Kadant - Q1 2024

Transcript

Operator (participant)

Good day, and thank you for standing by. Welcome to Kadant's 1st Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Michael McKenney, Executive Vice President and Chief Financial Officer. Please go ahead, sir.

Michael McKenney (EVP and CFO)

Thank you, Norma. Good morning, everyone, and welcome to Kadant's 1st Quarter 2024 Earnings Call. With me on the call today is Jeff Powell, our President and Chief Executive Officer. Before we begin, let me read our safe harbor statement. Various remarks that we may make today about Kadant's future plans and expectations, financial and operating results and prospects are forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are subject to known and unknown risks and uncertainties that may cause our actual results to differ materially from these forward-looking statements as a result of various important factors, including those outlined at the beginning of our slide presentation and those discussed under the heading Risk Factors in our annual report on Form 10-K for the fiscal year ended December 30th, 2023, and subsequent filings with the Securities and Exchange Commission. In addition, any forward-looking statements we make during this webcast represent our views and estimates only as of today. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views or estimates change. During this webcast, we will refer to some non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles.

A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is contained in our 1st quarter earnings press release and the slides presented on the webcast and discussed in the conference call, which are available in the Investor section of our website at www.kadant.com. Finally, I wanted to note that when we refer to GAAP earnings per share or EPS and adjusted EPS on this call, we're referring to each of these measures as calculated on a diluted basis. With that, I'll turn the call over to Jeff Powell, who will give you an update on Kadant's business and future prospects. Following Jeff's remarks, I will give an overview of our financial results for the quarter, and we will then have a Q&A session. Jeff?

Jeff Powell (President, Director and CEO)

Thanks, Mike. Hello, everyone. Thank you for joining us this morning to review our 1st quarter results and discuss our business outlook for 2024. Q1 was a solid start to 2024. Our acquisitions, Key Knife and KWS, completed at the beginning of the year, performed very well and contributed direct revenue in the 1st quarter. Solid execution by our operations teams around the globe contributed to excellent Adjusted EBITDA. As expected, demand in the 1st quarter moderated from the unprecedented record-setting 1st quarter of last year, as economic headwinds tempered manufacturing activity, particularly in Europe and Asia. As you can see on slide six, our Q1 revenue increased 8% to a record $249 million. Our recent acquisitions and strong performance in our Industrial Processing segment were the drivers of this record revenue.

Our aftermarket parts revenue made up 69% of Q1 revenue and was up 13% to a record $171 million. Solid operating performance led to an Adjusted EPS of $2.38 and Adjusted EBITDA of $52 million, representing 21% of revenue. All our operating segments delivered excellent Adjusted EBITDA margin performance despite inflationary pressures. Cash flow in Q1, which is historically a weaker quarter, decreased 38% to $23 million compared to last year's record cash flow for a 1st quarter, while free cash flow was $17 million. As expected, bookings softened in the 1st quarter, primarily due to reduced capital project activity. I'll provide more details about this when I discuss each of our operating segments, beginning with our Flow Control segment.

Our flow control segment experienced solid demand in the 1st quarter for both parts and capital equipment, particularly in North America. Bookings of $95 million were strong. However, they were down 9% compared to the record performance of Q1 last year. Q1 revenue declined 3% to $87 million, partly due to fewer capital shipments in the 1st quarter compared to the same period in the prior year. Aftermarket parts revenue made up 74% of Q1 revenue and is expected to remain stable as the year progresses. Adjusted EBITDA declined 9%, while adjusted EBITDA margin of 27.8% was down due to lower operating leverage. As many of you know, the 1st quarter of the year is often our strongest quarter for our flow control segment in terms of bookings, as our customers prepare for annual spring maintenance shutdowns.

That said, we do expect to deliver a strong performance again this year in our Flow Control segment. Turning now to our Industrial Processing segment on slide 8, we can see the positive effect from our recent acquisition of Key Knife, which became a key part of this segment beginning in the 1st quarter. Q1 revenue was up 27% to a record $106 million, and aftermarket parts revenue made up 69% of total revenue in the segment. Excluding the impact of FX and the acquisition, revenue was up 7% compared to the same period last year. Q1 bookings were down 7% compared to the prior year period, reflecting the recent moderation of capital orders in the segment.

However, there is significant capital project activity developing in this segment, and we expect to convert a good portion of those active projects into orders as the year progresses. Improved operating leverage and contributions from our recent acquisition led to record adjusted EBITDA of $27 million and adjusted EBITDA margin of 25.5%. Overall, we had a good start to the year and expect to see solid performance from the segment in the months ahead. In our Material Handling segment, we experienced solid demand for our aftermarket parts and benefited from our acquisition of KWS Manufacturing, completed at the end of January. Revenue of $56 million was flat compared to the prior year period, and was negatively impacted by some customer delays in shipments, as well as softness in capital equipment revenue.

Demand for capital equipment was down from the record performance set in the prior year period, which included an unusually large capital order. However, we believe the weaker capital order activity in the quarter was largely due to timing, as project activities remains relatively strong. Adjusted EBITDA margin of 20.3% of revenue was down 170 basis points from the same period last year, due to largely to reduced operating leverage associated with lower organic revenue. The outlook for this segment remains positive, as the end markets we serve are fundamentally strong. As we look to the second quarter of 2024 and the full year, our healthy balance sheet and ability to generate robust cash flows have us well positioned to fund growth as the year unfolds.

We expect industrial demand to strengthen in certain regions and remain stable in others as the year progresses. We remain focused on accelerating profitable growth in our core markets and expect to deliver strong financial performance again this year. Mike will discuss this in more detail, and with that, I'll turn the call over to Mike.

Michael McKenney (EVP and CFO)

Thank you, Jeff. I'll start with some key financial metrics from our 1st quarter. Gross margin was 44.6% in the 1st quarter of 2024, up 20 basis points compared to 44.4% in the 1st quarter of 2023. The gross margin in the 1st quarter of 2024 was negatively affected by the amortization of acquired profit and inventory related to our recent acquisitions, which lowered gross margin by 90 basis points. Excluding the impact of the amortization of acquired profit and inventory, gross margin in the 1st quarter of 2024 was 45.5%, up 110 basis points compared to the 1st quarter of 2023.

This is one of the highest gross margins in our recent history, due in part to higher margins achieved in our Industrial Processing segment on parts and consumables, as well as the mix of capital projects in the quarter. Also contributing to the improved gross margin was a higher overall percentage of parts and consumables revenue, which represented 69% of revenue in the 1st quarter of 2024, compared to 66% in the prior year. SG&A expenses as a percentage of revenue increased to 28.2% in the 1st quarter of 2024, compared to 25.5% in the prior year period. Higher percentage in the 1st quarter of 2024 is due in part to the non-recurring acquisition-related costs. In addition, the 1st quarter revenue represents the lowest quarterly revenue we expect for the year.

SG&A expenses were $70.3 million in the 1st quarter of 2024, an increase of $11.7 million compared to $58.6 million in the 1st quarter of 2023. This included an increase of $7.3 million from our acquisitions, $1.9 million from acquisition-related costs, and a $0.2 million unfavorable foreign currency translation effect. Excluding these items, SG&A expenses were up $2.3 million, or 4%, compared to the 1st quarter of 2023, primarily due to annual wage and incentive increases. Our effective tax rate in the 1st quarter was 23.9% and included tax benefits related to the vesting of equity awards, which lowered the effective tax rate by 1.5%.

Our GAAP EPS decreased 13% to $2.10 in the 1st quarter, compared to $2.40 in the 1st quarter of 2023, due to acquisition-related costs in the current period. Our adjusted EPS decreased 1% to $2.38, which exceeded the high end of our guidance range by $0.38 due to several factors. Gross margin was stronger than anticipated, and we had higher than anticipated revenue, especially for our aftermarket products in our Industrial Processing segment. In addition, the operating results for our acquisitions were better than expected. We closed our Key Knife acquisition at the beginning of the 1st quarter and our KWS acquisition in late January, and the integrations are going well, as Jeff mentioned earlier.

Adjusted EBITDA increased 8% to $52.2 million, compared to $48.6 million in the 1st quarter of 2023, driven by strong performance in our Industrial Processing segment. This segment had record adjusted EBITDA due to contributions from its recent acquisition and improved performance at our other wood processing businesses. As a percentage of revenue, adjusted EBITDA was 21%, compared to 21.1% in the 1st quarter of 2023. Operating cash flow at $22.8 million was lower than the prior two quarters due to an increase in working capital requirements, and down 38% compared to the 1st quarter of 2023. Free cash flow was $16.6 million in the 1st quarter of 2024, down 49% compared to the 1st quarter of 2023, which was a record for 1st quarter cash flows, both in operating and free cash flow.

We expect higher cash flows for the remaining quarters of the year and overall anticipate strong cash flows for 2024. We paid $232.3 million, net of cash acquired, for our acquisitions of Key Knife and KWS in the 1st quarter. We borrowed $234 million, mainly to fund our acquisitions, and we also repaid $33 million of our debt in the 1st quarter of 2024. Other non-operating uses of cash in the 1st quarter of 2024 included $6.3 million for capital expenditures, $3.4 million for dividends on our common stock, and $5.9 million for tax withholding payments related to the vesting of stock awards. Let me turn next to our EPS results for the quarter.

In the 1st quarter of 2024, GAAP EPS was $2.10, and after adding back 28 cents of acquisition-related costs, adjusted EPS was $2.38. In the 1st quarter of 2023, GAAP and adjusted EPS were $2.40. A decrease of $0.02 in adjusted EPS in the 1st quarter of 2024 compared to the 1st quarter of 2023 includes increases of $0.21 from our acquisitions, $0.18 due to higher gross margins, $0.05 due to a lower tax rate. These increases were offset by $0.18 due to higher operating expenses, $0.14 due to lower organic revenue, $0.13 due to higher interest expense, and $0.01 due to higher weighted average shares outstanding.

Collectively, including all the categories I just mentioned, was a favorable foreign currency translation effect of $0.01 in the 1st quarter of 2024 compared to the 1st quarter last year due to the weakening of the U.S. dollar. Looking at our liquidity metrics on slide 15, our Cash Conversion Days, which we calculate by taking days in receivables plus days in inventory and subtracting days in accounts payable, decreased to 128 at the end of the 1st quarter of 2024, compared to 136 at the end of the 1st quarter of 2023, due to a lower number of days in inventory. Working capital as a percentage of revenue was 15.7% in the 1st quarter of 2024, compared to 15.6% in the 1st quarter of 2023.

Our net debt, that is, debt less cash, increased $223 million sequentially to $227 million at the end of the 1st quarter of 2024 due to borrowings from the two acquisitions. Our leverage ratio, calculated in accordance with our credit agreement, increased to 1.12 at the end of the 1st quarter of 2024, compared to 0.27 at the end of 2023. At the end of the 1st quarter of 2024, we had $102 million of borrowing capacity available under our revolving credit facility and an additional $200 million of uncommitted borrowing capacity. Now I'll update our guidance for 2024.

We are maintaining our full-year revenue guidance of $1.04 billion-$1.065 billion, and our adjusted EPS guidance of $9.75-$10.05, which excludes $0.36 of acquisition-related costs. We now expect GAAP EPS of $9.39-$9.69, revised from our previous guidance of $9.55-$9.85, which had assumed acquisition-related costs of $0.20. 2024 guidance includes an unfavorable foreign currency translation impact of approximately $0.9 million on revenue and $0.01 on adjusted EPS. This represents a reduction of $0.16 from our prior forecast due to the strengthening of the U.S. dollar against other currencies.

Our revenue guidance for the2nd quarter of 2024 is $258 million-$266 million, and our Adjusted EPS guidance is $2.40-$2.50, which excludes $0.04 of amortization expense associated with acquired profit and inventory and $0.02 related to acquired backlog. Our 2024 guidance assumes amortization expense related to acquired profit and inventory will be completed in the 2nd quarter and an additional $0.02 of amortization expense associated with acquired backlog in the 3rd quarter. Excluding acquired backlog, the 2024 intangible amortization expense associated with the acquisition is $0.46. Both GAAP and Adjusted EPS guidance include our initial estimates of purchase accounting adjustments, which are subject to change as we review and finalize the valuation work for these acquisitions.

While we are maintaining our revenue and adjusted EPS guidance for 2024, we remain cautious and continue to monitor risks to our guidance. Requests for capital project proposals are high, but the timing for finalizing orders is uncertain, especially in certain regions like China, where securing financing can be a challenge. As a result, the timing for large capital projects can shift by quarter, with some potentially moving to next year. In addition, central bank's policy response to inflation and the impact on the U.S. dollar and other currencies can have a significant impact on our guidance. Our 2024 guidance currently includes a $0.01 unfavorable foreign currency translation effect, which represented a $0.16 decrease from our previous guidance. Further strengthening or weakening of the U.S. dollar will impact this estimate. We continue to anticipate gross margins for 2024 will be 43.5%-44.5%.

As a percent of revenue, we still anticipate SG&A will be approximately 25.5%-26.2%, and R&D expense will be approximately 1.3%-1.4% of revenue. We now expect net interest expense of approximately $17 million-$17.5 million, down from our previous guidance of $18 million-$18.5 million, as a result of faster debt paydowns than originally forecast. We continue to expect our recurring tax rate will be approximately 26.5%-27.5% in 2024, and we continue to expect depreciation and amortization will be approximately $46 million-$48 million, and we are maintaining our CapEx guidance spending of $29 million-$31 million. That concludes my review of the financials, and I will now turn the call back over to the operator for our Q&A session. Norma?

Operator (participant)

Thank you. As a reminder, to ask a question, you'll need to press star one one on your telephone. To withdraw your question, please press star one one again. Please wait for your name to be announced. Please stand by while we compile the Q&A roster. One moment for our first question, please. Our first question comes from the line of Ross Sparenblek with William Blair. Your line is now open.

Ross Sparenblek (Industrials Research Analyst)

Hey, good morning, guys.

Michael McKenney (EVP and CFO)

Morning, Ross.

Ross Sparenblek (Industrials Research Analyst)

Yeah, surprising strength on the aftermarket, you know, particularly given the concerns coming into the year that there was maybe a pull forward late last year. Can you just help parse out some of the drivers here during the quarter? And, you know, how are we thinking about price and volume for aftermarket for 2024? I know there seems to be a continuation of customer mothballing across the key markets, and just trying to gauge, you know, at what point does a broader capacity reduction begin to outweigh volume growth.

Jeff Powell (President, Director and CEO)

I think in general, Ross, as you know, our parts and consumables are kind of our function of operating rates, and the operating rates really vary quite a bit around the world right now. North America, they're holding up, you know, I think reasonably well. I would say the lowest operating rates are in China right now, which is still struggling to kind of recover from their pandemic policies and, you know, coming out of that. And then Europe, it varies, but, you know, some of the major economies in Europe, Germany and the U.K., are certainly very slow and maybe technically in recession. So the rates vary a fair amount around the world.

I do think that, you know, for a while, a lot of our customers were operating off of existing inventory. There was certainly some, you know, pull forward in some areas, but I think a lot of people also were running their stores lean, and so they, you know, they're starting to replenish those. And so I think we're benefiting from that. And then some of the markets, you know, there are some markets we have, OSB in particular, that's still running very strong, you know, surprisingly strong. So, you know, it's, there's kind of a fair amount of, I say, disparity around the globe, but, all in all, they're hanging in there. As you know, that's a big focus of ours, so we're constantly working to pick up market share, and the spares and consumable piece.

Ross Sparenblek (Industrials Research Analyst)

Yeah, no, that, that's very helpful. Can you maybe just also help frame the sensitivity of your equipment sales, your guidance? I know you kind of previously spoke to that in the comments, but, you know, any updated color from customer conversations as we think about, you know, potential 2nd half recovery, and then maybe any nuances that we should be thinking about in regards to strength in maintenance and rebuilds versus greenfields?

Jeff Powell (President, Director and CEO)

Well, so there's a couple things. First of all, as you know, many of our customers were quite busy during the pandemic and really ran their equipment very hard. And then also, a lot of our equipment, as we analyze it, the average age of our equipment, in a lot of our markets, the equipment is getting quite old. So, there is an awful lot of discussions and activity, and I would say quotes going on. The issue is, I think everybody's in the same, you know, in the same boat. They're all waiting to get more visibility and clarity on when things are gonna start to turn around and strengthen.

You know, it's very much driven by interest rates, and obviously in the U.S. in particular, the economy doesn't seem to be responding or acting the way the Fed had expected, and so rates are holding maybe higher, longer than I think a lot of people had thought. But I do think that at some point they will start to reduce rates, and I think there's a fair amount of pent-up demand in many of our markets, as well as kind of old, tired equipment that will need to be upgraded. So we think that the underlying fundamentals are still quite strong. It's just a question of timing as to when people get confident enough that things have bottomed out and are starting to turn around, to start, you know, making those investments.

Ross Sparenblek (Industrials Research Analyst)

Yeah. I mean, it looks like you have, you know, the backlog for the guidance this year. But when we think about the magnitude of these projects, I mean, is the expectation that we could see still sustained growth in 2025? I know it's still very early, but, you know, that's where the, you know, investor interest is right now.

Michael McKenney (EVP and CFO)

Well, it's a function of when the orders get booked, Ross, for sure on that. I think we are looking at the, you know, we are cautiously optimistic that in the back half of the year here, we're gonna start to see capital bookings really start to firm up.

Ross Sparenblek (Industrials Research Analyst)

Okay. So it, it's a meaningful pipeline here on the project side that you're speaking to?

Michael McKenney (EVP and CFO)

Yeah, there's a lot of projects on the board.

Ross Sparenblek (Industrials Research Analyst)

Awesome. That's perfect. I'll jump back in queue. Thanks, guys.

Operator (participant)

Thank you. One moment for our next question, please. Our next question comes from the line of Kurt Yinger with D.A. Davidson. Your line is now open.

Kurt Yinger (SVP and Research Analyst)

Great. Thanks, and good morning, everyone.

Michael McKenney (EVP and CFO)

Hi, Kurt. Sorry.

Kurt Yinger (SVP and Research Analyst)

It sounded like perhaps the commentary around industrial processing and material handling, you know, pointed to maybe an expectation for improved booking trends, particularly on capital in the coming quarters. I guess, am I interpreting that correctly, or is the expectation still that that's more of a back half type phenomenon?

Michael McKenney (EVP and CFO)

No, you're right on there, Kurt. You know, the Industrial Processing has some, you know, there. I think we may see things that'll be the earliest, and there are also some good projects in Material Handling. But I think Industrial Processing is the one that really stands out to me as having some projects coming up earlier.

Kurt Yinger (SVP and Research Analyst)

Gotcha. Okay, makes sense. And in terms of the strong gross margins, it sounded like Industrial Processing was kind of a standout there. Anything really noteworthy to call out there? I mean, maybe the strength in OFC you referenced, you know, was beneficial from a mix perspective. And is that something that can kind of prove sustainable, do you think?

Michael McKenney (EVP and CFO)

You know, Kurt, I mean, I gave a lot of credit. I thought the Industrial Processing segment performance was just outstanding. But our gross margins improved across the board for us in all 3 segments. So I was very, very happy to see that. And we, it was very good in parts and consumables, but we also had, broadly amongst the segments, a favorable mix in capital projects that went through, so good gross margins also on our capital projects.

Kurt Yinger (SVP and Research Analyst)

Got it. Okay. I'm not sure if I missed it. I apologize if I did, but was kind of the full year outlook for gross margins, I guess, maintained on that 43.5%-44.5% range? And I guess if we were to think about coming down from Q1, is that primarily a mix factor just in shifting more back towards capital or anything else that, I guess, could dampen us from the elevated Q1 level that we just saw?

Michael McKenney (EVP and CFO)

You're correct, Kurt. It's really a function of just having more capital in the mix. And I also wanted to point out that that guidance range of 43.5%-44.5%, that has the inventory write-up in it, the impact of that in there, which is about probably 25 basis points for the year or something like that.

Kurt Yinger (SVP and Research Analyst)

Got you. So, that would be, I guess, the GAAP gross margin, not the adjusted?

Michael McKenney (EVP and CFO)

Correct. It's the GAAP. It's the GAAP gross margin. I thought that would be the most useful to put out.

Kurt Yinger (SVP and Research Analyst)

Got it. Okay. That makes sense. And then in terms, it looked like, you know, Key Knife and KWS, you know, order of magnitude, you know, contributed maybe $24 million-$25 million in bookings and sales this quarter. Any way to think about kind of the split of that between aftermarket parts and consumables versus capital?

Michael McKenney (EVP and CFO)

Well, Key Knife is essentially all parts and consumables, and the split on KWS is about 60/40, with 60/40 being parts. So however you're building your model, you can use that as the way to parse it.

Kurt Yinger (SVP and Research Analyst)

Okay. Makes sense. And then just lastly, you know, there are two big deals in the containerboard space, the consolidation of some European and U.S. players. How do you think about any potential impacts to your business from that? And I guess longer term, any thoughts around kind of the implications of just continued consolidation in some of your key forest product customer base?

Jeff Powell (President, Director and CEO)

Yeah, as you obviously know, Kurt, there's been a fair amount of consolidation that's actually going on for quite some time. You know, the overall global demand continues to grow, but I actually think it's a positive thing for us. I think it's positive for the industry because they do a better job in balancing supply and demand. They do a better job in, I think, in controlling pricing and improving their profitability. And from our perspective, you know, we always want our customers to be as profitable as possible because then they have the capital to invest in their business, you know? And so for us, I think, generally speaking, consolidation is good because it increases the profitability of the industry and increases their opportunities to invest, to continue to drive efficiencies.

And, you know, they're a big customer of ours. Obviously, if you're talking about, you know, IP and WestRock, both of them are quite, quite big customers of ours. So, I actually look at it as, ultimately as a, as a positive thing, 'cause it'll, it'll improve the overall health of the industry.

Kurt Yinger (SVP and Research Analyst)

Makes sense. All right, appreciate the color, guys, and good luck here in Q2.

Operator (participant)

Thank you.

Thank you. One moment for our next question, please. Our next question comes from the line of Gary Prestopino with Barrington Research. Your line is now open.

Gary Prestopino (Managing Director)

Good morning, Jeff and Mike. How are you?

Jeff Powell (President, Director and CEO)

Good, Gary.

Michael McKenney (EVP and CFO)

Good.

Gary Prestopino (Managing Director)

Okay, couple of questions here. First of all, Mike, the EBITDA for this quarter did not reflect, I believe, a full quarter run rate from the acquisitions. Can you give us an idea of what the EBITDA would be on an annual basis or even a quarterly basis with the full effect of these acquisitions?

Michael McKenney (EVP and CFO)

Yeah, well, the most important piece of it to me is on the recurring amortization. Right now, we have that at about $7.2 million, annually. So you can and, you know, we maintained our, our guidance range on the DNA, but that'll hopefully help you in terms of, and, you know, the valuations are still open, but I think we're closing in on finalizing.

Gary Prestopino (Managing Director)

Okay, that's great. And then, given the environment that you're operating in right now, especially with the capital projects being, you know, choppy, and with the acquisitions that you've made here this year, do you think you can keep your parts and consumable revenues as a percentage of revenues in the high 60s, low 70s throughout the year?

Michael McKenney (EVP and CFO)

Well, as we go through the year, we're, you know, we're looking at capital increasing. So I would say, you know, we'll probably be in the kinda 62%-65% range as we go through the remainder of the year by quarter.

Gary Prestopino (Managing Director)

Okay. Okay. And then lastly, just on adjusted EBITDA, 'cause that's how I look at your, your company, and you may have mentioned this or not in the guidance. Did you give an Adjusted EBITDA margin number for this year in terms of what is, is part of your guidance?

Michael McKenney (EVP and CFO)

No, I haven't. You know, I usually do not do that because, well, for one, Gary, with the guidance I've given out, you can, you know, you can back into it, right?

Gary Prestopino (Managing Director)

Right.

Michael McKenney (EVP and CFO)

You have all the pieces to back into it.

Gary Prestopino (Managing Director)

Mm-hmm.

Michael McKenney (EVP and CFO)

But I will say, you know, very broadly that, you know, the guidance range that we've given out would, you'll when you calculate that, you'll find we're about 21%.

Gary Prestopino (Managing Director)

Yeah, that's what I figured. Okay, thank you.

Michael McKenney (EVP and CFO)

Yeah. Okay.

Operator (participant)

Thank you. As a reminder, to ask a question, you'll need to press star one one on your telephone and wait for your name to be announced. And it looks like I'm currently showing no further questions at this time. I'll hand the conference back over to Mr. Powell for any closing remarks.

Jeff Powell (President, Director and CEO)

Thank you, Norma. So before wrapping up the call today, I just wanted to leave you with a few takeaways. The 1st quarter was a solid start to 2024. Despite continued economic uncertainty, our employees around the globe continue to focus on meeting our customers' needs and finding new ways to deliver long-term value to our stakeholders. Our financial health is excellent, and our ability to generate strong free cash flow has us well positioned to quickly pay down the debt associated with our recent acquisitions. We look forward to delivering exceptional value for all our stakeholders again in 2024, and we wanna thank you for joining us today, and we look forward to updating you on our progress next quarter.

Operator (participant)

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.