Eastern Company (EML) 2023 Q4 法說會逐字稿

(audio in progress) (Operator Instructions) Please note this conference is being recorded. I will now turn the conference over to your host, Mr. [Ernie Hawkins]. Sir, you may begin.

（音訊正在進行中）（操作員指示）請注意，本次會議正在錄製中。我現在將會議轉交給東道主[厄尼·霍金斯]先生。先生，您可以開始了。

Thank you. Good morning, and thank you, everyone, for joining us this morning for a review of Eastern's results for the fourth quarter and full year 2023. With me on the call are Eastern's President and CEO, Mark Hernandez; and Eastern's CFO, Nicholas Vlahos. We issued an earnings press release yesterday after the market closed. If anyone has not yet seen the release, please visit the Investors section of the company's website, www.easterncompany.com where you will find the release under Financial News.

謝謝。早安，謝謝大家今天早上和我們一起回顧東方航空 2023 年第四季和全年的業績。與我一起參加電話會議的是東方航空總裁兼執行長馬克‧埃爾南德斯 (Mark Hernandez)；以及東方航空財務長尼古拉斯‧弗拉霍斯 (Nicholas Vlahos)。昨天市場收盤後，我們發布了收益新聞稿。如果有人尚未看到新聞稿，請造訪該公司網站 www.easterncompany.com 的投資者部分，您可以在「財經新聞」下找到該新聞稿。

Please note that some of the information you will hear during today's call will consist of forward-looking statements about the company's future financial performance and business prospects, including without limitation, statements regarding revenue, gross margin, operating expenses, other income and expenses, taxes, and business outlook. These forward-looking statements are subject to risks and uncertainties that could cause actual results or trends to differ significantly from those projected in these forward-looking statements.

請注意，您在今天的電話會議中聽到的一些資訊將包括有關公司未來財務業績和業務前景的前瞻性陳述，包括但不限於有關收入、毛利率、營運費用、其他收入和費用、稅收的陳述，以及業務前景。這些前瞻性陳述存在風險和不確定性，可能導致實際結果或趨勢與這些前瞻性陳述中預測的結果或趨勢有顯著差異。

We undertake no obligation to review or update any forward-looking statements to reflect events or circumstances that occur after the call. For more information regarding these risks and uncertainties, please refer to risk factors discussed in our SEC filings, including Form 10-K filed with the SEC on March 12, 2020 form for the fiscal year 2023.

我們沒有義務審查或更新任何前瞻性陳述以反映通話後發生的事件或情況。有關這些風險和不確定性的更多信息，請參閱我們向 SEC 提交的文件中討論的風險因素，包括 2020 年 3 月 12 日向 SEC 提交的 2023 財年 10-K 表。

In addition, during today's call, we will discuss non-GAAP financial measures measures that we believe are useful as supplemental measures of Eastern's performance. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. A reconciliation of each of the non-GAAP measures discussed during today's call to the most directly comparable GAAP measure can be found in the earnings press release. With that introduction, I'll turn the call over to Mark.

此外，在今天的電話會議中，我們將討論非公認會計準則財務指標，我們認為這些指標可作為東方航空績效的補充指標。這些非公認會計原則措施應作為公認會計原則結果的補充，而不是替代或孤立於公認會計原則結果。在今天的電話會議中討論的每項非公認會計準則衡量標準與最直接可比較的公認會計準則衡量標準的調節可以在收益新聞稿中找到。介紹完畢後，我會將電話轉給馬克。

Thank you, Ernie. Good morning to those who are joining us by the phone and those participating via the web. It's an absolute pleasure to be speaking with you today after a year of realignment and continuous improvement during which we focused on our core operations for long-term growth and shareholder value creation. As you know, since I became CEO in January of 2023, we've been following four fundamental strategies, disciplined operations, effective capital utilization, focused commercial business and value adding acquisitions.

謝謝你，厄尼。對於那些透過電話加入我們和透過網路參與的人來說早安。經過一年的調整和持續改進，我們專注於核心業務以實現長期成長和創造股東價值，今天很高興能與您交談。如您所知，當自我於 2023 年 1 月擔任執行長以來，我們一直遵循四項基本策略：紀律嚴明的營運、有效的資本利用、專注的商業業務和增值收購。

To those four pillars we recently added a key overlying component we call one Eastern to help us capture the many synergies that exist between our three business operations. During 2023, our determined application of Eastern's strategies produced increasingly strong results as '23 progressed. For the full year, we boosted our gross margins by 280 basis points from 21% in 2022 to [28 or] 23.8% in 2023 through onshoring, pricing increases, and cost recovery actions. Earnings from operations improved continuously each quarter, culminating in earnings per share of $0.57 in the fourth quarter of 2023 compared to $0.03 in last year's period.

對於這四個支柱，我們最近添加了一個關鍵的疊加組件，我們稱之為“東方”，以幫助我們捕捉三個業務運營之間存在的許多協同效應。2023年，隨著「23」的進展，我們對東方戰略的堅定應用產生了越來越強勁的成果。透過在岸外包、漲價和成本回收行動，我們全年的毛利率提高了 280 個基點，從 2022 年的 21% 提高到 2023 年的 [28 或] 23.8%。每季的營運收益持續成長，最終每股收益在 2023 年第四季達到 0.57 美元，而去年同期為 0.03 美元。

We achieved these results while dealing with the lingering impacts of troubled supply chains with customers reducing their inventory levels as global supply chain finally returned to its pre-pandemic state and with high inflation that hadn't been experienced for several decades. In addition to improving quality and consistency of our earnings, we brought down past due deliveries and past to order backlog. And we ended the year with working capital as a percentage of sales of 25.6% compared with 26.1% in 2022.

我們在取得這些成果的同時，也應對了陷入困境的供應鏈帶來的揮之不去的影響，隨著全球供應鏈最終恢復到大流行前的狀態以及幾十年來從未經歷過的高通膨，客戶降低了庫存水準。除了提高收入的品質和一致性之外，我們還減少了逾期交貨和逾期訂單積壓。截至年底，我們的營運資金佔銷售額的比例為 25.6%，而 2022 年為 26.1%。

By reducing working capital requirements and generating cash flow from continuing operations, we brought down debt by more than $20 million. Cash flow from operations improved to $26.5 million in 2023 compared to $7.4 million last year. And our balance sheet strengthens commensurately. While achieving these results, we continued investing in our company and returning capital to shareholders.

透過減少營運資金需求並透過持續經營產生現金流，我們減少了超過 2,000 萬美元的債務。營運現金流從去年的 740 萬美元增至 2023 年的 2,650 萬美元。我們的資產負債表也隨之增強。在取得這些成果的同時，我們繼續對公司進行投資並向股東返還資本。

During 2023, we streamlining operations, consolidating our focus on North America and in an example of vertical integration, we bought certain assets of Sureflex Incorporated to expand Velvac production capabilities. We also maintained Eastern's long-standing dividend program and repurchased 40,000 shares or approximately 0.6% of the company stock.

2023 年，我們精簡了運營，鞏固了對北美的關注，並以垂直整合為例，我們購買了 Sureflex Incorporated 的某些資產，以擴大 Velvac 的生產能力。我們還維持了東方航空長期的股息計劃，並回購了 40,000 股，約占公司股票的 0.6%。

In 2023, our transformation strategy delivered strong early results, and we expect to drive further improvements in 2024. We now have a solid operational foundation. We need to consider revenue-enhancing acquisitions that will help Eastern grow and vertical integration initiatives that will support gross margin improvement.

2023 年，我們的轉型策略取得了強勁的早期成果，我們預計將在 2024 年推動進一步改進。我們現在擁有堅實的營運基礎。我們需要考慮有助於東部成長的增加收入的收購和支持毛利率提高的垂直整合計劃。

Before I outline our approach for this year, I'll turn the call over to Nick for a quick review of the fourth quarter of 2023 financial results. Nick?

在概述我們今年的方法之前，我將把電話轉給尼克，讓他快速回顧一下 2023 年第四季的財務表現。缺口？

Thank you, Mark, and good morning, everyone. As Mark said, I'll run through our financial results for the fourth quarter 2023. For the period, net sales decreased 3% to $67 million from $69.1 million in the 2022 period, primarily due to lower demand for truck accessories and returnable transport packaging products amidst the normalization of the global supply chain. In the fourth quarter, we strengthened our backlog as a whole, while at the same time reducing our past due backlog.

謝謝你，馬克，大家早安。正如 Mark 所說，我將概述 2023 年第四季的財務表現。期內淨銷售額從 2022 年的 6,910 萬美元下降 3%，至 6,700 萬美元，主要是由於全球供應鏈正常化期間對卡車配件和可回收運輸包裝產品的需求下降。第四季度，我們整體加強了積壓，同時減少了逾期積壓。

Our backlog as of December 30, 2023, increased 10.5% to $80 million from $72.5 million on December 31, 2022, reflecting an increase at Big 3 for home services and returnable packaging and increase related to the launch of a new mirror program for Class-8 trucks at Velvac.

截至2023 年12 月30 日，我們的積壓訂單從2022 年12 月31 日的7,250 萬美元增加了10.5% 至8,000 萬美元，反映了三大巨頭在家庭服務和可回收包裝方面的增長，以及與針對Class- 推出新鏡像計劃相關的成長。

Gross margin as a percentage of sales in the fourth quarter was 26.8% compared to 16.6% in the 2022 period. The increase and margin primarily reflects lower material, freight costs, improved pricing, and a favorable adjustment to LIFO reserve in the fourth quarter of 2023, combined with other inventory write-offs in the 2022 period.

第四季毛利率佔銷售額的百分比為 26.8%，而 2022 年同期為 16.6%。這一增長和利潤率主要反映了材料、運費成本的降低、定價的改善以及 2023 年第四季度對 LIFO 儲備的有利調整，以及 2022 年期間的其他庫存沖銷。

As a percentage of net sales, price development expenses were 2% compared to 1.5% for last year's fourth quarter. Selling and administrative expenses increased $1.9 million or 19.9% for the fourth quarter of 2023. The increase was primarily due to higher payroll and payroll-related expenses, legal and professional, and selling costs. Other income and expense in the fourth quarter of 2023 decreased $3.2 million compared to the 2022 period. The decrease primarily reflected a favorable $1.1 million pension adjustment and various other items.

價格開發費用佔淨銷售額的百分比為 2%，去年第四季為 1.5%。2023 年第四季銷售和管理費用增加 190 萬美元，即 19.9%。這一增長主要是由於工資和工資相關費用、法律和專業費用以及銷售成本增加。與 2022 年同期相比，2023 年第四季的其他收入和支出減少了 320 萬美元。這一減少主要反映了 110 萬美元的有利退休金調整和各種其他項目。

Net income for the fourth quarter of 2023 increased to $3.5 million or [$0.5] -- $0.56 per diluted share from $0.2 million or $0.03 per diluted share in the 2022 period. In the fourth quarter of 2022, net income was negatively impacted by restructuring costs of $0.5 million, net of tax related to a warehouse consolidation into Eberhard.

2023 年第四季的淨利潤從 2022 年的 20 萬美元（即稀釋後每股 0.03 美元）增至 350 萬美元（即稀釋後每股 0.56 美元），即 [0.5 美元]。2022 年第四季度，淨收入受到 50 萬美元重組成本的負面影響（扣除與 Eberhard 倉庫合併相關的稅費）。

Adjusted EBITDA from continuing operations, a non-GAAP measure for the fourth quarter of 2023 was $7.2 million compared to $3.3 million for the fourth quarter of 2022. In 2023, we increased our cash flow from operations by $19 million when compared to 2022. The improvement reflects a reduction in cash used to support working capital, primarily a $5.3 million decrease in inventory. In 2023, we reduced our accounts receivable days to 48 days from [66] days in 2022. By comparison last year, cash was primarily used to ensure the availability of inventory to meet customer demand in light of the supply chain constraints.

根據非公認會計準則衡量，2023 年第四季來自持續經營業務的調整後 EBITDA 為 720 萬美元，而 2022 年第四季為 330 萬美元。與 2022 年相比，2023 年我們的營運現金流增加了 1,900 萬美元。這一改善反映了用於支持營運資金的現金減少，主要是庫存減少了 530 萬美元。2023 年，我們的應收帳款天數從 2022 年的 [66] 天減少到 48 天。與去年相比，鑑於供應鏈的限制，現金主要用於確保庫存的可用性，以滿足客戶的需求。

With this cash flow, we paid down $5 million of debt during the fourth quarter and $20 million for the full year. This is a record level of debt paydown for Eastern. At the end of the fourth quarter, our senior net leverage ratio was 1.41:1, down from [2.27] at the end of 2022. In addition, we invested $6.4 million in capital expenditures and paid dividends of $2.8 million in 2023.

有了這筆現金流，我們在第四季償還了 500 萬美元的債務，全年償還了 2,000 萬美元的債務。這是東方航空創紀錄的債務償還水準。截至第四季末，我們的高階淨槓桿率為 1.41:1，低於 2022 年底的 [2.27]。此外，我們還投資了 640 萬美元的資本支出，並在 2023 年支付了 280 萬美元的股息。

That completes my financial review. I'll now turn the call back.

我的財務審查就這樣完成了。我現在將回撥電話。

Thanks, Nick. At this point, I'll turn o our plans for 2024 and beyond. First and foremost, we continue going -- we're going to focus on delivering consistent performance through our proven strategy of disciplined operations, effective capital utilization, focused commercial business, and value-added acquisitions all under the umbrella of one Eastern. The difference between today and our fourth quarter call last year, and it's important one, is that we now have a solid foundation of reliable earnings from operating activities to build on. The foundation positions us to continue driving earnings and cash flow, paying down debt, and as I mentioned earlier, to seriously considering and pursuing M&A opportunities that accelerate our objectives while continuing to focus on vertical integration to drive margin increases.

謝謝，尼克。此時，我將放棄 2024 年及以後的計畫。首先也是最重要的，我們將繼續前進——我們將透過我們行之有效的紀律運營、有效的資本利用、專注的商業業務和增值收購策略，集中精力提供一致的業績，所有這些都在一個東方的保護下。今天的電話會議與我們去年第四季的電話會議之間的差異很重要，那就是我們現在擁有可靠的營運活動收益的堅實基礎。基金會使我們能夠繼續推動盈利和現金流、償還債務，並且正如我之前提到的，認真考慮和尋求加速我們目標的併購機會，同時繼續專注於垂直整合以推動利潤率增長。

In 2024, we expect our goals to be aligned, aided by continued strong sales demand in the automotive and commercial vehicle markets. Organic growth activities through new products and market share improvements as well as acquisitions. Our competence is supported by our $7.6 million increase in backlog as of year end 2023 to $80.1 million. This increase took place even as the global supply chain normalized. Customers cut back on excess inventory, and we reduced our past-due backlog.

到 2024 年，我們預計在汽車和商用車市場持續強勁的銷售需求的幫助下，我們的目標將保持一致。透過新產品和市場份額的提高以及收購進行有機成長活動。截至 2023 年底，我們的積壓訂單增加了 760 萬美元，達到 8,010 萬美元，這為我們的能力提供了支持。即使全球供應鏈正常化，這種成長仍然發生。客戶減少了多餘的庫存，我們也減少了逾期積壓。

It is a strong indication of the new orders we're generating, including Velvac's launch of a new mirror program for Class-8 trucks and for Big 3's mold services and returnable packaging. We have many initiatives underway to enhance our gross margins even further through reductions in product costs, concentrating on total landed costs through our vertical integration [make versus buy] strategies and spending rationalization efforts.

這有力地表明了我們正在產生的新訂單，包括 Velvac 為 8 級卡車以及 Big 3 的模具服務和可回收包裝推出的新鏡子計劃。我們正在採取許多舉措，透過降低產品成本進一步提高毛利率，透過垂直整合[自製與外購]策略和支出合理化努力來集中控制總到岸成本。

In addition, we've taken steps to ensure we have the right culture and opportunities in place to enable our teammates are Eastern's greatest resource to drive the company forward every day. We've created achievable plans for each of the three businesses, changed our structure to realize synergies across our disparate companies, and strengthening our incentive system. So it properly rewards cross-functional collaboration. Through these efforts, we're working to achieve more than what any one division is capable.

此外，我們還採取措施確保我們擁有正確的文化和機會，使我們的隊友成為東方航空每天推動公司前進的最大資源。我們為這三項業務分別制定了可實現的計劃，改變了我們的結構以實現不同公司之間的協同效應，並加強了我們的激勵體系。因此，它適當地獎勵了跨職能協作。透過這些努力，我們正在努力實現超越任何一個部門能力的目標。

We are also repositioning or all three of our businesses and reviewing our global footprint, analyzing how to improve our assets and optimize Eastern's sufficiency. At Eberhard, for example, we are enhancing our portfolio of electromechanical products, focusing on new geographies and sectors, including government, where we can expand our business. At Velvac, we're expanding our solutions for aftermarket in ways that will augment existing relationships. At Big 3, we're taking steps to leverage our metal fabrication and machining capabilities to increase performance.

我們也正在重新定位我們的全部三項業務，並審查我們的全球足跡，分析如何改善我們的資產並優化東方航空的充足性。例如，在艾伯哈德，我們正在增強我們的機電產品組合，並專注於新的地區和部門，包括政府，我們可以在其中擴展我們的業務。在 Velvac，我們正在以增強現有關係的方式擴展我們的售後市場解決方案。在 Big 3，我們正在採取措施利用我們的金屬製造和加工能力來提高性能。

To sum up, we are committed to achieving operational excellence by focusing on Eastern's operating costs, quality, on-time delivery, and especially employee safety. We expect our company to continue to play a unique role in the industry, embraces the move toward electrification, the rejuvenation of internal combustion engine market, digitization, and automation. We believe our capabilities are closely aligned with sustainable mobility, whether it be internal combustion engine or electric and through sustainable returnable packaging and commercial vehicle accessories that increase improvement in miles per gallon, but -- will result in increased miles per gallon by reducing wind resistance.

總而言之，我們致力於透過關注東方航空的營運成本、品質、準時交貨，尤其是員工安全來實現卓越營運。我們期望公司繼續在行業中發揮獨特作用，擁抱電氣化、內燃機市場復興、數位化和自動化。我們相信，我們的能力與可持續交通密切相關，無論是內燃機還是電動汽車，以及通過可持續的可回收包裝和商用車配件來提高每加侖行駛里程，但是- 將通過減少風阻來增加每加侖行駛里程。

With that overview, let's open the floor to questions.

有了這個概述，我們就可以開始提問了。

Okay. So I think we'll -- go ahead operator.

好的。所以我想我們會——操作員繼續。

Sorry, I interrupted you, please Continue.

抱歉，打擾了，請繼續。

We will take questions from the web. First, we do have a few questions. First question, you grew gross margin by 280 basis points in 2023, how should we think about margin expansion in 2024? Is another 280 basis point expansion possible?

我們將從網路上回答問題。首先，我們確實有幾個問題。第一個問題，2023年毛利率成長了280個基點，我們該如何看待2024年的利潤率擴張？是否有可能再擴張 280 個基點？

As I mentioned in our previous calls, we have aspirational goals to always increase gross margins as far as we can extend them. And this is supplemented by our cost improvement efforts through one Eastern utilizing one Eastern to lower our -- strengthen our position for purchasing as well as vertical integration activities where we're bringing stuff in-house that we would normally pay outside services to other companies. So yes, I believe that we can continue this effort to grow gross margins.

正如我在之前的電話會議中提到的，我們有一個雄心勃勃的目標，那就是盡可能提高毛利率。我們透過一個東方公司利用一個東方公司來降低我們的成本改進努力，以加強我們在採購和垂直整合活動中的地位，在這些活動中，我們將通常會向其他公司支付外部服務費用的東西帶入內部。所以，是的，我相信我們可以繼續努力提高毛利率。

And next question, as you get more active in M&A, what are your criteria in terms of size and profitability, which business offers the most attractive opportunities.

下一個問題是，隨著您在併購方面變得更加積極，您在規模和盈利能力方面的標準是什麼，哪些業務提供了最具吸引力的機會。

Both. Let start it with Sureflex. We want to take the crawl walk and run strategy going forward. We're looking for things first on the vertical acquisition space, that are smaller in nature, but can help our operations currently but that currently exist today and improve our gross margins as well as we're always looking for acquisitions that can add to our revenue enhancing capabilities and leverage the one Eastern strategy as we fold them into the Eastern Company.

兩個都。讓我們從 Sureflex 開始吧。我們希望繼續採取爬行和跑步的策略。我們首先在垂直收購領域尋找東西，這些空間本質上較小，但可以幫助我們目前的運營，但目前存在並提高我們的毛利率，並且我們一直在尋找可以增加我們的收購當我們將其納入東方公司時，我們會利用增強收入的能力並利用單一東方策略。

Next question. Mark, you've been CEO of Eastern for nearly a year. Can you share any learnings from the past year that you'd like to implement in the coming year?

下一個問題。馬克，你擔任東方航空執行長已經近一年了。您能否分享一下過去一年中您希望在來年實施的經驗教訓？

Well, it's been a year of learning for me personally, but putting strategies on paper are just what -- just half the story. Its actually the easier to have -- to put a strategy on paper. What's the challenge that I've seen in learning I have is getting everybody on the same page to pull towards one Eastern. And we continue that effort. We've made significant progress, and that's what led to the launch of the one Eastern strategy. Now all of our companies are not only looking to win for themselves, but looking to win for Eastern.

嗯，對我個人來說這是學習的一年，但將策略寫在紙上只是故事的一半。實際上，將戰略寫在紙上更容易。我在學習過程中遇到的挑戰是讓每個人達成共識，共同走向東方。我們將繼續這項努力。我們已經取得了重大進展，這導致了東方同一個戰略的啟動。現在我們所有的公司不僅要為自己贏得勝利，而且要為東方贏得勝利。

Revenue was down when compared to the prior year quarter and prior year, while earnings have strengthened. How do you see this going forward?

與去年同期和去年同期相比，收入有所下降，但獲利有所增強。您如何看待這股趨勢？

While I look at this in two level, break it up into two pieces. One is as supply chains normalize, there was a reduction in -- I call just-in-case inventory where our customers were buying extra inventory to protect themselves against the unreliable supply chains. So we see that resulted in our revenue as they cut back on their orders.

當我從兩個層面來看這個問題時，請將其分成兩部分。一是隨著供應鏈正常化，我稱之為以防萬一庫存減少，我們的客戶購買額外的庫存以保護自己免受不可靠供應鏈的影響。因此，我們看到，隨著他們減少訂單，我們的收入也隨之增加。

I also see it as some headwinds that we know happened in the commercial vehicle industry as suppliers struggle to enhance the supply chain so that the OEMs can increase their production levels to normal. And then that was coupled with some of the packaging solutions projects that are happening at its consumer packaging side, not to be as robust as in previous years.

我還認為這是商用車行業中發生的一些逆風，因為供應商努力增強供應鏈，以便原始設備製造商能夠將其生產水平提高到正常水平。然後，再加上消費者包裝方面正在實施的一些包裝解決方案項目，這些項目並不像前幾年那麼強勁。

Okay. And our final question from the web, were there any one-time items in Q4 selling and administrative expenses?

好的。我們來自網路的最後一個問題是，第四季的銷售和管理費用中有一次性項目嗎？

So I'll take that question, I think. And so yes, there were onetime expenses and selling and administrative expenses for recruiting and consulting fees. And then comparing on a prior year basis, as well, there was a positive adjustment prior year due to the removal of bonus accrual.

我想我會回答這個問題。所以，是的，有一次性費用、銷售費用和管理費用、招聘費用和諮詢費用。然後與前一年相比，由於取消了應計獎金，上一年出現了積極的調整。

Okay. So with that, operator, we'll turn it back to you for any other questions.

好的。因此，接線員，如果有任何其他問題，我們會將其轉回給您。

(Operator Instructions)

（操作員說明）

Ross Davison, Banneton Capital.

羅斯戴維森，班尼頓資本。

Hi, Mark. Hi, Nick. Thanks for taking the question. I'm just picking up on the gross margin question earlier and the information you provided. It sounds like as always, there are some puts and takes on gross margin in the quarter with some things that are clearly ongoing, like improved pricing that you've worked hard to change in the material and freight costs getting more favorable or less negative, but there's also things like a LIFO adjustment. As you think through those puts and takes, what should our expectation be for gross margin?

嗨，馬克。嗨，尼克。感謝您提出問題。我只是剛剛了解了之前的毛利率問題以及您提供的資訊。聽起來和往常一樣，本季的毛利率有一些看跌和看跌，有些事情顯然正在進行中，例如你努力改變材料和運費成本的改進定價變得更加有利或減少負面，但也有諸如後進先出調整之類的事情。當您考慮這些賣權和賣出選擇權時，我們對毛利率的預期應該是多少？

I know and you just reiterated like a long term goal always to step that up, but in the short term is a 26.8% from this quarter, unusually high because some of those more temporary things like LIFO or is that a target you think you can keep attaining as we look ahead to 2024?

我知道，您只是重申了長期目標，總是要提高這一目標，但從短期來看，本季度的增長率為26.8%，異常高，因為一些更臨時的事情，例如LIFO，或者您認為可以實現的目標展望 2024 年，我們能否繼續實現這一目標？

I stated earlier, earnings calls that our aspirational targets to get to 30% gross margins, and that is a stake in the ground of what we hold ourselves to. The LIFO adjustments are things that are I kind of call them outside of operational control. So we'll continue to take those adjustments as they come. However, from the operations side, we do believe that there's significant opportunity to grow our margins. We're not giving up on pricing, but as we have new products come to market obviously, we're going to position with focused commercial business strategy that yields us a gross margin that is acceptable to us and that we deserve.

我之前說過，在財報電話會議上，我們的理想目標是達到 30% 的毛利率，這是我們堅持不懈的基礎。我將後進先出調整稱為操作控制之外的事情。因此，我們將繼續進行這些調整。然而，從營運方面來看，我們確實相信有提高利潤率的重大機會。我們不會放棄定價，但隨著我們顯然有新產品進入市場，我們將採用專注的商業業務策略來定位，為我們帶來我們可以接受且應得的毛利率。

And then on the second piece. That pulls our whole point towards vertical acquisitions or CapEx investment that improves our ability instead of paying outside services companies or direct material companies to produce products that we are able and capable of producing ourselves through capital allocation or through mergers and acquisitions on the vertical acquisition side. We're very active in that space right now. And we see that there's a significant opportunity to get to that 30%, which is the first hurdle that we're trying to achieve.

然後是第二塊。這將我們的重點轉向垂直收購或資本支出投資，以提高我們的能力，而不是向外部服務公司或直接材料公司支付費用，以生產我們有能力透過資本配置或透過垂直收購方面的併購自行生產的產品。我們現在在這個領域非常活躍。我們發現，實現這 30% 的目標有很大的機會，這是我們想要實現的第一個障礙。

Great. That makes sense. And I guess just a quick follow-up on that. I mean just to put a finer point on it, is the LIFO adjustment in this quarter like a pretty meaningful piece of what allows you to hit that 26.8% or is it not? I'm just trying to get a sense of magnitude like should we not be surprised if we don't have that in Q1, presumably, there's a big step down?

偉大的。這就說得通了。我想只是對此進行快速跟進。我的意思是，更詳細地說，本季度的 LIFO 調整是否是一個非常有意義的部分，可以讓您達到 26.8%，或者不是？我只是想獲得一種規模感，如果我們在第一季沒有做到這一點，我們是否應該感到驚訝，大概會有很大的下降？

It won't be as a meaningful impact in the future.

這對未來不會產生有意義的影響。

Okay. Thank you. And then on the backlog, I'm sorry, go ahead, Mark.

好的。謝謝。然後關於積壓的工作，我很抱歉，請繼續，馬克。

Yeah, I was just going to add, it's a percentage of gross margin, it's not as significant as either opportunities that we're pursuing.

是的，我只是想補充一點，它是毛利率的百分比，它並不像我們正在追求的任何一個機會那麼重要。

Got it. Okay. On the backlog, I understand it's up year over year on, but it was down sequentially. And I don't remember sort of the seasonality pattern you usually see. Is the decline from Q3. Is that just seasonal, is that the past due backlog that you talked about, or that you have capacity backlog going down? Is it something else? I just want to double check if there's anything else that I should take away from the backlog ticking down like that from Q3?

知道了。好的。在積壓方面，我知道它逐年增加，但逐年下降。我不記得你通常看到的季節性模式。是從Q3開始下降的。這只是季節性的，還是您談到的逾期積壓，還是您的產能積壓正在下降？難道是別的什麼？我只是想仔細檢查一下，是否還有其他事情需要從第三季的積壓訂單中剔除？

I have a lot of experience in commercial vehicles since Q3 tends to be the strong quarter for most of our commercial vehicle customers, and they focus on production to get units off of the assembly line, and then they focus the fourth quarter on getting those units out of the factories to recognize revenue. So it would make sense and there's less working days in the fourth quarter.

我在商用車方面擁有豐富的經驗，因為對於我們大多數商用車客戶來說，第三季度往往是強勁的季度，他們專注於生產，使車輛下線，然後他們在第四季度專注於獲得這些車輛離開工廠確認收入。所以這是有道理的，第四季的工作日會減少。

So there's not a need for to order parts to start up in 2023 as companies try to rationalize their expenses to improve their earnings. So it had a little bit of a cycle to it, but I didn't see it as significant as it has been in the past in my career.

因此，隨著公司試圖合理化開支以提高收入，沒有必要訂購 2023 年啟動的零件。所以它有一點循環，但我認為它在我的職業生涯中並不像過去那麼重要。

Okay. So yeah, it sounds like I mean, all sounds very normal and nothing massive necessarily read into. And then just on the revenue, just to close it out here. I was -- just if you think about sort of the some of the things you work through in 2023 with the normalization in orders as your customers stocks -- sort of stocking having a buffer inventory, if you will. And also what you said about the truck OEMs not able to grow, do we -- are we at a point now where there's headwinds like on a quarterly basis are gone, are you still kind of anniversarying some of that as you go into 2024, if that makes -- just trying to get a sense of like you obviously have a headwind as you kind of normalize in 2023. I'm curious, does that headwind persisting in 2024 just because of timing or we sorted of through that?

好的。所以是的，聽起來我的意思是，一切聽起來都很正常，沒有什麼大必要的解讀。然後就收入而言，就在這裡結束吧。如果你願意的話，如果你想一下你在 2023 年要完成的一些事情，隨著你的客戶庫存的訂單正常化，我會說，如果你願意的話，那就是有緩衝庫存的庫存。還有你所說的關於卡車原始設備製造商無法增長的問題，我們現在是否已經到了像季度這樣的逆風已經消失的地步，當你進入 2024 年時，你是否仍在慶祝其中的一些週年紀念，如果這能讓——只是想感覺到，隨著2023 年的正常化，你顯然遇到了逆風。我很好奇，這種逆風在 2024 年持續存在只是因為時機還是我們已經解決了這個問題？

I would answer it this way, Ross, is that the headwinds aren't increasing. They're actually kind of stable, and that's primarily driven by interest rates -- with the falling of interest rates, we see that that headwinds will drop significantly because commercial vehicles -- the smaller commercial vehicle consumers will be able to -- the better position to replace their trucks. So I think -- what I would say right now, it's not increasing. The headwinds are steady, and we see positive signs through macroeconomic factors that will continue through 2024 to 2025.

羅斯，我會這樣回答，阻力並沒有增加。它們實際上是穩定的，這主要是由利率驅動的——隨著利率的下降，我們看到阻力將顯著下降，因為商用車——商用車消費者越小——越好更換卡車的位置。所以我認為——我現在想說的是，它並沒有增加。不利因素是穩定的，我們透過宏觀經濟因素看到正面跡象，這些跡象將持續到 2024 年至 2025 年。

Okay, great. Appreciate the added color and congrats on the year.

好的，太好了。欣賞增添的色彩並祝賀這一年。

Thank you.

謝謝。

Thank you. (Operator Instructions) Okay, as we currently have no further questions, I will hand it back to Mr. Hernandez for any closing comments.

謝謝。（操作員指示）好的，由於我們目前沒有其他問題，我會將其交還給埃爾南德斯先生以徵求結束意見。

Okay. I'd like to say thank you for joining us today. We are confident in our strategy, which for us brought consistently improved results in 2023, provides an excellent foundation for the future. We are looking forward to giving you an update on our progress after Q1. In the meantime, if you need additional information, please reach out to us. And thanks again for joining us today.

好的。我想說謝謝你今天加入我們。我們對我們的策略充滿信心，該策略為我們帶來了 2023 年持續改進的業績，為未來奠定了良好的基礎。我們期待在第一季之後向您提供最新進展。同時，如果您需要更多信息，請聯繫我們。再次感謝您今天加入我們。

Thank you. This concludes today's conference call and you may disconnect your lines at this time. We thank you for your participation.

謝謝。今天的電話會議到此結束，此時您可以斷開線路。我們感謝您的參與。