Greetings, welcome to RBC Bearings third quarter fiscal year 2023 earnings call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Josh Carroll with Investor Relations. Please go ahead. Good morning. Thank you for joining us for RBC Bearings fiscal 2023 third quarter earnings conference call. With me on the call today are Dr. Michael J. Hartnett, Chairman, President, Chief Executive Officer, Daniel A. Bergeron, Director, Vice President, and Chief Operating Officer, and Robert Sullivan, Vice President and Chief Financial Officer. Before beginning today's call, let me remind you that some of the statements made today will be forward-looking and are made under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected or implied due to a variety of factors. We refer you to RBC Bearings' recent filings with the SEC for a more detailed discussion of the risks that could impact the company's future operating results and financial condition. These factors are also described in greater detail in the press release and on the company's website. Reconciliation between GAAP and non-GAAP financial information is included as part of the release and is available on the company's website. With that, I'll now turn the call over to Dr. Hartnett. Okay. Thank you, Josh, good morning, everyone, and welcome to the RBC's third quarter conference call. On net sales for our third quarter for fiscal 2023 were $351.6 million versus $267 million for the same period last year, a 31.7% increase. For the third quarter of 2023, sales of industrial products represented 70% of net sales, with aerospace products at 30%. Gross margin for the quarter was $146 million or 41.5% of net sales. This compares to $93.3 million or 35% for the same period last year. Adjusted operating income was $71.6 million, 20.4% of net sales compared to last year of $46.3 million and 17.3% respectively. Adjusted EPS diluted came in at $1.64 a share. Adjusted EBITDA was $103.3 million, 29.4% of net sales, compared to $71.4 million, 26.7% of net sales for the same period last year. During the period, we paid down debt by another $60 million on the term loan, and free cash flow was $54.4 million. Turning now to some of our to our sectors. On the industrial business, we saw and are seeing continued strength from the OEM sector with RBC Classic Industrial up by 14.1%, driven by semiconductor machinery, energy, and mining. Both RBC and DODGE showed a 12-plus% growth in the industrial distribution revenues. Overall, industrials were up 11.8%, with sector growth mitigated somewhat by Europe and some select OEM weakness. On the aerospace and defense side, overall, we saw an expansion of 13.2%, with Aero OEM up 26%+. Demand drivers here are the obvious candidates, large plane builders and their supply chain coming to life as the production of Boeing's 737 and 787 ships rebound. We are at the beginning of this recovery now in pandemic inventories showing less of an impact and production rate increases are well publicized. We expect to see increased demand creating double-digit growth from the plane builders for many quarters to come, and we continue to add resources and planning to support increased build rates, build rate-driven demand, as well as expanded work statements. In total, RBC saw an organic growth in revenue of 12.7% during the period. There's been some questions about backlog, and much of our commercial aircraft business is done where the backlog isn't represented by the contract and the orders are published on a portal, and we ship to those orders. Probably 60% of our business there doesn't ever get into our backlog. Regarding the fourth quarter, we're expecting sales to be $375 million-$385 million. This is becoming an increasingly difficult projection to make now post DODGE acquisition, which means half our sales are stock items where daily shipments are subject to daily orders as opposed to being defined by long-term contracts where quarterly revenues can be well planned. Kind of puts us into the business of economic forecasting. We do the best we can. I'll now turn the call over to Rob for more detail on financial performance. Thank you, Mike. SG&A for the third quarter of fiscal 2023 was $56.8 million, compared to $41.7 million for the same period last year. As a percentage net sales, SG&A was 16.1% for the third quarter of fiscal 2023, compared to 15.6% for the same period last year. Looking forward, SG&A as a percentage of sales is expected to be between 15.25%-15.75% of sales in the fourth quarter. Other operating expenses for the third quarter totaled $18.9 million compared to $35.8 million for the same period last year. For the third quarter of fiscal 2023, expenses included $17.4 million of amortization of intangible assets, $1.2 million of costs associated with the DODGE acquisition, and $0.3 million of other expense. For the third quarter of fiscal 2022, other operating expenses consisted of primarily of $23.5 million of costs associated with the DODGE acquisition, $12.1 million of amortization of intangible assets, and $0.2 million of other items. Operating income was $70.4 million for the third quarter of fiscal 2023, compared to operating income of $15.9 million for the same period last year. Excluding approximately $1.2 million of acquisition costs, Adjusted operating income was $71.6 million or 20.4% of sales for the third quarter of fiscal 2023. Excluding approximately $30.4 million of acquisition costs, Adjusted operating income for the third quarter of fiscal 2022 was $46.3 million, or 17.3% of sales. Interest expense for the third quarter of fiscal 2023 was $20.9 million compared to $11.9 million for the same period last year. We anticipate total interest expense of between $21 million and $22 million for the fourth quarter of fiscal 2023, and an effective tax rate between 23% and 23.5%, excluding discrete or unusual items. For the third quarter of fiscal 2023, the company reported net income of $36.3 million compared to $0.5 million for the same period last year. On an adjusted basis, net income was $53.3 million for the third quarter of fiscal 2023, compared to $40.6 million for the same period last year. Net income available to common stockholders for the third quarter of fiscal 2023 was $30.6 million, compared to a net loss of $5.2 million for the same period last year. On an adjusted basis, net income available to common stockholders for the third quarter of fiscal 2023 was $47.7 million compared to $34.8 million for the same period last year. Diluted earnings per share was $1.05 per share for the third quarter of fiscal 23 compared to a loss of $0.18 per share for the same period last year. On an adjusted basis, diluted earnings per share for the third quarter of fiscal 2023 was $1.64 per share compared to adjusted diluted earnings per share of $1.20 per share for the same period last year. Turning to cash flow, the company generated $60.9 million in cash from operating activities in the third quarter of fiscal 2023 compared to $40 million for the same period last year. Capital expenditures were $6.5 million in the third quarter compared to $14.9 million for the same period last year. We paid down $60 million on the term loan during the period, leaving total debt of $1.46 billion as of December 31st, and cash on hand was $82 million. Cumulatively, since November 2021, we have paid $350 million on the term loan, including a $20 million payment in January of this year. I would now like to turn the call back to the operator for the question and answer session. Thank you. Ladies and gentlemen, at this time, we'll be conducting a question and answer session. If you'd like to ask a question, you may press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Pete Skibitski with Alembic Global. Please proceed with your question. Hey, good morning, guys. Hey, Mike, maybe you could put your economist hat on for a moment. You probably see a lot of the macro guys out there are concerned that we could tip into a mild recession later this year. Just wondering if you're seeing anything in your industrial end markets that might indicate that. I know you touched on Europe. Wondering if you're seeing anything else there. Well, Pete, you know, on our industrial end markets, we're seeing, you know, let me say right now we see a very strong picture from oil and gas. A lot of demand, you know, demand beyond our capacity, substantially beyond our capacity from the oil and gas sector. I suspect that's gonna continue given what's going on with the world events. I personally am a favor of fossil fuels. This is one of my favorite market sectors. Getting down, I just, yeah, we're also seeing strength from mining. Actually, mining is challenging the same manufacturing capacity as oil and gas. It's, we need to do a little bit of an expansion there. Industrial distribution, very steady. Some inventory adjustments are going on, but they're small. Small impact overall, not worth talking about. Construction of warehouses are down. You know, you've all read the Amazon news and, you know, we were a significant provider of hardware for those warehouses. That demand, which runs between $15 million and $25 million a year, was completely out of our revenues in the third quarter, and we don't expect them to be back in the fourth quarter. That's the major shift for us. We're seeing a little bit of weakness in semiconductor manufacturing. That manufacturing capacity that we're opening up is being used productively for industrial distribution, where we were a little bit short on product to support that sector. I think overall, we're just not seeing it. On the defense side, we're, you know, it's unbelievably strong. You know, you haven't seen the shipments yet, but, you know, we've got a sleepy supply chain that we're trying to wake up there and shake things out and make them happen. The aircraft build rates, you know, you know what's happening there with Boeing and Airbus and the 737, 787 programs. That's gonna be a double-digit growth sector for us for at least the next eight quarters. Okay. No, that's very helpful. Let me ask my last one on commercial aerospace, Mike. Just it seems like there still is a lot of inventory sitting at Boeing with regard to the MAX and the 787. They've kind of indicated to us kind of their timeframe for getting rid of that inventory, for delivering that inventory. Are you guys still delivering kind of below their stated rate? Like for instance, on the MAX, you know, I think they're at 31 a month now, but some of that is out of inventory. I'm just wondering if you guys are still delivering on the MAX, the ships at worth more in line with 20 a month or so. No, no. For us, it's. We study this pretty closely to make sure that we've got the right planning in place. You know, steel is really hard to get now. I mean, you have to be out 12 months on your planning with steel. You really have to be sharp on these numbers or you're gonna create a problem for your customer. It looks like every time we measure it, we're right in step with their production rate. Okay. Okay. Okay. Very helpful. Thanks, guys. Our next question comes from the line of Kristine Liwag with Morgan Stanley. Please proceed with your question. Thanks. Mike, you know, you kind of mentioned like it seems like backlog is no longer the leading indicator when we think about revenue growth. When you kind of think about forecasting your business, what do you guys have to do differently? How much conviction do you have, that you're gonna see growth like, you know, even with that, you know, the risk of a mild recession? Let's take the first question. What do we have to do differently? We actually don't have to do anything differently. You know, the thing that we've evolved to, Kristine, is just to understand, for example, when we do a contract with Boeing or Airbus, exactly what mix we have under contract. We sign a contract with them, it's three years or five years or whatever it is, and we have a certain mix that's in market share maybe 100%, maybe 80%, something like that, by contract for those ships. Because we're working against the portal and not against the backlog, it's really important for us to understand their production rates and their consumption rates of our product so that we can, you know, plan our plants to have more product in place as they relieve the product that we have to build their ships. That's basically. You know, we've evolved to that over the last five years. I would say five years ago, we were really terrible at this, and now we're really, really good at it. We take that information and we actually go to a lot of the subcontractors that use our hardware, our bearings, integrated into a, you know, subcontractor-produced system and then ship that to Boeing or Airbus. Their planning, they haven't got to this level. Let's just put it that way. We actually have to call our subcontractors and tell them when to put orders. Not in all cases, but in many cases, when to put in orders in order to, you know, catch up and be in position and not to get caught short. Because, you know, if they are caught short, they're gonna blame the bearing guy that they can't ship that piece of hardware they produced because they couldn't get bearings. We don't want them to do that. We do actually look at their content and help them with their planning. That's kind of how we evolved to operate. What was the second part of your question? In terms of confidence, in terms of forecasting, you know, I guess, like, you know, the underlying question to that second part is, you know, with the change in your business being more book to ship, how sensitive is that to the economic environment? Would you still see that grow if we're in a mild recession? How confident do you feel not having a backlog to kind of support that view? Yeah, I, you know, it depends on sector. We're very confident on aircraft not have, you know, with how to deal with the backlog situation. That's just standard operating procedure now. In terms of where we stand relative to an industrial, you know, mild industrial recession, I don't, I don't see a mild industrial recession showing up in the oil and gas area anytime soon. If you look at Dodge, I mean, their really important markets are, you know, grain and aggregate and mining, and those are markets that they service principally through industrial distribution. You look at grain, you know, wheat and corn and rice and soybeans, you look at what's happening in the world, the demand there, I don't, I don't see that backing off. That's food. The world, you know, the U.S. feeds the world, and now it has to feed it more with the problems in Ukraine and Russia. I think their grain sector is going to be good. When we look at the construction sector, the aggregate sector, and we talk to our salespeople, you know, all the cement plants are at 100% capacity, before the infrastructure bill released for commercialization. That looks to me like that sector has a net under it. The other important part of that business is food and beverage. Food and beverage is, you know, it's just a staple. I mean, as long as these machines are operating and producing cans and bottles and boxes, and transmitting that material, we're a strong part of that, a strong part of that business. You know, I think the DODGE business is very low beta in terms when you look at over the past years. It's so much a, you know, of what they do is a staple of life. Their revenues were impressively stable over many years. It's really helpful color. Oh, sorry, go ahead, please. Yeah. When it, you know, when it comes to the aircraft business, I think you know what's going on there. That kind of speaks for itself. Our marine business is. It's, you know, they're building. We have 10 Virginia ships in our backlog, and we're only showing one year of Virginia ships, but we have 10 of them. You know. Yeah, that's a lot. That's a lot. We're, you know, and we're bidding another 10 or 12, and we're also bidding Columbia. You know, we have a serious problem in our marine business with regard to our capacity and our footprint. We're trying to deal with that right now in terms of staffing and hardware and supply chain. We've got a lot to do in that sector in order to accommodate the objectives of the Navy. Yeah, I mean, it seems like a good problem to have if you've got strong demand. If I could sneak one more in, Mike, I mean, on gross margin. I mean, we looked at the quarter, it's 40.8%, for the nine months trailing the quarter. For the actual quarter itself, it's 41.5%. I mean, how much of this was, you know, like the synergies that you guys had outlined with the acquisition of DODGE? Can you give us an idea of where you are in that synergy extraction and where gross margins could go from here? I mean, your historical target was like, what, 1 percentage point in gross margin each year. You reinvest 50 basis points, so you have 50, you know, in terms of the net. Is that how we should think about this, or should there be more upside from the synergies? I mean, you know, this is a pretty big jump versus where you were last year. Yes, Kristine. Hi, it's Dan. Just to give you a range. You know, Dodge for the nine months ended December 2021, had an average gross margin around 35%-36%. For the nine months ended this December, it's around 42.8%. It's about a 7%-8% jump in gross margin. That's not all synergy, but say a big half of that or more is synergy, based on $700 million run rate of sales. You know, you're talking $40 million-$50 million of improvement in gross margin over a 12-month period since we've owned Dodge. I would say on our low-hanging fruit, it's going well on our synergy. On the integration of our sales team, it's going well. There's a lot of activity, and I think that's reflected in our industrial growth rates compared to the competition who have already reported this quarter, where their numbers are significantly under ours from a growth rate. We are working on our manufacturing processes and our manufacturing footprint and on being a better sourcer of intercompany activity between DODGE to RBC and RBC to DODGE. Those two are kind of the long pole in the tent. We should see the benefit from that activity in fiscal year 2025 and 2026. I would say we are definitely ahead of schedule, and things that we thought were going to be easy to get done aren't that easy. Things that we thought would be very difficult to get done turned out to be a little easier than we thought at first. I think we're in pretty good shape. Yeah. Kristine, I can add to that a little bit too. You know, we acquired Dodge in November of 2021. We were at a run rate, an actual rate of sending the previous owner of Dodge $18 million a year to support computer systems and other activities that couldn't be transferred day one. We've had a team of dozens of internal people and consultants working on putting Dodge on the RBC computer network. As of November 1st this year, that was mission accomplished. That $18 million goes away. That was a big project that had to be done in a fail-safe manner to be, you know, to complete this acquisition. I think the second, you know, another area that we're working on is in manufacturing integration. You know, some of the Dodge plants were very full in terms of floor space utilization. We needed to open up the Dodge floor space in some of those plants to capitalize new products or new manufacturing capacity for existing products that where there was market demand but were unable to satisfy that market demand because of capacity constraints. We're in the process of moving some of their processes to Mexico and to open up the floor space so that they can insource some of their materials that from outside suppliers and increase the throughput capacity for those products. You know, where Dodge is constrained, it seems that our RBC had a, you know, a pretty cost-effective solution for that. This year we'll be opening up some of the floor space in some of the Dodge plants by using our Mexican resources. I, you know, I think the final, the final thing we did, is in November, we ran a manufacturing seminar for 125 to 150 people in Tennessee, for manufacturing management and manufacturing engineers, and it was selected from our 40 plants with the purpose of presenting and exchanging best practices. Whenever we've done this for the RBC Classic business, it's produced amazing results in productivity. Each plant seems to be competitive with the other plant with regard to is absorbing new technology or new techniques in improving their operation. We expect to see a nice benefit from that seminar. Great. Thank you for all the color, guys. Our next question comes from the line of Steve Barger with KeyBanc. Please proceed with your question. Thanks. Mike, you sound pretty optimistic about end markets on both sides of the business. Orders were down 19% sequentially. Can you talk about what parts of the business that came from, and has that deceleration extended into 4Q? Yeah, Steve, the biggest impact on the backlog was our marine business. For marine, in September, our backlog was $118 million, and in December it dropped to $91 million. That's a $26 million-$27 million drop. The reason is 'cause we only reflect in backlog what's shippable in the marine product line in the next 12 months. The gross backlog, marine's total backlog that's shippable past 12 months is $179.9 million, compared to September of $170 million. It's actually up $10 million. When we put it in a total backlog, $25 million has a pretty big impact on the overall backlog. It's just mainly due to the timing of shipments on our submarine business and how we account for that. DODGE was down about 10. I think, yeah, September, DODGE was about $100 million in backlog, and they were down to $85 million. Their supply chain was freeing up in their capacity, and they're catching up to their past dues that they had in backlog. Those are the two big contributors. Nothing else really notable from an end market standpoint as to what decelerated? No, it's not. Steve, it's not decelerating, it's accelerating. We're adding to our legal staff because we have so much contract, so many contracts that have to be inked, negotiated. So there was, you know, we booked $100 million worth of new contracts between December and January. I suspect those even haven't even hit the backlog yet. Nice. Dan, your comment on the $50 million in synergy in the past year or so, if I'm remembering right, the original target was $70 million-$100 million over five years. Right. Now that you've had this for a while, has this changed the upside target? I guess in terms of either time or dollars, how are you thinking about what's possible? I think we're still, you know, targeting that range. As Mike said, and what I said a little earlier on some of the long pole in the tent, the manufacturing integration that we're doing, it just takes a little longer. You have to, you know, pull machines out of one plant, set them up in another plant, teach that plant how to make the product, put it through testing. It could be six to seven months, make sure it's acceptable to the marketplace, and then be able to supply it to the marketplace. I think every year, we'll just continue to see the activity between the DODGE sales team and the RBC Classic sales team continue to increase, where RBC Classic focuses more on OEM type activity, and DODGE focuses more on distribution activity. Got it. If I could just get one more in. You know, it seems like most companies are working on some sort of digital strategy. Do you guys have any initiatives underway at RBC designed to maximize sales efforts or optimize manufacturing from a, you know, data collection and standpoint? Yeah, sure. We do it on both sides. On the front end, DODGE uses the front end of their warehouse consortium that they're part of, and it's called PTp lace. That's where independent distributors and customers can come through and electronically place orders and get them delivered in 12 - 24 hours. RBC always had eShop, our front end, where our independent distributors also can come online and guarantee shipping in 12 - 24 months to keep them going. We've been making more advances on the manufacturing side on digital data collection, data mining to better run the plants. If you walk through one of the plants now and took a tour, you'd see a lot of visual screens, a lot of activity, at each manufacturer and cell, reflecting information from the machines, from the operator, and where they are compared to the standard that they're running. I think that part of it is actually become more and more important to our business as we move forward. Has that had a material benefit to margins yet, or is that more on the come? No, it's it all accrues. No, it's accruing to margins. You know, it's. It all has an impact. It all has an impact. Exactly right. By reducing, you know, touch labor, increasing your efficiencies, and obviously for customers being able to go online, place an order, and be able to get their delivery in 12- 24 months, weeks and days, hours. Sorry. That guy's better in a hurry. Yeah. Steve, especially when you have, you know. In some of our plants, we have a lot of robotic operations, and so you don't have any, you know, any people in that sector for, you know, every minute of the operating day. You need a screen like this to tell you if there's a problem, if the machine is idle, if it's on setup, and so that the manager can dispatch technicians or other talent to remedy the problem. Great. Thanks, guys. Our next question comes from the line of Seth Weber with Wells Fargo. Please proceed with your question. Hey, good morning, guys. Thanks for the question. I wanted to go back to the strong gross margin in the quarter. Can you just give us any color on what you're seeing, you know, the pricing environment, price cost, what your expectations are for price cost going forward, and then just, you know, whether you expect to retain price increases, in a, you know, if inflation starts to come down? Thanks. Yeah. Well, I mean, the pricing environment is positive, and I think I've said enough on that. Is the inflation. Yeah. In the contracts that we typically negotiate, have a Have an inflation index or some metrics tied to some bureau of, you know, economic standard that allows us to change pricing if there's a change in material cost or if there's a change in labor cost or something else happens, change in volume. To some extent, that's why we have a backlog in our in our contract, the legal side of our contract management because these contracts now are more difficult and timely to manage. Okay. I guess maybe just historically in a deflationary environment, have you given back pricing or have you historically held price increases? I can't remember a single case where we've given anything back. Okay. Maybe there is one, but it's just not coming up. Maybe just pivoting for a minute. Just on, you know, you guys have talked about adding capacity and adding resources and things like that. Can you just level set us kind of where you are, where you're at in some of these additions and just like how we should think about your, you know, this ramp, I guess, I don't know if it's through next year or just sort of how we should be able to think about your ability to produce higher volumes going forward. Thanks. Yeah. Well, first of all, you know, for the third quarter, our SG&A was a little higher than normal simply because there's, you know, production and sales are usually down because of the number of production days, but SG&A is like a constant, a fixed cost through a quarter. You know, that we expect that to normalize into the mid-15s by the end of the fourth quarter. We pretty much are, stay there where you know, it's a matter of getting on top of your cost base and, you know, as we increase our sales and production in a given quarter, we may revisit what we're spending on SG&A and let the company earn more SG&A credit. We're not gonna, you know, we're just not gonna dump in the SG&As and hope that it gets absorbed. You know, they have to earn it. Everybody understands that, and that's the way it works. Okay. A mid-15% SG&A level is a good way to think about the business going forward. Yeah. Yeah. Okay. All right. Thank you very much, guys. Our next question comes from the line of Michael Ciarmoli with Truist. Please proceed with your question. Hey, good morning, guys. Thanks for taking the questions here. Mike, just on this gross margin and what we saw in the quarter, and obviously, you know, piecing together what you just said, everything accrues. It sounds like on a go-forward basis, I mean, I don't wanna get out in front of our skis here, but, you know, it sounds like you've got a new floor here on gross margins. Or should we be thinking about anything that might push these margins down? Anything from a mix standpoint that we should be looking at? I don't think so. I was actually a little disappointed in our gross margin in the quarter, third quarter. That's good to know. All right. All right. Perfect. Just on aerospace, I understand what you said, and it's earlier this week, we heard Spirit kinda spill the beans. I guess they're going to 38 on the MAX, then 42 in October. Presumably you're kinda at those rates or prepping and kind of aligned. Oh, yeah. Yeah. Okay You know, Spirit spilled the beans. I had the beans right here, but I didn't spill them. Perfect. Just on... I know we've been trying to get at this. You mentioned, you know, DODGE, you know, not a lot of backlog, I guess, and I think you talked about the daily orders. I mean, are you noticing anything from those daily ordering trends of late? I mean, I guess we're all trying to figure out here, you know, the global macro backdrop. What are the daily orders kind of telling you as you're looking real-time, trying to gauge, you know, the health of the industrial markets, you know, aside from, you know, I know you talked about the strength in oil and gas? Well, the daily orders for DODGE in the month of January, the strength of those orders surprised us. Okay. You know, that was a pleasant surprise. You know, again, I have to, you know, I'm forced to do the job that Chairman Powell does for a living and try to figure out what the next two months are gonna be like. You know, that's, January was very positive. Okay we're still constrained at DODGE on very key high-margin products that just can't get our leg over the wall on it. I think we're gonna be there for another year. Okay. Last quick one for me. I think you mentioned so, Europe and maybe some specific OEM weakness that you saw. Anything notable with certain OEMs or just kinda isolated? For Europe, I think the OEM weakness that we saw was pretty much in the machine tool sector. Okay. Yeah. In China, which is mainly machine tools. Got it. Got it. Okay. Perfect. Thanks, guys. Yeah, thanks. Our next question comes from the line of Joe Ritchie with Goldman Sachs. Please proceed with your question. Thanks. Good morning, everybody. Morning, Joe. It sounds like Dodge orders accelerated in January. I'm curious. I was just trying to back into it, but what was Dodge revenue for the quarter and what was it up or down organically? Dodge's revenue in the third quarter was $174.8, and it was up 8% from last year organically. Okay, great. That's helpful. I'm just curious, and I know that, you know, it is putting your Powell hat on a little bit, but a lot of the industrial, you know, companies that we cover, some of them are kind of flashing, you know, yellow on their businesses. You know, down turning or seeing some destock from their distributors. I recognize that, you know, 2/3 of your industrial sales now go through distribution. I'd be curious to hear, you know, what you're seeing on the distribution side. I know that you called out a little bit of destock. How are you thinking about that as we progress through calendar year 2023? Well, you know, I think the fourth quarter, calendar quarter for the distributors is normally an unusual quarter. We normally see seasonality in that quarter because the distributors are trying to meet some working capital target that they had in order to achieve their bonuses for the year. They really clamp down on their hardware purchases. Typically, the business can't really run effectively there. You usually see a pretty good snapback in the fourth quarter. I think that was the January effect, and it probably is gonna continue through February. Got it. Okay. That's helpful. If I could maybe sneak one more in. Your defense business you called out, I saw in the Q some of the decline there was due to revenue recognition. Like is there any dollar amount that you can kinda quantify, you know, how much of the, you know, the down revenues were a timing impact? Yeah. We don't have that number in front of us, but I know on the defense side, I know that some of the operations. In order for us to ship a lot of our product, it has to be bought off by a government inspector. Sometimes our product isn't ready until the third week, sometimes the fourth week of the month. It's hard to get the government inspector into your plant when it's with the third week of the month and the month is December. We had definitely had some of that going on. Yeah. It was about $2 million-$3 million. Okay, great. Thanks, guys. Our next question comes from the line of Elizabeth Grenfell with Bank of America. Please proceed with your question. Hi. Good morning. Good morning. I was hoping you could give us a little color on your expectations for revenue growth in the fourth quarter. I think your guide implies somewhere lower obviously than it was in the third quarter. I was just wondering what that's attributable to, where you're seeing. Is this slowdown on the items you mentioned earlier or somewhere else? It's pretty much the, you know, the fact that we're not gonna see any revenues out of that sector where they were building warehouses as fast as they could build warehouses. As a matter of fact, last July, you know, those same people were visiting us, asking us what it would take to triple our capacity. You know, that's kind of a boom or bust area, and it's busted right now. That's sort of $15 million-$25 million a year annualized. It doesn't have particularly good margins, so frankly, we don't really miss it. Okay. You said there's some past dues that were, that Dodge worked through. How many past dues are still into it? The level of past due at Dodge? The backlog. Yeah. Yeah. Their backlog is past due. Backlog. You know, Those are orders that, you know, There's about $85 million left in backlog at this point. Those are orders that are shippable but can't be shipped for reasons that we can't get supply chain organized. Okay. Okay, got it. Great. Thank you very much. Sure. There are no further questions in the queue. I'd like to hand the call back to Dr. Hartnett for closing remarks. Okay. Well, I appreciate all the interest in the call today and look forward to speaking to you again. I guess that'll be in May. Thanks for your participation and good day. Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.