Q3 2019 Earnings Call
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I would now with the other conference over to your Speaker today, Mr., Michael Mckenney Executive Vice President and Chief Financial Officer. Please go ahead Sir.
Thank you like.
Good morning, everyone welcome to cadence third quarter 2019 earnings call.
With me on the call today's John Paul, Our President and Chief Executive Officer.
Before we began let me read our safe Harbor statement.
Parish remarks that we may make today about cadence future plans and expectations.
Financial and operating results and prospects are forward looking statements for purposes of the Safe Harbor provisions under private Securities Litigation Reform Act of 1995.
These forward looking statements are subject to known and unknown risks and uncertainties that may cause our actual results to differ materially.
These forward looking statements was resolved various important factors, including those outlined at the beginning of our slide presentation in those discussed under the heading risk factors in our annual report on Form 10-K for the fiscal year ended December 29, 2018, subsequent filings with the Securities and Exchange Commission.
In addition, any forward looking statements we make during this webcast represent our views and estimates only as of today.
Well, we may elect to update forward looking statements at some point in the future. We specifically disclaim any obligation to do so even if our views are estimates change.
During this webcast, we will refer to some non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles.
A reconciliation of non-GAAP financial measures to most directly comparable GAAP measures is contained in our third quarter earnings press release and the slides presented on the webcast discussed in the conference call, which are available for investors section of our website at www Dot Caden dot com under the heading Investor News.
With that I'll turn the call over to John Paul will give you an update hurricanes business and future prospects.
Following Jeff's remarks, I'll give an overview of our financial results for the corridor. We will then have acuity Sasha. Thanks, guys. Thanks, Mike Hello, everyone. Thank you for joining US. This morning to review our third quarter results ended just got through outlook for the remainder of the here.
Overall, we performed well and achieve the solid SP and her on her way to another record year financial performance.
I'll begin with our financial highlights for the quarter.
Our Q3 bookings increased 4% to 171 million and revenue was up 5% to 174 million led by our material handling business.
Our gross margins were 43% and adjusted EBITDA was 32 million or 18.6% of revenue.
Adjusted EBITDA was down 4% from a record third quarter of last year.
Adjusted EPS was $1.41 well above the top end of our guidance of one point either 126.
Cash flow from operations was strong at 26 million up 51% compared to third quarter of last year.
And finally, we finished the quarter with net debt of 267 million and the leverage ratio of 2.07.
As you can see on slide six the stronger dollar had a significant impact on our foreign currency translation.
Also of note was a strong contribution from our material handling acquisition completed earlier this year.
Excluding FX and acquisitions, both are internal revenue growth and internal growth and bookings were down 5%.
For parts and consumables, our internal revenue growth decreased 1%.
Wow bookings decreased 3%.
On slide seven you can see our Q3 bookings were up 4% and revenue was up 5% compared to third quarter of last year down slightly sequentially from last quarter's record revenue.
We benefited from solid bookings in our stock prep and fluid handling product lines in North America, Europe , and South America.
However, these were more than offset by declines in China, and then our wood processing segment, which I will discuss in more detail when I review our regional performance.
As many of you know our geographic diversity combined with our strong parts and consumables business helps buffer against global economic volatility.
This diversification is a key strategic attribute of our business.
[noise] parts and consumables were 61% of revenue for the quarter up 14% compared to the same period last year.
Our material handling acquisition led this growth as parts and consumables revenue was relatively stable and all of our markets with exception of our wood processing business, which saw a decline due to softness in lumber pricing and demand.
Parts and consumable bookings were up 11% to 101 million.
As was the case for revenue the largest growth contributor was our material handling acquisition.
During this acquisition and the impact from FX bookings were up 3% for the quarter.
That said our year to date parts and consumables organic bookings excluding FX.
From last year.
Next I'd like to review our performance in the major geographic regions, where we operate.
I'll begin with North America, where Q3 revenue increased 24% to 92 million.
This growth was led by our material handling product line.
Excluding the impact of FX and the acquisition revenue was down 1%.
Bookings in North America were 89 million up 15% compared to Q3 of last year. Our acquisition made a significant contribution to this increase excluding the impact of FX and the acquisition bookings were down 7%.
We saw solid growth in our stock prep and fluid handling product lines decreased bookings in our wood processing equipment in North America, which primarily serves the housing market.
Capital project activity and wood processing sector has softened.
As we stated during our last earnings call and we're seeing less demand for our capital products in 2019 compared to the historic demand that we experienced last year.
Before I leave North America, I want to comment on a recent and positive development.
Within our material handling segment during the third quarter, we entered into an agreement with the customer for mining projects that could represent up to 18 million the new business for us.
We have booked orders under this agreement valued at 4 million already and another 7 million after the third quarter close.
The market outlook for mining aggregate food sectors looks promising for 2020.
And we are encouraged by the forecasted growth.
Next let's turn to Europe .
Slide 10 shows our revenue and bookings performance in Europe , even with the weak export markets in Europe , we are performing well in this region as our customers continue to pursue new projects and demand replacement parts.
Third quarter revenue was up 9% to a record 49 million.
Excluding the negative impact of FX revenue was up 14%.
All of our product lines, except for fluid handling were up in Q3.
Booking in Europe was up 4% compared to third quarter of last year and up 9% excluding FX.
Strong demand for high performance Balers, and our fluid handling product lines led this bookings growth.
Next Asia the market in Asia, which is dominated by China continued at a similar pace as the beginning of 29 team.
The general slowdown in both bookings and revenue since mid 2018 can be seen on the chart on slide 11.
Our revenue in Asia was down 36% from last year's record 33 million in Q3 bookings were down 17%.
This is a challenging comparison due to the record strength of Q3 of last year.
As we discussed last quarter project activity in containerboard and John has slowed and our bookings reflect the slower pace of investment new capacity.
On a more positive note investment in tissue production and several industries, where we provide tcf and fluid handling products have been growing.
These markets, although smaller than containerboard are providing nice orders for high value doctoring fluid handling product lines.
I returned from China few weeks ago, and I was pleased with the discussion with our customers and our business leaders there.
Many of those I spoke with had the expectation that additional investments are needed as strategies are finalized to relieve the fiber shortages, resulting from the China Wastepaper Ben.
As discussed on prior earnings calls.
These new processing facilities are being built outside of China.
As of the end of Q3, we have now supplied or feet orders to supply 18, such systems and expect most of them to come online over the next 12 months.
Turning now to the rest of world results our bookings in the rest of World were strong in Q3 second only to the record setting bookings in the third quarter of 2018 during the quarter, we booked a number of smaller capital orders and one large stock prep system order, which helped drive our near record bookings performance in Q.
Three.
Our Q3 revenue was down 18%, we did see solid revenue growth, our DCF and fluid handling product lines.
I would like to conclude my remarks with a few comments on our guidance for Q4 and the full year.
Our performance to date has positioned us well for another record year financial results.
Our material handling acquisition provided a nice lift to our financial performance. However businesses continue to have solid operating metrics.
While we are performing well three factors continued to be a challenge.
The first is the stronger us dollar.
Negatively affects our results, we translate foreign currencies into us dollars.
The second is the tariff associated with us trying to try to trade dispute.
In the third as the global economic slowdown, which we believe is tempering investment and capital projects.
We expect the full year EPS impact of FX and tariffs to be 50 cents.
The effective which I believe obscures underlying performance of our business this year.
And finally I wanted to briefly comment on our plan to terminate our defined benefit pension plan, which we expect will be completed in the fourth quarter.
We estimate the cost will be approximately $7 million or 64 cents per share to terminate the plan.
This is expected to save US approximately 1.6 million annually and eliminate the risks and uncertainty associated with these plans Mike will provide more details in his remarks.
For the full year, we're lowering our revenue guidance to 694 to 690 million from our previous guidance, a 700 to 710 million due largely to the impact of FX translation.
We expect to achieve GAAP diluted EPS of $4.38 to $4 and 46 revised from previous guidance of $4.97 to five of nine. This revised EPS guidance includes 64 cents for the above mentioned pension termination costs.
We expect adjusted diluted EPS, which excludes the pension termination costs among other things to be $5.30 to 538 for 2019 revised from our previous guidance of 526 to 538.
For the fourth quarter of 2019, we expect to achieve GAAP diluted EPS of 59 to 67 cents on revenue of 172 to 176 million.
Excluding the pension termination cost I just mentioned, we expect adjusted diluted EPS of $1.23 to $1.31 from fourth quarter.
I'll now pass the call call over to Mike for some additional details on our financial performance in Q3.
Hi, Jeff.
Well start with our gross margin performance.
Consolidated gross margins are 42.8% in the third quarter of 2019.
Down 130 basis points compared to 44.1% in the third quarter of 2018.
During the inclusion of lower gross margin profile of our material handling business acquired in the first quarter of 2019.
Our parts and consumable revenue represented 61% of total revenue in the third quarter of 19 compared to 56%.
Third quarter of 18.
Now, let's turn to slide 16, our quarterly SGN a expenses.
SGN expenses were 47.1 million in the third quarter 2019.
Up 4.2 million from the third quarter of 18.
This included an increase of 4.7 million from our acquisition and a decrease of point $8 million from a favorable foreign currency translation effects.
SGN a expense as a percentage of revenue increased to 27.1% in the third quarter of 19 compared to 25.9% in the third quarter of 18.
Okay.
Let me next turn to our EPS results for the quarter.
In the third quarter of 2019, GAAP and adjusted diluted EPS were both $1.41.
In the third quarter of 18, GAAP diluted EPS was $1.64 and our adjusted diluted EPS was $1.53.
The 11th difference relates to three cents of restructuring costs and.
And a 14 sat discrete tax benefit that related to the reversal tax reserves associated with uncertain tax position covering multiple tax years.
The decrease of 12 cents and adjusted diluted EPS in the third quarter of 19 compared to adjusted duly Pos in the third quarter of 18 consist of the following.
13 cents due to lower effective tax rate.
Three cents lower interest expense after allocating a portion of interest expense to the acquisition.
Three cents due to lower operating expenses once that due to higher gross margins and once that due to lower non controlling interest expense.
These increases totaling 21 cents were offset by 33 cents due to lower revenue.
Collectively included in all the categories I've, just mentioned was an unfavorable foreign currency translation effect of five cents in the third quarter of 19 compared to third quarter of last year due to the strengthening of the U.S. dollar.
Let me also take a moment impair our adjusted diluted EPS results in the third quarter to the guidance we issued during our July 2019 earnings call.
Our adjusted diluted EPS guidance for the third COVID-19 was $1.20 to $1.26.
We reported adjusted diluted EPS of $1.41.
The 15 cents increase over the high end of our guidance range was the result of a nine sat tax benefit primarily related to the reversal tax reserves associated with the current years exploration of uncertain tax positions and to a lesser extent the exercise employee stock options.
In addition, lower SGN anyway.
Interest expense and a modest improvement in gross margins also contributed the guidance speed.
As I mentioned on the last call there could be additional tax benefits over the next three to four years associated with the exercise of previously awarded employee stock options as an exercise options reached their tenure expiration date.
Slide 18 presents our quarterly adjusted EBITDA performance.
Quarterly adjusted EBITDA was 32.3 million or 18.6% of revenue compared to 33.5 million or 20.2% of revenue in the third quarter of 18.
Adjusted EBITDA for the first nine months of 19 was 95 million or 18.2% of revenue.
From a low up 11.8 million or 14% compared to 83.2 million or 17.7% of revenue for the first nine months of 18.
The increase in adjusted EBITDA over 18 is the result of contributions from the material handling acquisition.
Now, let's turn to our cash flows and working capital metrics starting on slide 19.
Cash flow from operations was 25.7 million in third quarter of 19 compared to 17 million in the third quarter of 18.
Free cash flow increased to 23.6 million compared to $14.4 million for the third quarter of 18.
For the first nine months of 19 free cash flow increased 31% to 51.99 compared to 39.7 million in the first nine months of 18.
We had several notable non operating uses of cash in the third quarter of 19.
We paid down bank debt by $27.2 million.
Paid a 2.6 million dividend on our common stock.
And paid 2.19 for capital expenditures.
Looking at our overall working capital position, our cash conversion days measure calculated by taking days in receivables plus days in inventory and subtracting days and payables.
Was 122 at the end of the third quarter of 19.
Working capital as a percentage of revenue was 14.6% in the third quarter of 19 compared to 15.4% in the second quarter of 19 and 11.1% in the third quarter of 18.
Net debt that is debt less cash at the end of third COVID-19 was 266.9 million up from net debt of 135.69 at the end of the third quarter of 18.
But down sequentially from 288.7 million at the end of the second COVID-19.
As I mentioned on the last call during the third quarter, we repatriate $71 million cash from our European operations.
56, 90, this was through euro denominated borrowings under our credit facility with the remainder coming from cash on hand.
These funds were used to pay down U.S. stat that was outstanding under our credit facility.
As a result of this we've paid down 15 million to data, which is included in the 27.2 million that we paid down this quarter and exchange higher interest rates associated with us for lower interest rates on euro denominated debt.
As a result in lower interest rates on the euro denominated debt, we estimate annual savings of approximately 1.1 million at current market interest rates.
In addition, we expect to be easier for us to utilize the cash flows from our European operations to pay down debt.
As you can see on slide 22, our leverage ratio calculated in accordance with our credit facility decreased to 2.07 at the end of the third quarter of 19 from 2.19 at the end of the second COVID-19.
Under our credit facility this ratio must be less than four for three quarters falling immaterial acquisition as defined in our credit agreement and then the ratio requirement steps down to less than 3.75.
A few comments on our guidance for 2019.
In 2018, we froze and began the process of terminating a defined benefit pension plan and the supplemental benefit plan at one of our U.S. operations.
Participants in the pension plan were given the option to receive either a lump sum payment or an annuity.
On past calls, we mentioned to related settlement charge would likely be incurred late in 2019.
Part of which would be cash impart noncash.
We have now included in our 2019, U.S. GAAP guidance and estimated settlement loss 64 cents in the fourth quarter associated with the expected settlement of this pension plan.
This charge consists of an estimated pre tax settlement loss of 7.2 million, which includes additional cash funding a 5.1 million for the purchase of annuities and associated net tax provision and an associate net tax provision of point 1 million.
The associated net tax provision includes 0.9 8.9 million tax benefit fit from.
The additional cash funding offset by 1 million of tax expense, primarily related to the settlement of mounts and other comprehensive income.
The 64 cents charge has been excluded from our adjusted diluted EPS guidance for the fourth quarter of $1.23 to $1.31.
And for the full year of $5 in 30 cents to $5 in 38 cents.
Both the settlement loss and additional cash required to fund the pension plan termination are higher than anticipated due to one very significant fall in long term interest rates from the fourth quarter of 18 to today and to six significantly more plan participants than expect.
Chose to receive annuities, rather than cash lump sums in connection with the termination.
We anticipate the supplemental benefit plan will be cash settled in early 2020.
The liability for this is already reflected on the balance sheet at 2.4 million and we do not expect any material piano impact associated with this settlement.
With the progress we've made on paying down debt of nearly 40 million. So far this year and lower interest rates impart, resulting from having exchange Qs debt for euro denominated debt. We now estimate our net interest expense for the year will be approximately 12.8 million to 13 million.
Our tax rate for the third quarter of 19 was 24%.
Which included a tax benefit of two cents associated with the exercise of employee stock option awards and US seven cents benefit related to the reversal of tax reserves associated with the current years expiration of uncertain tax positions.
We expect our tax rate for the fourth quarter of 19 to be approximately 28% to 29% after excluding the impact of the pension plan settlement.
This does not include any potential tax benefit associated with the exercise employee stock option Awards.
That concludes my review the financials and I'll now turn the call back over to the operator for acuity session operator.
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Our first question comes from the line of Chris How with Barrington Research. Your line is now open.
Good morning, Jeff and Mike.
Good morning, Chris.
Hey.
Just going over some of the comments that.
You've mentioned.
Just as we think about parts and consumables.
You mentioned on inorganic basis it was down.
But your expectations are for the year for its still to be up.
On a geographic basis can you comment on the performance of parts and consumables and in the quarter and what you're seeing there as far as we look forward.
Yes, I would say that.
Our our parts consumables actually are holding up quite well generally speaking, which is an indication of the operating rates that our customers are are currently experiencing the one area, where our part consumables is down is in China and Thats because of course, there's been a reduction in.
And the run rates, there and there's been a reduction in the the amount of recycled material that their processing and we're in the process of building. These new processing facilities over there in southeast Asia, but most of them. The vast majority of not come online yet so we're not generating a part yet so we definitely have seen a reduction in our parts.
In the China associated with this transfer of of the initial fiber processing from mainland China to southeast Asia as well as US I would say parts in Europe actually have been it's been quite good for us some areas surprisingly strong and then you asked is holding its own I'd say with the the exception of the would process.
Seen which was down a little bit because operating rates are down somewhere in the wood processing side, but generally speaking I would say you know the parts consumables globally are holding up quite well, we're kind of flat with last year up slightly from from last year. When you kind of take out FX and everything else. So we're we're actually I'm pleased with that and we think that indicates that our CFO .
Customers are still operating on healthy rate from an operations from a from a run rate standpoint.
Okay, that's great and that leads me to my next question.
Just about Asia more specifically China.
The success that you're having.
Capital equipment orders outside of China.
Can you give an update where are we.
As far as the timeline and.
Where are we in regard to.
Offsetting the current fiber shortage with the term coming on.
And what are some key inflections or.
Look marks that we should pay attention to as we monitor the environment there.
So let me give you a couple of data points in 2016 before the before the waste import ban was implemented in the cleanliness standard was implemented China imported about 30.4 million tons of waste paper.
In 2017.
That was down to 25.7 million tons as the cleanliness standards started to be applied in 2018 that dropped down to 18.7 million tons and the 2019.
Through October there is 11 million tons that have been permitted so that gives you a sense. It this year, we're looking at possibly a third as much imported.
Waste as as they had in 2016 now.
I was over in China few weeks ago, and actually had dinner with the head of the China Paper Association.
And he tells US that in fact this band will go forward they'll continue to reduce the import permits next year and they'll be completely eliminated in 2021. So if you look at the 230 million tons that they are important in 2016, you can say, okay. They've got a somehow replace 30 million tons of fiber today the.
18 systems that we've received orders for which I think is the vast majority of all the orders have been placed.
Only represents about 4 million tons a replacement. So you can see that if in fact, they've got to replace 25 to 30 million tons.
We're in the early stages, you know I think in the last call I said, we were kind of in the second inning.
First the second ending of this and I would say that's still the case.
What theyre doing is there and they're starting up these systems and they're making sure that this works because there they have to ship. This this process fiber into China.
And get it is the machine before it starts to have biological activity start to occur. So they've got a very short timeline between processing the fiber and shipping it to mainland China together and I think they wanted to make sure that in fact that conceptually. This work they could do that and I think they are having success in doing that so we're starting to see more investments in more project active.
City.
Associated with that so I think over the next.
Couple of years, assuming they stick with this particular strategy of putting these processing plants in the southeast Asia countries.
There is going to have to be a fair amount of activity to replace the the shortfall now there are also buying some idle mills in the U.S. and this case, they're going to drive the pulp and send it over in a dry form you have to do that because of the length of time it takes to get it from from here to China and so we're seeing that come on line two but in reality it still.
Isn't anywhere near replacing the the amount of fiber, they're going to need now there there are fiber requirements of decreased a little bit their business is off a few percent and so of course there. Their overall production rate is down accordingly, but still there's quite a bit of tonnage that still has to be replaced over the next I would say 24 months to 36 months.
Great that's helpful and my last question.
Thanks, Jeff My last question is for Mike.
Your question a came in ahead of my expectations year at 47.1 million I was.
Around 48.
Can you talk about the different expense line items as we look forward to the fourth quarter and more specifically further out what type of leverage opportunities that you see.
Here.
Well, so Chris you had modeled at 48 and we came in at 47 one.
For SGN that yeah Yep Yep.
Thanks.
I think goal for the fourth quarter will probably be around that level.
So I think that's that's a pretty good marker.
For the fourth quarter activity.
You know.
In terms of.
Operating leverage and say it's at this point, it's very much contingent on sales volumes.
Okay.
That's all have for right now thank you.
As a reminder, ladies and gentlemen to ask a question at this time that Star then one.
Our next question comes from line of Walter Liptak with Seaport Global Your line is now open.
Hi, Thanks, Good morning, guys.
Good morning wall.
Wanted to ask a follow on about the.
The southeast Asia processing plants.
So and just to clarify so these 18 systems the call that you've already booked those orders.
Or those yet matters that are and.
And I would say, while roughly half of those have been delivered already.
Okay.
Right.
Okay great.
And the other half I guess finish up over the next 12 months that was what you're gonna Yep.
Okay.
But it sounds like there's there's potentially significant more orders behind those 18.
To get enough what fiber into China over the next couple of years is that so that's what you guys are talking about.
Yes, I mean, like I said, theyve seen a little bit of a slowdown in the in their economy.
And as well as or exports. So the demand probably isn't where it was in 2016 when they brought in 30 million tons and of course, they continue to try to increase their their recovery rate within China, although there kind of.
I think I'm, starting to bounce up against the talk to limit of that but theres still substantial fiber requirements that they're going to have to replace.
And.
So we we expect that they've got to get that somewhere bringing in pulp doesn't really work for them in the long run. So we expect that is going to be.
Said earlier.
Fairly significant investment requirements somewhere to to offset this this.
Loss of imported fiber.
Okay, Great what was the value of 18 systems that you've already booked orders.
Is roughly $14 million ish.
Okay, great and how many tons do you think that that that help bring.
Back on line into China.
Somewhere somewhere between three and 4 million tons.
Oh I see your Sam So theres, a long way to go to fill the.
30 billion.
Yep.
Okay great.
Okay, and then any visibility on the next slug of orders that might start coming in from trying I heard the concern about the economic issues, but.
Or is it something where we can start seeing orders next quarters.
A non unknown.
Kind of event for the next round of orders.
You know, obviously, we're constantly engage and our customers over there discussing projects I don't know that.
We are ready to forecast exactly when when and if they may occur, but there's there's.
This is ongoing discussions and activity.
Okay, Alright fair enough.
I wanted to ALC.
Yeah, Walt I wanted to actually now it's because I was looking at a schedule here that that 14 million that I referenced.
That's actually what's left to be delivered you were asking what the aggregate value was I would say, it's roughly twice that.
Oh Wow, Okay, Yeah, alright, great. So 28 million for 18 systems.
Okay.
I wanted to ask on the material handling.
Order congratulations on that.
Are those orders starting to come in how is how is the margin coming through for these are these going to be.
I guess.
Normal profitability or because of.
Where we are in the market as their pricing pressure.
Well they have.
They have quite a mix of products and as as is the case with many of our other businesses the margins very fair a fair amount from from product to product.
I think it's fair to say on the menu you might imagine I am really large projects like this multimillion dollar projects. There's always more there's always more competition more price pressure. So I would say generally speaking there really big systems and lower margin and of course, the parts in the smaller systems or higher margin.
Okay, Great and then.
Just wanted to ask about Europe the bookings.
Excluding foreign currency.
9% looked pretty good.
But weve everything we hear about Europe is bad, but slowing down we see items going down I wonder if you'd comment about the sustainability of.
Of the bookings are the visibility you have other projects.
Yeah.
Yes, so I can I think I mentioned this a little bit in the last call that you know the activity level that we're seeing tends to be in the developing parts of Europe , Eastern Europe , Russia, Bella roofs, Romania kind of developing world is.
As a standard of living increases there they have more and more demand for for our products and so I would say kind of the historical Western Europe definitely is a little slower right now.
The export market clearly is slow down in Germany.
But we're very active in all of Europe , and you know in Eastern Europe , Turkey in places like that they are still there's still decent activity. So.
I would say that.
Our project activity level has been quite high this year in kind of the what we call the developing portions of Europe .
Okay, Great and then last one for me for Mike.
Thinking about the pension.
Is there going to be in a lower expense level in 2020 as a result.
The.
The change in the pension.
Yes.
Okay, Yes, well, Ron do you have with penalty.
We had it had been running at about 1.6 million a year roughly at say 10 or 11 cents.
Cost.
Okay, great. So that goes away in 2020.
Right that will go away in 2020, yes.
Okay, Great alright, thanks, guys.
Welcome.
As a reminder, ladies and gentlemen that is star then one to ask a question at this time.
We have a follow up questions a line of Chris how with Barrington Research. Your line is now open.
Lets me again.
Just following up on the Walter's question about the material handling order.
Can you comment on the size of this deal how does this compare.
To other customers that are in the market and at the time of the acquisition you had mentioned about a potential synergistic acquisition opportunities related to cadence cintron.
How does that environment look and.
What are you seeing as far as the overall pricing environment for M&A.
Yes, so on the order it is a it's a larger it's on the larger side of orders.
Certainly there are projects out there that that we're aware of that could be larger than this but this would be considered a large large project large order.
As far as.
The acquisitions.
Our business is on the group actually has been spending a fair amount of time with with the company.
Just developing a strategic plan for that and do as you as you mentioned when we bought the company. We had indicated that one of things we really liked was the.
The size of the diversity their markets and the opportunities that that would present and I think we're still excited about that we still see that.
You know is the case and.
So we are obviously were build these guys now for for 10 months. So we're still early in the in the planning process, but we're working closely with them to develop a plan to grow that business expanded valuations.