Q3 2019 Earnings Call
This presentation. This call will last approximately 45 minutes to an hour.
I would like to turn the meeting over to Mr. Gary fields. Please go ahead Mr. field.
Good afternoon, I'd like to read a forward looking disclaimer to begin with.
To the extent any statement presented herein deals with information that is not historical including the outlook for the remainder of the year such statement is necessarily forward looking and made pursuant to the safe Harbor provisions of the Securities Litigation Reform Act of 1995.
As such it is subject to the occurrence of many events outside a ons control could cause a ons results to differ materially from those anticipated.
Please see the risk factors contained in our most recent FCC filings, including the annual report on Form 10-K , and the quarterly report on Form 10-Q .
Now I'd like to turn it over to Scott Asbjornson to discuss the.
Financial results welcomed.
That's correct.
Discussing the comparative results within three months ended September thirtyth.
<unk> versus September 32018.
Net sales were up one half from 1% to 113.5 million from 112.9 million net sales for the quarter up due to our price increases from 2018 and.
My team along with increases in <unk> and water source heat pumps sales.
Gross profit decreased 16.4% to 27.4 million from 32.8.
As a percentage of sales gross profit was 24.1 person in the quarter just ended compared to 29.7%.
Mmm 18.
Quarter, we experienced machine downtime.
Decreased sheet metal production.
Well.
Section and efficiency.
Selling general and administrative expenses decreased 1.5 person to 13.0 million from 13.2 million in 2018. Additionally, as a percentage of sales last year and <unk> decreased to 11.4% of total sales in the quarter just ended from 11.
<unk>, 7% in 2018.
Income from operations decreased 26.5% to 14.4 million or 12.7%.
Sales for 19.6 million or 17.3% of sales in 2019.
Our effective tax rate decreased to 3.9% from 28.2%.
These estimated annual 2019 effective tax rate, excluding discrete events was expected to be approximately 24.2%.
Increase effective tax rate was result of favorable return to provision adjustments on our R&D credit along with additional credits we received upon filing amended Oklahoma returns.
Net income decreased 13.8 million or 12.2% sales compared to 14.1 million or 12.5% to sales in 2018.
Diluted earnings per share decreased by 3.7% to 26 cents per share from 27 cents for sure.
Alluded earnings per share were based on 52 million 714, 2000 shares versus 52.627 million shares the same period a year ago.
The results of the nine months ended September Thirtyth 2019 versus September Thirtyth 2018.
Sales were up 7.8% to 346.8 million from 321.6 million.
Sales for the nine month ended our up mainly due to the price increases we implemented in 2018 and 19, our gross profit increased 10.1% to 83.4 million from 75.7 million as a percentage of our sales gross profit was 24 point.
Zero percent as compared to 23.5% in 2018.
Material costs have started to decline while the company continues to improve its labor and overhead efficiencies.
Selling general and administrative expenses increased 2.7% to 37.5 million from 36.5 million in 2018 as a percentage of sales as junaid decreased 10.8% of total sales as compared to 11.3% in 2018, the company's warranty.
Expense continues to improve.
Income from operations increased 16.1% of 45.6 million or 13.1% and sales from 39.3 million or 12.2% sales our effective tax rate decreased to 17.4% from 23.8%.
The company's estimated annual 2019 effective tax rate, excluding discrete events expected to be approximately 24.2%.
Already mentioned, our 2018 effective tax rate was lower than expected.
Due to favorable return to provision adjustments and additional credits that is 2019 I'm sorry for the air net income increased to 37.7 million or 10.9% of sales compared to 30.0 million or 9.3% of sales in 2018.
Diluted earnings per share increased by 26.3%. So 72 cents per share from 57 cents per share diluted earnings per share were based on 52.625 million shares versus 52.715 million shares in same period, a year ago at this time I'll turn call over to Rebecca.
Good Thompson, our Chief accounting Officer and Treasurer.
Thank you Scott.
Looking at the balance sheet, you'll see that we had a working capital balance of 116.7 million versus 92.8 million at December 31st 2018.
Cash totaled 28.4 million at September Thirtyth 2019.
Our current ratio was approximately 3.2 to one.
Capital expenditures were 30.8 million for the nine month.
We expect capital expenditures for the year to be approximately 48.3 million.
The company had stock repurchases at 15.4 million to date.
Shareholders' equity per diluted share is $5.31 at September 32019, compared to $4 is 70 cents at December 31st 2018.
I'd now like to turn the call back over to Gary fields, our president.
Good afternoon.
So the price increases have not yet all made it into the.
Second floor.
Some of those are still in the backlog because of our extended lead times, we did get some of the price increases in and we look for that to continue to improve.
The backlog.
As you can see is reduced a little bit versus last quarter, but.
But it's still up versus 2018.
No.
Orders have slowed down very very slightly due to the extended lead time.
So.
We're we're working on reducing those lead times I'll talk about that more than just a minute water source heat pumps are doing quite well however.
So water source heat pumps at this time.
Year to date or 58% more units then this time in 2018.
Quarter over.
Similar quarter.
The Q3 19 versus Q3 18 here at 13%, we've seen recently that water source heat pump business is beginning to strengthen for us even more so we look to finish the year very nicely.
Looking at the Q, where we're at $21.417 million. Thus far this year, we had forecast something around $25 million for the year and it looks like we should achieve that just fine.
We put in a new parts store.
Oh, we had one part store here in Tulsa at the plant we started another part store.
Its grand opening was June 1st and that was a little bits of a soft opening but we did.
Get it.
Open then.
Right now that parts store is running a.
Just slightly behind our legacy part store and gaining everyday.
Our parts business continues to be a very strong.
Growing business for us.
Our representative firms have increased their their parts stores number of stores effectiveness of stores and so we're looking for that to continue to grow.
We're working on updating and modernizing for 2023 efficiency standards.
Trying to meet those ahead of time 2018 efficiency standards, where somebody increased and we were easily above those benchmarks 2023 is a little bit more challenging.
No I was just in a meeting with one of our major component suppliers and they are going bringing to us some new prototype.
Materials because of our in a I see test lab facility and our ability to quickly tests. These prototype parts and those should should take us to some new high bench.
Hi, water benchmark efficiency levels.
The replacement market as continues to be an area of focus we're making some progress on on growing that replacement market beyond.
Historically it has been a 50%.
Component of our overall market and we're working on growing that we believe that theres a lot to be had in that market that our sales channel wasn't a.
Addressing as.
Aggressively as they could and we put some specialist in place in our sales process to help them.
Become more aggressive at that.
So all of our products are growing pretty equally.
In the legacy products, and let's say the water source heat.
Is growing at a rate that is far in excess of anything, but it's a startup business still a 2000.
18 versus 17, it doubled and 2019 like I said, it's up 58%, so we're doing well with that.
Not seeing any real change in the markets were serving I've mentioned cannabis in data centers in the past in those remain.
At about the same percentages they have in the past.
So I don't see any real change and what markets were serving at this point.
So the backlog September Thirtyth 2019 is 165.3 million then that is versus a 126.8 million.
To September Thirtyth 2018.
So if we had.
More sheet metal capacity in Q3, then we would have reduced that backlog even further.
Which is.
What we're striving to do.
No, but we had sheet metal capacity problems.
Through part of Q3, and what that really boils down to was is we had a couple of machines that while they were producing they were producing at the rate that we needed. So we.
Demoed those machines out in order to make room for new new machines.
New machines were putting their place and began producing.
Add up an initial level in September , but they won't be at full speed until probably next week. So we we had declining production.
From through the summer bottoming out in in August and then turnaround in September and we ended September not much short of what our expected run rate was and we've continued to increase that run rate.
So we're we're making headway on it we've got several more sheet metal machines, yet to install so we'll be adding capacity to our production capacity and we've already proven on the plant floor that when we get the sheet metal parts Bill that we have a good staff on the plant floor to get the units Bill.
We had a grand opening of our new.
R&D lab.
Earlier this week and it was a resembling success sure that if you look at into any of the industry publications that you've seen coverage of that ASHRAE HR I.
The Tulsa newspapers and so on so forth.
This laboratory is going to propel our innovation.
Long into the future the capacity for innovation, we have now is exponential compared to before that was available.
Another thing that you may have seen recently was a.
A press release about the new markets tax credit that we attained for the new facility were.
Building in Longview.
This was a very favorable.
Incentive for US we appreciate all those that helped us too.
Attain that.
And that facility, while we haven't done anything other than the ceremonial break ground at this point in time, we we intend to start moving dirt within the next 30 days.
And one year from right now we intend to be building.
Units in that new building that will give us considerable expansion capabilities of our products that we build Longview, Texas. It also frees up a considerable amount of space here in Tulsa that we had used to warehouse coils that that we build in Longview.
And.
That space will be really reutilize for additional sheet metal.
Manufacturing equipment here, so building the building there not only increases their revenue capability when it comes online but it also allows for foot further revenue.
Expansion here in the existing facility in Tulsa.
So with that.
Nor do you have any comments today I'd like a couple of comments.
Those are many of you have been with us for quite some time will tell you. This is kind of where I see us being at this point in time.
We've made the transition from my management over to Gary's and well I was manager some of the long term managers were working with us.
Good luck to stay on and we were going to try and make.
They could wearable pool management change over which is what occurred lot of them stayed more and I turn range over to Gary May retired.
Good presented us with two things first of all gave very a chance to style reorganization with his people not to have a lot of older people, who were ready for retirement, though compared with the they were gone.
I would also presented us with a lot of problems for a while we had a lot of young people, who are being groomed for those positions.
Didn't have much experience I think weve at least.
Well good capability of the new management style.
Sure some.
Experience, we paid a penalty for the shortness of experience over the last couple of through years, but those there's no more rapidly.
Dwindling and going behind us.
I see us going back into another period like we remain poor. So many years earlier in our history, where we were getting very boring growth both in.
Volume as well as profitability everything is winding up very nicely I feel very happy uncomfortable with with what has taken place as we've gone through this I've been on unpleasant.
Happy with with the Momentary times food past couple three years, but those prime drove pretty well behind us. So thank you for staying witness I think we are going to deliver a meet your expectations going forward.
Turning to slide back over to you for questions and answers.
If you would like to ask a question at this time. Please press star followed by the number one on your telephone keypad, well pause for just a moment to compiler Kenny roster.
My first question comes from Brent Thielman from D.A. Davidson Your line is open.
Good afternoon good afternoon.
Afternoon, congratulations on the opening of the R&D lab I know, there's a lot of work behind that.
Thank you.
I guess I first on that you know any updated thoughts you know I know I know won't be much in terms of contributions this year, but that is up and running.
How we can kind of think about the contributions from that into 2020 to the to the revenue and earnings line.
Well it has made some contribution in 2019 in that there were three projects that were very critical.
Performance.
Either operating strategy or acoustical performance that the design team was not comfortable with any manufacture that didnt have these testing capabilities. So we were awarded three separate contracts that were each fairly significant.
So that.
These would be tested one of those was the Jacob Javits Convention Center addition, in New York City.
We were awarded a contract for 26 very large units three medium size units. So 29 units total.
And this was based on our ability to prove acoustical performance and thermal performance and airflow performance all simultaneously under load.
Something that's unique to our lab in that the largest unit was 77 feet long.
12 feet, Leiden, eight and a half feet tall and it had capacity of about 180 tons of air conditioning capacity.
And so no one else in.
The World is able to test that unit to those.
Test conditions they requested.
And so that was paramount in essence.
Landing that order, we were competing against one of the legacy top players in the market that has.
I will say political connections that we do not have in New York City. So we want it strictly based on our technological capabilities with this lab.
Another project was Nike we had.
Completed a project for them a couple of three years ago for their world headquarters.
It was a prototype design from not only the equipment design, but also the system tight designed it really hadnt ever been done before so there was a lot of in the field learning in the commissioning process.
When it came time for their next addition on that campus, there and Portland, It was called the merchant building.
We were awarded that because we were able to bring those units into our laboratory and test them at 14 different points of operation.
And these were again large units larger than the environmental chambers of of any of our competitors. So we were able to do that land that project again, a very very substantial project. The final. One is called one will be tower, it's a high rise office building in Manhattan and.
Again, this was because of our acoustical capabilities, along with our airflow and thermal performance capabilities in our laboratory to be able to do that simultaneously. So there's three significant projects that contributed to 2019 revenue.
Now that I can identify from the lab.
The go forward on the the lab.
Oh, there's three primary purposes.
Each will have their own contribution some will be very tangible and measurable.
We will be a little less.
So this this witness testing like I described for Javits, one Willoughby Nike.
We're assigning a value of about one third of the utilization of the lab.
In chamber time for that type of activity.
One third of the activity, we are scheduling for development of new innovative ideas as I mentioned earlier in the call we have various.
Component manufacturers that.
Manufactured things like fans and and compressors and coils that are bringing new innovative ideas to us because of the qualified staff that we have because of the qualified laboratory that we have and the capabilities we have to get that done.
Don't exist elsewhere in the world, So that will propel our products to maintain our leading position as the greatest value equipment in the Hvdc industry and then the third and final use of the laboratory is the vast majority of our products are sort of.
Slide by HR.
HM.
Test these units from time to time, there's a certain percentage of every product model type they pull to test in their lab. So it's incumbent upon us to for us to test those things also to make sure that were in compliance with our published ratings on the equipment, so that kind of sums up what were.
Going to do with the lab.
Okay. Thanks for that Gary.
I guess my my next question would just be I. I mean, I think you you had said at least the materials cost.
Ill end year recognized still stuck at some of that old pricing in the backlog.
The way to kind of sort out either in.
Dollar terms him or.
Percentage terms, what the drag was from production anything and efficiencies versus presumably some tailwinds from materials cost front and the quarter. Just we can get a better fuel economy underline business going forward.
Sure.
About 65% of all the materials we purchase.
Our 90 basis points lower cost today than they were a year ago.
The other percentage.
We don't have it is good attracting metric because there's just a myriad of small.
Purchases.
It feels like those are our stable though.
Our cost has been increased salaries and wages has been one.
Significant issue in this low unemployment.
I guess you'd call it environment that there were operating and were in what do we have here Scott three.
3% to 3.2%.
And so we're competing for workers. So we've raised our entry level wage.
Considerably this year, what does that percentage Scott when it was nine person, that's what I recalled as well about 9% and that entry level position is roughly half of the people on the plant floor.
So there's a considerable number of people that got a 9% wage increase and of course as you go up through the ranks nobody is standing there without some wage increase so thats put some pressure on is the real burden in Q3 was that we didnt meet revenue projects.
Ones revenue goals because of the production status of some of the sheet metal equipment. So we didnt get great absorption on some of the fixed cost.
So now that we have.
We actually.
Bottomed out in August with the lowest production rate on a daily basis that we had all year and we finished September at nearly the peak of what we had ever done and we've continued to accelerate pass that and so as we keep adding more of the sheet metal machines will be able to increase the.
Revenue.
And when we increased revenue will get more absorption. So I think that the wage rates will be somewhat offset by the materials. When you look at everything in their proper proportion and so that'll that'll stabilize going forward and so the additional price increases that we get that are into backlog that are not yet produce.
Used the those will be accretive to the bottom line.
Okay, I guess given the challenges as this last quarter, but the fact that you've got.
Yeah. It seems like you've got more things in order here would you expect a sequential step up revenue.
Yes.
Yeah.
Yes.
Monitoring on a daily basis.
We've re stores to our peak level production and began to accelerate pass that.
And so from a revenue standpoint.
Yes, we look to have a step up there.
So that will get some.
Better absorption of those fixed cost plus we're getting more of the price increased backlog out on the plant floor.
Okay. All right my final questions just more I'm curious from caught your boots on the ground.
What do you hear about the end markets.
You know how how.
How to kind of quotation activity bidding activity out there and.
Yeah. So your general things on a non res market.
I'm, so glad you asked that.
I don't know how ideas for our competitors, but for us the demand outstrips, our ability to produce and that's why we've got such a strong emphasis on getting our production capabilities increased that's why we've got the capex for the new building Thats why Weve got the Capex for new sheet metal equipment.
We believe that that there is a lot of runway left out in front of us with our sales channel that we have.
They they tell us how much that we've missed this year because of lead times. So as we are able to bring lead times in.
They are all confident that we can recapture that going forward.
So I'm I'm very strong on what's going to happen for 2020 now.
This election, and impeachment talks and all of that could certainly have an effect, but when we're sitting there with $165 million backlog.
Yes.
That that represents.
About four to five months of production and orders, having a quick coming in the door. So the backlogs kind of.
Stabilized around that point are really close to it at this point in time so.
I think it's going to be a C saw battle as we increased production and shorten lead times I think more orders are going to comment so that backlogs just going to you know, it's going to ebb and flow a little bit.
I don't know what the equilibrium is going to be.
Okay I appreciate the thoughts I'll pass it on.
As a reminder, if you'd like to ask a question. Please press star followed by the number one on your telephone keypad.
Your next question comes from Jomon deal from Sidoti and company. Your line is open.
Hello, Joe how are you seeing today.
Doing good how are you guys doing.
Good.
So I just the just the jump on that last line of questioning when I look at the HR I shipment data it looks like the orders at 200 800 tons shipments recently, which I believe it's sort of your sweet spot.
It looks like that a market the shipments in the market have been actually flat to down actually and your orders in this quarter were up I believe 25%. The orders were up on the backlog up or 30%. So I'm just wondering.
You know what in terms of your opinion, how are you able to generate you know such strong 20, 530% growth when the market flat to down seemingly.
No that's been our secret sauce for a long time, Joe I think that the the years that I spent in the sales channel. If equipped me to know exactly what appeals to not only the end user customer and their market. So that I can help us position our products accordingly, but it also helps me to.
I understand.
What people that we should ally with is our sales channel partners as we've had discussion before I spent years for the company as a consultant helping them with the sales channel and then when.
Tomorrow is my third anniversary as president and as I have gone alone is three years I've continued to refine that sales channel and right now.
My opinion is and I know about the independent sales channel for a lot of manufacturers. There are no manufacturers that have a sales channel is good as ours period, I'll put ours up against any ones and I think thats, a big part of it so we give them the tools they need to win.
Things like the the new laboratory the in AI see laboratory.
That gives them tools to win I just.
Earlier told you about three projects in particular, well our sales channel partners. They use those as case studies when they're talking to their customers.
But you're out there trying to sell a complex project with acoustical considerations.
And they hand, the case study of Jacob Javits to their perspective clients and say well it met Jacob Javits Convention Center requirements. I think we can meet years. So the confidence level swells. So again, we're giving them a lot of great tools to be successful with but we also have.
The very best players in that.
Arena.
Alright, and I just wanted to also get an update on I assume given the inefficiencies that continued through the third quarter that lead time continued to be extended if not maybe extended a little further than earlier in the air I'm just curious saw.
Given these extended lead times, but we've seen for awhile.
You know, what's the update with customer feedback.
Customers going elsewhere, or what you know what's the update there.
Well of course, there you can find a story for just about any way you wanted to spin it.
Theres no doubt customers have gone to other manufacturers as a compromise because we couldn't meet their needs, but more so and again I attribute our sales channel in their competency.
For instance, our school business normally we don't start seeing.
Much spool up in order to until sometime in February maybe March.
For the upcoming summer season, we've already begun to see orders and next week.
I've got several people coming in here with their customers to sit down and talk schedules when they need to have their orders in in order to meet their schedules. So they are becoming longer term planners. So they've worked around that but I'm proud to to tell you that two weeks ago, we announced abroad.
Action in lead time, because weve turned that production rate around.
And any increased production so about half of the units that we produce we reduced the lead time two weeks and that was that took place two weeks ago. We review that every week for applicability and I'm going to to say that over the next six weeks.
We will have other announcements on reducing lead time again because of the increased production capability that is coming into play.
So it's been manageable, it's been difficult and yes, there's there's been some lost opportunity, but theres been an awful lot of creativity in the sales channel and with their end user customers that are very loyal a on customers that say hey.
It's worth waiting for.
And let's just make sure where order in it soon enough.
Yeah, well it certainly seems like it's coming through with the orders and backlog so.
Doesn't seem like effect with a two month.
In terms of just to clarify where you are with production operational efficiencies with the new solve in any machines and capacity and thoughts.
Did you say September was running at the highest efficiency of the year.
No just short.
We are currently running at the highest efficiency of the year in dollars going out the door and we're doing it with one so we peaked clear back in April our best dollars per day going out of the plant here in Tulsa occurred in April and then we had some deterioration in may in.
It just continued to deteriorate as we were trying to push those machines and then when we finally took the machines out it bottomed out in August then we got.
That activity kind of cleared out we've got some new machines in place by mid September we had partial use of the first ones and there were three machines put in place and.
As of today, we've got about one in three quarters machine capability with the full three machine capability forecast to be next week. So.
Then we're adding about one machine per month to add five more machines. So.
In the month of October were back at our peak slightly above the peak that we established in April and we're doing it with 100 fewer people as well.
So there's been a lot of efficiency gain.
Something that I've been thinking about also is with the with with the higher capacity the higher volumes.
Do you have to bring on new personnel going into 2020.
And if so does that create any lingering inefficiencies that you have to sort of train new personnel factor at all.
Well, we we have a very slight turnover at the entry level a few people per week. So we will maintain that for several months now, but how many months Scott if we've been at that stable number we're at right now probably.
Three months I would say three to four stable, yes, three to four and the turnover has been on the downward trend. So we think we've seen the worst of our our turnover problems, but we do have substantial overtime in our Longview, Texas operations, which were replacing with some headcount increase yes. So in the the.
Oklahoma operations.
We've already proven when we get the sheet metal out to the plant floor that we have.
Additional production capability with those people.
And we will have to add a few but it's not anything consequential.
It's not like we need to add a huge percentage, we will have some slight head count growth as we get sheet metal production growth, but it's not anything that is.
Is out of the ordinary that it's going to be difficult overcome.
Okay and then so last question for me and I'll hop back in Q.
What would your if you had to sort of think of something what's the biggest risk of getting back to sort of a 30, 31% growth margins.
You know in 20 well.
We've got overhead that that we didnt have in those 30, 31% days.
We've got overhead with the startup business in the water source heat pump, we still don't have even it what looks like it's going to be about 25 million. This year, that's still not enough revenue to.
Absorbed the overhead of depreciation and other things on that line so that when.
Dilutes us a little bit.
The new laboratory.
That one dilutes us a little bit as well.
Now there's there's a.
Intangible long term benefit that I described earlier that helps propel that growth. So you have to invest in order to grow those are investments.
We believe we're targeting 28% to 32% as the range that we're going to manage this too.
And one once we achieve we're at 24% right now but.
Did that with this quarter was yes, we were at 24% now we've got some price increases that haven't yet hit the.
Plant floor.
It was a 5% price increase which we got it was in June we got part of it in the third quarter. So I want to say that maybe 3% to 4% would be accretive.
Yes.
In the December numbers.
And then in December small and yes, we have a small price increase on select items coming up in December so.
We're trying to manage to get to that 28% and then as we absorbed this.
Fixed cost overhead with the additional production capability, then I think well honed this knife and if we were to gradually go from 28 up through the year 2020 than.
That's a reasonable expectation.
But it's not going to be a wake up tomorrow and its here.
Our well good luck Banco appreciate you taking my question.
Thank you Joe.
Your next question comes from Tekmiras from Myers family Office. Your line is open.
Hi, guys.
And again today.
Yes.
I was hoping I had a couple of quick questions. One was on the last call you were nicely able to give us what the real time backlog was can you do that again today, what is the backlog as of today.
I was.
Told that I'm not supposed to be doing that actually that's forward looking so im not going to do that again I got scolded the last topic Mack Cali, well, okay, well I want to tell you that as but okay.
Well I will tell you that it's not had a substantial change from the the ended the quarter How's that okay fair enough.
I wanted to make sure I was understanding that's correct as it pertains to Joe's question, because clearly the backlog is still up substantially year over year, which is great. Though it looks like in this last quarter, obviously was down about $14 million from the end of Q2, which right you impute that.
As to what how much how much sales were written in the quarter. It was just about $100 million or maybe slightly below if my calculations are correct.
It is that right. Yeah is there is is it your sense in Q4 is there any seasonality meeting is Q3, usually or is there any seasonality to sales written in general or or not.
Historically, there has been seasonality.
The anomaly occurred when I came here and there were a lot of things that.
We were able to put together that we'll call it stored energy in the flywheel that I was able to get out.
And so we didnt have the seasonality up until now and so now the curve looks more traditional looking back for the last many years there has been some seasonality to it.
As backlog.
We expect.
Yes so.
It is Scott was pointing out is this backlog starts to burn down then we will pick it back at the luxury we have now that we have not gone into Q4 in Q1 of the following year with in the past is we've always gone in and kind of a procurian level, where you had to be careful you did.
Burn off so much backlog that you didn't have anything to build we don't have that problem. There's there's.
An intent to burn the backlog down to get the lead time shorter because our lead times in general are about two X what they need to be.
Okay, because I was just looking at your these sales written for each of the last four quarters, starting in Q4 of 18 and it was about a 137 that 128132 last quarter and it down to about 99. This quarter based on what you're saying is it reasonable to think that sales written in Q4 would be higher or lower than.
You know the 99 million we did this quarter.
They're going to be slightly higher for the reason that we shortened up some lead times and like I said earlier in the call. We've got some customers that in the face of the longer lead times are trying to get their orders in sooner.
And then my last question just going back to I think this is one of Joe's questions on the gross profit margin.
It just seems like Youre going to end this year, just based on where the first three quarters were at something like 20, 425% something like that.
And you know obviously, we're all expecting some reasonably large sales gains over the next year as long as something doesn't strange happened in the economy et cetera, but based on what you just said in response to the last question. It sounded unreasonable to me to think that we would be back at 30% gross margins for next year at that.
It's going to take maybe a few years to get there did I understand that correctly or did I misunderstand and actually 30% gross margins might be achievable next year.
Well for the year as a whole I don't believe we can do that okay. If you looked at it.
Quarter by quarter and said.
Are we going to incrementally increase the gross margins such that we end the year in the range of 30% I think that might be reasonable to expect.
And just and just to make sure we understand the order of magnitude. This will be my last question. So if you expect that we did I think 20, 425% gross margins this quarter, let's say they go up 1% or wondering a half percent every quarter getting a 30% by the end of next year.
So you average out it I don't know, 28% or something for next year, what sort of run rate revenues do you think you need to be out to get to that gross margin.
I think we can get to the gross margin what you're talking about with our current revenue rate.
Simply because we have the price increases going into effect and we have good control over our labor costs at this point seem to kind of stabilize.
Certainly if we're able to increase revenue on a quarter over quarter basis in the coming year, we might improve faster.
Since we absorbed barrel.
Okay.
Great. Thanks, guys I appreciate the clarification on the gross profit margin just silver sort of all in the same page and no. One disappointed as we sort of ramp slowly to that 30% goal over time. Thanks, so much.
Well I'm going to answer one more question for you that you asked about the Q4 bookings orders in the door.
I just had a young Lady handed me a note what we book today and kind of how we finished out the month.
So.
Very confident in [noise].
[noise] look at it.
[laughter] I'm very confident in the statement that the Q4 bookings will be higher than Q3, we've already seen the effective shortening the lead times and we've also given.
Some indication to our sales channel that were were potentially going to short lead time, some more so theyre, they're engaging with some more commitments what we've booked through today as a.
I'm very very nice.
Thank you so much for your time.
We have no further questions I turn the call back over to the presenters.
[noise] right I'd like to thank you for participating in the call today, we'll talk to you in February of 2024, our Q4 19 results have a nice day.
This concludes today's conference call. Thank you for your participation you may now disconnect.