Earnings Call Transcript - RBC Q4 2023

Operator, Operator

RBC Bearings Fourth Quarter 2023 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.

Josh Carroll, Investor Relations

Thank you, operator. Good morning and thank you for joining us for RBC Bearings fiscal 2023 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; and Robert Sullivan, Vice President and Chief Financial Officer. Before beginning today's call, let me remind you that some of the statements made today will be forward-looking and are made under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected or implied due to a variety of factors. We refer you to RBC 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.

Dr. Michael Hartnett, CEO

Thank you, Josh, and good morning and welcome to all. Net sales for the fourth quarter of fiscal 2023 were $394.4 million versus $358.9 million for the same period last year, an increase of 9.9%. For the fourth quarter of our 2023 sales of industrial products represented 69% of our net sales and aerospace products 31%. Gross margin for the quarter was $166.5 million, or 42.2% of net sales. This compares with $137.5 million or 38.3% for the same period last year. Adjusted operating income was $88.6 million, 22.5% of net sales, compared to last year's $71.9 million and 20% respectively. Adjusted EPS came in at $2.13 a share. Adjusted EBITDA was $121.1 million, 30.7% of net sales compared to $104.4 million and 29.1% of net sales for the same period last year. On the industrial businesses, during the period, the industrial sales growth was 7.4% against some strong comps from last year. Dodge was our leader with a 9.2% expansion rate on combined OEM and distribution sales. The latter showed a low-teens expansion rate for Dodge. Overall, the industrials were up high single digits, with sector growth mitigated somewhat by Europe. On aerospace and defense, overall, we saw a rate of expansion of 16% with aero OEM up 25%, and aero commercial distribution up 42.8%. The demand drivers here continue to be the large plane builders and their supply chain in support of production for Boeing and Airbus 737, 787, A320 and A330 principally, as well as other producers of business jets and a myriad of subcontractors needed to support the industry. Additional volume increases were felt from our space initiatives, and we saw demand for products to support the new field for aerotaxis beginning to trickle in. As mentioned in previous calls, we expect to see increased demand, creating double-digit growth from the plane builders for many quarters to come as they continue to aggressively expand build rates. We continue to add resources and planning to support these increased rates, as well as we expect expanded work statements. To summarize, for the period, RBC saw growth in revenue of 9.9% and an adjusted EBITDA expansion of 16% against the same quarter last year. Regarding our first quarter of 2024, we are expecting sales to be somewhere between $380 million and $390 million range. I'll now turn the call over to Rob for more detail on the financial performance.

Robert Sullivan, CFO

Thank you, Mike. SG&A for the fourth quarter of fiscal 2023 was $59.6 million compared to $54.5 million for the same period last year. As a percentage of net sales, SG&A was 15.1% for the fourth quarter compared to 15.2% the same period last year. Looking forward, SG&A as a percentage of net sales is expected to be between 15.75% and 16% of sales in the first quarter, including approximately $3 million to $4 million of stock-based compensation expense. Other operating expenses for the fourth quarter of fiscal 2023 totaled $20.7 million compared to $23.7 million for the same period last year. For the fourth quarter of fiscal '23, other operating expenses included $17.7 million of amortization of intangible assets, $2.5 million of restructuring costs associated with our South Carolina operations, and $0.5 million of other items. For the fourth quarter of fiscal 2022, other operating expenses consisted primarily of $17.2 million of amortization of intangible assets, $5.7 million of costs associated with the Dodge acquisition, and $0.8 million of other items. Operating income was $86.1 million for the fourth quarter of fiscal '23 compared to operating income of $59.3 million for the same period in fiscal 2022. Excluding approximately $2.6 million of restructuring costs associated with our South Carolina operations offset by $0.1 million of acquisition related costs, adjusted operating income was $88.6 million or 22.5% of sales for the fourth quarter of fiscal 2023. Excluding approximately $12.5 million of acquisition costs, adjusted operating income for the fourth quarter of fiscal 2022 was $71.9 million or 20% of sales. Interest expense for the fourth quarter of fiscal 2023 was $21.7 million, compared to $13.6 million for the same period last year. We anticipate interest expense between $20 million and $21 million for the first quarter of fiscal 2024, including approximately $1 million of costs associated with the amortization of deferred financing fees. For the fourth quarter of fiscal 2023, the company reported net income of $49.2 million compared to $31.5 million for the same period last year. On an adjusted basis, net income was $67.7 million for the fourth quarter of fiscal 2023, compared to $61.7 million for the same period last year. Net income available to common stockholders for the fourth quarter of fiscal 2023 was $43.4 million, compared to $25.7 million for the same period last year. On an adjusted basis, net income available to common stockholders for the fourth quarter of fiscal '23 was $61.9 million, compared to $56 million for the same period last year. Diluted earnings per share attributable to common stockholders was $1.49 per share for the fourth quarter of fiscal '23, compared to $0.89 per share for the same period last year. On an adjusted basis, diluted earnings per share attributable to common stockholders for the fourth quarter of fiscal '23 was $2.13 per share, compared to $1.93 per share for the same period last year. Turning to cash flow, the company generated $71.4 million in cash from operating activities in the fourth quarter of fiscal '23, compared to $46.9 million for the same period last year. Capital expenditures were $12.4 million in the fourth quarter of fiscal '23, compared to $8 million of capital expenditures for the same period last year. We paid down $70 million on the term loan during the period, leaving total debt of $1.4 billion as of April 1, 2023, and cash on hand was $65.4 million. Cumulatively, since November 2021, we have now paid $400 million on the term loan. I would now like to turn the call back to the operator for the question-and-answer session.

Operator, Operator

Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. Our first question comes from the line of Kristine Liwag with Morgan Stanley.

Kristine Liwag, Analyst

Looking at margins, you achieved 42.2%, one of the highest you've ever had. Can you discuss what contributed to this margin improvement? How much of this is attributable to synergies? Last quarter, you had already realized significant synergies from Dodge. How much is left to reach your target of $70 million to $100 million per year by year 5?

Daniel Bergeron, COO

Kristine, it's Dan. We had a good mix in the quarter. And you're right on the synergy side. Since owning Dodge, over this period of time, we've added 7 percentage points to their gross margin contribution. I think on the COGS side, that will start to slow for a little for the next 12 months, then pick up again at some of our longer-term projects that we're working on the synergy side will kick in. On the top line sales side, I think we're a little behind target of where we'd like to be on our synergies. So I think we still have some good upside over the next 3 to 4 years to get to that target as we train our sales teams on both sides of RBC and Dodge to cross-sell each other's products around the world. That's working well, but it takes time to get everybody trained up. And on SG&A, I think we're definitely ahead of where we thought we were going to be. We were able to move Dodge off of ABB's IT systems and picked up savings on doing that. I'm getting them on to their own system and on the back of RBC's IT group also. So going into this year, Rob gave you guidance for Q1. Hopefully, we can do a little better than that. We'll see what happens. But I think we are definitely ahead of where we thought we would be coming into the real first year of our integration with Dodge.

Kristine Liwag, Analyst

Okay. Can you provide an update on the synergies that have been achieved so far? Specifically, out of the $70 million to $100 million target, how much has already been realized?

Daniel Bergeron, COO

Yes, I'd say on average, that run rate is anywhere is from $45 million to $56 million.

Kristine Liwag, Analyst

Great. And then in terms of commercial aerospace, you talked about the significant step-up for aircraft production rates, Mike. And so can you level set us in terms of where you are in production rates Boeing trying to hold on to 31 per month for the MAX and there's discussion of moving up to 38 per month around now is this summer and then to 42 by year-end? Is that where you're tracking? Are you above or below where they are? Is there some sort of inventory that needs to get depleted before you get on that rate ramp? And also, any color you could provide on the 787 as well as you get towards 10 the A320 and the A350?

Dr. Michael Hartnett, CEO

Yes. First, let's address your questions. In terms of Boeing's content and our position regarding the buildup, we examine their skylight chart to see if they are meeting their production goals, and we believe they are. We monitor this closely. For instance, if they plan to increase to 38 planes a year in January, we need to ensure our product is ready six months prior because the bearings and hardware cannot arrive on the day they expect to produce 38 planes. Therefore, we adjust our lead time on their chart by six months to decide on our production needs. We are aligned and understand our mix of components per plane, which allows us to compute their production rate and compare it to ours, confirming they correlate well. We've done significant work to ensure we are in sync with their buildup. Regarding current inventory, we are grateful for the stock we have because increasing production rates by 25% annually is a substantial challenge for us, as we need to manufacture from raw materials to finished products. We are striving to meet their rate expectations. We anticipate that by the end of the year, most of the inventory for the 737 and 787 will be depleted, necessitating efficient production at their rates from December onwards. The challenge lies in materials; the lead time for aircraft steels is 50 weeks, and deliveries can be uncertain, often extending beyond that timeframe. Steel availability poses a problem, especially for certain important alloys that are highly utilized in the aircraft industry. I believe the aircraft manufacturers will face challenges across the board, not only in bearings but also in structures, as they explore substituting different steels for those already specified.

Kristine Liwag, Analyst

And so Mike, in terms of these deals, is there a Boeing master agreement or an Airbus master agreement that could help with sourcing? I mean that seems like a fairly important input to have uncertainty over considering the production rate volumes that are in that guideline.

Dr. Michael Hartnett, CEO

We talk to them all the time. I'm sure other people have the same discussions, not just people making what we make. The specialty steel producers are, to some extent, unwilling to produce the chemistry needed. Some of them have gone bankrupt or have been restructured. Actually, Airbus just bought one of them because of this situation and this situation exists in the United States too.

Kristine Liwag, Analyst

Sorry, Mike. So with this uncertainty, how are we going to see the 50%, 60% volume increases that the OEMs want in two, three years? I mean, the environment you're describing seems fairly dire for a really important input, and we've got this massive volume ahead of us to meet those rate ramps. How do you think this gets resolved? And does that put at risk these production rate increases?

Dr. Michael Hartnett, CEO

It certainly is a big consideration on these production rate increases, and it needs to be resolved. Exactly how it gets resolved is that there needs to be some material substitutions for some of these alloys in the design. And we can't do that. That's Boeing's design. They must double time their engineering department to provide materials that are modern and available.

Operator, Operator

Our next questions come from the line of Pete Skibitski with Alembic Global.

Peter Skibitski, Analyst

And Mike, just one clarification. When you talk about steel and steel alloys, are you also including aluminum alloys and nickel alloys? Or is it strictly steel in these alloys?

Dr. Michael Hartnett, CEO

Well, I'm referring to steel and its alloys, which include nickel, chrome, and manganese. So yes, I'm talking about steel. We don't have concerns about aluminum like others do, but we do have concerns about steel.

Peter Skibitski, Analyst

Okay. Okay. Got it. I guess I just wanted to ask about the top line in the fourth quarter. You guys beat your revenue guide pretty handily. Was there a particular market segment that surprised you there or a share gain maybe or something else?

Dr. Michael Hartnett, CEO

Well, as I mentioned in the previous conference call, it's quite challenging for us to estimate Dodge's revenue since they don't operate with an order book like the rest of RBC. RBC has a backlog of about a year, which gives us confidence in our production and revenue forecasts. In contrast, Dodge has a different business model that relies on GDP. Essentially, if you tell me what the GDP will be, I can predict Dodge's revenues. In this quarter, their business performance exceeded our expectations from the last conference call, and it remains strong.

Peter Skibitski, Analyst

Okay. That's fair. And to that point, I mean, you've seen ISM PMIs below 50 now for a couple of quarters in a row, right? So I'm wondering, are you guys kind of seeing market softness at all? Or I'm wondering if there's market softness, but you're kind of offsetting it with pricing gains and market share gains, things like that? Or actually are just the end market just stronger than you might expect for where the PMIs are right now? And you talked about Europe being weak as well.

Dr. Michael Hartnett, CEO

In the industrial sector, performance varies significantly depending on the end market. Currently, there is considerable consolidation among our industrial peers, which may be leading to some service level challenges. However, looking at specific end markets, oil and gas is performing very well, semiconductors are soft but still have activity, mining remains steady with acceptable demand, aggregates are strong, grain is performing well, infrastructure is good, wind energy has slowed compared to last year, and general distribution is very strong. Despite the prevailing economic news, the industrial markets we cater to are surprisingly robust.

Peter Skibitski, Analyst

Yes, I appreciate the insight. You have mentioned your expectations for growth this year, along with additional defense plans. I noticed you recently underwent a restructuring in South Carolina, and I'm curious if that was solely for cost reduction. How do all these factors influence your capital expenditure projection for fiscal year 2024?

Dr. Michael Hartnett, CEO

Yes. I think we'll be right in that 3%, 3.5% of revenue range. I'd be surprised if it bulges more than that. There's nothing to make a bulge right now on the horizon.

Peter Skibitski, Analyst

Okay. Okay. And the South Carolina restructuring, was that just a pure cost reduction at Dodge? How to think about that?

Robert Sullivan, CFO

Yes. It was kind of a combination of some cleanup at the Dodge level as well as one of our legacy RBC plants, just cleanup down there. So nothing out of the ordinary.

Operator, Operator

Our next questions come from the line of Steve Barger with KeyBanc Capital Markets.

Steve Barger, Analyst

Thinking about your 1Q revenue guide. As I look at the comps, it seems like we'll see another double-digit organic for aero, maybe single-digit for industrial. So first, is that how you see it? And second, is that how you're thinking about the year as well?

Dr. Michael Hartnett, CEO

Yes and yes.

Steve Barger, Analyst

Got it.

Dr. Michael Hartnett, CEO

Yes, and absolutely yes.

Steve Barger, Analyst

Absolutely yes single-digit industrial or just that's that you expect solid growth for the full year?

Dr. Michael Hartnett, CEO

Yes. I mean it will be single-digit industrial, I expect, maybe a little bit better, certainly not into the double digits, maybe the upper singles. The aerospace will be strong. It will be sort of at least mid-teens. Marine, marine will be a contributor, and they haven't been this past year, but the knots are getting untied and that material will start to flow.

Steve Barger, Analyst

That sounds good. You achieved 174 basis points of gross margin expansion last year, which is the best performance in a decade. Dan mentioned that the Dodge COGS benefit is beginning to slow this year. Can you discuss the overall plans for gross margin expansion at the company? What is your target, and what are the main drivers for this expansion? How are you approaching gross margin for the fiscal year 2024?

Dr. Michael Hartnett, CEO

Well, I'd love to say that we're going to grow 0.5 point to 1 point. I can't tell you what the details of that growth are going to be. That's probably more an objective than a plan. But I don't see a deterioration in gross margin.

Steve Barger, Analyst

I mean just the volume alone should give you pretty good leverage, right? What's the offset?

Dr. Michael Hartnett, CEO

Yes, the increase in aircraft volume at our plants is leading to improved absorption of our overhead costs each quarter, as we've had some facilities operating at a slower pace. This trend will positively impact our overall performance. However, the Dodge business relies heavily on subcontractors and purchased parts, and while there were significant variances last year, they are now under control and seem to be stabilizing. Conversely, we are also working on bringing some of that production from Asia to our facilities in the United States and Mexico. There will likely be some initial costs associated with this shift due to the learning curve, but we can manage those expenses. In the long run, this transition will enhance efficiency at our Mexican plants. Overall, I expect some expansion, although I do not anticipate repeating the same results as last year.

Steve Barger, Analyst

Yes, I understand. Referring back to Pete's question about PMI being below 50 for the past six or seven months, it's interesting to note the strong performance in industrials, which we observed throughout the earnings season. What are your insights regarding this divergence? Considering your expertise in studying cycles, what do you believe is happening?

Dr. Michael Hartnett, CEO

That's a good question. I study our sectors quite thoroughly and I have a decent understanding of the situation, but I want to clarify that we are not significantly involved in the automotive and heavy truck markets. These sectors have shown modest performance, but consumer goods are not our focus. Our main operation is producing essential food products to support the economy. If you consider the Dodge business, it shows low volatility in demand over the years. Thus, I believe we are somewhat distinct from the typical industrial businesses that cater to automotive and consumer goods.

Operator, Operator

Our next questions come from the line of Seth Weber with Wells Fargo.

Lawrence Stavitski, Analyst

You guys mentioned the areas of strength, industrial strength in terms of end markets. Have you seen any change in industrial customer appetite due to macro concerns quarter-over-quarter? Anything that's a concern to you guys?

Dr. Michael Hartnett, CEO

Well, we're thinking about that. No, I guess the overall answer is no. We haven't seen any concern. I think the only soft spot that we've seen in the industrial side was the reversal of Amazon's decision to build all those warehouses. So I think that kind of kicked the legs out of a few stools in the industry. Our business softened up last year at this time in that sector, but we've completely been able to overcome and restructure around it.

Lawrence Stavitski, Analyst

Okay. Okay. And then on supply chain, you mentioned steel availability is still a problem. How have the dynamics with the supply chain, how they change quarter-to-quarter or year-over-year? I mean, are things loosening up a little bit for you guys? Or is it still pretty tight out there?

Dr. Michael Hartnett, CEO

It’s mostly returned to normal. For about 80% of our steel production, the planning lead time has increased, so we need to adjust our planning lead time accordingly. If you stay proactive, you'll be fine, and we are ahead of the curve. However, specialty steels are still hard to come by, presenting an ongoing challenge.

Lawrence Stavitski, Analyst

Yes. And you expect that to go on for a couple of quarters?

Dr. Michael Hartnett, CEO

I think new suppliers will need to be established. There should be some new entrants in the market who can manufacture these products. Although it's capital-intensive, many people already have the required capital. If they recognize the reasonable volume and profitability in these alloys, I believe the issue will be resolved.

Operator, Operator

Our next questions come from the line of Joe Ritchie with Goldman Sachs.

Vivek Srivastava, Analyst

My first question is on industrial inventory at distributors. Could you provide some color on the destock risk, especially on the industrial distributor side? And maybe any color by end market where there's more destock risk right now versus less? And any color on the timeline of when this stuff can happen?

Dr. Michael Hartnett, CEO

Yes, I believe the industry overall is not facing any overstocking issues. During the pandemic, it was difficult to source materials, and now our distributors are pleased to have these materials available. About fifty percent of their sales come from break-fix situations, where immediate repairs are necessary, making it a profitable scenario if they have the items in stock. They prefer not to run low on inventory. There has been some inventory liquidation in the last six to nine months due to a couple of our major customers consolidating their operations, which involved closing stores and merging inventories. As a result, we definitely observed a decline in revenues from some major customers during this time. This consolidation appeared to be completed around December and January, which might explain why our fourth quarter performance was better than we expected. This was the only notable occurrence we observed in the past year.

Vivek Srivastava, Analyst

Got it. That's super helpful. And then just maybe on your backlog. It looks like sequentially, backlogs were pretty strong and maybe it's driven by aero. Any indication you can provide on how the industrial side of the backlog at RBC is pending? And what are you seeing from order trends on the industrial side?

Robert Sullivan, CFO

Yes, sure. Most of the sequential increase was driven from our defense business, be it Sargent or actually one of our legacy businesses. The Dodge backlog is actually down $10 million, which is not a bad thing because as we've talked about, they are not a business that traditionally carries a significant backlog. But the orders have remained strong, holistically in the industrial side of the business.

Vivek Srivastava, Analyst

That's helpful. My last one, just across like some of your peers talk about having a portfolio outside of just bearings and broadly across the industrial drivetrain could help with gaining more traction with the customers. Just any indication on how much of your portfolio maybe is outside of bearings, more on the industrial drivetrain side? What is your counter to some of those claims that peers probably have more products across the drivetrain that can gain more share?

Dr. Michael Hartnett, CEO

Yes, I'd think that maybe 25% to 30% of our sales are products that are not bearings. They're either systems, gearbox systems or valves, or their rods that go into structural components for aircraft. So yes, I'd say we haven't made those calculations, but so I'm extrapolating what I know about the business, but I'd say it's 25% to 30% of our revenues are outside the direct bearing line.

Operator, Operator

Our next questions come from the line of Michael Ciarmoli with Truist.

Michael Ciarmoli, Analyst

Nice results and margins here. Maybe, Mike, just a lot of this talk on supply chain in aero. I mean, as you look at the year, you said double-digit aero growth. I mean, how do you risk-adjust that for not getting access to supply? I mean, is there a big threat there to meeting your objectives for the year? I mean, I think we keep hearing some cases, bearing lead times are stretching out like three years. But how do we just think about the risk of you guys executing if you don't get that supply?

Dr. Michael Hartnett, CEO

We do receive the supply. More than 90% of our bearing products, likely around 95%, are made from materials that are easily accessible. However, there is that remaining 5% of both bearings and structural components that are harder to obtain. I believe this issue is more significant for companies like Boeing, which utilize these materials extensively across their aircraft line, compared to RBC.

Michael Ciarmoli, Analyst

Okay. That helps. So if you're exposed, it's about 5% of your product where you're seeing some of that tightness on alloys?

Dr. Michael Hartnett, CEO

Yes, maximum 5%.

Michael Ciarmoli, Analyst

Okay. Regarding the gross margins, I understand you mentioned some learning curves and start-ups, but there seems to be a slight decrease in volume in the first quarter. What other factors are contributing to the decline in gross margins? A couple of quarters ago, you seemed quite optimistic about establishing a new baseline, and while the margins are still impressive, is there more insight you can provide? Is this merely a cautious approach? You've mentioned subcontractors purchasing parts and some transitions, but is that primarily influencing the situation, or how should we interpret this in the first quarter?

Dr. Michael Hartnett, CEO

Yes. Yes. Well, I think that's probably a little conservatism playing a role there. There's no supporting mathematics behind that estimate, believe me.

Michael Ciarmoli, Analyst

Okay. That's good to know. You mentioned the synergies and noted that COGS is slowing down. Referring back to the Dodge deal, you mentioned the potential for sourcing around $200 million worth of material and supply in-house. Can you provide an update on that? I believe you indicated it would start to take effect after the next 12 months. How much time is left on that?

Dr. Michael Hartnett, CEO

Yes, we're just getting started with this. We've been working on it for a little over a year and a quarter. We're in the early stages of analyzing that mix, determining which parts can be produced in some of our lower-cost facilities and which parts are necessary to meet our volume demands. At the same time, we've identified several growth opportunities that we could tap into. By producing certain products ourselves or in-sourcing materials that our supply chain has previously struggled with, we could improve our revenues and margins. This goes beyond just the synergy concept. There is significant potential for growth within the Dodge product lineup if we apply some of these product strategies.

Michael Ciarmoli, Analyst

Okay. That's good to know. The margins have been fantastic, and I think you mentioned a mid-30% EBITDA margin target by year 5. It sounds like you have runway and options to achieve this starting with COGS. So, you're still confident in that mid-30% EBITDA margin.

Dr. Michael Hartnett, CEO

That's a good goal. You need to have a humongous goal. I think we're making our way towards it. Let's put it that way.

Michael Ciarmoli, Analyst

Fair enough. Last question, I'll get out of the way. I guess the implied defense, you didn't give the defense revenues, but I guess they look to be down 7%. I mean, I know you talked about marine not being a contributor presumably lapping some easy comps, get some of that product flow in on the subs. So should we expect a pretty good rebound in defense next year or this year for fiscal '24?

Dr. Michael Hartnett, CEO

Yes. Probably it comes in later in the year because first of all, I think the marine business gets its mojo going, and it looks like it's on track for that. At the same time, we have a lot of key product that has to be replaced. It was used in the Ukraine situation. That will probably start phasing in at the end of the year.

Operator, Operator

Our next questions come from the line of Pete Skibitski with Alembic Global.

Peter Skibitski, Analyst

Just one follow-up for me, guys. I don't think all the data is out yet, but it looks like probably fiscal '23 ended up as a big inventory build year for you guys. I imagine some of that is safety stock, maybe some is to support the growth. Just wondering if you expect inventory to build at a similar level in fiscal '24 than it did in '23.

Robert Sullivan, CFO

Pete, it's Rob. So inventory build for the year was about $70 million, a little more than $70 million. Some of that was at the Sargent business where, as we talked about in the past, we do get reimbursed for some of that material purchased on the marine program. The rest of it was Dodge, primarily. I don't expect that level of growth in the next fiscal year.

Peter Skibitski, Analyst

Okay. Okay. What drove the Dodge growth? Just curious.

Dr. Michael Hartnett, CEO

Supply chain, when you can't get it from supplier A, you order it from supplier B, and then supplier A delivers, and supplier B delivers.

Operator, Operator

Ladies and gentlemen, there are no further questions at this time. I would now like to turn the call back to Dr. Hartnett for any closing remarks.

Dr. Michael Hartnett, CEO

Okay. Well, that's the end of our conference call. We thank you for participating and look forward to speaking to you again in the July, August timeframe. Good day.

Operator, Operator

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.