from those opportunities. We are actively working on initiatives tailored to these international markets based on what we can provide and how we can collaboratively enhance our market access between Dodge and RBC. For instance, in India, we have extensive infrastructure that facilitates manufacturing and distribution, which includes the capabilities necessary for importing and exporting. Additionally, many of our aerospace clients are relocating to India for cost advantages, providing us better access to the aerospace customer base through Dodge's sales force. We anticipate expanding that customer base from less than $10 million annually today to approximately $30 million to $40 million in the coming years, which is quite significant. This is just one example of the ongoing aerospace and industrial synergy made possible by the support provided through Dodge's infrastructure.

Great. Thank you for the color, Mike. And if I could tag a second question maybe on cost. When you've talked about the footprint of Dodge manufacturing, you've talked about in the past how it's still mostly U.S. based, but there's an opportunity to move some to low-cost countries while keeping the higher value things in the U.S. Can you give any progress in terms of where you are in terms of that initiative? And when everything is completed as you've planned in the next 12 months or 24 months, how much more margin do you think you can get from a lower cost structure?

We have recently completed the construction of a 100,000 square foot plant in Takata, Mexico for Dodge. This facility enables us to shift some of Dodge's manufacturing from the U.S. to Mexico, which will help alleviate space constraints in other Dodge plants, allowing for product expansion. We have already made significant progress by capitalizing on this initiative, and you may notice our trucks on Interstate 10 this weekend. This move is expected to increase Dodge's product offerings in terms of volume that they previously could not achieve. It will not only support growth but also transition existing products to a lower-cost country. This is just the first step, as building a 100,000 square foot plant takes time and has been in planning for the last 18 months. We anticipate starting production in Takata with our first round of products by July.

Great. Well, I'll keep an eye out for RBC trucks on Interstate 10. Thank you very much.

Thank you. The next question is coming from Pete Skibitski of Alembic Global. Please go ahead.

Hey. Good morning, guys. Hope you are doing well.

Good morning, Pete.

Let me start by mentioning that the growth in backlog, both sequentially and year-over-year, is impressive. Should we mainly consider this in terms of commercial aerospace, particularly regarding long-term orders?

Aerospace and Marine is largely focused on that sector, likely with an 80-20 split. Very little of Dodge's backlog is included in that area as it doesn't fit their business model. Orders placed by customers for Dodge are typically shipped the same day or within two to three days, preventing them from making it into backlog. This segment accounts for 50% of our sales.

Yeah. Okay. That's helpful. And then just your guidance for the first quarter, that would be a reacceleration of sales, right? You're kind of in that 4% to 6% range the last three quarters. Now you're talking close to 8%. I imagine the backlog doesn't hurt with regard to visibility there. But can you talk to us about what you're seeing in this first quarter versus the prior three quarters to kind of lead you to believe that sales are going to reaccelerate?

We are experiencing strong bookings, especially in Aerospace and Defense, which is very positive. I don't believe that Boeing's reduced production rate for the 737 has impacted the first quarter results; I think we will see that effect in the second quarter instead.

Okay. Yeah. That's helpful. That was a little confusing. Because yeah, so I was going to ask you in terms of the changes to Boeing's master schedule and how it's impacting you. And I know they tried to keep a lot of suppliers at a roughly 30 a month rate, I think, on the max. But it sounds like maybe you guys are going to go below that for a quarter or two, and then rise back up? Is that the way to think about it?

I believe that if we examine Boeing's current production rate and their target, the key figure to keep in mind is 38 shipments per month. Currently, they are averaging around 20 to 25 shipments a month, possibly reaching 30. By next April, we expect them to be in a strong position to assemble 38 shipments monthly. For our product, we need to produce and ship it by October, which means our manufacturing should start in July. While we may not ship at a high rate initially, likely at a reduced pace compared to the first quarter, I anticipate that production will increase after the second quarter, which ends in September. I expect that moving forward each quarter will align more closely with their assembly rate starting in April. They might adjust their schedule, but they understand the importance of this. Everything needed is within their capabilities; no new technologies are required — it's primarily about executing well, and I have confidence in their qualified team to accomplish this.

I appreciate it. This is my last question. The growth in defense this year has been remarkable. Is it primarily due to marine submarines or other factors driving this? I also have the impression that you're anticipating another potential double-digit growth in both defense and commercial sectors, suggesting that the strong performance is likely to continue.

Defense is expected to keep growing. Currently, we are limited in our ability to produce enough defense products overall, so we are putting in significant effort to increase our production rates. This is influenced by factors such as labor availability, material supply, and the overall supply chain. We are making good progress in ramping up production rates, typically seeing increases in the mid-teens percentage wise year-over-year, sometimes even higher. In some sectors, we will need to maintain this growth for the next three to four years to meet demand. The marine defense sector is particularly robust, and there is strong demand stemming from situations like the ongoing conflict in Ukraine, as many foreign nations are interested in acquiring the Strike Fighter platform. We're also witnessing increased demand from Lockheed for these programs. The long-range bomber program is underway and facing high demand, and both marine and airframe sectors are performing well. Guided munitions are another strong area for us, encompassing ground-to-ground systems like the HIMAR, shoulder-mounted options, and ballistic interceptors. Currently, there is significant demand to replace supplies for Ukraine, as well as a need to strengthen U.S. stockpiles. I expect this demand to persist for the foreseeable future. While the situation in Ukraine may stabilize in the medium term, the long-term outlook indicates that U.S. arsenals are not sufficiently stocked, a sentiment acknowledged even by China as they expand their military capabilities. They won’t take action regarding Taiwan until they feel their arsenal is adequately equipped. Therefore, we anticipate a prolonged cycle of growth in defense spending.

Yeah. No, that’s great color. Appreciate it, Mike. Thanks, guys.

Yeah.

Thank you. The next question is coming from Steve Barger of KeyBanc Capital Markets. Please go ahead.

Hey, good morning. Thanks.

Yes. Go ahead, Steve.

Hello. As Mike talked about accessing more world markets for Dodge, is that all organic channel development or would you think about geographic acquisitions to accelerate that process?

Yeah. We would think of both. I mean, but it's organic. I think it's primarily organic. If there was an acquisition that would accelerate the process, we'd consider it, but right now, it's pretty much using the assets that we already have more effectively and building out the teams. What has to be done there is very achievable. It's a matter of paying attention to what's going on in Europe, spending more time with the foreign nationals at these various sites, and making sure that they're well integrated with the RBC and Dodge missions. Before we acquired Dodge, they really didn't have access to these markets. They had access through ABB, their previous owner. ABB didn't pay a great amount of attention to the mechanical side of their world. These languished and atrophied. We're pleasantly surprised that we have these footprints in active and productive areas of the world that we can spool up. We’re in the process of spooling them up.

When discussing Europe, India, Mexico, and Canada, as you begin to focus more in those regions, are you facing competition from other global bearings manufacturers or primarily from local companies? I’m trying to understand the market share opportunities as you concentrate your efforts in that direction.

Yeah. Well, it's the global bearing manufacturers if it's bearings. In a lot of cases, for aerospace and defense, it's particularly aerospace. It's a matter of following your customer to these remote sites and being able to service the requirements effectively. If you have the footprint to follow him and to service him, you're well ahead of anybody else.

Yeah. Got it. And then given all the funding visibility out there from the government for big projects, it's interesting that aggregates and cement are weak. Is this a destock or what are your customers telling you and how do you think that unfolds for the back half of the calendar year?

Well, I think you know as much about that as I do, Steve. The aggregate and cement business is pretty much correlated almost perfectly with housing starts. So when housing starts are up, that business is very strong; and when housing starts are not up, that business is not so strong. So in housing starts, it's all about mortgage rates, right? So when you read the research on Vulcan or Martin Marietta or the people that are in this world and the investment analysts correlate housing starts with demand for their business volumes, it’s amazingly correlated. I mean, it's like our square of 95 or something. It's one-on-one. So we look at housing starts. I don't think the infrastructure bill has really impacted anything at this point. I mean there's people that talk about it here and there, but it has not had any macro influence to the state that I can put my finger on.

Got it. No. That makes a lot of sense. Thanks.

Thank you. The next question is coming from Michael Ciarmoli of Truist Securities. Please go ahead.

Hi. Good morning, guys. Thanks for taking my question.

Good morning.

I know you just discussed the aggregates, but I believe the previous expectation for the fourth quarter was for industrial growth to be a few points year-over-year. It appears that came in slightly lower than anticipated. Were there any unexpected weaknesses in the aggregates and cement markets, particularly in relation to power generation waste? Or was it mainly the aggregates? I recall you mentioned that oil and gas was somewhat weaker as well.

Well, I think first of all, one of the things we didn't mention was that last year Dodge did have a backlog, which was driven by the supply chain. In last year's fourth quarter, that backlog significantly boosted the sales figures once it was released.

That was about a $10 million impact.

Okay. So the difference was about $10 million. This year, the supply chain has normalized, and they don't have those kinds of backlogs anymore. It's a challenging comparison. It's a challenging comparison.

Yeah. Okay. That makes sense. And then just back on to '25. I want to make sure I heard it. Did you say low double-digit growth for Aero Defense combined? And is there an expected parse out between commercial air and defense in that view?

There's no parse out, but yes, it's combined. We're just trying to figure out this Boeing thing, and we had all of our plans around a different build rate for the ships. Now we're reevaluating those plans and determining what we should bring in terms of additional business to offset any of the losses. That's sort of ongoing, yes.

Got it.

It's not going to be a normal year in terms of assuming Boeing gets their problem solved and gets to where they need to be, like in the upper 50s in terms of 737 rates per year. They have a 10-year backlog on this stuff. They have to giddy up. They have to get this behind them. We’ll be back up into the high-teens again.

Yeah. Okay. And then just maybe on that as well. I mean you talked about 50 basis points to 75 basis points of gross margin expansion with that ongoing absorption in Aero. Is that kind of taken into your commentary there? Should we expect margin expansion to be a little bit more backend loaded in '25 as you kind of get clarity from Boeing?

Yes.

Okay. That would imply maybe a really strong fourth quarter, especially as the $5.8 million of preferred drops off. So just from a modeling, is that kind of how we should think about the year?

You're on the right track there.

Okay. Very good. Last question I have: It seems like leverage is going to decrease. Is there a significant interest in pursuing more mergers and acquisitions? Dodge has clearly been very successful and continues to add value, so what is the interest in making another deal?

Well, the appetite is good. But the appetite is picky.

Thank you. The next question is coming from Joe Ritchie of Goldman Sachs. Please go ahead.

Hi. This is Vivek Srivastava on for Joe. My first question is just on revenue seasonality. It looks like at this time, your first quarter where you would be better than where the fourth quarter ended. As you think about gross profit and EBIT dollars, should that be sequentially better also on higher sales or is there something else we should keep in mind?

I think as Mike just kind of spoke to regarding margin, we think that the overall margin expansion we discussed is really back loaded. It's lumpy throughout the year. We'll continue to invest in a bit of SG&A in fiscal '25, so we're expecting continued strong performance.

Understood. And just a high-level question. Your EBITDA margin this quarter at 31.4%, very impressive. Just as we think about the long term, what kind of margin target long-term do you have in mind, and then outside of aero volume recovery and some broad synergies. Is there anything like improvement in terms of the base business that would further impact margin expansion?

I think there's an ongoing process. It's really about addressing manufacturing technology one project at a time and identifying where the lower-margin performers are. We're looking at what technologies are available to reduce labor costs, improve material expenses, or minimize scrap to enhance margin performance. We have active programs across all our plants that we review monthly. We analyze revenue generation and explore ways to improve the operating performance of each line item, considering manufacturing options that could enhance overall margins. RBC excels in this area, and that's been our focus for the past 30 years, and we continue to pursue it. If you're interested, come visit one of our plants, and we'll show you our approach.

That sounds great, yeah. Just last question on free cash flow. How should we think about free cash flow in 2025 and from a working capital standpoint, maybe just talk about what improvements you’re baking in for the coming year.

Yeah. So as Mike just referenced, ultimately, we're looking to deleverage by another $275 million to $300 million, so we're going to have to generate some healthy free cash flow to do that. We're always targeting over 100% conversion on net income, 115% this year. We'll continue to drive that. Within the working capital section, as we look to the long term, which is important to do, we always are strategically looking at our inventory levels, making sure that we're prepared to strike and deliver to our customers as needed. So there's potential for a little bit of investment in that side, especially in aerospace. We'll continue to manage the remainder of the working capital along the way.

Great. Thank you.

Thank you. The next question is coming from Jordan Lyonnais of Bank of America. Please go ahead.

Hey, good morning. Thanks for taking the question.

Welcome.

Last quarter, you guys said on the 787, you were going to step up to seven a month in April, and it would be an important shift. Are you still producing at or still planning to produce at seven a month, like we saw Spirits cutting headcount in Boeing also just cut. So could you give any more color for the wide-bodies?

Yeah. No, we're staying at five a month.

Okay. And then also too, so for the ARO Guide, how much, if there's still all of the production uncertainty. How much do you guys are looking at the guide of how much you can make up in terms of pricing or just defense accelerating to make up for the commercial side?

Well, I mean, in terms of mitigating how are we going to mitigate the shortfall there for Boeing for a while? I think we have a quarter or two of the Boeing effect. Given a quarter or two, I mean, the maximum impact on revenues if we didn't do any mitigation, it would be $20 million over two quarters. $10 million would be sort of the minimum if we did no mitigation over two quarters. It's sort of an achievable number. When I look at some of the markets that we've been servicing, particularly, we talked about how strong defense is and how much we can realign our schedules to bring some of that defense production into earlier quarters, which is what's happening right now for some of the mitigation. A few years ago, we started working in space. In '24, we shipped $20 million into the space world. Our business on space products is accelerating. We see that getting to $40 million, and we see that probably getting to $30 million this year. Space is starting to become a significant component of our A&D sales. That's part of the mitigation. Defense is part of the mitigation, and increasing our spares sales is another part of the mitigation. We have what we have maybe half a dozen significant divisions working on various mitigation techniques, products to offset any shortfall of the in the second quarter that we might see from the Boeing production reduction. I suspect they'll get a long way towards the goal.

Great. That’s really helpful. Thank you.

Thank you. Ladies and gentlemen, there are no further questions at this time. I would like to turn the call over to Dr. Hartnett for closing comments.

Okay. Well, thank you. That completes our call for today, and I appreciate everybody participating and listening to our presentation. Obviously, we've delivered another year of solid growth and great cash flow conversion. We look forward to talking to you again in July.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.