Q3 2020 Gibraltar Industries Inc Earnings Call
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Ladies and gentlemen, please standby.
Hi, good Bralettes, our industries third quarter 2020 conference call will begin momentarily.
Again, please standby.
My friends callable beginning in one minute. Thank you.
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At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.
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I would now like to turn the conference over to your host Mr., Kevin capacity will also help LHP ma'am. Please go ahead. Thanks.
Thank you operator, good morning, everyone and thank you for joining US today with me on the call is Bill Bosley Gibraltar Industries', President and Chief Executive Officer, and Tim Murphy Gibraltars, Chief Financial Officer. The earnings press release that was issued this morning as well as the slide presentation that management will use during the call are both available on the investor.
In a section of the company's website Gibraltar, one dot com.
As noted on slide two of the presentation. The earnings press release and slide presentation contain forward looking statements with respect to future financial results. These statements are not guarantees of future performance and the Companys actual results may differ materially from the anticipated events performance or results expressed or implied by these forward looking statements.
Bargain performance.
Particularly despite the continued market slowdown we discussed last quarter.
Impacting our processing business the the cannabis portion of her going business and our core industrial business I.
I guess the good news is that are considered that consumer demand for Canada. Some hint based products remains healthy and I think with the processing equipment market stabilizing the second half of 2020.
As well as with the improvement and did an award activity for the cannabis growing solutions. Because this we we expect a much better performance of 2021 and.
N B R and then I'll, let Tim provide more commentary regarding Q3 results. During his review of the businesses also during the quarter, our backlog increased to $304 million, it's up 26%.
Driven by again strengthen our renewable energy and conservation group, along with increased backlog, we experienced strong revenue growth within renewable energy. The result of good progress by the team Ah, particularly it or fix tilt and canopy racking solutions as well as in our electrical balance our systems busy.
All of which.
Have experienced here today growth greater than 25% you know as a reminder.
We intentionally part of sales of our tracker solution over the last 12 months. So you know generate overall revenue backlog growth. This year in renewables really reflects tremendous effort by our team.
We also we're also excited to have launched our new tracker solution sunflower too at the end of last quarter, and which we started to see generate backlog in Q3 in and shoot converge revenue in 2021.
The strike in our conservation business is.
Is driven by a really positive order activity on fruits and vegetables business as well as increased activity in the cannabis growing business. So our position the market is much stronger than it was just nine months ago, adding thermo energy systems to the portfolio earlier this year.
Really is a significant step toward building a leadership position North American market and with good progress to date integrating this business.
Uhm I'm really looking forward to seeing the group person 2021.
We also recently completed 27 million dollar acquisition of architectural mailboxes. So complimentary addition to our mailing package solutions business. This is a really exciting edition for us that provides an entry into new segment's ads capability and create some synergy across digital marketing.
Innovation in engineering as well as a supply chain.
Architectural school your sales or anticipate and just maybe around $26 million this year.
Or in 2020.
Yeah over the last nine months I'd say, our investments in the business have been meaningful very targeted and I think are beginning to generate some positive results. We are delivering more consistent execution I think we're building starter positions with our customers.
And we continue to make ongoing investments in systems and technology.
People in and.
Probably most importantly stay laser focused on creating the safest work environment, we can for our folks.
Where the fourth quarter with solid momentum.
With a very strong balance sheet, which supports the continued fine of of many are key initiatives.
We are making progress and I am excited with the options that are still in front of US you know as well.
Really truly grateful for every whatever organization it and how we've.
Collectively you know navigated through this this unique and ever changing environment. So I do want to thank our entire team and their families.
For a couple of things the resilience, obviously, the dedication and support for the business, but also for each other during this time.
So now, let's turn to slide for in in Tim will review, our consolidated financial results.
<unk>.
Thanks, Bill in the morning, everyone.
Take you to Arkansas hated and segment results.
Consolidated revenue increased 10.2% growth in the residential products and renewable energy and conservation segments offset the revenue decline in our industrial and infrastructure sentiment.
Continued execution drove organic revenue growth of 2.1% and the residential every little energy businesses.
We generate at 8.1% grants for my third call. The 20th 19 acquisition of APEC Supercritical first quarter 2020, I positions, a thermal energy solutions and also shop on issues.
Backlog at quarter, Angelus 304 million, 26% from the prior year at 9% from upon corner.
Driven by continued on market demand in a renewable energy and conservation segment and to a lesser extent demand and the infrastructure business.
Consolidated GAAP operating income was 139.8% and adjusted operating income increased 13.9% and the third corner.
For a quote of 2020 operating income include approximately $1 million of ongoing net direct investments and the safety and financial security of our people directly related to COVID-19.
Consolidated gap and adjusted EPS to 36% and 11.6% respectively.
The increase was the results of organic growth marked margin expansion in a residential product sentiment.
<unk> services mix effective prices material cost management, and I'm doing benefits from operational excellence initiatives.
Now, let's review each for three reporting segment, starting with <unk>, five so adorable energy and consolation settlement.
Second revenue increased 9.8%.
Organic growth in the renewables business was more than offset.
Started declining our core conservation business give you the current your weakness in Canada. Some have pockets combined with top comparisons in last year's third corner, which saw strengthen the candidates and market, resulting in an organic decline at some 0.8%.
A recent acquisition of APEC supercritical thermal energy solutions, and Delta separation strung, 26%, though.
Continued strong demand in the renewable energy market for a fixed shelton canopy solutions more than compensated for a substantial gap and tracker sales compared to the third quarter of 2019, resulting from our decision to pause on sales of our tracker product last year cause we went.
Through some fueled modifications.
Recently, we launched our tracker and if you had to go back lots of this product.
The renewable energy businesses margin performance was solid in the corner.
Strong Shin participation games and product and service next year.
Near term market challenges negatively impacted margin in court and the core conservation business, particularly particularly related to the cannabis and half markets.
The acquisitions made in the consultation business delivered negative margins consistent with expectations and these margins are expected to improve as we move forward with the integration of these businesses.
Backlog, both accelerated going into the fourth quarter of total segment backlog up 28% in both renewable energy and conservation businesses contributing roughly equally to the increase.
Strong demand from our customers and renewable energy business continues and the natural customers in our conservation business is being driven by strengthening fruits and vegetables market and increasing activity in the cannabis market.
We anticipate continued strengthen our renewables business and continued challenging Thompson, our core consultation business related to the timing of the cannabis projects during the remainder of the year.
We believe we've hit bottom of the margin impacts from a recent acquisitions and anticipate the operating margin profile segments to include sequentially as we move through the remainder of the year.
Let's move to slide six to review all residential product settlement.
Southern revenues increased 21% from last year I was also continued strength on the repair remodel markets as well as participation danger costs are distribution channels.
Adjusted operating margin increased 530 basis points, a result of consistent execution on higher volumes continuing focus on 80 20 initiatives supply chain optimization process improvements increased Morgan news organizational competency and effective price of material cost ma'am.
<unk>.
Now, let's move to slide seven to discuss our recent acquisition.
This bill mentioned in early October we proceed with the acquisition of architectural mailboxes supplier innovative pining engineered USPS approved mailboxes and package delivery solutions, the 27 million Ah roughly one times annual revenue.
This is a very complimentary addition to our existing mail and package solutions business in a residential product segment.
It broadens our product offering strengthens our positions single family home and mail package market.
Improves our digital marketing engineering and supply chain capabilities.
We're excited that have the architectural team join ours and look forward to continuing to drive value for our customers in this space.
Based on current customer activities and taken into account the seasonal nature of this segment. We expect continued strength on both the top or bottom line during the nature of the year in a residential product segment compared to the prior quarter.
Let's move on to slide eight towards your industrial and infrastructure product segment.
Segment revenues decreased 11.6% driven by lower demand for core industrial products.
The infrastructure business was down slightly as the pandemic effected spending on infrastructure products and certain and markets.
Infrastructure backlog Bruce lately.
Adjusted operating margin was up 80 basis points through continued improvement execution in the industrial business and effective price of material cost management.
Let's move to slide eight to discuss our liquidity position.
I'll continue to produce strong cash flows from $63 million cash generated from operations during the third quarter, driven by higher earnings and reduced in Boston and working capital.
Are strong operating cash flow, coupled with our modest capital expenditures 12 free cash flow, 18% of revenues during the quarter.
On September 30th.
And as of today, a revolver remains undrawn.
We ended the quarter with $180 million cash on the balance sheet.
And subsequent to Portland, as we mentioned reinvested $27 million in cash and architectural mailboxes.
Given our strong cash position and our undrawn $400 million revolving credit facility and continue to have ample liquidity to invest in operational excellence growth initiatives and the development of organization.
We remain active in the M&A discussions and continue to remain focused on managing are working capital.
Now I'll turn the call back to ball.
Thanks, Ken let's move to slide 10 for quick updated or three strategic pillows first let's talk about our business system.
Continue to best and optimize our operating playbook really to try to keep as agile and aggressive as possible.
In today's.
Dynamic environment. We also remain very focused on maintaining the best and safest work environment 14th.
Executing consistently every day.
Focused on supporting our customers and supply chain in further building our digital systems capability.
In regard to portfolio management.
After a temporary pause and Q2 I'd say discussions have accelerated cross.
A robust pipeline a strategic assets.
We believe will further strengthen our position and the markets were in.
As mentioned earlier, Yeah. We did recently complete the acquisition of architectural Mailboxes and I think that's a good example of building our presence in creating access to do market segments for mail and package business. We're also making progress with our organization development initiative.
Throughout 2020.
We've actually added key positions were filled organization gaps, we've we've upgraded some talent.
Part of our development effort and really through an initiative actually started in 2019, we launched our digital education initiatives required all dubroff employees salary an hourly to complete approximately 12 hours per year of online education across a it really abroad curriculum of topics.
This requirement also includes our online cyber security education, which also started in 2019 and.
That's become even more important today's work from home environment.
Sort of decided 11 and and they'll discuss your outlook for the fourth quarter through the first three quarters, we've been able to deliberate.
Liver solid revenue and earnings growth relative to 2019, and and I believe our market trends in our momentum remain positive. However, there is still a significant amount of uncertainty today.
We had obviously the ongoing pandemic, we have next week's election.
And I think in the potential impact of both on the economy and its recovery going forward.
So as there's all will offer qualitative outlook for the rest of the year based on trends, we're seeing today in our markets as well as with our businesses. So let me start with some thoughts about the renewable energy and conservation segment. So as I mentioned earlier, we you expect demand and continue.
And a renewable energy business and we continue to grow and build a backlog accordingly, thank with momentum and our fixed Hilton Kennedy racking business.
And our electrical balance system business, and with a free relaunch or the launch of sunflower too.
We're expecting to see progress in queue for as well as strength cause we enter 2021.
Conservation business continue to deal with an <unk> interesting set of market dynamics than the growing business should continue to see growth and fruits and vegetables backlog and revenue as we move forward.
Sniff good investment in this market continues as does demand for greenhouse structures and growing solutions.
And we expect thermal energy systems to be to benefit accordingly.
Yeah, the cannabis market project didn't reward activity increased in Q3.
And we expect that to continue in the fourth quarter and into 2021, so and.
And we are really well positioned to support this are.
Processing business and the processing equipment market has stabilized and it's starting to improve.
With further recovery.
Dissipated in queue for in in 2021.
Market has also continue to self correct the supply demand imbalance for process equipment as the market for hemp processing.
Continue to mature.
Continues to mature.
In a residential building products business.
We expect solid demand in queue for in a seasonally adjusted market basis as the new construction and repair them all markets remain active we continue to focus on consistent execution really serving.
Serving our customers as best we can and finding opportunities to drive participation gains with them as well we.
We expect our industrial business to continue experiencing consistent demand for core products and we remain very focused on execution and selling higher value product families to delivered.
The solid margin operating income dollars you see.
Alright infrastructure business is expect to remain steady with solid growth.
And are fabricated products all set it all setting some of the slower demand and non fabricated products either sealants Encodings, which are currently impacted by reduced investment in airport runways and structural maintenance.
Project bidding activities rising in her backlog remains solid.
So in summary, BARDA is significant change to today's environment, which is interesting in itself we are confident.
We'll deliver solid fourth quarter performance compared to last year.
And then we will revisit the question of quantitative guidance again, when we report our queue for results.
So with that let's open the call for questions.
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<unk> your lines them open.
Built him good morning, Thanks for taking my questions.
Oh man I'll start with renewables and conservation specifically process equipment sounds like market is stabilizing there in Canada spitting activity, increasing now how would you characterize activity in the processing side, maybe compared to pre covid levels.
And you said you expect much better performance in general for the speak the overall segment in 21, given the backlogs you know, it's just double digit growth achievable and I you know I don't Wanna get into the guidance, but you know just how are we thinking about the the type of growth rates that.
We might be able to see gone going forward when we get past this year and given the easy comps from early in the in the first half.
Yeah, well you know so Dan we've we are like.
Like this marketplace because of the inherent while we're on the way we think it has and I do think the industry itself as.
Is this going through this correction in dealing with Covid will come back at all you know, we'll see growth rates as we had hoped going into this year.
I think we've always think of this market seems to be growing high single digit type of.
Growth in the past and we hope to see that return next year.
You know, we got a little a little bit more of a I think market flush if you will that's going to happen.
Q for it a little bit into Q1, and then you'll start to see.
That return a lot of that in a lot of that has a lot to do with the imbalance I mentioned.
There with with.
The hemp market.
Remember the farm Bill lack came about made ham better illegal and then you had a lot of people rushing into the space and and probably artificially pumped up the market a bit we saw that and we knew that it just taken more time, I think with Coke Coke covid, sorry for that to rebalance because of access to capital and other things that a lot of the the part.
Disappoints an industry have dealt with the last nine months so.
Oh, that's kind of getting flushed, if he will probably take longer than it has taken longer than I think I anticipated from our understanding of what we've been working on.
With the market.
I think you'll start to see that recovery and next year and I think we hope to see the business start generating that type of growth, we expected going into the air.
And I think the other aspect of that is obviously you know there's a margin drag.
Does come with the reduction in the market, which we've shared with you guys over the last two quarters and hopefully we'll start to see that turned we should see that turned in a positive direction as well.
Very helpful and along the same lines backward looking but I Miss the revenue contribution from apex Delta what were those in the quarter and what was organic growth in renewables and conservation.
So again.
All of those was up and conservation was off the core business.
Basically cannabis market Orange down when you combine it was down in the 10% range and then the acquisitions Adam.
20.
And that that's outside of town.
20 million, great I'm gonna be monitored cottages, sorry, Oh, Okay got it got it you have to kind of assist downtown percent and added the the [noise] back.
Acquisitions out of 20%.
Basically.
Got it.
And then very interesting architectural mailbox.
You know, what's the Martian profile today with the opportunity set.
And you know do you see a big opportunity and kind of residential partial boxes.
Reflecting the growth and E commerce is that part of the <unk>.
Part of the thought process here.
Yeah, well, there's a couple of things.
Michigan, We mentioned hey, it's complimentary to say well how is that there's a core core mailbox business that we've built out over time and and what architectural [noise] [noise].
Right and then a single family World, There really isn't that architectural design very innovative type of mailbox, so kind of it. So that's a compliment on call that single family.
Both us and they have been working on trying to find.
Find the best solution for residential homes for package delivery. So there's some interesting things going on there that we think we can leverage is that more and market continues and of course, you know our court.
Listing business, we do a lot of [noise].
Foster boxes, enlarge lockers for both commercial and and.
No.
New neighborhoods, where you go into more centralized mail delivery. So when you add it all up you know it's interesting because we we've got now have kind of three or four markets that this gives us a little more access to and and it just adds to the thought process around how to solve this home delivery thing you know in a way that I think a lot of people were looking for.
So that's that's how it all fits and then the backside.
Obviously, it sometimes some things that we can do together.
As we operate the business so.
Very helpful. Okay, I'll jump back with any follow ups. Thank you.
Yep. Thank you.
Okay.
Your next question is from the lineup can zennor from Keybanc, Sir your line I'm opening.
Good morning, everybody.
Good morning, and how are you.
Oh I have electricity so that's good.
The basics of life.
Gordon.
Yeah.
So.
Yeah, what what I interpret this quarters of Miss but I think this is one of the concerns about investors is clarity renewable many or investors come from the building products World.
Ah and solar.
Have vegetables. So let me just let me rephrase, what you've said I believe so I could get some clarity to 20% growth that you had.
And renewable is.
From acquisitions, you said, though have margins, where negative where you're referring to these acquisitions collectively which would include the Canadian.
[noise] house or how should we think about parsing out you.
Your negative comment margins inhabit just to start with cross.
Yeah, that'd be processing, the tune processing, which are apex and and [noise].
Delta serve that market that we're talking about that really has slowed significantly and that's where the bulk of the negative margin drag has come from this year as it didn't do too I'm in Q3.
Right and my my recollection as you had $75 million at the time of acquired sales in the vegetable business in 46 and 17, so about 60 and those two businesses is that correct.
Ah sales.
Yeah that was trail, Iowa, Yeah, Yeah, So how should I I added up the M&A line and renewable and it looked like you know the contract for about $80 million here and you are acquired sales were about $140 million. So it fell 40 per cent, obviously timing covid you couldn't control that but.
Is the hemp down like.
More than that 40, I mean is it down like 80% and the vegetables is okay and the reason I'm asking these questions is your core renewable so legacy solar.
And greenhouse.
Are those margins organically year over year, because this is kind of central to the fact, you know are you facing covid issues or are you facing execution issues and that's that's gotta be on investors' minds today.
Yeah, I'm still here backlog. The question is what's going to grow it.
Let me person renewal.
When you're all those we had growth in revenue. Despite the fact that we've created a headwind by stopping trap her last year.
We had decent track room revenues in the third quarter. So the other components in that segment, which are the fixed tilt the.
The canopy in the electrical balance assistance Bill Bill pointed out in his comments.
Revenue growth.
Those pieces of the business or greater than 25% each and so that bill. Okay. So those categories grew twenty-five your organic and those categories grew 25% year over year.
Embryo it created cover I'm, sorry, we generated growth from renewables intolerant.
Margins are solid and renewables I need to go to core conservation.
The poor conservation business had.
A fair amount of cannabis in the third quarter of last year.
Project right it was that yep and and it's down this year. So cannabis market was chopped up the beginning of the year from Ah just getting any contracts raining dumpsville backlog declined.
Creates a hole.
And we're starting to see.
Candidates activity picked up in basketball failed so in that core business.
There's a timing issue.
No real concerns with that impacted margins negatively.
That volume of revenue.
Is it fair to say then sorry to focus on this I think it's just this is a great opportunity for you guys to expand investors understanding of this Nathan business.
The conservative which is both which is led by hand in terms of the downside, but that would also be greenhouses and everything else correct.
Yeah. So.
[noise] installation.
Yeah, when I'm talking about core conservation talking about the entire greenhouse business, but.
The driver average performance Miss Florida is really tough.
Talk to you over your Canada Smacks I mean, there's you know there's always an illusion every business, but that's if you're looking at what what.
What happened and then in any acquisitions in total.
Uhm generated.
Decent say they generated 20% sales growth.
So I made up for some of the shortfall.
And the concentration with some spot.
In total revenue effected total it's negative revenue.
No margin no sorry negative Mark correct negative margin. So could you quantify that negative margin I mean is it like mid single digits or is it like low double digits.
And the reason I ask just as you guys. As you guys ponder that is if you have for example, minus you know if you have low single digit margins. It means your actual margins in your renewable organically, we're basically flat to up.
And I think that's it's hard to understand.
The magnitude.
Mm of these obvious covid induced.
Declines in the in the <unk> in the conservation business that's all.
Yeah, I mean, I guess, what I would say is that acquisitions drove the majority of the revenue decline.
And then the next piece of it as the peace and conservation.
Okay I'll move on.
Fair enough I do appreciate it.
Residential 20% how much I mean, I know you guys are your four Q guidance them I guess my last question back it out here I do appreciate the details you offered your side.
About fight 11.
Four Q outlook.
I don't know I heard you guys I wasn't sure how to exactly interpret this are you, saying sales are up if I say sales rep.
Ever.
Cor, 3% should I have that 3% sales growth the 37% renewable because this is percent of fourth quarter revenue.
Or is this kind of.
I I just didn't know how to interpret when he said renewable 37% of revenues that for the fourth quarter basically.
I'm just looking at slide along with a four year.
Oh, no that's just sort of trailing it's too yeah yeah.
Okay, that's just hey.
Just trying to give people a relative.
Waiting of these three segments.
On our portfolio.
Okay.
Thank you I think you guys pay very much and you can't Ken Let me I just wanted to clarify something for you as well maybe you know this but.
And for the audience.
Hempton cannabis or two distinctly different drivers of.
Market stuff, we talked about today so.
Him is really processing and.
Impacts the processing aspect of our business not.
Not the growing because people grow hemp outside.
So our core growing business or conservation business, whether it's cannabis or [noise].
That's gonna be candidates such grown inside and a.
And a greenhouse the him and cannabis market that's.
Also impactful too.
Testing equipment, but that's really where we where we've seen a big reduction or in the marketplace or slow down as it related to hemp and processing that makes sense.
It does.
And so there are two things that are impacting the processing market. One is the hemp maturation process. Because there was no harm Bill Act that was approved and so you had a lot of people running into that space. That's balancing itself out the second piece of the processing gives us a second impact with processing basically.
Around Covid and that's all the processors, having access to capital, whether they're processing cannabis or him.
Yeah, those two things that are hitting and that's my point there there were flushing through that this year it took a little bit longer than we thought to flush out because I think covid has extended that a bit and that's where apex in delta separations.
That is 100 per cent of where their businesses focused processing hemp and cannabis.
Two impacts on processing those are the two acquisitions that were directly impacted by it that's flushing itself out that's the stabilization, we're starting to see that will start to pick back up next year, Canada.
Cannabis for growing is really just associated with <unk>, you know covid upfront, where people are you know or anything slow down getting access the permits and all that and you know that's kind of started to work itself out and those projects. The good activity in the projects we started to increase throughout the <unk>.
Quarter and and so we we think that's recovering at a little a little faster pace from it and market perspective.
And that that particular piece of our business last year was at record levels.
So you got a little bit of a cough thing and you've got a market recovery thing happening on the growing side as it relates to cannabis.
That very good I'll put that yeah. It is and I think these type of detailed explanations are very helpful to you guys still here so yep.
Your next question is from the line off who you'll Romero from <unk> company. So your line is now open.
Hey, good morning, I Hope you all are well alright.
Hello, how are you.
I'm good so on the rest of your business. Thank you mentioned in your prepared remarks, you expect a better top line and bottom line year over year I guess, what would you expect the margins to be up in the same range that you've seen in the last two quarters, because you seem very good strength year over year in the second and third quarter. So.
Does that does that fair that 300 400 basis point.
Okay, I don't <unk> of 19.
Yeah, you know I think that'll work, we're gonna be up on both top and bottom line year over year. You know it is seasonally adjusted obviously versus we won't be sequentially because of the season out of the business, but I think you know we've been each quarter been performing a little bit better than the previous year and I would expect 12 to continue.
In the in the fourth quarter, you know what does that really gonna look like yeah.
I think it would be better I can't give you a number now only because.
You you know if if you thought Q3 or Q2 is a little bit.
Unique and trying to understand some things where we're getting ready you know we're in the middle of the pretty Crazy time, right now too but you.
We're we're pretty confident that we're.
We're gonna get through the fourth quarter with with better performance, So I hope to see.
<unk>.
As you described better performance for sure I'm top and bottom line.
Got it stay on that segment I mean on the architectural mailbox acquisition that you mentioned it is more of a single family offering then the cluster bombs right. You traditionally offer does that does that sold through the same channels as as your legacy mailbox offer yeah.
Yes, they I would say architectural.
There's a lot of overlap in terms of where we sell through and I would say, there's a good online presence for them as well. So it. It just you know if you think about distribution channels. It gives us a little more breath across all of those and there are multiple channels between big box small box online.
So on so forth and then we talked earlier about the various product lines. It brings which effectively helps you get two additional sub segments within the customer.
The customer base.
Which we haven't really been in so that's very helpful for us.
Yeah and I.
I guess my last one is is your total mailbox offering does that.
I'll make up like about a fifth of your total ready segment and would there be more tuck in acquisitions to target.
In the pipeline.
As it relates to mail them package or right and yet in residential porcelain posted yeah.
Not not in the near term.
You know I think what we have now is a pretty strong foundation to to go after some of the problem sets or opportunities that.
Are out there, whether it's home delivery or or you know in the multifamily world a home deliver there as well there's a different solution sets there I think.
You know they they they bring a strong engineering organization that.
It helps to strengthen on your organization they bring some good marketing as well and so I think collectively what we're gonna it'll help us focus a little bit more than some of the organic opportunities that might exist.
But you know, we'll keep our eyes open, but there's nothing obvious right now and that space that we would add.
Got it thanks for taking the questions and best of luck in the fourth quarter.
Yeah. Thanks. Thanks.
Thank you.
Your next question is from the lineup Walter.
From the seaports, Sir your lines and I'm open.
Hi, Thanks for good morning, guys.
Well one wanted to go back to the previous discussion and maybe just ask the question about organic growth what was your panic room.
And the word declining renewable and conservation business.
So the the.
It came back in the in the organic renewable and conservation.
Renewables we're up.
Conservation was down and that combined was a little over 10% I think it's 10 48.
10% or.
10.8% online.
Yeah like because we've got.
Almost 10% growth in the segment.
That difference is the impact of the acquisitions.
Okay great.
Okay Uhm.
And then on the the backlog I Wonder if you can talk a little bit about you said the composition or backlog was split the broken backlog from.
The fruits and veggies greenhouse and the.
The solar.
I Wonder if you could talk a little bit about the the solar part of it uh-huh how much of that is due sunflower too.
And how much of it is traditional <unk>.
So so well both sides of the businesses Uh huh.
Head backlog growing.
28%, plus which is kinda cool.
And he kind of mentioned fruits and vegetables, that's good and markets and and very active things going on in the marketplace. There. So we're excited about that and that's really gonna show up in 2021.
And the solar side the majority of that backlog growth is still in our core business community solar.
It's still heavily oriented towards fix tilt and canopy.
And our electrical balance of systems business, and then launched.
Launch, a sunflower too and Ah.
Towards the end of two two our backlog is starting to build in.
And.
And our tracker solution. So I would say the majority of it [noise] gosh.
Gosh, probably 80% on the solar side is 75% or so is still our core business in the track or just.
Starting to pick up so we relaunched at an hour obviously in discussions with in a variety of projects and as they come across it gets put it in the back we don't put anything in the backlog until signed agreement.
Legal documents so.
We started to see that build get some projects across the finish line in Q3, I think that will continue and.
We'll have a better cute and we'll have a better 2021, because the sales will actually show up in 2021.
But the backlog is building, but it's still small smaller piece of the total right now which is good and bad in the sense.
I I really liked the fact that when it tells you is the marketplace really does need more than one solution, particularly in the community space where we.
Our mark.
We have three solutions that we're proving that are.
Of a great demand and so.
You know that as I said before will give us another arrow in the quiver going into 2021, but yeah, it's starting to build.
Okay that sounds great yeah, and realize it was the second late second quarter launch that sunflower too, but it sounds like you did get some orders commensurate with the yeah yeah.
Yeah, we do we have we have projects I came across the finish line and and Q3 and and you know a lot of actors betting going on.
As we speak and you know given the conversion timeframe and be anywhere from nine to 12 months once the.
Projects done so.
Before you see it start to take.
Take off.
Okay, great in on the fruits and veggies, sorry to tell him like that ships.
Later in the year that there'll be 2021.
Started shipping in the first quarter or is that it'll.
It'll be a mix we got into yeah. We have we have projects that that that entering the backlog throughout the year and you'll see stuff flow starting you know and keep for Q1 Q too. It's just the idea behind that building that backlog, what's really relevant about it I know it sounds obvious but it gives us this constant.
Cadence across each of the quarters as you build it up and and that's what we're trying to do across both businesses. So we take the lumpiness out of.
As best we can.
But.
I think you'll start seeing.
Rootsy vegetables, as well as Canada still those.
They they flow as as easily as you have access to put them in the ground. So if you have good weather doesn't matter.
That's in December or if it's in June [laughter]. They can flow out there. So this year is disrupted a little bit because of permitting and cruise being available and all that good stuff and it's been a bit of a challenge moving schedules around and that's a little bit of a challenge this year with a lot of businesses are going through that but.
But I think you will get a steady flow going is the backlog continues to build for both sides of the business.
Okay, Great and then we thought we haven't talked about industrial yes, and weapons since the margins look great mhm, but it doesn't look like there's much of a recovery happening yet what do you think about the timing was there a funnel where you can say okay. Maybe this will be for.
First half a second half of 2021, where the revenues start to recover M U C cops.
Yeah, I think the second half will be.
Well, we will see it show up more in the second half of the first but.
And the reason I say that one I think.
It's hard to understand what's gonna happen with the economy, depending on some results that we get the next few weeks on election, so forth, but the other thing that.
We've been working hard on is is really pushing our premise security initiative in our architectural initiative in this.
This year, it's really hard to say how much of that's been impacted with again. These are project base kind of things are going out there and we're hoping to get more clarity and more consistency being able to execute those projects in the field not us be able to make them, but our customers to be able to execute them and I think it's gonna take some time for that.
Work itself out as we deal with a pandemic and everyone kind of gets back to some level of enormous and that's why I say the second half probably more.
Reflective of something that would be more positive on the top line that it would be the first half.
Okay Fair enough and then the last one for me is just you can provide any details about the I'm gonna need mailbox acquisition sales.
In the diet and kind of accretion.
Purchase price et cetera, yeah.
We said the so we paid 20, just under 27 nine for it and it's sales for 2020 should hit a similar number.
26, 26, plus somewhere around there so effectually kind of one time sales.
<unk> was a price and that's the sales level I think the margin profile is similar to what we have today.
Okay, well it doesn't matter what account today so yeah.
Okay.
And my last question is from the line of Mister Daniel more from C. G. A securities Sir your line is not moving.
Thank you again, just to remind us where you expect the margins on the processing side to get too once the market does recover and you know what do you see as a reasonable timeframe.
Yeah, you know Dan when when we.
Part of the business.
Obviously, we we believe it's accretive to Gibraltar so.
We're gonna be moving towards I think mid teens is what we've said in the past and I think that's very reasonable.
To get there and we'll obviously and I'm trying to private up over that over time.
And I think we'll start to see.
Getting back to that level towards the end of next year second half make sure it's depends on I'm, hoping the market.
As we've seen stabilized starts to turn for starts to seem more positive activity as we come out of two four.
Come down to that.
Yeah. The integration work that we've done is gone really well we've brought the teams together we have no. One thing we've implemented common ERP system common crm's. So we've done all the hard work. It's just I think when the market returns and we'll be in a really good position and hopefully.
The margins will flow as we expect I think.
That's what the industry margins look like from the work that we've done and and I fully expect us to get there and I'm, hoping that we see that.
Towards the second half of 2021.
Maybe a little sooner 2021 second half.
That is helpful. Thank you again.
Yep.
I am showing no further question at this time I would now like with that over the conference back to Mister Bill Bosley.
Hey, guys well again, thanks for join Us will.
Participate in 2020.
Yeah Global Industrial conference, that's coming up and hopefully, we'll get a chance to spend some more time with you there and as.
As well as our follow up calls that we have scheduled so they say you have a great day and.
Well talk to you soon don't forget to vote.
Thank you.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful day, you mean I'll disconnect.
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