Transcat , Inc. (NASDAQ:TRNS), a leading provider of calibration and laboratory instrument services, has reported robust financial performance in the fourth quarter of fiscal year 2024. The company recorded a 13% increase in consolidated revenue, which amounted to $259 million.
The growth was primarily driven by a significant 11% organic service growth and a total service growth of 17%. Transcat's strategic acquisitions and initiatives, such as the TS3, are set to further enhance their market position, targeting highly regulated industries with comprehensive service offerings.
Key Takeaways
- Transcat achieved a 13% increase in consolidated revenue, reaching $259 million in Q4.
- Organic service growth was strong at 11%, contributing to a total service growth of 17%.
- Gross margins expanded by 270 basis points to 32.3%.
- Adjusted EBITDA saw a 27% increase, reaching $38.6 million.
- The company completed three acquisitions, expanding its services and addressable markets.
- Transcat's TS3 initiative is expected to launch mid-fiscal year, enhancing their life science manufacturing market offerings.
- John Cummins (NYSE:CMI) was promoted to Vice President of Global Strategic Partnerships.
Company Outlook
- Transcat anticipates continued organic service growth and margin expansion through process improvements and automation.
- The company plans to enhance customer value through expanded capabilities and strategic acquisitions.
- Transcat is focusing on building a recession-resistant value proposition, especially in the life sciences sector.
Bearish Highlights
- Executives discussed the potential impact of interest rate changes on the rental business.
- Seasonality in the Becnel business could lead to variability in quarterly revenues, with Q1 being the lightest.
Bullish Highlights
- Transcat's high-margin rental business is expected to grow, contributing to overall margin expansion.
- The TS3 initiative and new brand positioning aim to attract larger and longer contracts in highly regulated industries.
- The company is confident in its value proposition and the potential for significant contract growth.
Misses
- There were no specific financial misses reported in the earnings call.
Q&A Highlights
- The company is open to further mergers and acquisitions in the new market segments.
- Capital expenditures are anticipated to increase in '25, similar to the previous year, partly due to acquisitions.
- Transcat's TS3 brand positioning is designed to target highly regulated customers, offering integrated services.
Transcat's strong financial results are underpinned by the company's focus on organic growth and strategic acquisitions. The recent promotion of John Cummins to lead the TS3 initiative demonstrates the company's commitment to integrating its services and expanding its reach within the life sciences industry and other regulated sectors. With a clear strategy to provide value to customers and shareholders, Transcat is positioning itself for sustained growth and resilience in a changing economic landscape.
InvestingPro Insights
Transcat, Inc. (TRNS) has shown a remarkable financial journey as evidenced by the latest data and insights from InvestingPro. With a market capitalization of 1.3 billion USD, the company's strategic initiatives and focus on organic growth have paid off, but it's important to look at the nuances behind the numbers.
InvestingPro Data highlights a Price to Earnings (P/E) ratio of 107.83, which suggests that the company is trading at a high earnings multiple compared to its peers. This could be indicative of investor confidence in Transcat's future earnings potential or a reflection of its current premium market positioning. Additionally, the company's revenue has grown by 11.7% over the last twelve months as of Q3 2024, aligning with the positive growth narrative presented in the earnings report.
A noteworthy InvestingPro Tip is that Transcat holds more cash than debt on its balance sheet, which is a strong indicator of financial health and may provide the company with the flexibility to pursue further strategic acquisitions or invest in innovation without the pressure of high debt levels.
Moreover, the stock has experienced significant returns over the past week, month, and year with price total returns of 18.76%, 31.3%, and 62.66% respectively, signaling strong investor enthusiasm. This aligns with the bullish sentiment expressed in the article about the company's growth prospects and market position.
For readers looking to delve deeper into Transcat's financial metrics and gain additional insights, InvestingPro offers a comprehensive list of tips. Currently, there are 19 additional InvestingPro Tips available, which can help investors make informed decisions. To access these insights and more, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/TRNS.
Full transcript - Transcat (TRNS) Q4 2024:
Operator: Greetings, and welcome to Transcat, Inc. Fourth Quarter Fiscal Year 2024 financial results. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Tom Barbato. Thank you. You may begin.
Tom Barbato: Thank you, operator, and good morning, everyone. We appreciate your time and your interest in Transcat. With me here on the call today is our President and CEO, Lee Rudow; and our Chief Operating Officer, Mike West. We will begin the call with some prepared remarks, and then we'll open up the call for questions. Our earnings release crossed the wire after markets closed yesterday, both the earnings release and the slides that we will reference during our prepared remarks can be found on our website, transcat.com in the Investor Relations section. If you would, please refer to Slide number 2. As you are aware, we make forward-looking statements during the formal presentation and Q&A portion of this teleconference. These 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 in the documents filed by the company with the SEC. 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. Additionally, 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've provided reconciliations of non-GAAP to compared GAAP measures in the tables accompanying the earnings release. With that, I'll turn the call over to Lee.
Lee Rudow: Thank you, Tom. Good morning, everyone. We appreciate you joining us on the call today. Fiscal 2024 was another strong year for Transcat. Our excellent operating results included double-digit organic service growth, significant and continued gross margin expansion and dynamic growth in EBITDA and operating cash flow. We fortified our strong position in core markets by enhancing our differentiated value proposition and expanded our addressable markets. It was a great year, and we're very proud of the team, their continued hard work and their accomplishments. In fiscal 2024, we generated double-digit organic service growth of 11% and total service growth of 17%. Consolidated revenue was up 13% to $259 million. The demand for our products and services remain strong. Consolidated gross margins expanded 270 basis points to 32.3%, driven by organic service revenue, inherent leverage in our service operating model, improved productivity in our labs and a higher rental mix in our Distribution segment. Adjusted EBITDA, a key metric for us given our acquisition strategy grew 27% from prior year to $38.6 million. Accretive acquisitions played an important role in fiscal 2024 as we acquired 3 companies: TIC-MS, SteriQual and Axiom Test Equipment, the acquisitions expanded our addressable markets, widened the breadth of our service offering and allowed us to leverage our existing infrastructure. As always, the key differentiator of Transcat's acquisition strategy is the effectiveness for integration process that enables us to quickly achieve growth synergies and capitalize on compelling cross-selling organic growth opportunities. In fiscal 2024, service gross margins continued to expand. Margins expanded 160 basis points to 33.8%. Service margins benefited from our differentiated suite of services which continues to resonate throughout our highly regulated and expanded addressable markets. Transcat customers continue to recognize and value Transcat's role servicing markets where the cost of failure is high and risk mitigation is a top priority. I'll touch upon the fourth quarter results for our Service segment. In the fourth quarter of fiscal 2024, our Service segment recorded its 60th straight quarter of year-over-year growth. We generated 18% total service growth and 13% organic service growth driven by recurring revenue streams and high year-over-year retention. Increases in productivity, driven primarily by automation and process improvement, drove year-over-year increases in the fourth quarter Service gross margin by 170 basis points to 35.7%. Turning to Distribution for the full fiscal 2024 year. Revenue grew 5% and benefited from the high-performing Axiom acquisition. Gross margins expanded 420 basis points from prior year. In the fourth quarter, distribution revenue grew 8% and gross margins expanded 510 basis points, again, driven by the increased mix of the rental business. With that, I'll turn things over to Tom Barbato for a more detailed look at the fiscal 2024 financials.
Tom Barbato: Thanks, Lee. I'll start on Slide 4 of the earnings deck posted on our website which provides detail regarding our revenue on a consolidated basis and by segment for the fourth quarter and full year. Fourth quarter consolidated revenue of $70.9 million was up 14% versus prior year and Service segment strength and solid revenue performance in our Distribution business. Looking at it by segment, Service revenue grew -- growth remained very strong at 18%, with 13% of the growth coming organically and the other 5% from acquisition. As Lee mentioned, demand for our core calibration business remains strong. Turning to Distribution. Revenue of $24.2 million was up 8% versus the prior year. We continue to see growth in the higher-margin rental business, which also benefited from the Axiom Test Equipment acquisition. Finally, on a full year basis, total consolidated revenue was $259.5 million, an increase of 13% compared to the prior fiscal year. Our service business saw very strong demand throughout the year, resulting in year-over-year growth of 17%. Distribution segment revenue grew 5%, driven by strong rental performance. Turning to Slide 5. Our consolidated gross profit for the fourth quarter of $24 million was up 26% from the prior year, and our gross margin expanded 300 basis points. Service gross margin expanded 170 basis points to 35.7%. The Service margin increase further demonstrates our ability to leverage high levels of technician productivity and our differentiated value proposition. Distribution segment gross margin of 30.3% was up 510 basis points. For the full year, our consolidated gross profit increased 23% to $83.8 million and our gross margin improved 270 basis points to 32.3%. Our Service gross margin was 33.8%, which represented an increase of 160 basis points compared to the prior year. Distribution segment gross margin of 29.5% was up 420 basis points as the segment benefited from significant growth in the higher-margin rental business. Turning to Slide 6. Q4 net income of $6.9 million increased 88% from the prior year, and our diluted earnings per share increased to $0.77 from $0.48. Net income includes a noncash adjustment of $2.4 million for the amended NEXA Earn-Out agreement. We report adjusted diluted earnings per share as well to normalize for the impact of upfront and ongoing acquisition-related costs. Q4 adjusted diluted earnings per share was $0.66, up 10% from the same quarter of the prior year. Full year net income increased 28% from prior year or $0.23 per share and benefited from $800,000 of interest income driven by the proceeds from our successful secondary offering earlier in Q2 of fiscal '24. Flipping to Slide 7, where we show our adjusted EBITDA and adjusted EBITDA margin. We use adjusted EBITDA, which is non-GAAP to gauge the performance of our business because we believe it is the best measure of our operating performance and ability to generate cash. As we continue to execute on our acquisition strategy, this metric becomes even more important to highlight as it does adjust for onetime deal-related transaction costs as well as the increased level of noncash expenses that will hit our income statement from acquisition purchase accounting. With that in mind, fourth quarter consolidated adjusted EBITDA of $11.7 million was up 30% from the same quarter in the prior year, and adjusted EBITDA margin expanded 200 basis points, both segments had adjusted EBITDA growth and EBITDA margin expansion compared to last year. Full year EBITDA was $38.6 million, which is up 27% compared to the prior year, driven by the significant year-over-year profit improvement in both segments as always, a reconciliation of adjusted EBITDA to operating income and net income can be found in the supplemental section of this presentation. Moving to Slide 8. Operating free cash flow of $19.3 million significantly improved versus the prior year. Full year capital expenditures were $2 million higher than prior year, primarily to support the growth in rentals. Capital expenditures in total continued to be centered around Service segment capabilities, rental pool assets, technology and future growth projects. The spend was in line with expectations. Slide 9 highlights our strong balance sheet. At year-end, we had total net cash of $31 million with a leverage ratio of 0.1x. We had $80 million available from our credit facility at quarter end. And as previously announced, we acquired Becnel Rental Tools for $50 million just after the end of fiscal year, paid in combination of $32.5 million in company stock and $17.5 million in cash. Lastly, we expect to file our Form 10-K on May 28. With that, I'll turn it back to you, Lee.
Lee Rudow: All right. Thank you, Tom. As I stated at the start of the call, fiscal 2024 was an excellent year for Transcat. Our strategy is to drive meaningful and consistent differentiation into the highly regulated markets we serve. We want to continue to enhance the value we provide for our customers, which as always includes a concentration of life sciences. We'll continue to leverage our competitive advantages, which include strong leadership and execution to fortify and grow Transcat's position in the highly regulated markets that we serve. We continue -- we expect to continue to benefit from the recurring revenue streams and to generate organic service growth in the high single-digit to low double-digit range. We expect our high-margin rental business to continue to grow. We expect to continue to leverage continuous process improvement and automation to enable further sustainable margin expansion in our service operation. On the acquisition front, we expect our robust and diverse acquisition pipeline to continue to be a key component of our go-forward growth strategy. We expect to continue to acquire and integrate strategic acquisitions that enhance the value we bring to our customers through expanded capabilities. We expect acquisitions to be accretive and to effectively drive synergies. We expect to continue to expand our addressable markets in areas we believe are strategic and are a good fit for our core operating strengths. The recent acquisition of Becnel is a great example of that. The acquisition further diversifies our portfolio of services within regulated spaces and increases Transcat's durability. Becnel is essentially a rental platform with a growing service component. It operates in a regulated environmental space with synergistic growth opportunities with large instrumentation users. Becnel is a highly profitable company, led by a creative team of strong leaders with a demonstrated track record. We love that. We're excited about the promotion of John Cummins, former owner of NEXA Enterprise Asset Management to Vice President of Global Strategic Partnerships. In his new position, John will launch our integrated Transcat's TS3 initiative, which stands for Transcat's Single Source Solutions. This is an important next step for growth and differentiation. It's about looking ahead, anticipating and adapting to the market and opportunities. It's about being different or better or both. Essentially, TS3 is the integration of NEXA's asset management and life cycle services with Transcat's core calibration services to provide a comprehensive full suite of services to be sold to high-level decision makers for new capital projects and existing operations. One company, Transcat, will be able to offer commissioning, decommissioning, validation, CMMS, calibration, reliability and many other critical services to the life science manufacturing market, among others. This is a unique approach capitalizing on both Transcat's very strong brand and our position in the market. Transcat Single Source Solution program will launch midway through the fiscal year. We're excited to get started. And of course, in addition to all these expectations, we expect to generate continued and sustainable long-term value for our shareholders. And with that, operator, please open the line for questions.
Operator: [Operator Instructions] Our first question comes from Greg Palm with Craig-Hallum.
Danny Eggerichs: This is Danny Eggerichs on for Greg today. Congrats on the good results again. Wanted to kind of start on the Service side. Obviously, you saw good growth again and a seemingly pretty good outlook for fiscal year '25 as well. I guess, as we're talking about the margin there, I think a quarterly record at 35.7%, and you kind of talked about some of the internal initiatives going on in the process improvements and the automation. Just kind of wondering where we're at in terms of those kind of internal initiatives and how much further we can kind of pull out of that margin moving forward?
Lee Rudow: Right. So things continue to progress. We like the work that we're doing both in automation. I think that's important. We're certainly no further along than if you were to use an analogy of a baseball game, we're probably in the fourth or fifth inning of that initiative. Process improvement, we're probably not even in the fourth or fifth, we're probably closer to third or fourth. So I think there's runway on both of those initiatives. But there are other things as well. We're always developing our operational leaders. So the actual leadership in our labs, both at the management level, the assistant management level, we're working on all these things that will eventually make their way into margins. So I think we're looking at -- we've sort of established that we're in the mid-30% range at this point. I think we'll get above that over time. As systems continue to improve and some of these other programs I mentioned, mature, we'll get into the mid- to upper 30s. And beyond the possibility, but it's probably be -- too premature to talk about it. But I think we've got runway to keep getting better. And I guess, essentially, that's the message.
Danny Eggerichs: Got it. That's helpful. And I guess maybe just sticking with margins, maybe on the Distribution side. So over 30% over the last couple of quarters here, and that's obviously before Becnel contribution. So I think maybe previously, it was kind of the 28% to 30% range. But now as we kind of layer in that higher-margin business as well. How should we think about the progression of the Distribution margins going forward?
Tom Barbato: Yes. Yes. Danny, it's Tom. Obviously, we're well entrenched in the low 30s, and we would expect with the addition of Becnel for that total margin to get into the kind of mid-30s. And we could provide some additional guidance as we go forward. We're still digesting Becnel, but we've got a pretty good idea of what impact it's going to have, obviously. But you could think of it in kind of that mid-30s range.
Danny Eggerichs: Okay. Great. And just following up on that Becnel. That's an entirely kind of new market that you're entering in on the rental side over there in kind of the oil and gas, is that correct?
Tom Barbato: It is, but we think about it a little bit differently, right, is that we believe that the business isn't -- and we've done a lot of diligence around this that the business isn't really tied to the oil and gas industry so much as it's tied to the regulation around the work that has to be done. As Lee mentioned, there's environmental regulation around that industry decommissioning oil wells and Becnel's providing and renting equipment to support those really important activities. So it's really more plays with the regulation -- regulated end markets that we serve. And from that standpoint, we see it as more of the same than something different.
Operator: Our next question is from Scott Buck with H.C. Wainwright.
Scott Buck: Can you tell us what percentage of Distribution segment revenue is coming from rentals post-Becnel acquisition?
Tom Barbato: Yes. Post-acquisition, it's about 35% of the overall Distribution business.
Scott Buck: Okay. Perfect. That's helpful. And the second one, I want to ask about acquisitions. I'm curious, just given -- and I think we saw it a little bit with Becnel, the strength of your equity, does that change the way that you view potential acquisitions and maybe in terms of size or how you would finance deals?
Lee Rudow: So this is Lee. I would say yes and no. I mean, it's good. We did the offering. We put ourselves in a position so that if we found an opportunity that was a little bit larger than what we had done in the past and was a good strategic fit that we'd be in a position to execute upon it. I think as we go forward, we continue to look at the strength of our stock. We look at our cash position. And we'll -- each deal will present a different opportunity, and we'll look at them on an individual basis. But I like the position we're in. Our capital structure allows us to execute our strategy, and that's the key. And I see us being in a good position to do just that. So I think it depends on each individual situation, how we'll approach it. Equity will always be on the table as a potential tool. So I hope that answers your question, Scott.
Scott Buck: Yes. No, that makes sense. I appreciate that. And then last one, Tom, just on OpEx for '25. How should we be thinking about general growth there versus the strength that you've seen on the top line?
Tom Barbato: Yes, Scott. I think if you look at kind of Q4 numbers as kind of a jumping off point, I think you could continue to expect some level of reasonable growth going forward from there. In order to be able to continue to grow at the rate we are organically, we need to continue to invest in the appropriate level of selling resources to support that future growth. So I would use Q4 as a jumping off point, some level of kind of modest growth from there and you would expect that growth to continue through the fiscal year.
Operator: Our next question is from Ted Jackson with Northland Securities.
Ted Jackson: I'm going to beat some dead horses because everyone has asked all my questions basically. Congrats on the quarter. Can we go back over into the rental? One of the comments that was in the press release that I thought was at least worth exploring a little bit was the efforts in terms of trying to bring rental into kind of other parts of your customer base? And maybe my first question would be, could you unpack that a little bit and talk about what you see with that and how that effort is going to unfold kind of what verticals and kind of where -- what kind of penetration do you think you can get out of it? And then I've got a follow-up.
Tom Barbato: Yes, Ted, let me make sure I understand the question. So are you saying what sort of additional cross-selling opportunities are for the rental business into our service customers? Is that essentially...
Ted Jackson: Yes. Yes.
Lee Rudow: So one example I'll give you and something that we liked in the Becnel deal. So clearly, this is a company that rents equipment for the decommissioning of this regulated decommissioning space with oil wells. But when you -- when we looked at their customer base, of course, you're going to see Halliburton (NYSE:HAL) and Schlumberger (NYSE:SLB), you're going to see Baker Hughes and these are historically large, large users of instrumentation, all process equipment, calibrators, pressure gauges. And so it's not just the service component and the rental component, it's also the instrument component. So I think that wherever there's instrumentation, there's opportunities for calibration growth as well. And sometimes internally here, we say all roads lead to calibration. And so when we look at an acquisition, we like to check that box if we can. And I think with like Becnel example, we were able to do that. So time will tell, you have to execute well. You have to cross-sell well, but we're certainly capable of doing that, and that's what I would expect from the company.
Tom Barbato: And I would just say going the other way, right? I mean there's always a focused effort on renting to our existing customer base, right? And it helps solve customer problems. It builds goodwill with those customers. And obviously, it provides us a path to some really attractive margin business. So that's something that we just -- we do as a regular part of our normal course of doing business in our sales efforts.
Ted Jackson: Is there any case to be made that buying equipment in your Distribution business, that's CapEx and renting is more of an OpEx turning it into a variable that with interest rates higher and people managing and looking at the capital expenditures and a little more detail that there's an underlying lift maybe for some of your rental business because of the change in the interest rate environment and such.
Lee Rudow: Yes, there certainly could be. And as we look at our company, and you've heard us, Ted, through the years talk about being recession-resistant, it's all part of how we build our value prop. So our suite of services, which includes rentals, certainly has that OpEx CapEx component to it. So life sciences, in general, tends to lend itself to some resistance. And so we start -- if you look at the NEXA business and what they do on the cost control and optimization portion and all these services together are coordinated and lead towards some sort of resistance to economic cycles, and we love that part of the business, and we're going to keep making sure that we enhance it, and it's part of our value prop.
Ted Jackson: Okay. And then just shifting over to Becnel for those of us that actually haven't really incorporated that into their forecast at this point. It's about a $20 million revenue business. I assume we would be kind of sort of layering that into this fiscal year with maybe an adjustment for the first quarter because it's quite a full quarter. Is there any seasonality to that business that should be taken into account? How do we think about that in terms of like how their top line flows through over the course of the 12-month cycle?
Tom Barbato: Yes. So Ted, I'll take that one. So think of it as a kind of high-teens revenue business. And I think your point is correct, right? There should be an adjustment for the first quarter of this year because we acquired them partway through April. There is some seasonality to that business. It's actually almost like somewhat complementary to the seasonality of Transcat's business, right, because their lowest revenue is in calendar Q1, which is traditionally Transcat's highest quarter. So I guess if there's going to be seasonality, that's kind of a good fit. But Q1 is definitely the lightest -- calendar Q1 is definitely the lightest quarter for their business. And it's that way for all the business operating in the Gulf. There's weather concerns in the winter. There's some other reasons behind that. But if you need more detail on that, we can discuss offline.
Ted Jackson: Okay. And then I'll step out of line, but you've got into this business. It sounds pretty interesting. Is there other opportunity for you there in terms of M&A like the pipeline? I mean, is there an area -- is this something that you can grow through further M&A? And obviously, I'm sure you'll be trying to do it on an organic basis. But I mean it did kind of put you in a brand-new market, it's intriguing.
Lee Rudow: Yes. So this is Lee, Ted. And I think any time we make an acquisition and we state that it expands our addressable markets somewhere we have in mind that there's potential growth beyond the acquired company. And that remains to be seen, but we -- and we certainly have to execute against that. But I think your point is we're in a space that if we operate well in and develop a demonstrated track record to grow organically, then we would also look down the acquisitive path as well. That would be a normal course of action for us. So yes, we'll keep looking at this market, both organically and through acquisition and try to make the best decisions to match our strategy as we go forward.
Operator: [Operator Instructions] Our next question comes from Martin Yang with Oppenheimer.
Martin Yang: First question on CapEx for fiscal '25. Is there anything incremental on a year-over-year basis, especially relating to Becnel?
Tom Barbato: Yes. Martin, great question. Obviously, we saw an increase in CapEx this past year with the Axiom acquisition. I think we should expect to see a similar increase in '25 with the Becnel acquisition, right? I mean the key to growing a rental business is you've got to have the assets in place to be able to rent. The returns on those assets are very good. And you see that in the margin profile of that business. So -- but yes, I would expect a similar increase to support rentals. And then the majority of the remainder of the business remains about the same.
Martin Yang: Should we think about the similar increase in terms of dollar amount or percentage growth?
Tom Barbato: Dollar amount.
Martin Yang: Next question on TS3, maybe can you maybe give us a little bit more detail on the new brand positioning with a more integrated service are you trying to approach customers or maybe not easy to win without a such offering -- overall, is this new positioning relating to trying to get customers that are harder to reach without it?
Lee Rudow: Yes. I think that's the right way to characterize it. So when you take a look at our value proposition that we've built over the years, both organically and through acquired companies, we look at the strength of that and it's -- we're in a unique position now as a result of those activities to be able to present something that is really so comprehensive that if we get to the right level at the right time with the right decision-makers, which is what TS3 is all about, we really do have a compelling approach to servicing highly regulated customers. And historically, we've always had nice growth, but it's been at the low, mid and high ranges of what we call opportunities. We have a transactional business. We've got a business that is anywhere from a couple of hundred thousand dollars to, let's say, low 7 figures or $1 million. But now with this value prop, if you get in the right place at the right time, there should be, we believe, an opportunity to do something different and do something large. And it takes a different approach and it takes a different game plan, but that's what TS3 is about, a single-source solution that can really save the customer a lot of time and money over time and get their work done properly and all the other features like risk mitigation. And that's what it's about. So I think you've characterized it well.
Martin Yang: Got it. A quick follow-up on the way you're characterizing large. Is there a potential for -- what I'm thinking is 2 verticals. One is more service offer to customers. The other is maybe the duration of the contract or relationship with the customers. Is any 1 of the 2 or others that gave you confidence that you can maybe grow the potential size of the business you engage with?
Lee Rudow: I think the potential is there for both to grow the length of these contracts and to grow the size of these contracts. Over time, the goal would be both based upon our ability to do something unique and to do it well and to add value. When you do those things, when you have that combination going for you at a fair price, you're going to be -- you're going to have a really good relationship with your customer. And I think that's going to ultimately make its way to the length of the contract and the size of the contract. So you've got to execute well, Martin, but assuming you do that, I would agree that both are potentially our goals.
Operator: We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Lee Rudow for closing comments.
Lee Rudow: Okay. Well, thank you all for joining us on the call today. We certainly appreciate it. We'll be presenting at the Craig-Hallum Investment Conference in Minneapolis on May 29, if you're welcome to join us there. Otherwise, feel free to check in with us any time. We look forward to talking with everyone again after our first quarter. Take care.
Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
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