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[00:00:04] Today and welcome to the Spandex International Fiscal First Quarter, Twenty twenty one earnings conference call, all participants will be in the same boat. Should you need assistance, please? Signal conference specialist Professor Moustaki, followed by zero. After today's presentation, there will be an opportunity to ask questions, to ask the question, press star, then one on the touchtone. So to all your question, please press started to please note this event is being recorded. I'd now like to turn the call over to Gary Farber with the growth advisors. Please go ahead, sir.
[00:00:38] Thank you, Rocco, and good morning. Please note that the presentation accompanying management's remarks can be found on the investor relations portion of the company's website at Westend X.com. Please refer to Stanekzai is Safe Harbor statement on slide. Two matters that Static's management will discuss on today's conference call include predictions, estimate's expectations and other forward looking statements. These statements are subject to risks and uncertainties that could cause actual results. To differ materially, you should refer to stand his most recent SEC filings and public announcements for a detailed list of risk factors. In addition, I'd like to remind you that today's discussion will include references to the non-cash measures of EBITDA, which is earnings before interest, taxes, depreciation and amortization adjusted EBITDA which is EBITDA excluding restructuring, purchase, accounting, acquisition related expenses and one time items and EBITDA margin and adjusted EBITDA margin. We will also refer to other non-cash measures, including adjusted net income, adjusted income from operations, adjusted net income from continuing operations, adjusted earnings per share adjusted operating margin, free operating cash flow and pro forma net debt to EBITDA. These non-cash financial measures are intended to serve as a complement to results provided in accordance with accounting principles generally accepted in the United States. Stanekzai believe that such information provides an additional measurement and consistent historical comparison of the company's performance. On the call today, Esten Excess Chairman, President and Chief Executive Officer David Dunbar and Chief Financial Officer and Treasurer Ademir specific. I'll now turn the call over to David.
[00:02:16] Thank you, Gary. Good morning and welcome to our fiscal first quarter. Twenty twenty one conference call and today's call. I will provide commentary on the quarterly twenty one results and the trends we are seeing in our business. I will then review our segment performance. Ademir will follow with a discussion of our consolidated results and financial position. Finally, I will conclude with comments on our outlook and key takeaways. If everyone can please turn to slide three key messages. Overall, fiscal first quarter results were ahead of our expectations on several fronts, reflecting stronger than anticipated demand and solid operational execution, particularly at our electronics and grade and in scientific segments, consolidated revenue increased eight point five percent sequentially. This is ahead of the outlook we provided previously a fiscal first quarter twenty twenty one revenue being flat to slightly above the fourth quarter of twenty twenty. At the electronic segment, revenue increased twenty three percent sequentially and eighteen point six percent year on year, reflecting positive trends in magnetics as well as contribution from the recent Renco acquisition. Sequentially increasing operating margin increased 800 basis points to sixteen point one percent due to cost efficiency and productivity initiatives on fifteen point one percent revenue growth compared to fiscal fourth quarter twenty twenty. Finally, the scientific segment reported its highest quarterly sales ever at sixteen point seven dollars million.
[00:03:48] Earlier this year, we divested of Refrigerated Solutions business and established scientific as a standalone reporting segment, both actions advancing our strategy to build our higher margin segments. In particular, the scientific segment results reflected increased demand for seasonal flu vaccine storage, as well as initial sales related to potential covid-19 vaccines. In addition, our electronics new business opportunity pipeline is healthy. Fifty six million dollars across a wide variety of end markets, we expect the sales contribution from this pipeline to grow sequentially on an annual basis. And engraving, we see continued opportunity in the tour, finishing in soft trim to all the noise globally, we're leveraging these top line trends with stronger operating disciplines in all businesses complemented by several financial initiatives. We are on track to deliver over seven million dollars in savings in fiscal twenty one from the actions we announced in the third quarter of fiscal twenty twenty. We also begin to implement tax savings initiatives in the quarter, including optimizing our foreign tax credits. We expect our tax related actions to result in cash savings of two million to three million dollars in fiscal twenty twenty one. As a result, our tax rate in fiscal 2001 is expected to be approximately twenty two percent or 500 basis points lower than fiscal twenty twenty.
[00:05:09] We also expect to realize one point five million dollars in cash savings in fiscal 21 due to our previously announced floating to fixed rate interest swaps. We continue to maintain a strong financial position with a solid balance sheet and significant liquidity supported by consistent free cash flow generation standards, had approximately two hundred six million dollars of available liquidity at the end of the fiscal first quarter, with a net debt adjusted EBITDA ratio of one point one. During the quarter, we generated free cash flow a four point four dollars million. We also continued our cash repatriation efforts with approximately eight million dollars repatriated in the first quarter. We expect to repatriate thirty five million dollars in total in fiscal 2001, which would result in seventy four million dollars in cash repatriated over the past two fiscal years. In some, we're off to a solid start and expect continued growth and margin improvement as we move through fiscal 21. Our financial flexibility will continue to strengthen through free cash flow generation, cash repatriation and new tax initiatives. In our fiscal second quarter of twenty one, we expect consolidated revenue to be flat to slightly above the first quarter, with a slight to moderate increase in segment operating margin.
[00:06:23] Please turn to slide four and I will begin to discuss our segment financial performance, beginning with electronics electronics segment revenue increased eight point seven dollars million, or eighteen point six percent year on year, reflecting a three point nine percent organic growth rate with strength in the magnetics product line and a five point nine dollars million from the recent Renco acquisition, or approximately twelve point six percent. The balance of the revenue increase is related to foreign currency impact.
[00:06:52] Adjusted operating income increased approximately one million dollars, or twelve point seven percent year on year, reflecting operating leverage on the revenue growth productivity initiatives and Renco Electronics profit contribution, partially offset by inflationary material cost increases. Our new business opportunities funnel has increased to fifty six million dollars and is expected to deliver 11 million dollars of incremental sales now for twenty one across a broad range of end markets, including industrial electrical vehicles, safety systems and military. We are also very pleased with the pace of integration of our sales channels with Renco. In three months, we've identified over one million dollars of cross-selling opportunities in each other's accounts ahead of our expectations. In terms of our second quarter fiscal twenty twenty one outlook, we expect revenue to be sequentially, slightly higher and operating margin to be sequentially similar to the fiscal first quarter. Our outlook assumes improvement in European and North American markets, with Asia results slightly below fiscal first quarter, 2001. Please turn to slide five for discussion of the engraving segment revenue decrease approximately two million dollars, or five point three percent year over year in operating income was lower by approximately six hundred thousand dollars, or ten point two percent. The results reflect the impact of covid-19 our end markets, partially mitigated by productivity and expense savings in the quarter. However, sequentially from Q4, fiscal twenty engraving reported a significant improvement as revenue increased fifteen point one percent and operating margin improved 800 basis points, reflecting an overall increase in the level of customer activity combined with cost efficiency and productivity initiatives, which will continue with the segment.
[00:08:35] Laneway sales are recovering quickly from Q4, growing by twenty seven percent sequentially to eleven point seven dollars million, nearly back to free covid levels and strength and to finishing offerings and software tools. I'm pleased to see the progress our North American negotiating business has made improving labor management through standard work and better capacity planning. Our corporate VP of Operations, hired in February, is collaborating with business management to improve operating procedures and drive efficiencies. In addition, the completion of our global ERP platform will allow additional analysis and improved performance management across all major global sites to further drive consistent performance. As far as second quarter outlook on a sequential basis, standing's expects a slight revenue increase and continued improvement in operating margin in the fiscal second quarter of twenty one, the expected revenue growth reflects an increased level of customer activity due to new automotive launches, along with continued introduction of software and tools and tools initial offerings, we expect to see continued margin improvement from the volume increase, combined with continued cost efficiencies and productivity initiatives. Turning to Slide six, the scientific segment scientific segment revenue increased approximately one point nine dollars million, or 13 percent year on year, reflecting organic growth in end markets, especially retail pharmaceutical chains.
[00:09:57] The sales growth reflects distribution and storage of vaccine for the coming flu season, as well as a few initial orders for covid vaccine storage. Operating income increased approximately four hundred thousand dollars or ten percent year over year, reflecting revenue growth partially offset with reinvestments in the business for future growth opportunities. The picture highlights our undercount of cabinet use for storage of refrigerated and frozen medications and vaccines. Static's is well positioned with strong distribution channels for a leading role in a potential covid-19 vaccine rollout. In the second quarter, we expect to see a sequential and year on year revenue increase, driven primarily by continued positive trends in retail, pharmaceutical chains and clinical end markets and accelerated by the expected rollout of a national covid vaccine. We expect the operating margin to slightly improve, reflecting volume increase balance with reinvestment for future growth opportunities looking further. We expect scientific revenue growth sequentially and year on year in fiscal 2001, with approximately 10 to 20 million dollars of incremental sales to support covid vaccine storage. Turning to the engineering technology segment on Slide seven, as expected, engineering technologies had a challenging quarter. Revenue and operating income decreased seven billion dollars, or twenty eight point four percent, in two point nine dollars million or 86 percent year on year, respectively.
[00:11:20] The first quarter results reflected the economic impact of covid-19 on the commercial aviation market, especially engine parts manufacturing. However, we continue to experience positive trends in the unmanned segment of the space industry and defense sales. In our second quarter, we expect revenue to be sequentially similar to the first quarter as a result of continued weakness in the aviation and market operating margin is expected to increase slightly sequentially, despite aviation and market trends as a result of productivity initiatives and cost reduction activities which are ongoing, we're pleased to show the progress of our efforts to expand capacity in our record plant using lean processes as a result of setup time reduction, improved layouts and process improvements. We've increased throughput 20 percent, positioning us well to support continued growth in our space and markets and deliver higher margins. Please turn to Slide eight Specialty Solutions, which includes the hydraulics, merchandizing and pumps, businesses, specialty solutions, revenue and operating income decreased year on year, although was in line with our expectations. The results would be sequentially similar to the fiscal fourth quarter of twenty twenty. Revenue decreased approximately six point two dollars million, or nineteen point seven percent year over year. The decrease was primarily associated with the economic impact of covid-19 on several end markets, including the food service, equipment and hospitality industries at the pumps and merchandizing businesses and the market.
[00:12:51] Hydraulics operating income decreased approximately one point seven dollars million, or thirty point nine percent year over year, reflecting lower volume partially mitigated by cost reduction efforts. To partially offset these trends, we pursued additional opportunities focused on strengthening the segments margin profile. We continue to allocate hydraulics capacity to higher value opportunities, particularly aftermarket sales. We've also closed a pumps operation in Ireland and outsourced the components previously manufactured there to save approximately one million dollars annually. At the other end, markets are down from the effect of covid-19. The businesses continue to utilize our growth disciplined processes to work with customers on promising future opportunities. The example pictured here is a pump control system that houses eight pumps along with the electronic controls and diagnostics. This is a good example of the business using a structured approach to explore new growth opportunities in an inexpensive manner. As far as outlook and fiscal quarter second quarter twenty twenty one, we expect revenue and operating margin to decline slightly sequentially due to normal seasonality and the lower number of shipping days in the quarter. I will now turn the call over to Ademir, who will discuss our quarterly results in greater detail.
[00:14:08] Thank you, David, and good morning, everyone. First, I will provide a few key financial takeaways from our fiscal first quarter twenty twenty results. Overall results are outside of our expectations. Specifically, revenue at electronics and basic segments was higher than anticipated in the mathematics product line and our electronic segment and vaccine related storage demand that the segment benefited results in the quarter. In addition, our cost efficiency and operational initiatives, which will continue throughout the fiscal year, are providing tailwind to our results. As previously communicated, we are well-positioned to deliver over seven million in annual savings related to cost of financial position remains strong, with substantial liquidity and low leverage complemented by consistent cash flow generation and ongoing cash position efforts. In addition, we have also implemented several initiatives in the area of tax planning and interest expense that will further add to our cash position. Now let's turn to slide nine fiscal first quarter, Twenty twenty one income statement summary. On a daily basis, total revenue declined three percent year on year two hundred fifty one point three million. This reflects organic revenue decline of eight point two percent year on year, mostly due to the economic impact of the covid-19 pandemic, as the expected impact was felt primarily at the engineering technology segment due to weakness in the aviation and market and at the Specialty Solutions segment due to weakness in the food service equipment, the hospitality industry, the RAND Corporation, which closed in early July, conservative revenue of five point nine million or three point eight percent offset to the organic revenue decline, in addition, contributed one point four percent offset to the organic revenue decline.
[00:15:52] Gross margin decreased by 20 basis points, primarily due to a decline in volume and increased material costs year on year, mostly in electronics on a sequential basis, gross margin increased 290 basis points, affecting cost outcome, productivity and favorable product mix are adjusted. Operating margin was 11 percent compared to eleven point three percent a year ago. Interest expense decreased approximately six hundred thousand dollars year on year, mostly due to a lower overall interest rate as a result of the variable to fixed rate. We implemented in fiscal third quarter of Twenty twenty. In addition, the tax rate of 22 percent in the quarter represents 580 basis points decrease year on year, largely due to various tax planning strategies we have started to implement. I jotted down especially over ninety six cents in the first quarter of Twenty twenty one compared to 91 cents in the first quarter of Twenty twenty. Now, please don't just listen fiscal first quarter, Twenty twenty on free cash flow. There remain a persistent generator of free cash flow reported free cash flow, four point four million, compared to two point eight million in the first quarter of Twenty twenty. This increase dramatically reflects lower capital spending, with four point eight million in the first quarter Twenty twenty one, compared to six point seven million a year ago.
[00:17:10] Capital investments in the first quarter 21 one focused on maintenance, safety and a high priority growth initiatives. Next, please turn to slide 11, a summary of sentences, capitalization, structure and liquidity statistics, which remain very strong. Let's have an attack on a six point two million at the end of September, compared to eighty point three million at the end of June of Twenty twenty increase in net. That is due to the record position, which was financed with cash on hand. And debt for the first quarter of twenty twenty one consisted primarily of long term debt. Two hundred million in cash and cash equivalents of ninety three point seven million dollars, seventy five point seven million was held by foreign substance. We also had approximately two hundred six million available liquidity at the end of September. The company's net debt suggests that the EBITDA leverage was one point one with a net debt, the total capital ratio of eighteen point two percent and interest coverage ratio of approximately nine point nine times. We also continue to proactively identify opportunities to further acts of a national strength. We can start to implement several tax planning saving initiatives, including implementation of strategies to optimize the gas tax, cost of global intangible tax income, implementation of various tax credits, optimization strategies that are expected to provide us the ability to utilize additional credits, and the filing of amended returns to take advantage of regulations that have recently been finalized as a result of tax rates and fiscal twenty twenty one is expected to be approximately 22 percent or 500 basis points lower than fiscal twenty twenty.
[00:18:43] We expect these actions to result in cost savings of two to two million in fiscal twenty twenty from. We also expect approximately one point five million in annual interest expense savings due to the previously announced floating rate interest swaps. We also repatriated eight million in the first quarter and expect to repatriate 35 million this fiscal year. From a capital allocation perspective, we've had an active quarter earlier in the quarter, we announced the acquisition of electronics for approximately 28 million, which was financed with cash on hand. We also repurchased approximately eighty seven thousand shares for 5.1 million in the quarter. There's approximately thirty eight million remaining under the board's current repurchase authorization. We declared our two hundred twenty fifth consecutive quarterly dividend of 24 cents per share, a nine percent year over year increase. And finally, we expect capital expenditures to be approximately 25 to 28 million compared to a prospective range of between 28 to 30 million and what expenditures of 19 million in fiscal twenty twenty. I will now turn the call over to David for closing comments.
[00:19:49] Thank you, Ademir. If and if everyone could please turn to Slide 12 for closing thoughts. Key takeaways in the second quarter of fiscal twenty twenty one, we expect consolidated revenue to be flat to slightly above the first quarter of twenty twenty one, with a slight to moderate increase in operating margin. Several assumptions underpin this outlook. We expect the electronics and engraving segments to have a slight sequential revenue increase due to an increased level of customer activity and scientific. We expect a moderate sequential revenue increase as and market momentum builds to prepare for vaccine delivery engineering technologies. Revenue is expected to be similar to fiscal first quarter twenty twenty one as commercial aviation markets stabilize with a slight increase in operating margin for productivity and cost reduction activities. At Specialty Solutions, we expect revenue and operating margins to decrease slightly, primarily due to seasonality and the lower number of shipping days in the quarter. In general, we expect continued growth and margin improvement as we move through fiscal twenty twenty one. In addition, we see attractive growth opportunities across the businesses. In the near term, we anticipate the opportunity for covid-19 vaccine storage to be between 10 and 20 million dollars in the fiscal year. The growing funnel of opportunities in electronics will deliver an incremental eleven million dollars in sales in the fiscal year. Previous cost actions complete and expected to deliver over seven million dollars in savings in fiscal 21. Operational excellence initiatives are gaining momentum across all businesses. We are also strengthening financial flexibility with strong, free cash flow generation, continued cash repatriation and new tax initiatives. In some, we're very well positioned to further build our higher margin business segments into more significant platforms with customized, differentiated solutions supported by deep technical and applications expertize. Operator, please open the line for questions.
[00:21:46] Thank you. We will now begin the question and answer session. So ask the question star then one on your customer using speakerphone. We asked you please pick up the keys to your question, please. Press started to list. First question comes from crestmore WJR Securities. Please go home.
[00:22:06] Hey, good morning guys. Morning. Good morning. Yeah, maybe start with some engraving. The engraving margins were certainly rebounded more quickly than we were expecting. Can you you talk a little bit further in terms of kind of what was behind that?
[00:22:26] Well, yeah, last quarter we announced that the entire industry kind of took a pause as tools couldn't couldn't be released from tool shops into our shops, in part because of collaborative meetings couldn't take place. So that has really opened up. So obviously we saw it. We saw volume increase, but at the same time, we put a lot of effort into improving the operating disciplines, integrating particularly in North America. You know, I mentioned our view of operations. Jim Hooven is working closely with that, with that business, improving the labor management practices and leveraging the investment we made in the last few years in a global ERP system so we can just improve our our local operating disciplines in a common way around the world. And it's first really showing up in North America.
[00:23:17] God is helpful, maybe on the electronic side. Talk a little bit more about the improvement there that Renco integration sounds like when it goes off to a pretty good start.
[00:23:30] Yeah, yeah. We are really pleased with the first few months of integration with with first of all, culturally, it's a great fit. You know, they'll they'll be a great member of the standing family. And they're bringing some things to us. For example, they had they had some practices they put in place for their covid response protocols that we that we've been able to duplicate, that we learned from. I mentioned in the in the in the script earlier that the cross-selling opportunities are ahead of what we expected. So the sales channels are really coming together well, and they're and their profitability is running ahead of our model. So we're very happy on that front. More broadly in electronics, North America struck. Asia was stronger than we thought it would be. And Europe really started to come along towards the last part of the quarter. And if you cut it between the sensor and the magnetics business, you know, we're seeing a lot of strength in the magnetics customers here, especially in North America.
[00:24:30] Got it. Appreciate that. Just in terms of the seven million in cost savings, fiscal 20, maybe talk a little bit more about the expected cadence. And I just want to assume that all that will flow through into fiscal 22.
[00:24:48] Yes, we could tell him, yes, that's correct. You know, we we feel really good about where we are with all of our cosseting assets. If we continue to see the lead out as we move to this fiscal year and the year before, we expect that to continue to to.
[00:25:03] And then in terms of of, you know, kind of that cadence during during fiscal twenty one, is it is it more backloaded on the savings or is it kind of smoother?
[00:25:14] Most of the savings year to year, we will see probably in the first three quarters, you know, in the fourth quarter of last fiscal year, we had about a quarter point to four point two dollars worth of savings. And some of those are not going to repeat. So, you know, Q1 to Q2 is where you would see most of that seven million dollars without.
[00:25:34] Got it. Thank you. And then on the tax rate side, it looks like twenty two percent for fiscal 2001. Obviously, you know, we don't know what impact the elections will have on on tax rates moving forward. But from where you sit today, is there any reason to think that that rate would not flow, you know, into fiscal 20 to.
[00:25:56] Chris, based on we sit where we sit today, you know, we believe that the range and physical contact who might take up a little bit, you know, maybe to twenty three percent, but still significantly lower than what was our tax rate in the prior fiscal year. You know, again, you know, kind of where we are today without knowing if there's going to be changing in administration or new tax laws.
[00:26:19] Got it. Very helpful. All right, I'll jump back in line, let somebody else have a chance. Thanks, guys. Thank you.
[00:26:38] Hello, Rocco. Anyone else in the question queue?
[00:26:43] I apologize, my line was our new products comes from our burns research.
[00:26:50] Good morning, everyone.
[00:26:53] Good morning, Chris.
[00:26:54] Good morning. I wanted to highlight here the scientific segment. David had mentioned the Twenty twenty million of incremental sales. As we look to this fiscal year, if we look below the top line, you had twenty four and a half percent operating margin this quarter. We expect some improvement on that going into Q2. Perhaps you can talk a little bit more on the margin line, how we expect maybe the remainder of the year to play out as we look at investments you are making in this segment versus opportunities for margin expansion.
[00:27:30] Yeah, well, I think the margins in the in those low, low 20s is still is certainly reasonable expectation. This business level as well. The products that will sell are our standard products. So they will deliver the same margins as our core business. The investments we're making in the business are are largely in the short term to support the growth, of course.
[00:27:56] But we're also investing in engineering capability. We have a very active new product development funnel and as the quarters roll on, we'll begin announcing some new products. So our of our plan here is to invest but invest appropriately.
[00:28:12] And we're not we're not going to lower the cost structure and reduce the even rates continue to expect even rates that you've that you've seen in this business.
[00:28:28] Help is helpful if we shift back to engraving, following up on some of the previous questions, good margin recovery, recovery sequentially in the quarter, some of that is tools being released into the quarter from Q4. If we strip that out, margin still came in at around the same level.
[00:28:52] Yeah, yeah, well, yeah, it was you know, this business levers very nicely, so the volume is important because it's with high fixed cost base as a service business with 60 to 70 percent of business. But you know, the example we provided in here we are.
[00:29:09] We are we're delivering work with fewer labor hours in North America. And that is a that is a lasting productivity improvement in the business.
[00:29:23] Ok. Very helpful in that you see a relatively sustainable I know we don't know what's going to happen with all these different variations of a resurgence, but that improvement you're seeing in Q2, we think that can be relatively sustained as we get into Q3 and Q4, barring any kind of unseen economic disruption.
[00:29:45] Yeah, you know, on both fronts, the indications we get from our customers is that pretty steady outlook for the market and these these practices that are being put in place, they are the standard work and improved operating discipline to deliver consistently better results.
[00:30:01] So, yes, you know, we're we're counting on them continuing.
[00:30:06] Great. My last question is. And level basis, more specifically, perhaps, how they did on a monthly basis in the quarter. If we look at that trend and what you're seeing currently in October, has there been any shift or change in the trend line? Or perhaps you can talk about how the mix was as it played out from month to month. So, Chris, you cut out just one word and there, which was that we were referring to a specific business or the corporation overall in that question corporation overall, if we were to split it out by month in the quarter and then what you're seeing in October, any change in behavior.
[00:30:54] No, I wouldn't say so, too, does the outlook statements we gave throughout to kind of reflect our aggregate view of the business.
[00:31:02] And I think, you know, we're looking for sequential growth through the year and we're seeing that in our backlog and our customer activity. And as you go through your segment by segment, we modulate those statements based on based on what we're hearing from our customers.
[00:31:22] Got it. That's all I have for now. Asia-Pac, thanks. Thank you.
[00:31:27] And our next question comes from Chris McGinnis with Stability and Company, please go ahead.
[00:31:32] Good morning. Thanks for taking my phone call. I have a lot of my questions have been answered, but I guess if we could just talk about not stay on the engraving, but just the benefit you saw from the productivity gains that we put in place. When you look across the five segments, you know, where the other areas that you really kind of focus on driving productivity gains with Jim now at the helm.
[00:31:59] Well, you're roughly Ademir may correct me here. If I look at the quarter sequentially to Q1 compared to Q4, that's probably five hundred eight hundred K and engraving from from productivity.
[00:32:13] And we have a great example of productivity in engineering technologies, which which actually is a little farther down the line in an adoption of lean and driving of productivity improvements, in part because of in the markets they serve, very demanding customers require them to be to be a little more advanced. So a couple of years ago, we recognized that in in the plant where we manufacture domes for spacecraft, we were headed for capacity constraints in the coming year or two.
[00:32:46] So they started a project to reduce set time and then just flowed downstream from there from the critical machines to expand capacity. And as of today, they've expanded their capacity by 20 percent. And that's a great example. We obviously lever that fixed cost structure across 20 percent more volume. So that's that's a great example in both electronics and scientific. You know, Jim and his team are working with those businesses to put in place sales, inventory and operations planning process. So there's a tighter coupling between the demand forecast from sales and the the capacity, planning and operations, and especially in a couple of those who we have long supply chains with our with our suppliers, you know, getting that getting that balance right. When you've got a 12 say, for example, a 12 week lead time on some components and we call it a three to four week lead, time to customers, the more disciplined CI process there will will help them optimize their their cash management and their on time delivery over time.
[00:33:52] So so the Jim's working across all the businesses to varying degrees, depending on what their needs are, with a particular emphasis in the near-term on engraving in North America.
[00:34:04] Yeah. And quickly, if I can add, you know, engraving is all about labor management, very little material content in the in the business. So we can still believe our management. You know, that business levels are pretty nicely the in.
[00:34:18] What's the successor to Jim Talent versus maybe the prior. I know. You know, I think you had a couple of people in that in that position before. What's the difference that Jim brings that's making it so successful so early on?
[00:34:31] Yeah, you know, the first time, the first the first couple of cracks at this, we we fill the job, the OpEx roll with someone who is a good with individual great teachers, who could run events, who could help with, you know, with process improvements.
[00:34:49] Jim was an operator. He was a plant manager. He was a leader.
[00:34:54] So as opposed to simply being a teacher or an instructor or an event leader, he also knows how to run a business. And so that additional credibility has helped him to sit down with with our businesses, really assess the entirety of the problems they have and with a lot of credibility, outlined a plan of attack. So you have having that that hands on experience in the past was it was a critical differentiator for Jim.
[00:35:24] That isn't just some of the comments and the relief around opportunities around M&A. We just expand on what you're kind of seeing. Are you seeing more companies since last the last quarter approach? You you just talk about how your pipeline setting up revenue potential. I'm there going forward.
[00:35:43] Yeah. Yeah. So our we have quite an active funnel. We continue to work the pipeline all year long, although most people took a step back, you know, throughout this year just to see how the market would develop. But we continue to maintain our relationships and our contacts with the owners of these these businesses that we think at some point will be will be good opportunities. And I would say now, as we get closer to the end of the year, there are a couple of them are starting to starting to simmer and look like they may become actionable in the coming quarters. I guess I have to say I was surprised a little bit that we didn't get as many unsolicited, unexpected inbound. Opportunities coming to our attention, we had kind of cross our fingers that coming into this year with a strong balance sheet, there be some unexpected opportunities that came up. But we did not see too much of that. But we feel like we have a great following. We have great balance sheet.
[00:36:42] And I think that the string of successful acquisitions will continue into the next year.
[00:36:51] Great. I appreciate it. Thanks for answering my questions. Good luck to you, too.
[00:36:54] Yeah, thank you, Chris.
[00:36:56] And ladies and gentlemen, as a reminder, if you'd like to ask a question, please, press star, the one at this time, we'll pause momentarily to assemble our roster. Families and settlements includes the question and answer session. Turn the conference back over to the management team for the final remarks.
[00:37:16] All right, thank you, Rocco. In closing, we are off to a solid start in fiscal twenty twenty one very excited at the results we were able to to communicate today, very proud of the employees globally around X who have responded to this these unprecedented circumstances we all live in with great agility and adaptability and a heightened degree of collaboration and teamwork around the world, making us all proud to be part part of this company. I also want to thank shareholders for your continued support and your interest in Stand X, and we look forward to speaking with you again this second quarter, Fiscal 21 call. Thank you.
[00:37:55] And thank you, sir. This includes today's conference call with thank you all for attending today's presentation. You, me, go to Switzerland and have a wonderful day. Thank you.