PHINIA Inc. (PHIN) Earnings Call Transcript & Summary

All right. So let's get on with. Brady Ericson, President and CEO of PHINIA and Chris Gropp, Vice President and Chief Financial Officer. We have Kellen in the audience as well here, Kellen Ferris, Vice President of IR. Thanks for joining us. We are delighted to have you talk about PHINIA's outlook for growth and market development, capital allocation strategy, simple stuff. I can tell you, being a kind of a retired an auto analyst, there's a lot of suppliers that would like to trade places with you in terms of your portfolio and your balance sheet. Not that it's an easy job, of course, but that the opportunities that you have to continue to improve the business and work on that multiple as well, which it quite good progress so far. I know you're not satisfied yet. We'd love to trade places with you. And one of the really interesting things that we've been talking about with Brady and Chris that may not seem so obvious, is why is it covered by auto analysts. Auto as an end market is 27% of your total revenues and I suspect, falling over time, not rising over time. You're not burdened with the R&D and operational and execution burdens of the electric vehicle portfolio. Aftermarket is thriving, and we'll get into that as well as to how much duration there is behind that. But really happy to get into some of these topics with you. But Brady and/or Chris, any opening comments or messages beyond what I stated that you wanted to get to the audience?

I think you hit a lot of the key comments. I think we've been trying to educate folks on the diversity of our business, not just from the different markets, but also regional diversity and customer diversity. And so I know we've been talking a lot of folks so far and there's some doom and gloom out there around commercial vehicle trucks and build rates and whatnot, and they ask us. And we're like, yes, we're kind of okay. Yes, EV, heavy-duty North America is still less than 10% of our revenues and so it has an impact. But South America is doing okay. Europe is kind of plugging along. We're seeing some positive signs out of Asia and as you pointed out, aftermarket continues to chunk away. So for us, we really see ourselves as a very diversified industrial. That's just going to -- we're not going to get swung one way or the other based on one particular market. And so we're feeling kind of very comfortable where we are right now from a balance sheet standpoint, from a cash flow generation and just continuing to use that free cash flow as efficiently as possible to benefit our shareholders.

Great. William, why don't you delve some of the more finer topics?

I think there's a number of new markets that you guys have entered or announced that you would enter over the past year. Obviously, you had hydrogen before, which seems like it's -- maybe a focus may not be Aerospace is most recent one. Talk about the decision to enter the aerospace market, maybe a little bit on the off-highway too, but the new markets broadly, what the focus is and where do you see that going?

Yes. I think what we're trying to do is we're trying to leverage our existing human capital and manufacturing capital and taking it into new markets. And so this is not a situation that we have to invest another $100 million in R&D or put in new plants or anything else. The lines that we're producing light vehicle diesel in Europe are the lines that we converted to make aerospace. The engineers that worked on light vehicle diesel and commercial vehicles are the ones that can shift to aerospace or off-highway. The ones that we had on hydrogen for a while -- we still think hydrogen is going to come along, but it's going to take a lot longer, we can reallocate those to ethanol and methanol applications and alternative fuels. And so that's -- I think the one nice thing about our strategy is depending on where it goes, we can easily shift our human capital and manufacturing capital. Going into aerospace. There's 4 major customers out there, so I don't need a big sales force. We know who they are. They're learning who we are. And so it's really just engineer to engineer, and so we're starting to pick up a lot of RFIs and RFQs and we'll launch our first 2 programs with Safran, first one here in Q4, next one in Q1, and we think there's going to be more to follow. Going into the off-highway applications with their Tier 4 and Tier 5 emissions. We're bringing our existing technology. We converted the GDi line to run on diesel for some of those off-highway applications. And so again, we're leveraging existing capital for new applications and similar engineers. So I'm not having to hire and fire a bunch of people not having to take my CapEx to 7%, keep my engineering at 3, my CapEx at 4, and we can easily transition depending on where the markets are.

And any way of, I guess, sizing those opportunities? Because I know you're aiming for the 2% to 4% growth rate at the end of the decade. How reliant is that growth on these new markets? And I guess like when you think about how much of the business could shift these sort of like adjacent tangible markets, like what percent of the business does that become over time?

Yes, I still think it's going to be in the mid- to high single digits of our total revenue. towards the end of this decade. Do we have -- it's not large enough right now for us to call out, but we're probably going to call that out probably sometime next year after we finish the 2025 number to give more color to our investors as we did to separate light passenger vehicle from light commercial vehicle to give them a little more color. And so I think it's going to start to become substantial enough that it makes sense for us to call out. And again, I think the total addressable market for those off-highway and aerospace is as big as our commercial vehicle business globally. So it's a multibillion-dollar total addressable market, of which we really have little penetration. And we think there's a strong demand from customers given the new emissions regulations and requirements that's going to have us pulling getting pulled into those sectors.

And to your point, I mean you already have the plants, same engineers, you're not spending a ton of CapEx on this. And so it's basically a free call option. It's like why not?

Or R&D. We also manage our R&D spend by project. And so we've actually flexed that up and down depending on what we're seeing out there, we were spending a little bit more a year or so ago. We pulled that back and we saw that sort of coming down on hydrogen and things, but then we can flex it back up because it's the same engineers. It's the same knowledge base that you apply to it.

And again, probably 2 -- probably over 2/3 of our engineering spend is application engineering. Well, application engineering is taking an existing core product and just adapting it installation to their specific requirements. So it's the same basic technology, so I don't need to develop something from scratch. It's just tweaking it to the specific customer application. So that's the same thing that we're doing on the aerospace side and off-highway side.

We talked a lot about the organic diversification. You guys just acquired a company called SEM, Swedish Electromagnet. Any other inorganic expansion opportunities, ways you can augment your business? I'm sure there's a lot of attractive targets in this environment.

Yes. And again, we're always going to look at it and compare it to our own valuation and our own multiple. When we were trading at 4x and 5x. There's not a whole lot of companies out there that we think are good, that's going to be at or below our multiple. And that's always how we're going to compare it, which is why we bought back close to 20% of our shares since we've spun because we just thought we were way undervalued and buying somebody else at 6 or 7x when we're trading at 5 and they're going to be similar, it doesn't make a good sense to us. So now as we're getting up to maybe we're now just over 6, that may open up a few more opportunities that we can maybe find some interesting assets that may be trading in the 5 to 6 range. If it's a pure aftermarket asset, maybe we go a little bit higher. But we're always going to compare it to the safe and conservative plan just buying back our shares and continue to other appreciate. So that's our base plan. I think of just continuing to grow organically. We've got good opportunities to grow organically. And if we think our share price is a good value, we'll continue to buy.

Anything specifically on the aftermarket business? Because when you're in environments like this and everything is going down, you benefit by having a very stable business line like aftermarket that's not tied to auto production. So I guess any sort of trends that you would call out? Because I feel like it's one of the businesses that people tend to overlook with PHINIA.

Yes. Again, it's 34% of our global revenues. And so it is -- if you look at a ship that ballast and so when the rate -- all the waves are crashing, we've got that nice ballot that keeps us from moving around. And that's a constant cash flow constant support. When OE are down, our aftermarket tend to come up a bit. And so it's been a great business for us, and we're going to continue to expand in that area. We produce about 60% of the revenues in our aftermarket segment from a product that we produce internally, 40% we're buying and reselling. The Delphi brand has a great reputation with the mechanics and customers in the field. And so we'll work with suppliers, have them meet our specifications and then we'll add additional product lines to our portfolio. And that's what's been kind of helping our aftermarket grow a little bit faster than the market. And so as we continue to bring additional product lines in that will continue to support us and the Delphi brand is a great brand for us to use.

Back on the core fuel injector business, maybe on the more automotive side. I remember what we initiated last year, one of the big trends is that all the other legacy auto suppliers are divesting away from fuel injectors. I won't say specific to AMS, but some of the larger ones. Is that still a trend that's going on? Are you getting that free market share? And sort of where has the share shifted over the past couple of years?

Yes, I think it's probably is more prevalent in '23 and '24, where we were probably 50% of our -- we were winning 50% of conquest opportunities. I think that's down now closer in the 20% to 30% range.

Would that be historically normal? Would '25 to '30 be more of a normal...

It's more normalized. I think obviously, there's one that said they're kind of exiting in their plan in 2030s. There's another that their JV partner in China is kind of tired of losing share, and so they're probably getting a little bit more aggressive on that and they see more opportunities in GDi and plug-in hybrids in China. And so they're probably being a little more defensive. I think what's also happening in the marketplace, we're not getting as many I guess, RFIs or RFQs because customers are just rather than sending out a bid, they're just extending the program and keeping volumes higher. And they know in space setting out an RFQ is not going to do much when there's only 2 people out there and they know they're not going to switch to somebody that already has over 50% market share. And so we're seeing a lot of just natural extensions beyond what we originally were expecting. Just to your point earlier, I think we still like light passenger vehicle. We're still going to support those customers. I'm just not trying to grow it from a dollar perspective. It's about $900 million of our revenue right now. I'd like to keep it around there, maybe go up to $1 billion, keep the plants running, generating cash as we continue to grow in the commercial vehicle and other markets.

Any update on GDis, which is a little bit more light vehicle staying at the same point? But it is a growth opportunity within light vehicle?

Yes. I mean we're seeing a lot of positive growth in China. And what people didn't know when we were spinning in 2023 and thinking EVs are going to take over the world, we had the Li Autos, the Changans and the BYDs saying, "Hey, can you give us a GDi injector for 350, 500 bar because we know hybrids are going to be needed in their portfolio. EVs are great. I just don't think it's going to be 100%. EVs may plateau. I think they're plateauing in China even around 30%, maybe going a little bit higher. But it's not going to 100. Maybe it goes to 40%, maybe it goes to 50%, but that means there's still 50 million, 60 million engines, combustion engines out there.

But our GDi also in the U.S. or in North America has also been very high. So we ended '24 just below 20% in terms of market share. So it has been our biggest area of growth over the last several years.

Maybe shifting a little more short term, anything you'd highlight on industry volatility across the business, maybe a little bit on the light vehicle/CV side? There's not a lot of CV peers that we look at personally, and so it's always helpful to hear what you guys have to say.

Yes. I mean, North America is obviously probably the most challenge right now and probably I think I've been hearing from a number of folks that have talked to some of the CV. There's not a lot of hope. There's a lot of despair out there. we're kind of okay with it. We've been bumping along this bottom at this run rate for a play going on in the fourth quarter. So from a sequential standpoint, we don't see it getting worse. We see it bumping along the bottom.

When do you think the inflection happens?

And freight rates start coming back up and freight demand comes back up. Interest rates, I think, is one that people have been pointing to but I'm not sure interest rates alone are going to get people to buy more trucks. They just don't have the demand. We're hearing people are putting trucks on the lot. They're cannibalizing some of the parts. They're going to keep those used trucks lasting longer. I think the build rates right now are below replacement rates. And so there's probably vehicles being decommissioned faster than bringing on new ones. And that's because the demand for freight is not there and the freight rates are too low. I think if housing starts to come back at some point, that will then start helping trucking and freight rates to come back up again. But I think it's going to be a while. I don't think there's going to be a prebuy. I don't see it happening this year. Maybe there's a little bit next year, but I don't see any big prebuy before the model year or the 2070 emissions regulations come out.

I have to ask, any update on tariff mitigation plans, anything weighted to policy?

No. I mean, I think as we communicated, we think overall, tariffs are going to be neutral to our P&L. When we gave our new guide, we basically said that revenues are going to be up $50 million, $60 million because of tariffs, but there's going to be zero EBITDA impact. And that's then affected our EBITDA margin midpoint going from 14.1% to 13.9% because of that, because it was revenue without profit, but the midpoint of our EBITDA number stayed at $470 million. There were some puts and takes, some ups and downs, currency benefit, volume in North America down, Europe. But all in all, we kind of held our overall guide in Q2, and we're still on pace to be at the high end of the revenue side.

That's great. Capital allocation back half, part of the story was that we're going to continue to buy back stock continue to beat on free cash flow, and that was sort of like differentiate you from the other suppliers. How do you think about capital allocation at the back half of this year? And then, I guess, heading into next year?

I mean, again, no change to what we've been doing. We're going to be -- continuing to be a good steward of the capital for our shareholders. First half of this year, we've been a little bit light on our free cash flow generation. I think it was only around $20 million. But we kept to guide where it is. We still expect to deliver our midpoint at 180, which means we're going to generate about $160 million of free cash flow in the second half. $20 million of that is going to go to dividends. That's generally what we're giving out in dividends. We spent $50 million on the SEM acquisition. So that leaves us about $90 million left, due to do share repurchases or other acquisitions. Nothing urgent on the acquisition side, so I still see a good use for share repurchases. And our debt levels are at 1.4, so it's a little bit below target. So our cash balances are in a good position. So again, I think we're in a very enviable position. We've kind of continued to maintain our conservative nature and being very financially disciplined.

Any audience questions? We have about 15 minutes left. If I could just weigh in on the onshoring strategy. What is the onshoring thesis for PHINIA? And how does that -- how would that differentiate from other suppliers that you might be looking at and benchmarking? And also I'd like to follow up just on automation. We're hearing as LLMs and GenAI gets into the physical world, there's opportunities for manufacturers to create digital twins and eke out efficiencies and over time, mitigate some labor cost inflation in key markets that might be necessary in an onshoring world. So how do you kind of see that?

Yes. I mean, again, in general, our strategy has always been designed, develop source, produce and sell within region. So again, we've always generally, on average, over 80% is sourced and sold within regions. So we don't like to ship a bunch of stuff. And so when this all kind of occurred, we were in a starting point, pretty good. Are we looking at additional opportunities to get that 80% to 90% or 95%, absolutely. That may require some things kind of going back and forth, not just in one direction to the U.S. or North America. So we are looking at some of those opportunities primarily to desource some of the Asian suppliers tend to be where the biggest impact and where we were sourced before. And so we're working with those suppliers to put plants here in North America to support us and/or we'll look at make versus buy changes as well, but still within our 4% CapEx. From an AI perspective, we probably got a dozen different projects going on around the company. We actually have a digital steering committee that monitors all the different AI and IT projects that we have going on, but they're going to be probably a lot more targeted. We don't have customer service type entities that we can quickly automate. But as far as helping us analyze production efficiencies and key data that we're tracking, warranty analysis, inventory, software, calibration work that we're giving to customers. So there's a bunch of different programs that we have, but I think they're going to be more targeted, and they're really going to be focused on let's ensure that whatever we're doing actually delivers the value that we expect. Doing AI just to say we're doing AI and not driving value to the bottom line is not what we're going to do.

Has it changed the kind of people though that you've brought into the organization? I don't know if you can point to any recent external hires or other areas that you've brought into the business to beef up the IT part of it?

Well, we have software engineers already, and we have little pockets of where we -- I mean we have a group that's in the U.K. that had done the original software engineering. But then we've concentrated that and moved a lot of that into India and into Turkey, where we have software engineers and doing work around that. So engineering has a big push on that. And within my group, in finance, I mean I have a robotics department within our shared services that literally comes up with ways to automate some of our internal administration stuff and push it out to the world. So there's a group there that's a very small group. But when you take that, you can push it out easier, the software side, the engineer side, it's a lot bigger.

There's probably 2 different sides of it. As Chris mentioned, we've got over 400 software and calibration engineers. People wouldn't -- were mechanical people think is mechanical. We probably have a lot more software engineers than maybe our predecessors do. And that's why we get close to $100 million a year from our customers for software calibration, cybersecurity, specialty projects that we actually quote them for packages that we'll do $3 million $4 million, $5 million packages to do cyber secure for them. So we have a lot of capability inside that also allows us to do the complete system integration. So that's kind of one side of it. On the IT and the finance side of it, that is an area that we're probably going to be investing in the next few years because as we got spun out were legacy Delco Remy, legacy BorgWarner, legacy Aptiv, legacy Delphi Tech acquisition. And so we've got a number of different instances. And so we're going to -- our goal is to then rightsize the structure and infrastructure of we don't need 6 data centers spread around the world for our size of the business, but that's what we've got spun off with. So we're consolidating all that. We're looking to go down to 1. As we go to S/4HANA and SAP, we'll consolidate down to 1 instance globally, make it more consistent across the organization, which then makes it easier for acquisitions. It makes it easier on the finance team because now we're not trying to go all these different systems that have to talk to different systems and the chart of accounts becomes consistent. And so we're really going to be driving for consistency across the organization, which then is going to help as we do AI or any kind of software upgrades we can blow it through everywhere without having to do. Right now, the person who runs in the financial side in Turkey can't really talk to the one in Juarez because their chart of accounts are different, their queries are different because they don't have the same system. And so we think that's going to be an opportunity for us to drive a lot of significant savings.

And I think, I mean, the technology of fuel injectors, it's complicated. It's not simple. So I'm sure all these AI tools design, CADD, like all that is benefits you guys to design new products to see the OEMs?

Yes. I think it was in our -- it used to be a lot higher. I think they cut down the amount of data. But for every single diesel injector that we produce, there's about 5 megabytes of data that we store for every single injector as far as the data that we're storing and having to have traceability, too. And so as we start getting AI and the big data, that's an opportunity for us to really start analyzing how can we make our part more efficient, more robust? Where do we see variations? How can we control better? And again, we're talking about tolerances that we're controlling to plus or minus 0.5 micron. And if people realize, 0.5 micron is like a little bit larger than a virus. That's how small that we're controlling. And by the way, in our diesel injectors, it's 3,000 bar and people kind of go, what's 3,000 bar. That's close to 45,000 psi. Your tire, when your tire explorers big bang, that's like 40, 50-psi. We're managing 45,000 psi of pressure inside of our injectors, with 0.5 micron tolerate that to last 0.5 million miles with a bunch of junk in biofuels and sulfur and crap they throw in these things. This is not easy stuff. I've been in the industry for 30 years in turbos and engine design and development. This fuel injection stuff is next level. And when we start taking that technology and capabilities to aerospace, it's like aerospace stuff is easy from -- they just have a lot more paperwork to do to kind of track everything. But as far as the manufacturing processes and capabilities, it's really not a big issue.

It's a high-pressure drop. High pressure. Yes, that's a 50-year-old dad joke, sorry.

Well, you're getting me excited too about fuel injectors and I never thought...

Brady gets very excited about that.

What's the next big tech wave in fuel injectors? Like what's the next big unlock?

Well, I think on the light vehicle side, we're already leading with the 500-bar technology out there. I think we're looking to push that maybe a little bit higher. I think a lot of the fuel injection is being adaptable to multiple fuels, whether it's different fuels and multi-fuel applications because customers are not sure what the fuel of the future is going to be, but they need a fuel system that can adapt to whatever people are going to want to adapt to. So we're doing a lot of multi-fuel where it runs -- it can run on 100% ethanol or 100% gasoline in Brazil. We're seeing dual injectors that will do both diesel and natural gas or diesel and hydrogen. And so I think there's a lot of unique technologies coming there as well.

But if I can just chime in here, are we we still at -- I know that there's an extended stay of execution or more excited useful life for internal combustion technologies and particularly because the hybrids and then regulatory changes as well. But would you still categorize that we may be in the final generation of the technology? Like are we -- like OEMs aren't really trying to make giant leap and injector technology for light vehicle or commercial vehicle applications or kind of where would you push back on that?

Yes, I mean, on the...

It's been good for you.

Commercial vehicle guys, we're still developing next generation. They're still trying to squeeze out that 1%, 2% efficiency. So we're launching '27. We've got some other upgrades that people are working on for '30, and they're already asking us for upgrades for '32. And our view and what we've stated is our view is that combustion engines are going to be around for the rest of the century in transportation, full stop. Now it may go from gasoline and diesel to carbon-neutral fuels like ethanol, methanol to carbon-neutral fuels like hydrogen. It's going to take decades to transition. It's going to take decades to transition to those carbon-free and carbon-neutral fuels. But a liquefied or a gaseous fuel is just a very, very efficient energy dense way. for transportation, off-highway, construction, marine, aerospace, it's going to be something like that. Battery technology is going to get there. I don't think it's going to get there for at least clean renewable energy is not going to be available in quantity in Wyoming or South America or Southeast Asia.

If I were to ask you on hydrogen combustion to gauge your level of excitement today versus a year ago, is it same, less or more? Doesn't feel like it's...

It's probably a little bit less because I think people are now becoming more realistic on the time frame. In commercial applications, they like to run things for 3 or 4 years before they make a wholesale change. And so I think we need to get more demo fleets out there.

They need more of that in order to commit?

We still need the infrastructure. Same thing as battery electrics went through. They still have infrastructure. Do we have enough hydrogen stations? Is the cost of hydrogen there. We're working on hydrogen, bring down the hydrogen cost quite a bit because of we actually got approved a new grade of hydrogen. That's for combustion.

But geographically, where is the main event for hydrogen combustion? Asia, U.S., Europe?

I think more India and China. And so I think India is interesting because they've already got a large infrastructure for natural gas, and so they're used to those. So the tanks are already in the vehicles. They understand how it works and so for them to convert those stations and infrastructure from natural gas to hydrogen.

It's not liquefied, it's not like under high pressure?

Correct.

Cryogenic, yes.

Do you think it's a 10-year story with hydrogen? Do you think it's a 20-year story, a 30-year story?

I think it's at least a decade before. I don't think it's going to be any meaningful part of our revenues until sometime in the 2030s. There's still -- there's a lot of interesting work. I mean take a look at -- we just did a hydrogen van like 24 hours of Le Mans driving it around France for 24 hours straight in cold weather, hauling things with really no issues with a 10-minute refill time. We're working with Alpine and a number of the F1 folks on hydrogen for racing as well as they see that as a way forward because they love combustion sounds of an engine, and now they're trying to get cleaner as well. So we've got a lot of opportunities there as well.

What about marine or defense?

For hydrogen or for just in general?

In general. You still need fuel injectors in tanks?

Oh yes. Yes, it's going to be different. I mean, they're going away from the heavy diesel on the marine. So now they're looking at ammonia, they're looking at methanol they're looking at different fuel types as well. And again, we're kind of agnostic to all the different fuel type. We can adapt to whatever they want. And so from our perspective, depending on where the trend is, we'll adjust accordingly. And a year, a year or 2 ago, we had a lot of customers in 50 development programs that they were paying for us to develop on hydrogen. They're now asking us for ethanol, methanol and ammonia, and we can adjust accordingly. I think the fuel injection system at the end of the day, is going to be at the heart of it because that's the main thing that has to change and probably one that's most impacted.

Some of these first aerospace are for defense models, and we're having to produce them in country -- for the country that they're for. I've done it before, BorgWarner. BorgWarner has some, too. It's very niche. It's very small. It's very lucrative, but it's just a different market, yes.

And again, we -- it also ties in, the aerospace ties in well with having a good aftermarket because they have their, hey, every 1,000 hours, they're going to replace your injectors regardless of whether there's an issue or not. And so you get -- we're starting with the OE side of it. And then after a number of years, we'll start to get to MRO that comes with it as well that's going to give us that perpetual dividend.

I'm just going to guess the aerospace, the defense injectors are probably multiples more expensive than what you have in a CV?

Oh absolutely. Their volumes are lower. They're, again, a lot more paperwork. And again, their focus is on quality and delivery. That's their biggest challenge, full stop. We don't have to talk to them and negotiate on a $3.22 or $3.17. They want 100% guarantee on the quality, and they don't want their lines to be affected. And that's why the biggest impact they've seen over the last decade is supply chain issues that have prevented them from meeting their numbers. And we see ourselves as a good supplier because our program management and on the commercial vehicle and light vehicle side, you don't miss an if you miss an SOP, you're out of business. And we're supporting our first customers, not only were we on time, we were early and they didn't know what to do with us. because they're used to everyone being late. And so us actually being ahead of time was very unique for them.

Finance questions, 2 minutes.

Was the decision to enter aerospace, is that more of you being approached by manufacturers that needed to diversify? Or was that a you decision because you had the technology and you could make it work?

I think it was a little bit of both. I think we were originally approached because they had some supply issues probably 5, 7 years ago. And so the relationship started building at that point. We continue to show our commitment to the space. We continue to allow our teams to be entrepreneurial to find new opportunities for growth. And it's -- they planted the seed and that seed is turning out to turn into a nice little -- nice tree. So we're going to continue to cultivate it and plant some more trees.

It really came through some of our engineers who had contacts within the industry and they start talking and speaking and then it just kind of grew from there. they had a need and they knew what we did, and they approached us and they talked to our engineers and get a solution.

So what are some of the good public comps for your business, industrial, commercial aftermarket that people should think about?

Yes. It's on our deck, probably about half of them that we use is our, I guess, compensation and peer for TSR is there. So the Allisons, the Timkens, the Dormans, the Donaldsons, who else I'm missing, Oshkosh is another good one. So those are the types of folks, Atmos, I think we've added in there, too. Garrett, they're still probably 70%, 80% pass car. So they're still pretty heavy in that space.

We took Gates off.

Gates is one that we probably need to add. Gates is another good example. And these are ones that they're serving a lot of different markets. They don't have a heavy exposure into one different industry. They generally have a good portion of aftermarket business. They're global in nature. And so I think those are -- I've got my own list, I can add more to it. I've got like 9 or 10 that I think are what I would consider our core comps in that space. I think there were 5 of them I just brought it off the top of my head.

Great. Brady and Chris, we really appreciate your time, and good luck.

Thank you.

Thanks, guys.

Great. Thank you so much. Good luck to you, too.