Q4 2023 Ducommun Inc Earnings Call
Participants
Suman Mookerji; SVP, CFO; Ducommun Inc
Steve Oswald; Chairman, President and CEO; Ducommun Inc
Griffin Boss; Analyst; B Riley Securities Inc
Michael Ciarmoli; Analyst; Truist Securities Inc
Presentation
Operator
Good day, and thank you for waiting. Welcome to the Q4 2023 Ducommun earnings conference call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session to ask a question. During the session, you will need to press star one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one again.
Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Sumant Mukherjee, Senior Vice President and Chief Financial Officer. Please go ahead.
Suman Mookerji
Thank you, and welcome to Ducommun's 2023 fourth quarter conference call. With me today is Steve Oswald, Chairman, President and CEO. I'm going to discuss certain limitations to any forward-looking statements regarding future events, projections or performance that we may make during the prepared remarks or the Q&A session that follows certain statements today that are not historical facts, including any statements as to future market conditions, results of operations and financial projections are forward-looking statements under the Private Securities Litigation Reform Act of 1995 and are therefore prospective. These forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from the future results expressed or implied by such forward-looking statements. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. In addition, estimates of the future operating results are based on the Company's current business, which is subject to change Particular risks facing Ducommun include, among others, the cyclicality of our end-use markets, the level of U.S. government defense spending, our customers may experience delays in the launch and certification of new products, timing of orders from our customers, legal and regulatory risks, the cost of expansion and acquisitions, competition, economic and geopolitical developments, including supply chain issues and rising are high interest rates. The ability to attract and retain key personnel and avoid labor disruptions, the ability to adequately protect and enforce intellectual property rights, pandemics, disasters, natural or otherwise, and risk of cybersecurity attacks. These risks and others will be described in our annual report on Form 10-K once it is filed with the SEC and our forward-looking statements are subject to those risks.
Statements made during the call are only as of the time made, and we do not intend to update any statements made in this presentation, except if and as required by regulatory authorities. This call also includes non-GAAP financial measures. Please refer to our filings with the SEC for a reconciliation of the GAAP to non-GAAP measures referenced on this call this year, we expect to file our 2023 form 10-K on Thursday, February 22nd, 2020, for the additional time is to complete the documentation of our internal controls and preparation of the Form 10-K for filing in the 2023 form 10-K, we expect to report a material weakness in our internal controls over financial reporting related to our revenue recognition process. This material weakness resulted in immaterial adjustments to net revenues and contract assets as of and for the quarterly period ending December 31st, 2023, we do not expect the material weakness to result in a restatement or change to the reported financial statements, we will make the necessary changes to the design and operating effectiveness of these specific revenue recognition. Internal controls during 2024.
I would now like to turn the call over to Steve Oswald for a review of the operating results. Steve?
Steve Oswald
Okay. Thank you, Samantha, and thanks, everyone, for joining us today for our fourth quarter conference call today. And as usual, I'll give an update on the current situation of the company, after which Sumant will review our financial results in detail.
Q4 was a very good quarter as we wrapped up 2023. Revenues exceeded $190 million for the second consecutive quarter to $192.2 million, driving a full year revenue of $757 million with the last high mark set in 2020 12. Strong growth in our single-aisle commercial aircraft business helped to drive the revenue. The continued recovery in commercial aerospace once again delivered in Q4 with Boeing single aisle platform business in aggregate being up 46% year over year, along with Airbus 80 20 program showing strong growth of 73% year over year. Overall, commercial aerospace with Airbus and Boeing and others was up 18% from Q4 2022, spite Boeing's in spirits, continued challenges with Max quality issues. We are now in our 10th quarter of year-over-year revenue growth for commercial aerospace, a continued excellent sign for DCO and the industry. While our defense business is slightly down quarter with sunsetting programs such as the F-18 having an impact, the company also experienced strong demand in the Apache program as well as increases for F-35 and the Mir missile platform. The defense business was over $100 million revenue once again at $103 million of revenue for the quarter. We remain optimistic about the growth ahead as we go through a tiny transition on certain programs. The ever-growing backlog in defense tells the story with backlog, up $70 million from last year and $33 million from Q3 2023. Defense backlog now stands at over $0.5 billion at $527.1 million. And other real bright spot in Q4 was gross margins of 21.7% for the fourth for Q4, up four up 120 basis points year over year from 20.5% as we began realizing benefits from our strategic pricing initiatives, productivity improvements and some initial restructuring savings. We are now also in the final stages of operation at our variable Arkansas and Monrovia, California performance centers are targeting a full shutdown by June 30th, final approval stage with RTX for the Tomahawk harnesses going to Mexico. The last product still being produced at various of that variable is close and we continue to have a full effort with BABCS. and B., a defense on the MAX boilers and Apache tail rotors, respectively, working with them on approval and building buffer due to the low level of production at both sites. We do have some headwinds, but this is temporary and will clear after the closures for adjusted operating margin in Q4, the team delivered 8.3% compared to 8.1% in Q4 2022 a nice result while investing some of the gross margin improvement after a few lean years during COVID and the ramp up of commercial aerospace, GAAP diluted EPS was $0.34 a share in Q4 2023 versus $0.65 a share for Q4 2022. And with the adjustments, diluted EPS was a solid $0.7 a share compared to diluted EPS of $0.85 in the prior year. Some key drivers for the lower GAAP diluted EPS include higher interest expense due to higher interest rates, higher inventory purchase accounting adjustments and higher SG&A expenses as we invested in the business to position it for future.
The total Company backlog performance increased decreased both sequentially and compared to the prior year. Total Company backlog ended 2023 at almost $994 million, increasing over $30 million, both sequentially and compared to the prior year.
Defense backlog, as mentioned earlier, also increased $70 million compared to the prior year to the end at direct at a record of $527 million. The strong defense backlog reaffirms the common defense business remains in good shape with more positive news to come. The commercial aerospace backlog, however, decreased slightly year over year, primarily due to industry issues with single-aisle production rates, specifically the MAX issues mentioned earlier with BA and spirit, but still ended Q4 2023 at a solid $429 million for offloading from the French fries. The work continues. We are expecting roughly $90 million for the full year 2024 as committed to mainly in our circuit card business for RTX in new areas such as radar for the SPY. six. As communicated, the long-term run rate of these defense programs already commercialized or in development for offloading will be over $125 million by 2025. Once the transition work is completed in Q4, our team delivered another good quarter, managing the supply chain as evidenced by positive revenue growth along with significant gross margin expansion compared to a year ago.
Another great example of productivity improvements and people is the revenue for our employee number, which granted as a high-level number, but then increase significantly by 16% in 2023 versus 2022.
Does a terrific job everyone at the Company. 2023 record revenues of $757 million was a solid 6.2% growth over 2022 and in line with the guidance of 6% to 6.5%. We provided to you during the Q3 call. We were obviously happy with this record number last set in 2012, especially in light of the seven 37 MAX headwinds with BA and spirit that created a more modest pace than had been expected and single aisle production rate and 2023 for revenue guidance for 2024, we believe that with the uncertainty surrounding BA Spirit and the FAA at this point on the MAX, the best approaches to guide to mid single digits and look to further updates on future earnings calls the commercial aerospace recovery will continue to expand along with growth in defense, which is backed by our record backlog. We continue to be active with acquisitions as in 20, our acquisition last April. I believe this is another catalyst to drive us possibly higher in year ahead.
Now let me provide some additional color on our markets, products and programs. Beginning with our military and space sector. We experienced our second consecutive quarter of revenues of $100 million at $102.8 million compared to $108.4 million in Q4 of 2022, while lower, we saw some bright spots, including strong demand for the Apache tail rotor blades with over 380% year over year growth and increased demand for other military and space products, other military, rotary wing platforms, F-35 and Amir missile as well. The fourth quarter military and space revenue represented 50% -- 53% of Ducommun's revenue in the period, down from 58% last year. And this trend will continue to reflect more balance with commercial aerospace, which we like We also ended the fourth quarter with backlog in excess of $500 million to $527 million, an increase of $70 million year over year and represents 53% of the common total.
Yes.
Within our commercial aerospace operations, fourth quarter revenue saw double-digit growth once again, increasing 18% year over year to $80 million driven mainly by build rate increases on large aircraft platforms, including the seven 37 MAX and a three to 20 platforms and twin aisle commercial aircraft platforms, commercial rotary wing aircraft platforms and regional and business jets. As many of you are aware, the FAA announced in January that will increase its oversight of Boeing as well as we probably get approval for production rate increases or additional production lines for the seven 37 MAX until it is satisfied. That Ball is in full compliance with required quality control procedures. This will likely cap the production of the seven 37 MAX, but we need to see how things go in Q1 of 2024 and the FAA going forward plan. We do, however, expect the long-term trend to remain positive once the issues are fully addressed.
The backlog within our commercial aerospace sector was $429 million at the end of the fourth quarter and while it was $21 million lower year over year and increased $7 million sequentially, a solid number given the temporary weakness in commercial aerospace.
With that, I'll have Suman, review our financial results in detail. Suman?
Suman Mookerji
Thank you, Steve. As a reminder, please see the Company's Q4 earnings release for a further description of information mentioned on today's call. As Steve discussed, our fourth quarter results reflect another period of good performance. We again saw a significant increase in our commercial aerospace revenues. We remain encouraged by the continued strength in domestic and global travel, which should support higher long-term demand for aircraft as we work through some of the industry issues impacting single-aisle production rates.
In addition, we are encouraged by the strong backlog growth in our military and space business that should help drive our revenues in that end user segment going forward.
During the quarter, we also continued to make progress on our restructuring program, and I will provide some more color shortly with all this, we feel like we have entered 2024 with good momentum as will continue to drive our performance.
Now turning to our fourth quarter results. Revenue for the fourth quarter of 2023 was $192.2 million versus $188.3 million for the fourth quarter of 2022. The year-over-year increase reflects $12.1 million of growth across our commercial aerospace platforms, partially offset by $5.6 million of lower revenue within the military and space sector due to lower build rates on various missile platforms and military fixed-wing aircraft platforms such as the F-18, partially offset by higher build rates on military rotary wing aircraft platforms such as the Apache new common total backlog at the end of the fourth quarter was $993.6 million This includes a record backlog in our defense and end-users defense end-user segment, which grew by $33 million to a total $527 million backlog in our commercial aerospace business increased slightly during the quarter from 440 -- $423 million at the end of Q3 to $429 million at the end of Q4. As a reminder, we define backlog as potential revenue based on customer purchase orders and long-term agreements with firm fixed prices and expected delivery dates of 24 months or less. We posted total gross profit of $41.7 million or 21.7% of revenue for the quarter versus $38.6 million or 20.5% of revenue in the prior year period. We continue to share adjusted gross margins as we have certain non-GAAP cost of sales items in the current and prior year period relating to inventory step-up amortization on our recent acquisitions, restructuring charges and the impact of the Guaymas fire on our operations. On an adjusted basis, our gross margins were 23.2% in Q4 2023 versus 21% in Q4 2022. The improvement in gross margins was driven by favorable product mix, better pricing and improved scale in our commercial aerospace business. We continue to work through a difficult operating environment with supply chain and labor. However, through our proactive efforts, including strategic buys and our inventory investments, we have been able to avoid any significant impacts thus far on our business. In parallel, we continue to look for opportunities to run wind, our working capital investments to improve our cash flow. During the fourth quarter of 2023, we were able to reduce our inventory by $16 million sequentially compared to Q3. We also reduced our contract assets, net of contract liabilities by $15 million. Ducommun reported operating income for the fourth quarter of $8.9 million or 4.6% of revenue compared to $9.7 million or 5.1% of revenue in the prior year period. Adjusted operating income was $15.9 million or 8.3% of revenue this quarter compared to $15.2 million or 8.1% of revenue in the comparable period last year. The Company reported net income for the fourth quarter of 2023 of $5.1 million, our $0.34 per diluted share compared to net income of 81 -- $8.1 million, or $0.65 per diluted share a year ago. On an adjusted basis, the Company reported net income of $10.4 million, or $0.7 per diluted share compared to net income of $10.6 million or $0.85 in Q4 2022. The lower adjusted net income during the quarter, despite a higher level of adjusted operating income, was driven mainly by higher interest costs, partially offset by lower income tax expense. This was primarily due to the impact of Fed rate hike on short-term interest rates. I will discuss this along with our interest rate hedge, which took effect on January first, 2024 shortly.
Now let me turn to our segment results. Our Structural Systems segment posted revenue of $85.6 million in the fourth quarter of 2023 versus $68.2 million last year. The year-over-year increase reflects $12.3 million of higher sales across our commercial aerospace applications mainly for single-aisle aircraft for the seven three seven MAX and A. two 20 platforms and $5 million of higher revenue within the military and space markets, mainly from the ramp-up in sales in the Apache program and other military rotary wing aircraft platforms.
Structural Systems operating income for the quarter was $6.6 million or 7.7% of revenue compared to $4.4 million or 6.4% of revenue last year. Excluding restructuring charges and other adjustments in both years, the segment operating margin was 14.6% in Q4 2023 versus 10.8% in Q4 2022. Strong year-over-year improvement was driven by favorable product mix, better pricing and higher and more scale in the businesses have in the business as our commercial aerospace revenues have continued to grow. This has been another great quarter for our Structural Systems segment. Our Electronic Systems segment posted revenue of $106.7 million in the fourth quarter of 2023 versus $120 million in the prior year period. The decline was mainly due to lower revenues with the company's military and space customers, including the impact and timing of reductions in revenues on sunsetting programs such as the F-18, not synchronized with growth in sales from the company's position on next-gen platform.
Electronic Systems.
Operating income for the fourth quarter was $9.8 million or 9.2% of revenue versus $13 million or 10.8% of revenue in the prior year period. Excluding restructuring charges and other adjustments in both years, the segment operating margin was 10.2% in Q4 2023 versus 12.9% in Q4 2022. Year over year decrease was due to unfavorable product mix. And as Steve mentioned earlier, due to the loss of manufacturing volume and inefficiencies at our very well performance center as we wind down their operations. To clarify, such inefficiencies have not been considered as restructuring charges in our calculation of adjusted operating income or adjusted EBITDA.
Next on the restructuring. As a reminder, and as discussed previously, we commenced a restructuring initiative back in 2022. These actions are being taken to accelerate the achievement of our strategic goals and to better position the Company for stronger performance in the short and long term. This includes the shutdown of our facilities in Monrovia, California and variable Arkansas and transfer of majority of that work to a low-cost operation in Guaymas, Mexico, with the remainder going to other existing performance centers in the United States we continue to make progress in these transitions with excellent employee retention and engagement and are also working diligently with our customers, Boeing and RPX to obtain the requisite approvals during Q4 2023, we recorded $1.9 million in restructuring charges. The majority of these charges were severance and benefits related as we continue to wind down the two operations. The recertification process is ongoing, and we plan to close both facilities fully in the first half of 2024, we expect to incur $5 million to $7 million in restructuring expenses through 2024, and that will conclude the spending upon completion of our restructuring program. We expect to generate $11 million to $13 million in annual savings from our actions and expect a portion of those savings to be realized starting in the second half of 2024, we anticipate selling the land and buildings at both Monrovia, California and variable Arkansas.
Turning next to liquidity and capital resources. During Q4 2023, we generated $26.5 million in cash flow from operating activities, which was up from $14.3 million in Q3 2023. For the full year 2023, we generated $31.1 million in cash flow from operating activities. This is despite cash payments of $10.7 million for restructuring and $18.3 million for taxes relating to changes in rules for R&D tax credits relating to 2022 and 2023 at the end of the fourth quarter, we have available liquidity of $218.9 million, comprising of the unutilized portion of our revolver and cash on hand, our existing credit facility was put in place in July 2022 at an opportune time in the credit markets, allowing us to reduce our spread, increased the size of our revolver and allowing us the flexibility to execute on our acquisition strategy. Our debt through Q4 2023 was 100% floating and linked to software as a result. And as I have highlighted before the increase in our interest cost from $3.5 million in Q4 2022 to $5.4 million in Q4 2023 was driven by the run-up in short-term rates due to the Fed rate hike. In November 2021, we had put in place an interest rate hedge that went into effect for a seven year period starting January 2024 and begs the one month term so far at 170 basis points for $150 million of our debt. This will help drive significant interest cost savings in 2024 and beyond.
To conclude the financial overview for Q4 2023. I would like to say that we had a strong finish to 2023 and anticipate another strong year in 2024.
I would now like to turn it back over to Steve for his closing remarks.
Steve Oswald
Steve, we had actually one. So just a couple of more comments were good questions and closing. I think Q4 was a very good quarter with many highlights for the Company and our shareholders in addition to achieving all-time highs for annual revenue and adjusted EBITDA of $757 million, $102 million, respectively, in 2023 are wonderful milestones and very happy for the hardworking to Kaman team and all of our other stakeholders for those achievements.
I also want to mention that 2024 will be our 175th year of continuous operation here to come a great achievement, and we will be recognizing that through the year.
Final note, as our 2027 strategy, which we've talked about. We had a strong 1st year with both engineered products and aftermarket, gaining a larger percentage of revenue for the company in 2023 versus 2022 and the future. It's very bright. If those remarks, I will conclude and open up to questions.
Thank you for listening.
Question and Answer Session
Operator
Certainly as a reminder, to ask a question please press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one again, please standby while we compile the Q&A roster. And one moment for our first question. Our first question will be coming from Griffin balls of B. Riley Securities. Your line is Yes.
Griffin Boss
Hi, thank you for taking my questions. So Steve, you just mentioned the Engineered Products and aftermarket parts. Are there any more specific details you can give on percentage of revenue there and how you would characterize that trending going forward versus the rest of the business.
Steve Oswald
And so I'm not going to disclose an actual number, though, just not just at this time, we will probably do something as we go forward at Investor Day meeting, but it was certainly it was certainly up quite a bit. I will say that both in revenue, both in revenue and the aftermarket for Engineered Products. And we're moving we have a 25% target for 2027 for revenues for Engineered Products. And we just say that we're tracking very strongly towards that and to beat it.
Griffin Boss
Okay, great. Fair enough. And I appreciate the color. And then on So we saw a sequential on slight sequential decline in gross margin. I'm just curious if you can add a little bit more color on what you're seeing there and how you're thinking about that in on the next quarter and going into '24.
Steve Oswald
Repeat that question once more Griffin?
Griffin Boss
Yes.
So I mean, we saw a sequential decline in gross margin on. I was just curious if you could give some more color on what was driving that and how you're thinking about that trending going into '24?
Suman Mookerji
That's why.
So the sequential decline was driven by one product mix, but also because we have two facilities that we are in the process of winding down, and we're just producing inefficiently there, given the much lower volume of operations versus the size and scope of those facilities and that's causing a drag and particularly on the Electronic Systems side, but also some drive on the structural system side. And we expect that as headwinds to linger, but gradually go down as we close those both those facilities in the first half of 2024?
Steve Oswald
Yes, I think you cannot just put some color on that for bearings of, for instance, shall adjourn quarter, obviously have a lot less people are reserved for it. We would run sort of $7 million a quarter at Perryville and now are less than $1 million just making the Tomahawk. So that's why there's a little bit of a timing issue or have some of that.
Griffin Boss
Okay, great. Thanks for. Thanks for the detail on that. And then just one last one for me. I apologize if I missed this in the prepared remarks. Can you give us an update on how the offloading opportunities are trending and how you're thinking about the potential upside to those 2025 targets on that front?
Steve Oswald
Yes. Thank you for the question. Yes, this is you know, I've been talking about this. We think there is some potential above the one 25, though we still have a little more work to do here. I know it's all very positive. It's actually movement isn't as I mentioned in my remarks, more to the radar business for this is, you know, a lot of it is cards, but so what happens is just you know it when you deal with RTX and you're moving work out of their facility. They have lots of inventory. They have lots of different things. We have to overcome the test equipment that they either want to keep or they don't want to keep, you know, they have that test equipment has lead times. It's over $1 million for some of these the test, the equipment, the machines so there's a lot that goes into it. But once you once it gets, the Tulsa gets somewhere else and Appleton are up, we're off to the races here. So we are actively heads down working very hard in 2024 to get a lot of this past. It was sort of the finish line here. So we'll have an update later in the year, but we're feeling real good about where we are and hope to have that report on the one 25 plus towards the end of 2024.
Griffin Boss
Ok, great. Glad to hear. Thanks for taking my questions.
Appreciate it.
Operator
Again.
Ladies and gentlemen, if you do have a question, please press star one on your touchtone telephone. Again, please press star one.
Our next question will be coming from Michael, your Molly of Truist Securities. Your line is open.
Michael Ciarmoli
Hey, good afternoon, guys. Thanks for taking the question. And I don't know, Steve, or Sumant, just I guess if we'd look maybe to piggyback on the offloading, but if we look at defense revenue's down sequentially, you finished the year, I guess, down two years in a row. And I guess you haven't really parsed out the guidance, but it sounded like there was more conservatism in there around the MAX. What's the biggest headwind I mean I know you called out the F-16 wind down, but is there anything else, you know, impacting the defense revenue growth?
Steve Oswald
Yes, you know, it's again, this is Mike. Good to be with you?
It's you know, it's a little bit a little bit of a mix. May look, the F-18 is significant, right, not in of the total business, but the FHA will also earlier and I'll say 2021, 2022, we did these toll missile cases for Raytheon, and they were running 15 or 20 plus. So call it a year. And what happens with the toll missile cases, you know, they have problems in supply chain and they can't get the motor for the missile. And then also in the case of business dries up for year two, and we're a little bit in that valley right now. So there's just a couple there's nothing systemic to the business. We like where we are, you know, we're getting pinched here and there a little bit. But we think that coming out of this thing where we're in really good shape and we have a team. I think we had a great run with it, but now those things sometimes they come to an end.
Michael Ciarmoli
Okay. Okay.
And it did I hear it right. The offloading was $90 million expected to be in '24 because I think you called out maybe seen that step up to [125 and 25].
Steve Oswald
Yes, I think that's where we're heading. So again, work and we're you know, again, it's one of the big rocks here is the SPY. six, and there's a number of cards, right? So we have the first cards already being made at Tulsa and that's, you know, let's just those cards, the lower $15 million, $20 million a year, right? So we have those going in parallel, we've got two other layers of cards that are just general. They're in a they're in Andover. It's tough to get it over here, work and fit right initially until we get all the material from them because they get the inventory, right? So our revenue is tamped down a lot, but really a breakthrough feeling very good about 2020 for these changes to just you know, that's great businesses, but unfortunately come out of a big OEM. It's a bit of a long time coming.
Michael Ciarmoli
Got it. Got it.
Suman Mookerji
And just to highlight again, the Our defense backlog is the highest it has ever been in the last few years. So yes, you had some decline in the current year, but the backlog is at the highs, and that's kind of a two year look on We in our backlog numbers. So that's a good position here.
Michael Ciarmoli
Yes.
Yes.
No, no, I noticed that. Yes, definitely positive there. And it's just I guess, what's the level of conservatism or prudence that you've sort of built in for the MAX in 24? Can you even give us a sense what you're delivering to the Spirit, what you're assuming. I know we've heard, you know, kind of some several commentary from Boeing about lower first half picking up second half, but where exactly are you guys and what are you in?
Steve Oswald
Yes, that's a little bit a little bit of a moving target. So you're over here. We are seeing better things ramping up a little bit at Spirit and Boeing and now things are, as you know, from reports on January, we feel that too right, but we're probably sitting in for some of you were probably in the 32, 34 range, right?
For 2024, I'd say, right?
Suman Mookerji
Yes, 34, yes.
Steve Oswald
Yes.
So far, we like kind of made a hire but again, we have to yes, I think this momentum is just going to push us forward. And hopefully as we get through this FDA audit and rightly so, right, but you know where we're being a little modest right now, but we certainly expect things to ramp up. The good. The good news is, Mike. We have the capacity and we have the people. We just need yours.
Michael Ciarmoli
Yes, yes, makes sense.
Yes.
Okay, perfect.
I'll jump back in the queue.
Suman Mookerji
Thank you, Mike.
Steve Oswald
Thank you, Mike.
Operator
And I'm showing no further questions I would now like to turn the conference back to Steve Oswald for closing remarks.
Steve Oswald
Okay. Let me finish up here, so I just wanted to thank everybody for joining us today. So obviously, we had a very, very good year in 2023. I'm thrilled that we're able to break through our record last established in 2012, and we're marching forwards are for 2017 commitments and we're building more engineered products or were driving more aftermarket. And you were cleaning up our contract manufacturing and taking costs out of that and driving hopefully much better day once we get these two factories closed. And I believe that's going to be the case. So looking forward to a great year ahead, we again, thank everybody for their support. And I want to again thank our employees for all their hard work in 2023. Thank you.
Operator
And this concludes today's conference call. Thank you for participating.
You may now disconnect.
