Transcat Inc (TRNS) 2019 Q4 法說會逐字稿

Greetings, and welcome to the Transcat Fourth Quarter and Full Year 2019 Financial Results Conference Call.

(Operator Instructions) As a reminder, this conference is being recorded.

I'd now turn the conference over to your host, Craig Mychajluk.

Thank you.

You may begin.

Yes.

Thank you, and good morning, everyone.

We certainly appreciate your time today and your interest in Transcat.

With me on the call today are Transcat's President and CEO, Lee Rudow; and our Chief Financial Officer, Mike Tschiderer.

After formal remarks, we will open the call for questions.

If you do not have the news release that crossed the wire after markets closed yesterday, it can be found at our website at transcat.com.

The slides that accompany today's discussion are also on our website.

If you would, please refer to Slide 2. As you are aware, we may make some forward-looking statements during the formal presentation and Q&A portion of this teleconference.

Those statements apply to future events, which are subject to risks and uncertainties as well as other factors that could cause the actual results to differ materially from where we are today.

These factors are outlined in the news release as well as with documents filed by the company with the Securities and Exchange Commission.

You can find those on our website where we regularly post information about the company as well as on the SEC's website at sec.gov.

We undertake no obligation to publicly update or correct any of the forward-looking statements contained in this call, whether as a result of new information, future events or otherwise, except as required by law.

Please review our forward-looking statements in conjunction with these precautionary factors.

I would like to point out as well that during today's call, we will discuss certain non-GAAP measures, which we believe will be useful in evaluating our performance.

You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP.

We have provided reconciliations of non-GAAP to comparable GAAP measures in the tables accompanying the earnings release.

So with that, let me turn the call over to Lee to begin.

Lee?

Thank you, Craig.

Good morning, everyone.

Thank you for joining us on the call today.

We'll follow the same format we have in the past.

I will hit upon some highlights for the quarter and for the full fiscal year, and Mike will provide additional detail on the financials before I wrap things up with an outlook for fiscal 2020 and beyond.

In fiscal 2019, our team turned in another year of double-digit earnings growth with strong performances across most of our key performance metrics.

I'll highlight a few of them for you now.

Record fourth quarter sales of over $44 million and record full year sales of $161 million.

Consolidated gross margin expansion of 20 basis points in the fourth quarter and 40 basis points for the fiscal year.

Record net income of $2.7 million in the fourth quarter and a record $7.1 million for the full fiscal year.

When normalizing for a 52-week year this year versus a 53-week year last year, organic Service growth was 13.6% in the fourth quarter and 8.6% for the year.

The statistic we're most proud of is our consecutive year-over-year Service growth.

In the fourth quarter fiscal 2019, we reached the milestone of 40 consecutive quarters of year-over-year quarterly growth.

That's 10 straight years.

And from a final KPI perspective, we generated $12.6 million of cash from operations.

Our strong cash flow enables us to pay down debt and at the same time continue to execute our acquisition strategy.

On the acquisition front, we completed 2 deals during the past year and one at the start of the new fiscal year.

2 of the 3 deals were small bolt-on acquisitions that added unique capabilities to our current scope of services.

The third deal, Angel's Instrumentation, expanded our footprint in Virginia and also broadened our capabilities.

We believe these acquisitions have strengthened our value proposition and positioned our Service segment to generate double-digit growth into the future.

In fiscal 2019, we generated solid Service revenue growth.

Even with 1 less week in the year, Service revenue was up nearly 11% in the fourth quarter and 8.5% for the full year.

We continue to take market share from the competition as well as in-house labs and OEMs.

This is particularly true in life sciences.

And with our recent expanded RF capability, we've experienced a meaningful uptick in aerospace and defense opportunities as well.

On the productivity front, we remain focused on 3 key initiatives: improving the process of recruiting, onboarding and training new technicians to support strong organic growth; driving process improvement throughout the entire organization; and launching automation throughout our network of calibration labs.

For all these reasons, we continue to have a high level of confidence and expect that we can meaningfully improve our service margin profile over time.

Moving on to Distribution.

We believe we remain the only calibration services company that has the ability to leverage an $80 million Distribution business to deliver a unique value proposition across both our platforms.

And we expect to continue to maximize the complementary nature of our Service and Distribution segments.

Fiscal 2019 was another strong year in terms of margin expansion for Distribution.

Among many operational excellence improvements in the segment, effective pricing optimization on our core end-user business as well as a higher mix of rental sales led the way.

Rental sales increased 21% to $1.2 million in the fourth quarter and were up 19% to $4.2 million for the year.

The combination of pricing optimization and a higher margin mix drove an increase in both gross margin dollars and gross margin percentage on slightly less volume.

These are results we're pleased with, and we continue to like our Distribution plan and expect to continue to execute a similar approach in fiscal 2020.

Before I turn things over to Mike, I'd like to point out a significant honor Transcat received at the start of the new fiscal year.

In fiscal 2019, our Director of Service Operations, Howard Zion, received the calibration industry's highest honor, the prestigious Woodington Award for Metrology Excellence.

The prior year, fiscal 2018, another member of the Transcat team, Chris Grachanen, our Director of Metrology, won the same award.

And in the 30 years the Woodington Award has been presented, Transcat is the only commercial calibration organization to receive the award twice.

And so we're very proud of Howard and Chris and the entire team that have elevated Transcat to this high level of recognition.

And with that, let me turn things over to Mike.

Thanks, Lee, and good morning, everyone.

I will say one final time that before we get started the reminder that our fiscal year 2019 was a 52-week year while fiscal 2018 was a 53-week year.

So the fourth quarter and the full year comparisons are impacted by having 1 less week this year as the extra week was in the fourth quarter of fiscal 2018.

Starting with the first quarter of fiscal year 2020, it will be back to 13-week quarters and 52-week years until, I believe, fiscal 2024.

In the press release and the slides, we provided additional commentary that normalizes the revenue growth numbers between the years and between the quarters, so you can get a more relevant comparison of the periods.

Starting on Slide 5 of the deck that was provided and posted, we provide some detail regarding our top line.

We ended the year on a solid note with a record consolidated quarterly revenue of $44.5 million, which resulted in a record full year of $160.9 million of consolidated revenue.

On a normalized basis, the fourth quarter revenue was up 12.9% and full year consolidated revenue was up 6.2%.

The Service segment continued to perform very well from a revenue perspective and was up 10.8% in the quarter and 8.5% for the fiscal year despite the 1 fewer week.

Angel's Instrumentation contributed approximately $1.9 million of Service segment revenue over the 7 months that they have been part of the Transcat team.

We continue to be very happy with the results of the Angel's transaction.

As we mentioned, when normalized to a 52-week year, Service organic revenue growth was 13.6% in the quarter and 8.6% for the fiscal year.

Our stated goal is to achieve organic growth rates in the mid- to high-single digits range, and our recent performance demonstrates the success we have had in taking market share, especially in the U.S. Canada was still soft which, based on what we see and hear, is a common theme there.

In connection with the 40 consecutive quarters of year-over-year revenue growth, since fiscal 2015, Service segment revenue has grown at a compound annual growth rate of 13%.

Gross margin for the Service segment was 27.7% for the quarter and was 24.9% for the full fiscal year, an 80 basis point decrease in both periods.

Gross margin was impacted by the short-term productivity challenges due to the large number of new tech staff hires in support of our record growth and the Canada top line softness.

As we've stated, we do anticipate seeing margins grow throughout fiscal 2020 though.

As we discussed in the past, the primary focus in the Service -- excuse me, in the Distribution segment is on improving the gross profit dollars and margin by focusing on high-value, higher-margin opportunities, repricing and the rental business.

The successful execution of this strategy was evident in our results as the Distribution gross margin in the fourth quarter and for the full fiscal year was 23.9%, up 130 basis points and 140 basis points, respectively.

While still small, our rental business continued to grow 21% up to $1.2 million in the fourth quarter and up 19%, up to a total of $4.2 million for the full fiscal year.

And as a result of the strength in the Distribution segment, consolidated gross margin expanded 20 basis points in the quarter and 40 basis points for the full year.

Total annual operating expenses as a percentage of revenues decreased 20 basis points to 18.1% of consolidated revenue but still allowed for continued investments in technology, infrastructure and operational excellence initiatives.

As a result, we saw operating leverage for the full fiscal year as consolidated operating income was up over 13% to $10.2 million and our operating margin improved 60 basis points to 6.4%.

From a segment perspective, the lower Service operating margin for the quarter and for the year reflects the flow through of the earlier commentary around the gross margin.

And Distribution operating margin expansion was due to the optimization of the mix and the pricing initiatives discussed earlier.

Please see Slide 6 for details.

On Slide #7, we show our bottom line results, highlighted by a 21% increase to a record $7.1 million of net income or earnings of $0.95 per diluted share.

Net income for the quarter was up 8% to a record $2.7 million or $0.35 per diluted share.

Both periods benefited from lower effective tax rates due to the U.S. Tax Cuts and Jobs Act enacted in late December of 2017, just at the end of our third quarter of fiscal 2018.

Our effective tax rate for fiscal 2020 is expected to range between 22% and 23% and includes federal, various state and Canadian income taxes.

We expect a lower income tax expense from the impact of accounting for certain share-based payment awards through tax expense versus the balance sheet.

This accounting standard only had an immaterial impact on the tax expense in fiscal 2019 and '18.

However, it is expected to result in a significantly lower first quarter fiscal 2020 tax rate of between 10% and 11% as it is recorded as a discrete tax event rather than being part of the overall effective tax rate used.

Moving to Slide 8. We show adjusted EBITDA and adjusted EBITDA margins.

Among other measures, we do use adjusted EBITDA, which is a non-GAAP measure, to gauge the performance of our segments because we believe that is a good measure of operating performance and is used by investors and others to evaluate and compare performance of core operations from period-to-period.

I encourage you to look at the provided reconciliation of adjusted EBITDA to the closest GAAP measures, which for us are operating income and net income.

On a consolidated basis, quarterly adjusted EBITDA was up 5% to $5.6 million with adjusted EBITDA margin expanding 10 basis points to 12.6%.

Full fiscal year consolidated adjusted EBITDA increased almost 9% to $17.8 million, and EBITDA margin improved 50 basis points to 11.1%.

On Slide 9, we provide detail regarding our balance sheet and our cash flow.

We generated strong cash from operations of $12.6 million, an increase of 27%, which was used in part for acquisitions, to fund our growth-focused investments, to drive our operational excellence initiatives as well as to reduce our debt.

At our fiscal 2019 year-end, we had total debt of $21 million with $23.5 million available under the facility.

Our debt levels were down $1.8 million since the end of fiscal 2018, and our fiscal year-end leverage ratio also decreased down to 1.12 to 1. We calculate this leverage ratio as our total debt on the balance sheet at a period end divided by the trailing 12 months adjusted EBITDA and including the pre-acquisition EBITDA of acquired companies in the trailing 12 months.

Other companies may calculate such a metric differently.

As previously reported in December of 2018, we amended our credit facility agreement, in part to mitigate any interest rate change risk.

We replaced our current loan with a new $15 million term loan that has a 4.15% fixed interest rate through a new maturity date of December 2025.

The previous term loan had a variable interest rate.

The revolving portion of our facility still has a variable interest rate.

Capital expenditures were $7 million during fiscal 2019 and primarily were focused on customer-driven expansion of Service segment capabilities and acquiring assets for our growing rental business.

As noted on Slide 11, we expect fiscal 2020 CapEx to be approximately $7.8 million to $8.2 million.

The majority of the incremental capital spend in excess of fiscal 2019 levels is expected to be for growth-oriented opportunities within both of our operating segments.

Approximately $4 million to $4.5 million of the total CapEx spend is expected to be focused on Service segment capabilities, another $2 million to $2.5 million on rental pool assets.

And maintenance CapEx is anticipated to be similar to this past fiscal year at approximately $1 million to $1.5 million.

We continue to believe we have sufficient liquidity for any investment opportunities that meet our strategic criteria.

And lastly, we expect to timely file our Form 10-K on or about June 7.

And with that, I will turn it back to you, Lee.

Okay.

Thank you, Mike.

As I talk to our outlook, I want to introduce our new service branding campaign.

Recognizing that we've established a very strong differentiated brand over the past several years, we're starting to promote 3 simple and straightforward words, Calibrated By Transcat.

The goal is for the phrase Calibrated By Transcat to be synonymous with compliance, control and risk reduction in the highly regulated industries like life science and aerospace, and that it will become commonplace in the calibration industry to hear people ask, are your instruments Calibrated By Transcat.

In conclusion, we're pleased with our overall performance in 2019.

Most important, we demonstrated the ability to strike an effective balance between hitting short-term goals and preparing the business for the long term.

In addition to generating record levels of revenue and earnings, we've fortified our infrastructure and made significant progress improving the functionality of many of our critical systems.

And as we enter 2020 with strong demand for our products and services, we also enter the year a better company.

And we believe we're well positioned to capitalize on new business opportunities.

Acquisitions will remain important part of our strategy.

And combined with our healthy organic Service pipeline, we expect to drive double-digit Service growth.

Process improvement and automation will be major contributors defining the future for Transcat.

While we're still early in the game, progress continues and we believe we are doing the right things to drive growth and margin improvement.

We strongly feel the long view on Transcat remains very compelling and we're confident in our ability to continue executing well and expect to reach another record year in fiscal 2020.

So with that, operator, we can open the call for questions.

(Operator Instructions) Our first question is from Matt Koranda from ROTH Capital.

I just want to start out with the Service segment.

It looks like growth there in your Q4 was really strong, even if I normalize for the entire number of weeks last year, which you guys emphasized, and thank you for that.

And I think you cited share take in the life sciences segment, but are there any other areas of strength that you can call out?

And how sustainable is that sort of low-teens growth rate that you guys generated organically?

So yes, the growth that we experienced even when normalized for the difference in the 1 week, it was significant and it was weighted towards life science.

But as I mentioned on some of my discussion points, we did also see an uptick in aerospace and defense.

And so if we look at the pipeline now, Matt, on a go-forward basis, we're seeing a pretty healthy mix of the 2 particular end-user targets for us.

There are others mixed in general manufacturing, and so on and so forth, but I would say that we would expect to see the concentrated amount -- the concentration to be in life science and aerospace going forward.

Okay.

That's helpful.

And then I think you guys have typically in the past said that Service growth sort of organically should run kind of in the mid- to high-single digits.

And it looks like on the outlook side, you're calling for double-digit growth.

So I'm assuming is that inclusive of acquisitions that you have completed, like the tuck-in that you did at the beginning of your fiscal year?

Or does that assume some additional tuck-ins happen throughout fiscal '20 to achieve that double-digit growth rate in Service?

Yes, that will assume the -- on a go-forward basis, doing about what we've done in the past.

So you're going to see the mid- to high-single digits in organic growth.

You saw that in the fourth quarter.

You actually saw better than that in the fourth quarter.

But I think we're comfortable with the stated range there.

We will continue to make acquisitions.

Some of them will be small tuck-ins that just fit really well and are very easy for us to do, part of our core competencies on the acquisition side.

You're going to see that continue.

We look for mid- or larger-sized deals as well that will be sprinkled in.

But I think that if you look at our past performance, it's probably indicative of what we're likely to do and it will be a blend to achieve the double-digit growth.

Yes, Matt, I think the pipeline is strong and we'll continue to execute kind of in the space that we are looking for businesses with the same criteria.

I will say that we don't intend -- because it was so small, Gauge Repair Service, that company that we bought right at the beginning of this fiscal year, we're not going to call that out every quarter.

It's just going to be put into regular revenue.

It's just so small.

We're not going to parse that out and take it away from organic.

Okay.

That's fair.

Since we're on that point, I guess maybe just a little commentary on sort of what Gauge adds in terms of capabilities or customer lists in terms of what you are looking to achieve there would be helpful.

Right.

So that's a small company that was located just a few miles from our operation in L.A., which is specifically in Fullerton.

And that particular company has a unique capability on the pressure calibration and pressure repair side.

And so when we look at a company like that, Matt, we're looking at 2 ways.

Number one, they do have a customer base, albeit small, that will benefit by our broader scope of services, but we look at the amount of work that we outsource ourselves, which runs in the 10% to 12% range.

And when we buy a company like Gauge and we bring on that -- we bring in-house that unique capability, it also helps us to reduce our TMS spend.

And that's one of the ways that we're looking to increase our margins, by doing more in-house versus the typical 12% roughly of outsourcing.

So it has a dual purpose there.

We look for both the cost and the sales synergies.

A small company like that gets absorbed really quickly, you eliminate the rent and the redundant location and then you get the upside when we sell to their customer base.

So it's really kind of -- it makes a lot of sense to do deals like these.

They're not very difficult.

They are very, very low risk and the upside is compelling.

Yes, and this particular one, Gauge happened to be a third-party vendor of ours already.

So we knew the quality, we knew the principles.

And it just kind of fit into that bolt-on scenario that was perfect for us.

When gotten right, they play out to be a 1 plus 1 equals 3 scenario, and that's what we're doing.

Right.

Perfect.

And it's a good jumping off point to talk about service margins and just wanted to see if we could delve a little deeper and maybe isolate and rank the most important factors that you think are sort of holding back some of the pull-through in gross margins in the Service segment.

I mean I get that inefficiency in the ramp-up of kind of new technicians is probably your biggest pain point, but are there other factors that you would call out?

And obviously you have automation that you talked about that's sort of coming, and -- but are there other -- what are the other elements or maybe an example of sort of the streamline onboarding process that you've got going that sort of address some of the pain points there?

Yes, it's a great question.

So the number one factor when we look back on the year was clearly the stabilization of our staff and the hiring of enough new technicians to handle the growth rates.

And that's been a challenge for about the past year, 1.5 years.

It will continue to be a challenge.

So we're addressing it through recruiting a little bit differently and getting our new employees trained at a more accelerated pace.

We put a lot of online tools in place to get that training, better onboarding and training more effectively executed.

And the combination of keeping your staff that you currently have and getting the new staff onboard quickly and trained quickly really makes a huge difference in the margins.

And so that's one of our #1 goals, to improve those rates and to focus on that.

But it's a little bit more than that as well.

As you grow and the company experiences a type of growth that we've encountered, you're going to do -- your mix is going to change a little bit as well.

So we're doing a little bit more dimensional work incrementally with some of these wins to get the larger accounts.

We talked about landing more CBLs, client-based labs.

When you win a client-based lab, you win all of their work.

And so you've got to take some of the lower-end work, some of the lower-margin work in addition to some of the higher-margin instruments that we see.

And so the blend and the mix has changed a little bit.

So to counter that, that's why we're writing the automation and the scripts around getting this work through our lab quicker.

We didn't -- that caused a little off-guard some of that growth, and so it might be a little bit behind, but we're catching up quickly.

And so a combination of getting the staff trained, getting the -- driving automation to some of these lower mix products, these are all very, very doable things.

They don't happen overnight and they are challenging to do.

But objectively, we can certainly get it accomplished.

So it's not a matter of -- less a matter of if and more a matter of when.

And we're just trying to drive it at a good pace, so that we can see the improvements in the upcoming year.

Our next question here is from Dick Ryan from Dougherty.

Congratulations, guys, on a strong quarter and year.

Lee, I want -- just want to look at life sciences may be a little bit deeper.

I think it's maybe 40% of Service revenue or whatever, but if you look back over the last 4 or 5 years, it looks like that business has grown maybe 50%.

Is there a way to look at that and say how much is actually taking share versus the -- just the overall market expansion by you guys being able to offer a greater amount of services?

I would -- I don't have specific breakouts in terms of data around that, but I can tell you that I'm pretty comfortable in saying that the lion's share of the growth has been by taking market share from competition and from the OEMs.

We have expanded some capabilities relative to life science, but it hasn't really driven that growth.

That growth is by the market recognizing our quality value proposition.

So as these companies grow, they have compliance issues.

When they have compliance issues, Transcat is the company to turn to.

So all of those rigors and all the investments we made to drive really high-quality services, I think, has really just resonated well.

And in combination with the fact that some of our customers had difficulty obtaining technicians as well has driven this growth.

I mean let's look at the example, we have 320 technicians, but our average in-house lab that we would outsource to achieve some of our growth, Dick, has 5 employees.

And so if they lose 1 to retirement and 1 leaves for a different opportunity, they have lost a significant percentage of their workforce, and they're going to struggle to stay compliant, and that's a big risk.

So they turn to a company like Transcat and say, look, this isn't part of our core competency, it's yours, we want to outsource this.

And so that's been part of the growth.

So again, that's taking market share in that particular case from the in-house labs.

We've done some good work on the OEM side too, on the third-party providers, but it's really been a blend of winning in the marketplace more, no question.

When you look from the competitive share gains, is there 1 or 2 companies specifically that you're taking share from?

Is this still -- with your breadth of services, is it still kind of low-hanging fruit out there, the kind of pipeline you're looking at?

I think our pipeline is as strong as it's ever been.

So we go into the year with a pretty good sense that we're going to see the growth that we have forecasted.

And from a marketplace perspective, we're really seeing it across the board.

There are times we're winning against the small owner-operators because of the depth and breadth of our Service line.

There's times that we're winning against some of the larger national providers just because of our ability to execute and our overall value proposition.

So it's no one place other than to say, as I said last quarter and I'm going to continue to say, we are seeing a concentration of larger accounts.

And our pipeline has more larger accounts in them than they typically have in the past, and you saw that starting in second and third quarter of last year and you're going to see it continue throughout this year.

At least the early read on this year is that it's much of the same.

So I attribute that back to my earlier comment on the availability of technicians.

And so on a go-forward basis, we have to be the type of company that can build and train our own technicians to support this type of growth we're seeing, and that's all part of what we're focused on.

Great.

You talked on productivity strategies to move that Service margin higher and not looking at any particular time frame, let's say, but when all 3 of those are hitting their strides, where do you expect Service margins to go?

I mean are we looking north of a 30% range or can you kind of ballpark that for us?

Well, Mike and I have messaged over the last couple of years that the first way -- the first thing I'd want to say is we expect to see fairly steady progress moving forward.

Whether that will be 50 basis points or 150 basis points remains to be seen.

But I think it will be consistent, be fairly steady, not necessarily quarter-to-quarter, but over the longer period of time.

I don't see -- we think it's not unreasonable to get the margins up in the 30% range over the next couple of years and some of it depends on timing and how much traction we get on these programs.

Beyond 30% would require a lot of success on the automation side and some programs we're working on.

It's not to say it can't be done, but I wouldn't want to message that at this point.

So let's stick to where we are and I think we should get into the high 20s and 30s before too long if we continue to make progress.

Okay.

Great.

One last one on the rental side.

What's your kind of short-term strategy for growing the rental?

You had nice growth this year, but obviously a small base.

Do you want to take that, Mike?

No, go ahead.

I will follow on.

So we're going to continue to drive rentals.

We started that business, if you recall, to help stabilize the Distribution business.

We had the entire infrastructure in place, the units were on the shelf.

We had shipping receiving.

We had a sales team.

We had a calibration lab, which was an absolute necessity.

All the components were in place.

Made a lot of sense to build that business and start it.

What we didn't realize at the time was it was going to resonate so well with both our Service customers and our core Distribution customers.

So it's really kind of a service that has high margins, that pulls the company together.

It's like a bridge service between our 2 segments.

So we're going to continue -- for that reason, and Dick, to address your question, we're going to continue to fund the growth of that business.

The margins are attractive.

It's valuable to our customers, it makes our value proposition better.

It supports our service growth, and it makes us unique.

That suite of services between Rental, Distribution and Service makes Transcat unique.

And so as long as it keeps growing and keeps putting out the margins that it does, makes our business better, you're going to see us invest capital on that.

And we learn more and more about rentals now.

Will it be a $30 million business 1 year?

That's not on our road map.

But there is no reason why we can't continue with similar growth rates as we have demonstrated in the past couple of years.

Yes.

I think it will be more of what we kind of have, Dick.

We will continue to be measured as we look at the CapEx that's needed and what other kind of maybe ancillary products that we would want to put into that rental pool.

We will continue to look at our win rates to see what is successful and what margins we're able to get in that business, but I wouldn't expect any other changes -- any other large changes than what -- the success we have had so far.

(Operator Instructions) Our next question here is from Chris Sakai from Singular Research.

Can you comment on business in Canada?

And what you see going on there as far as when the market will start to improve there?

So Chris, this is Lee.

We definitely saw over the past 4 quarters, a softening in the business in Canada, particularly in Service.

We mentioned earlier that there were no real big customer losses in that softness, just a reduced workload from our current customer base.

So the encouraging factor is, as things turn around and pick up a little bit, we are really well positioned to recapture some of that volume that we lost in the past year.

The sales model that we run in Canada is a little bit different than what we do here in the States.

And we're using this particular sort of softer time to rejigger that model up there, so it reflects something a little bit closer to what we do in the U.S. There has been an opportunity to get our arms around that.

So directly to answer your question, I think we're pretty well positioned that when Canada turns around, we're going to turn around with it and do at least as well as we've done in the past with some upside, with some of the changes that we've made.

Does that answer your question?

Yes, yes.

Moving to, I guess, the previous quarters, you've done a lot of training of new technicians.

How has that gone?

And in the quarters coming, do you expect to do the same amount of training?

So the training over the past year, I think we've done sort of a mediocre job.

It's been the type of job where we've had to hire a lot of people, we've had to get them through the system and train.

It hasn't been as efficient or effective as what we'd like to see in the future.

So we've done the best we could to manage some of the growth.

On a go-forward basis, we are going to do a much better job -- we intend to do a much better job.

We certainly expect to improve our training program.

We've set up different training materials, everything from sort of a formal or informal school, if you will, to get technicians through our system quicker with less drag on some of the senior technicians who do the training.

There is a lot of talk around Transcat on how to get people in and productive quicker than we had in the past, more effective than we've done in the past.

So I think there is a lot of room for opportunity here to get better.

And that's a really important part of how we're going to manage growth going forward.

So I'm pretty confident we're doing the right things across the spectrum with materials, training, on-boarding, everything.

So we shouldn't be having these conversations this time next year or we'll have these conversations talking about some of the success that we had, at least that's what we expect.

Yes, Chris, the other thing I just kind of add on top of that is in addition to the new hires, is the focus on retention, retention tools because that's a big piece of it, too.

We have a pretty good retention rate, but we know that turnover is very expensive.

And those same kind of tools were -- through our HR group as well as our operations group trying to develop paths and satisfaction and on-boarding and 6-month interviews and 12-month interviews with staff to see what's working, what's not working because we find that once they're here for a period of time, they stay.

But we want to just keep them here so we're not starting all over again.

So it's -- the existing staff as well as the new staff is the focus.

This concludes the question-and-answer session.

I'd like to turn the floor back to management for any closing comments.

Okay.

So this is Lee.

We appreciate everyone being on the call today.

Thank you for joining us.

We appreciate your interest in Transcat.

We will be participating at the Stifel Conference in Boston on June 11.

Feel free to check in with us at the conference or you can reach out to Mike, you can reach out to me anytime.

Otherwise, we look forward to speaking with you all again after our first quarter results are released.

And again, thanks for participating today.

This concludes today's teleconference.

You may disconnect your lines at this time.

Thank you again for your participation.