Carpenter Technology - Earnings Call - Q3 2021

Transcript

Speaker 0

Good morning, and welcome to the Carpenter Technology Corporation Third Quarter twenty twenty one Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there would be an opportunity to ask questions. To withdraw your question, please press then 2. Please note that this event is being recorded.

I would now like to turn the conference over to Brett Edwards. Please go ahead.

Speaker 1

Thank you, operator. Good morning, everyone, and welcome to the Carpenter Technology earnings conference call for the fiscal twenty twenty one third quarter ended 03/31/2021. This call is also being broadcast over the Internet along with presentation slides. Please note, for those of you listening by phone, you may experience a time delay in slide movement. Speakers on the call today are Tony Tain, President and Chief Executive Officer and Tim Laine, Senior Vice President and Chief Financial Officer.

Statements made by management during this earnings presentation that are forward looking statements are based on current expectations. Risk factors could cause actual results to differ materially from these forward looking statements can be found in Carpenter Technology's most recent SEC filings, including the company's report on Form 10 k for the year ended 06/30/2020, Form 10 Q for the quarters ended 09/30/2020, and 12/31/2020, and the exhibits attached to those filings. Please also note that in the following discussion, unless otherwise noted, when management discusses sales or revenue, that reference excludes surcharge. When referring to operating margins, that is based on operating income and sales, excluding surcharge. I will now turn the call over to Tony.

Speaker 2

Thank you, Brad, and good morning to everyone on the call. Let's begin on Slide four and a review of our safety performance. Our fiscal year to date total case incident rate, or TCIR, is 0.6. We have now demonstrated three consecutive quarters of of sub one point zero TCIR performance as an organization, which is exceptional safety performance. However, we do not take these accomplishments for granted and continue to enhance the fundamentals of our program in areas such as hand safety, human performance, leadership development, ergonomics, employee engagement activities, and at home safety programs.

I look forward safety to achieving our next safety performance milestone as we pursue safety excellence on our path to zero. Now let's turn to Slide five and a review of the third quarter. Our third quarter results were largely in line with our expectations as near term volume headwinds related to COVID-nineteen continue to pressure our financial performance. Both our SAO and PEP segments delivered results that were consistent with the guidance we provided on our second quarter earnings call. We have maintained a focus on our key strategic priorities during this challenging period.

First, ensure the safety of our employees. Second, drive cash flow generation and strengthen our liquidity profile. Over the last four quarters, we have generated $189,000,000 in free cash flow and ended the third quarter with total liquidity of $539,000,000 including $244,000,000 of cash and no near term financial obligations. And third, focus on the long term relationships with our customers. During the quarter, we continue to expand our relationships across our customer base and uncover additional areas of value creation.

As evidenced, we completed several contract extensions, primarily in our medical, transportation and aerospace and defense end use markets. In the aerospace market, customers fully understand that capacity was limited prior to the pandemic and supply of aerospace materials will be constrained again when build rates return to normalized levels. As you know, Carpenter Technology is the only company in our space that has invested in capacity, namely the Athens facility. Qualification efforts have continued through the pandemic as we received a meaningful provisional approval during the quarter. Lastly, the investment made in our hot strip mill on our Reading campus is currently in its final commissioning stages.

This advanced mill is a significant addition to our soft magnetic solutions and capabilities portfolio and positions us to benefit from the growing trend of electrification. Now let's move to Slide six and the end use market update. Our customers and markets have been heavily impacted by COVID-nineteen, particularly aerospace and defense, our largest market. We have been successful in mitigating a portion of the near term impact of the aerospace downturn by capitalizing on growing demand for our solutions in transportation and industrial and consumer end use markets, namely our semicon business. Recently, all of our end use markets have experienced positive inflections and have moved past their pandemic decline trajectories.

All of our end use markets are in demand recovery, albeit at different rates. We believe the worst is behind us, and we expect to see improving conditions over the coming quarters. Let's get into some more detail, starting with the aerospace and defense end use market, where sales were down both year over year and sequentially. In the third quarter, customer inventories continued to decrease, and we saw some initial replenishment activity. As a reminder, in our recent second quarter, we talked about a variety of onetime customer contract related items, which represented positives.

When you remove the impact of those items, aerospace results would be relatively flat sequentially. While visibility remains limited, overall sentiment points to incremental improvement through the balance of calendar year 2021 and then accelerate activity in calendar year 2022 and beyond. In addition, future industry capacity and lead time continues to be a focus during conversations with customers as most recall the situation the supply chain was in prior to COVID nineteen where lead times were significantly extended. Activity in the defense submarket remains solid, and we continue to see increased demand on select programs. In the medical end use market, sales were up 7% sequentially.

Elective procedure volumes increased compared to the second quarter as patient sentiment and hospital capacity improved. Recovery of elective surgery volume is expected to continue into the second half of calendar year twenty twenty one as vaccination levels rise to support increased confidence. Based on current conditions, we expect activity levels in the medical end use market to show further improvement in the fourth quarter as our customers look to support an increase in elective surgeries. As many of you recall, the medical end use market was one of our fastest growing markets prior to the pandemic. Today, we remain well positioned to continue supporting the medical end use market given our expanded OEM relationships, leading advanced materials portfolio, and ability to develop new materials solutions that address complex and unmet market needs.

In the transportation end use market, sales were up both sequentially and year over year. On a sequential basis, sales increased across all of our submarkets. Demand in the light vehicle market remained solid, driven by North America and China, while the heavy duty truck market has largely recovered and is expected to grow through calendar year 2022. Overall, we are winning share in both the light vehicle and heavy duty truck submarkets due to the value of our high temp, high resistance turbocharger and valve exhaust solutions. Now moving to the energy end use market.

Conditions in the oil and gas submarket remain challenged and activity levels remain low in The U. S, while international markets have shown some improvement. Keep in mind that prior year third quarter results included our Omega West business that was divested during the first quarter of this fiscal year. In the power generation submarket, we continue to work with customers as the current maintenance upgrade cycle continues. Lastly, for the industrial and consumer end use market, sales were down year over year and sequentially.

The slight sequential decline was a function of order flow between the last two quarters as we continue to experience demand pickup consistent with the general manufacturing recovery. Now I will turn it over to Tim for the financial review.

Speaker 3

Thanks, Tony. Good morning, everyone. I'll start on Slide eight, the income statement summary. Net sales in the third quarter were $351,900,000 and sales excluding surcharge totaled $298,100,000 Sales excluding surcharge were effectively flat sequentially on 5% lower volume. Compared to the third quarter a year ago, sales decreased 40% on 39% lower volume.

As Sony covered in his review of the end use markets, the year over year decline is attributable to the ongoing demand headwinds in our key end use markets of aerospace and defense and medical as a result of the global pandemic. As expected, the demand was similar to our recent Q2 levels. Given the current demand environment, we continue to actively manage our production schedules and focus on executing against our targeted inventory reduction program. As we have said on prior calls, while the reduction in inventory drives near term cash flow generation as evidenced by our liquidity position, it negatively impacts our operating income performance. SG and A expenses were $47,800,000 in the third quarter, down $3,000,000 from the same period a year ago, reflecting the actions we took to reduce costs, including the elimination of about 20% of our global salary positions late last fiscal year, managing discretionary spend closely as well as the impacts of remote working conditions that reduce certain administrative costs such as travel and entertainment.

Sequentially, SG and A costs were higher by $5,600,000 reflecting incremental costs in the quarter associated with going live with our new ERP implementation as well as the incremental depreciation costs associated with the ERP system. The current quarter's operating results include $7,600,000 of restructuring and asset impairment charges, including inventory write downs, associated with our ongoing actions to reduce cost and narrow focus in our additive business unit within our PEP segment. In addition, our results for the third quarter include $2,700,000 in COVID-nineteen related costs, which are down slightly from the $3,900,000 of COVID-nineteen costs incurred in our recent second quarter. As a reminder, these costs include direct incremental operating costs, including outside services to execute enhanced cleaning protocols, isolation pay for employees potentially exposed to COVID nineteen, and additional personal protective equipment and other operating supplies necessary to maintain the operations while keeping employees safe against possible exposure. The operating loss was $40,000,000 in the current quarter.

When excluding the impact of the special items, namely the restructuring and asset impairment charges and the COVID-nineteen costs, adjusted operating loss was $29,700,000 compared to operating income of $58,700,000 in the prior year period and adjusted operating loss of $32,300,000 in the second quarter of fiscal year twenty twenty one. Again, the current quarter's results were largely in line with the expectations we set at the beginning of the quarter and reflect the impact of significantly lower volume compared to the prior year combined with a targeted inventory reduction partially offset by the cost reduction efforts. Although not shown on the slide, in the current quarter, other expense net includes an $8,900,000 noncash pension settlement charge related to our largest qualified pension plan. In addition to recording the charge in the current quarter, we were also required to remeasure the plan's net pension liabilities. As a result of the remeasurement, we expect pension expense to be lower by about $3,000,000 for the full fiscal year versus what we had anticipated.

For clarity, this reduction in net pension expense does not impact operating income. Our effective tax rate for the third quarter was 29.2. For the balance of the year, we currently expect the tax rate to be in the range of 28% to 30%. Earnings per share for the quarter was a loss of $0.84 per share. When excluding the impact of the special items, adjusted earnings per share was a loss of

Speaker 4

$0.54 per share.

Speaker 3

Now turning to Slide nine and our SAO segment results. Net sales for the quarter were $299,600,000 or $246,500,000 excluding surcharge. Compared to the third quarter last year, sales excluding surcharge decreased 38% on 37% lower volume. Sequentially, sales excluding surcharge were essentially flat on 3% lower volume. These sequential results reflect similar weakened demand conditions in our largest end use market of aerospace and defense as the supply chain continues to deal with near term reductions in OEM bill rates.

This is partially offset by stronger shipments in transportation as North American light vehicle production continues to drive strong demand conditions for our materials. SAO reported an operating loss of $9,900,000 for the current quarter. The same quarter a year ago, SAO's operating income was $76,400,000 and in the second quarter of fiscal year twenty twenty one, SEO reported an operating loss of $11,600,000 The year over year reduction in operating income primarily reflects the impacts of lower volume as well as the negative income statement impacts of reducing inventory, partially offset by the actions taken to reduce operating costs. During the current quarter, SAO reduced inventory by approximately $15,000,000 and year to date has reduced inventory by 146,000,000 Sequentially, the lower operating loss is principally the result of lower volume offset by a favorable product mix and a less pronounced impact of the inventory reduction relative to the second quarter due in part to rising raw material prices. In addition, the current quarter's results reflect approximately $2,100,000 of direct incremental costs associated with our efforts to protect our facilities and employees in light of COVID-nineteen.

This compares to $3,200,000 in COVID-nineteen costs in our recent second quarter. Looking ahead, we expect demand conditions across most end use markets will stabilize and begin to gradually recover beginning in the fourth quarter of fiscal year twenty twenty one. Based on current expectations, we anticipate SAO will generate an operating loss of approximately 5,000,000 to $7,000,000 in the fourth quarter of fiscal year twenty twenty one. For clarity, want to highlight a couple of key points in this guidance. First, this estimate includes similar sequential COVID-nineteen related costs in the upcoming fourth quarter.

And second, as we continue to reduce inventory, we expect that we will be required to record a noncash LIFO decrement charge in our upcoming fourth quarter. Given the significant inventory reductions we expect to generate for the full fiscal year, we are liquidating LIFO layers that include inventory costs that are higher than the fiscal year twenty twenty one cost, and as such a non cash charge will be recorded to the income statement. The guidance we provided excludes the impact of any non cash LIFO decrement charges. Now turning to Slide 10 and our PEP segment results. Net sales excluding surcharge were $64,900,000 which were down 39% from the same quarter a year ago and up 20% sequentially.

The year over year decline in sales was driven by market headwinds largely due to the global pandemic. Additionally, sales in the energy end use market declined as a result of our exit of the Amega West oil and gas business in the first quarter of this fiscal year. The sequential increase in sales reflects increasing demand for titanium materials used in the aerospace and defense and medical end use markets. In addition, our distribution business drove higher sales due to growing demand related to the strong activity in the automotive supply chain. Lastly, our additive business saw a modest increase in sales as demand improved.

In the current quarter, PEP reported an operating loss of $3,300,000 This compares to an operating loss of $7,200,000 in the second quarter of fiscal year twenty twenty one and an operating loss of $300,000 in the same quarter last year. The sequential operating results reflect the favorable impacts of higher volumes across all the PEP business units. As we look ahead, we believe that demand conditions will gradually begin to improve in the coming quarters and we currently anticipate PEP will generate an operating loss of 0 to $1,000,000 in our upcoming fourth quarter. Also, as I mentioned for SAO, the PEP guidance includes COVID-nineteen costs in line with the recent quarter, but excludes any noncash LIFO decrement charges. Now turning to Slide 11 and a review of free cash flow.

In the current quarter, we generated $4,000,000 of cash from operating activities. As you can see within the cash flow generated from operations, we continued to reduce inventory, although less pronounced than we have executed in the last several quarters. Over the last four quarters, beginning with our fourth quarter of fiscal year twenty twenty, we have reduced inventory by just under 300,000,000 including $182,000,000 of reductions to date in fiscal year twenty twenty one. In terms of other working capital, with the implementation of our new ERP system, we experienced some challenges with customer collections that reduced cash from accounts receivable collections. Those challenges are largely behind us and we expect to realize the benefits of that catch up in our upcoming fourth quarter.

In the third quarter, we spent $19,000,000 on capital expenditures. We expect to spend about 110,000,000 to $120,000,000 on capital expenditures for fiscal year twenty twenty one, depending on the timing of certain projects expected to be completed in the balance of this fiscal year. The actions we have taken to generate cash in the current environment have been essential. It should not be a loss that we believe in the value of returning capital to our shareholders. And despite the challenging economic conditions, we have continued to pay a quarterly dividend to our shareholders.

The quarterly dividend demonstrates the confidence we have in our ability to deal with the near term impacts of market conditions and the long term prospects for our business. With those details in mind, we reported negative $25,000,000 of free cash flow in the quarter. As I mentioned, we dealt with some challenges in the quarter related to cash collections of accounts receivable. As we look at the fourth quarter, we believe we have addressed those challenges and will continue to execute on opportunities for further inventory reductions. With that in mind, we are targeting at least 50,000,000 of positive free cash flow in our upcoming fourth quarter.

From a liquidity perspective, we ended the current quarter with total liquidity of $539,000,000 including $244,000,000 of cash and $295,000,000 of available borrowings under our credit facility. Keep in mind, in the current quarter, we amended and extended our credit facility and reduced the size of our facility from $400,000,000 to $300,000,000 which is reflected in the sequential change in liquidity. With that, I'll move on to the next slide, Slide 12, to talk about our capital structure. Over the years, we maintained a balanced view of capital allocation. And as the global pandemic emerged a little over a year ago, we quickly shifted our focus towards building liquidity, which was enabled by our strong capital allocation philosophy.

In addition to the actions we took to reduce costs and focus on cash generation earlier this year, we took action to extend our maturity profile and add incremental cash to our balance sheet with our July 2020 notes offering. This extended our notes due in July 2021 to July 2028. Last month, in March 2021, we executed another important step in our strategy by completing an amended and extended credit facility. The previous credit facility was set to expire in March 2022. The new facility matures in March 2024.

With those actions behind us, we have no near term maturities and have significant liquidity with opportunities to generate even more. With that, I will turn the call back over to Tony.

Speaker 2

Thanks, Tim. As we all know, different demand recovery time lines and customer ordering patterns will continue to influence our shorter term quarter to quarter mix. I want to share a bit more on our enthusiasm related to midterm and longer term outlooks in the end use markets we serve. Let's start with aerospace. During the downturn, we continued to improve our already strong position.

Most market participants and experts believe that demand will rebound to and through pre COVID nineteen levels, which if you recall, was already exhibiting constrained dynamics. Longer term, the industry will continue to need improved fuel efficiency and emissions, driving the need for better engine materials where we are strongly positioned. Defense will continue to experience market resiliency on key platforms that require increases in strength, customers, and fatigue performance. Longer term, we are monitoring funding patterns as governments reassess their budgets after significant COVID nineteen related spending. In medical, as orthopedics and dental follow the cardiology recovery, we continue to secure additional share and identify more upside largely due to the breadth of the high value material solutions we offer in support of the industry innovation in this space.

Longer term, we see this continuing as quicker patient recoveries and improved patient outcomes will be the key drivers. In transportation, with the recovery well underway in North America and China, regulations drive the near term movement to higher efficiency powertrains, which is a positive for our portfolio of high temperature materials. Longer term, as electric vehicle adoption grows, it is natural they will take more and more share away from the large internal combustion engine base. We have a good view of the life cycle decline of those products and are balancing our focus accordingly. As I mentioned earlier, our new hot strip mill brings capability and capacity to support significant future electric vehicle volume growth.

Moving to energy, which experienced a significant decline in demand this past year. Oil prices have increased by 50% in calendar year 2021, and we have seen limited capital expenditures released for some major projects that offer up specific opportunities. With that said, there will likely continue to be a supply and demand imbalance over the next couple of years. Longer term, we expect to see continued emphasis to move away from oil to natural gas and other alternative fuel sources. In industrial submarkets, specifically with semiconductor and fluid control products, the relatively steady demand we experienced through the pandemic is expected to increase, driven by manufacturing for five g, Internet of Things connectivity, and more efficient power plants that require better performing materials.

The consumer submarket is expected to continue its seasonal cyclicality. However, we're seeing more and more applications that have tighter design envelopes that require the removal of wave interference and that make use of our materials to offer automated sensory feedback responses. Longer term, with the proliferation of digital and data management, we expect to see more devices with more sensors requiring exponentially more connectivity. I've spoken in prior quarters about our soft magnetics products and their relevance within increasing electrification trends. We believe this capability will well position us in the long term to capitalize on the growth in these areas.

In the electrification space, we are participating in an increasing amount of prototype and initial low rate production initiatives that utilize our products to provide power dense propulsion in a manner that relies upon reduced mass or where there is limited space for the motor. And we see current drone, air taxi, and other related applications becoming more and more relevant, especially where our options to extend range or boost performance are being exhausted. And lastly, in additive manufacturing, while we've seen some projects canceled or delayed indefinitely along with some industry consolidation, we believe the competitive space has been narrowed, thus providing a focus on the value of our quality and life cycle management platform where data and knowledge management will be vital to the success of any additive program. Now let's turn to slide 15 and my closing comments. Despite the challenges the pandemic has created, we have continued to strengthen our foundation for long term profitable growth.

I'm proud that we continue to drive towards a goal of a zero injury workplace and that all of our facilities have remained open during the pandemic. The efforts have demonstrated a resiliency and commitment to our fellow employees, our customers, and our communities. We have adopted to new working conditions, aligned our cost structure and our manufacturing footprint to rapidly changing market conditions. We have taken a series of steps to enhance our capital structure, drive strong liquidity and extend our debt maturities. We ended the third quarter with $244,000,000 in cash and over $539,000,000 in total liquidity.

Our capital structure activities, combined with our targeted cost reduction initiatives, place us on solid ground to not just manage through the downturn, but emerge on the other side a leaner, more flexible, and more productive company. We have also deepened our relationships with our customers. Recovery across our end use markets remains in varying stages, but we expect overall market conditions to continue to improve as we move through the rest of calendar year 2021 and into 2022. Some markets will recover faster than others, and we are laser focused on capitalizing on the recovery as opportunities arise. This includes our largest end use market, aerospace and defense, where the recovery is beginning to show signs of life.

We are working daily with our customers to align our production schedules with their material needs as overall sentiment begins to trend upwards. Our core business is established and built upon a hundred and thirty years of metallurgical expertise, manufacturing and processing experience, and a commitment to delivering mission critical solutions to customers in some of the largest industries in the world. This strong core business will be supported over the long term by the targeted investments we have made in critical emerging technologies, including electrification and additive manufacturing. Taken together, we believe our core business and next generation capabilities position us to deliver sustainable long term growth and value creation to our shareholders for years to come. Thank you for your time, and now I'll turn it over to the operator to take your questions.

Speaker 0

We will now begin the question and answer session. The first question is from Phil Gibbs from KeyBanc Capital Markets. Please go ahead.

Speaker 5

Hey, good morning.

Speaker 2

Good morning, Phil. Good

Speaker 3

morning, Phil.

Speaker 5

Hey, Tony, can you give us an idea of what the overall backlog looked like this quarter versus last? And then also what your jet engine sales did either year over year or quarter over quarter, please?

Speaker 2

Yep. So I'll start with the last one first. Remember you asked me that question last quarter as well, and engine sales were up 19% sequential quarter. And I said not to get too excited about that just from a timing standpoint. So this quarter, they're down about 18%.

So over the last two quarters, you've seen it relatively flat on the engine sales, maybe a little bit of an increase. So that's in line with what we expected. From a backlog standpoint, overall, our backlog was up about 6% sequential quarter.

Speaker 5

Thank you. And then on the LIFO liquidation piece in Q4, any sense, guys, terms of what we should model in terms of an impact from that?

Speaker 3

Yeah. So I'll take that one. Just a couple of comments there. One is, you know, most of SAOs SAOs inventory is on LIFO. Dynamet as well as in PEP, so there's a bid in both segments.

As we've taken inventory down, we're gonna eat into, I mentioned in my comments, eat into some higher cost inventory. So we expect, you know, that it's certainly, it's a estimate that's very sensitive to where we wind up in any inventory, but we'd expect that to be to be somewhere in the neighborhood of 40 to 45,000,000 and most of that being in SEO with maybe a million or 2 in in PEP.

Speaker 5

Now is is that, in your mind, a onetime thing, meaning meaning we meaning is there any recurrence or or bleed into fiscal twenty two?

Speaker 3

No. We wouldn't expect it to bleed into 2022. I don't wanna say one time, but nonrecurring, noncash special item in q four.

Speaker 5

Okay. And then last one for me. The COVID cost of 2,700,000.0, did you did you say that that was there was about 2,000,000 in SAO and the rest in PEP?

Speaker 3

Yeah. It's two one 2.1 in SAO and 600,000 in in PEP.

Speaker 5

And then your inventory write down in in restructuring impairment that you called out in your release, where where did those flow through?

Speaker 3

The Shows up in corporate calls in the corporate calls number when you're looking at the breakdown.

Speaker 5

Thanks. Appreciate it, guys.

Speaker 0

The next question is from Gautam Khanna from Cowen. Please go ahead.

Speaker 4

Thanks. Good morning. Following up on Phil's question, wanted to ask what the visibility, as you've mentioned, on the engine side, how far out can you see in terms of delivery requirements of customers since they are asking about lead times? Or do you have visibility into calendar q four at this point? And if you could also talk about the other aerospace subsegments and how they fared sequentially in the March, so fasteners and other structures.

Speaker 2

Hey. Good morning, Gautam. We can see into our fiscal fourth quarter on aerospace. In fact, on a booking standpoint, bookings for aerospace were up 60% this past quarter, and we see that trend continuing. So pretty good visibility there in close contact with our customers.

From a sales standpoint, overall, aerospace, as you could see on the slide, was down 8%. Fasteners were were up a couple percentage points. Structural was up about seven. Distribution was up three to four percentage points as well. So all of the segments were up quarter over quarter.

Engine is the only one that was down, and that's just because you had the balancing with the quarter before. As I said, you know, the the second quarter, we were up 19%. So and this quarter, 18. So if you balance that out, maybe a point or two improvement. So all the segments were up quarter over quarter.

Okay. Maybe I on the aerospace side. Defense defense was up, yeah, defense was down just a little bit.

Speaker 3

Yep.

Speaker 2

Used to be fair quarter over quarter, but the aerospace segment.

Speaker 4

Got it. And then I I was I was more curious about the engine visibility beyond fiscal q four into, you know, the end of the calendar year. So just so what we can expect normally, we have a big seasonal dip, you know, in the second half of the year versus the first half. I'm talking to the calendar year. Do you expect that we'll see I mean, do you have visibility into the second half of the calendar year right now on the engine supply chain and on the engine demand

Speaker 2

environment and what Yeah. Yeah. We do. And as I said, we're very close to our customers. I'm trying to capture that in my remarks that the discussions are really around lead times and availability and where we see it through this calendar year and maybe a bit into calendar year 2022 as we start to to stack those orders up.

A lot more discussion around Athens, and so we had one provisional approval. So I wanted to understand and get those qualifications complete. So from an overall standpoint, of course, I'd like for the visibility to be sharper, but I think we're right at this point in time. We have a pretty good idea of where our customers are at. And as I said in the comments, very bullish going forward.

We do believe that that we've hit the bottom. Much like many of the other companies that have reported so far have had the same type of message, and we're looking forward to to coming out of this.

Speaker 4

And could you speak to the seasonal, seasonality we should expect in the second half of the calendar year? Should we still

Speaker 2

expect to a decline? I'm not so sure. Yeah. Sorry for interrupting you. I'm not so sure about that.

I mean, that's been a bit muted the last couple quarters. I mean, the last couple years as well, as as we come come in. You know, there there's always some summer shutdowns maybe in the transportation side, but I think you're gonna see a lot of those manufacturers shorten those summer shark shutdowns just because of some of the shortages they've had with chips that they'll run maybe stronger than what they had in the past. So, at this time, I don't I don't see a material impact because of seasonality.

Speaker 4

Okay. Thank you very much.

Speaker 2

Yes. Thanks, Kassi.

Speaker 0

This concludes our question and answer session. I would like to turn the conference back over to Brad Edwards for any closing remarks.

Speaker 1

Thanks, operator, and thanks to everyone for joining us today for our fiscal third quarter twenty twenty one earnings call. We look forward to speaking with all of you in the near future. Thanks again, and enjoy the rest of your day.

Speaker 0

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.