Q1 2021 Graco Inc Earnings Call
[music].
Good morning, and welcome to the first quarter Conference call for Graco, Inc. If you wish to access the replay for this call you may do so by dialing 8558592056 within the United States or Canada. The dial in number for international callers is 404.
5373, and 406 day conference I'd number is six one and 657 to seven and the replay will be available through two P. M. Eastern time Thursday April 29.
Great glad and additional information available in a Powerpoint slide presentation, which is available as part of the webcast player at the request of the company. We will open the conference up for questions and answers after the opening remarks from management there and.
This call various remarks may be made by management about their expectations plans and prospects for the future.
These remarks constitute forward looking statements for the purpose of the Safe Harbor provisions of the private Securities Litigation Reform Act actual results may differ materially from those indicated as a result of various risk factors, including those identified and item one day of the company's 2020 annual report on form.
From 10-K and in item one day of the company's most recent quarterly report on form.
<unk> 10-Q.
Reports are available on the company's website at Www Dot graco dot com and the SEC's website at.
W. W. Dot SEC dot Gov forward looking statements reflect management's current views and speak only as of the time. They are made the company undertakes no obligation to update these statements in light of new information or future events.
I will now turn the call over to Kathy shown rock.
Executive Vice President corporate controller.
Thank you Josh good morning, everyone and here this morning, with Pat Mchale and Mark Sheahan.
Our conference call slides have been posted on our website and provide additional information that you may find helpful.
Sales are 454 million and in the quarter and increase of 22% from the first quarter of last year, and an increase of 18% and consistent translation rate.
The effect of currency translation added four percentage points of growth or practically 11 million and the first quarter.
Reported net earnings totaled $105 7 million per the quarter or <unk> 61 per diluted share.
After adjusting for the impact and excess tax benefits from stock option exercises net earnings totaled $101 6 million or 58 cents per diluted share.
Gross margin rate per strong in the quarter up 120 basis points from the first quarter of last year and the favorable effect from currency translation realized pricing and factory volume were partially offset by the unfavorable impact of material costs and net.
Mix related to the significant growth and the lower margin contractor segment.
We saw a material cost increase throughout the quarter, which negatively impacted our gross margin rate.
At current factory volume, we expect that pricing and strong factory operating performance will continue to offset higher material costs for the remainder of the year.
We also experienced supply chain disruptions and the corner with regards to logistics capacity and component availability across most of our factories.
Purchasing and manufacturing teams are working to address these disruptions and we are not currently losing orders or have had any of our manufacturing line shut down we expect these challenges to continue and the second quarter.
Operating expenses increased $10 million and the quarter, including $2 million related to currency translation $5 million of increases in sales and earnings based expenses.
And two and a half million dollars and new product development, and we continue to invest and our growth initiatives.
Other non operating expenses decreased 5 million due to an improvement and the market valuation of investments held to fund certain retirement benefit liabilities.
The effective tax rate was 16% per the quarter, which was five percentage points higher than the first quarter of last year due to a decrease and excess tax benefits related to stock option exercises.
Cash flow from operations totaled $102 million compared to $54 million and the first quarter of last year.
The majority of this increase was due to an increase in earnings and the quarter.
Capital expenditures were $21 million and dividends paid were $31 6 million.
A few comments as we look forward to the rest of the year.
Based on current exchange rates.
Fact of currency translation and will continue to be a tailwind for us with.
What's the full year effect estimated to be 2% on sales and five per cent on earnings with the most significant impact occurring in the first half of the year.
We expect unallocated corporate expense to be approximately $30 million and can vary by quarter.
2021 full year tax rate is expected to be approximately 18% to 19%, excluding any effect from excess tax benefits related to stock option exercises.
Capital expenditures are estimated to be $140 million, including $90 million per facility expansion project.
Finally, 2021 will be a 53 week year with the extra week occurring in the fourth quarter.
I'll turn the call over to Pat now for further segment and regional discussion.
Thank you Cathy good morning, everyone. All my comments this morning will be on an organic constant currency basis.
Q1 was a solid quarter as we delivered growth in every segment and every region with the exception of process and EMEA, which was down low single digits.
In addition to good performance by our commercial teams and I want to specifically recognize our manufacturing purchasing warehousing and logistics folks.
And we're successfully dealing with both external supply chain issues and rising material prices.
Contractor continued its strong performance with record Q1 sales and earnings as revenue growth and all regions exceeded 30% for the quarter.
Residential construction activity remains solid and the home improvement market is robust.
Contract and North America continues to see strong out the door sales and both propane and home center and we're working hard to keep up with the demand.
Favorable favorable volume and continued discretionary expense management drove solid operating earnings during the quarter.
The outlook for the contractor business remains positive for the year, However, comparisons do get much tougher and the second half.
And the industrial segment grew low teens during the quarter with improvement in all regions order rates were strong throughout the quarter with growth and all major product categories. Overall demand and this segment remains broad based with many of our key end markets improving as customer facilities begin to reopen to outside vendors.
Segment sales grew in Q1 with improving and market conditions, particularly in the Americas and Asia Pacific All major product categories were up with the exception of oil and gas and coming order rates accelerated throughout the quarter similar to industrial and market growth was broad based and benefited from improved factory access.
A couple of comments on our outlook as we head into the second quarter incoming orders remained solid and last year's second quarter was our trough. So we expect a good Q2.
And second half comparisons will get significantly more difficult as our business accelerated in Q3 and Q4.
And although the second half economic environment is uncertain, we will continue to aggressively pursue our key long term growth strategies and investments.
In closing I want to thank all of our employees suppliers and distributor partners, who continue to work hard to meet customer demands.
Operator, we're ready for questions.
Thank you for the question and answer session will begin at this time.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.
Your question will be taken and the order that it has received free standby for your first question. Our first question comes from.
Joe Ritchie with Goldman Sachs. You May proceed with your question.
Thanks, Good morning, everybody.
Good morning.
Hey, Pat.
Great quarter.
Curious one of the things that we've been talking to investors a lot about has been the supply chain and inflation didn't seem to really impact your quarter based on the drop through and we saw on margins.
Maybe just talk about what youre seeing across your different businesses along both both of those the supply chain side and also on the inflation point.
Yes, obviously margins would have been better without it I think we did a good job with pricing and factory performance to offset the impact of that so youre not really seeing it but obviously its still there.
<unk> chain side.
You have to have if you got 300 parts and a piece of equipment you got to have all 300 dairy can't be missing one and so the team here has been scramble and hard to.
Finding substitutions or to expedite or to switch over to models. While they are waiting for parts of the command and they've done that successfully throughout the quarter.
And at this point I'm not anticipating.
Big problem as we go forward, but I am anticipating thats going to be a big effort to try to keep things going so it's been okay. We're surviving but it's certainly been challenging.
Okay Fair enough and then I guess.
If you take a look at the acceleration and the improvement that you're seeing throughout the industrial business is there any other color you can count and provide on and markets, where youre seeing and particular strength versus others.
And you really haven't seen much of a pickup yet just any color around that would be helpful.
No I think probably the only market that we really are calling out is still be and softer as oil and gas.
I think generally the improvement has been pretty broad based and.
And I feel optimistic based upon what I'm seeing and hearing that that's going to continue.
Okay, Great maybe one last one.
A lot less debt, we're hearing across the space and this has been a big year for both M&A and also for divestitures across the space and just curious as you're kind of thinking about your own portfolio are there like what are you seeing from an M&A perspective.
And maybe building out adjacencies across here.
Businesses.
Well I'll, just say that it's expensive and I'll, let mark way and with any thoughts that he has yes.
Yes, I think that we still are we're still committed to returning capital to our shareholders and doing the best job. There that we can but obviously M&A should play a big part of that going forward pricing is high but I think that we're going to continue to.
Shaking the bushes and see what's out there I think graco does bring a lot to the party when it comes to potential companies that would be interesting and partnering with US We've got world cl<expletive> manufacturing, we've got a great brand we have channel we got sales representation.
Patient around the world. So, it's a matter of being able to leverage those things and the deals that we see are are good and strategic and we.
And we'll do our best to try to bring some things home here.
Got it thanks guys.
Yes.
Thank you and your next question comes from Matt Summerville with D. A Davidson you May state your question.
Thanks, So just a quick one on auto and be sporadic shut downs and that industry hurt your business at all or maybe even helped it and the sense that maybe.
And maybe folks are looking to catch up on capital projects that have gotten deferred so could you maybe speak a little bit and a little more detail around the auto specifically.
Yes, I think we are better when the plants are running about 40% of that business is parts and accessories and that's based upon volume and I think sporadic shutdowns arent as good as planned shutdowns and so I'm sure that there's we're.
And we're getting a little bit of a day, there, but again overall debt kind of that whole industrial implant market is improving and.
I think automotive will come along with that.
And then just as a follow up in terms of price realization, giving given the input cost environment and the increases that we've seen and things like steel and aluminum did you guys end up taking more price in 'twenty, one and then what would what Craig's I would normally realized and how favorable do you expect that price cost.
Spread to be as you move throughout the year. Thank you.
Yes, no we didn't.
Jack prices up and.
We're kind of beyond the normal range and we typically don't tie our pricing to directly to what's happening and the material market. It's one of many factors that we considered when we take a look at.
Pricing on an annual basis. So I think you could expect that price realization would be similar to past years, and I'll, let mark way and as well, yes, no I think it's and that one 5% to 2% range Thats, what wed expect Matt.
Got it thank you.
Thank you and our next question comes from Jeff Hammond with Keybanc. You May proceed with your question.
Hey, Good morning, guys best of luck to you here as you move on.
Thank you.
Just on.
Sure folks are getting into plants can you give us a sense of what they're seeing in terms of kind of pent up demand and stuff that hasnt been done and and how that kind of frames your view going forward.
Yes.
A little hard to get our hands around I would say, it's more anecdotal than anything else, but.
Really throughout the pandemic, what we were hearing from our people was that.
Projects weren't really being canceled or being pushed and so we didn't have a lot of things kind of drop and off our pipeline. We had things just moving out and action wasn't happening and so we're starting to see some of that break loose and so I think we're going to have to get into the back half of the year and it kind of try to sort out what's.
And what projects have been pushed and that are now coming onto the radar screen and actually turn into orders and what the actual tempo is on new products. As we go forward. So I would say the jury's out there.
Okay, and then just on the contractor I think you said strength and both pro and DIY, but any kind of signs of moderating demand here as you go forward I know some of the thesis is we kind of reopen and people get back to normal and start to do other things besides working on their home.
And any signs of that yet.
Yes bookings are good then.
That we will learn a lot more and the second half.
And the housing starts are really strong as you probably have seen.
And I think they are up 37% that run at about $1 $7 million right. Now as are the permits which is really good for that market interest rates are still pretty favorable people are making investments and their home prices of homes are going way up. So I think there is a built and confidence level with the consumers on putting money into there.
Homes versus maybe some of the other things that they're doing and there is a huge.
I guess, a dearth of homes out there there's about 4 million homes I think that was projected as being under under what we would expect for this type of activity. So I think that the things still has some legs and and should run for a while.
Okay, and then just last one.
No theres been a lot of talk about like foam shortages and the Texas freezes that impact any of your spray foam business and the short term or what are you seeing there.
So for sure we have contractors and <unk>.
Lenders that have been scrambling to get raw material I have heard about that on a number of occasions, I think and general at this point, it's not a big deal in terms of our direct sales.
Okay. Thanks, guys.
Thank you. Our next question comes from <unk> <unk> with Jefferies. You May proceed with your question.
Thanks first Pat congratulations on your upcoming retirement, and I think I read that you have a bucket list of adventures.
Hope you have a really great time on that and we appreciate working with you the past few years.
Alright, well I appreciate everybody's support and I plan to have a good time, and I'm going to listen and to Mark every quarter and making sure that he is still kicking butt.
And here Halo.
I guess building on the M&A question and now, let's talk about capital deployment and the past those cash effectively earning negative rates does this change how you're thinking about your balance sheet and when you think about increasing leverage for share buybacks or M&A.
Yes, I think I'll, let mark weigh in here and go ahead, Mark Yeah. So I think that for sure. We built from cash on the balance sheet, we don't really feel like it's at a point, yet where we have to take action and over it.
<unk> 12 billion dollar market cap company, and we got $400 million of cash on the balance sheet. So it's not at a critical stage.
We'd like to deploy it I think we can hopefully deploy some of it through M&A and obviously, we'll do some share repurchases as well, but our overall objective is to try to get.
Double digit rates of return on our investment dollars Thats, what we do every time, we put a new machine tool into the factory and that's what we do and we take a look at the product development investments that we're making so given the current valuation levels that we see both in terms of the equity markets as well as the M&A market and it makes it a.
And more challenging for us, but you can probably rest <expletive>ured that over time, we are just going to pile up a big mountain of cash flow our job is to deploy it and do it smartly and that's what we've done historically thats, what I think we will continue to do and the future.
Okay, and then just from an industrials growth picked up and Americas underperformed EMEA and APAC is there a difference and end market exposures. There that's driving this and maybe.
Just a little commentary and the benefit Youre seeing is customers asking you to open up.
I think that.
The timeframe that were talking about and the nature of that business is and it's it's too soon to tell those businesses can move around based upon projects that I think.
Our view is is that the recovery on the industrial side is broad based.
And that we should benefit from that and all the regions, but I think try and debt decide region to region over a 13 week period that there is some trend that's worth noting is not a good move for us.
Great Thanks for that color.
Yes.
Thank you. Our next question comes from Deane Dray with RBC capital markets. You May proceed with your question. Thank.
Thank you and good morning, everyone.
<unk> and <unk>.
And were you getting away from giving that six week update or the most recent six weeks just given the.
The comp issue, but can you talk about what the cadence has been and April.
Any color by region.
Also like the size of orders things like that just to kind of.
Lars out what demand looks like.
And we're not going to get too granular with it but we tried to give you a view of that really let you know that bookings. The last few weeks have been running consistent with what we saw happen and in March So I think the overall.
Temple is good and we haven't really seen any big deviations Dean in terms of businesses and in terms of regions. I think it's been fairly broad based kind of like what you saw in Q1.
Good and then just in terms of pricing power and one of the things the lessons I learned from graco back when 2018, when our biggest worry.
It was about tariffs if you remember that.
Yes.
The debt you all have your own cadence on price increases it seemed like everyone and multi industry was putting in the true that particular quarter and you guys said no that's not the way we do it at Graco and and so I appreciate that so when you talk about one 5% to 2% price increases.
And how much of that has already been put through.
And what might the cadence of price increases during the balance of the ERP.
And just to be clear that one five to two is realized so you may see price increases on our list to list basis higher and different product categories and the marketplace are you may hear from our channel partners that the numbers are higher but we run promotions and we do discounts and theres lots of other factors that.
Involve at what the net realized pricing is going to be and it's probably going to be consistent and that one 5% to 2% range, we typically run that through.
And the first quarter, sometimes there's a december impact sometimes there is a january impact kind of dependent upon what the channel might be doing and to try to get ahead of the price increase but this year. The timing was very consistent with what you've seen in the past couple of years.
And have we realized at all no we probably haven't realized at all yet we typically don't and the first quarter orders that are in house for example on a project.
We're not going to go and we're not going to typically change pricing on those new orders coming in we will have new pricing and there are various factors that will push our realized pricing out into debt second and third quarters, but we saw some of it and Q1.
Great and just last question from me is on what's the expectation on new product introductions for the year, what's the pipeline and look like and what kind of contribution might you would expect.
I think it looks pretty typical.
<unk> and new product development has been stayed.
Stable to slightly increasing and so we're happy where across the businesses with the projects that we've got and the pipeline and how theyre going to contribute this year I don't think it and be anything that's going to be dramatically better or worse than prior years.
Good to hear and Pat wish you all the best.
Alright. Thanks.
Thank you and our next question comes from Andrew Scott Greenberg and you May proceed with your question.
Good morning, guys.
Good morning.
And we there lose Andrew.
It sounds like it Josh.
Thank you. Our next question comes from Mike Halloran with.
Robert W. Baird you May proceed with your question.
Hey, good morning, everybody and best of luck, Pat I've enjoyed working with you to a decade or whatever it's been we show the best.
Thanks, Mike, Yes, I think once in a decade, you put a buy on me. So I appreciate that that's been and more recent years, otherwise it'd be think and poorly and you and retirement.
I wanted to make sure it's since Jan and I know and then.
I'd like to be delusional months pretend that this is one of those bucket list items, essentially and the retirement, but I don't I don't think that's the case, but all day.
I know youre going to be right and you may even be.
Moving to remind you of our compound annual growth rate has been for the last 45 years, but I won't.
And I can say that.
Pretty straightforward, but since I know youre going to be listening I hope you make sure you p<expletive> on the tradition to Mark <unk>.
Very tightly but informative conference calls, it's very appreciated and I have no doubt that you will keep the tradition alive and well.
Good stuff so couple here first.
When you think about the underlying business is there anything in there that concerns you in terms of.
A little excess and I don't mean in terms of growth rate I mean in terms of absolute levels, right and youre going to face a tough comps and the back half of the year and the contracted piece, but when you look at the three segments is there anything that you think is unsustainable.
From a absolute demand perspective.
So I think market, a really nice job laying out the end market environment on the propane side I think the industrial businesses.
And again, given the Canada broad based recovery that we're seeing are not at least today.
Cause of concern for me I still have questions on.
And how they'll work from home impacted the home center side of the contractor business, and which really exploded and the second half of last year and and so I think right now sitting here today. My biggest question Mark regarding and end market is is that.
Is that a dislocation is that a pull ahead.
Is that the pie got bigger because more people are doing projects and I think there's no way to know that until we get into the second half, but really all the rest of the graco business segments I think sitting here today, we're feeling pretty good about yes, I'd agree with that and the only other thing I might add to the the whole housing and question in terms of Red flags or things, we're keeping an eye on would be that building cost things.
They are going up and that could move things down a little bit as well as interest rates may be coming up at some point as well, but for now it looks pretty good.
Makes sense the contractor Asia, and it's always been an area, where you've highlighted you had a little little more work to do than maybe some of the other geographic or product segments, but certainly seems like performance has been pretty strong I mean, how would you characterize it you feel like you've got that kind of humming to where you want it to be.
And we're more change necessary.
No I think I think we're happy with the work that the group over there is doing today, but that business is way smaller than it should be and I think that all of US here have a view that that business has got the opportunity to be a lot bigger than it is we saw great.
Run for many many years, which even continues to this day in terms of the actual size of our contractor business in EMEA.
And that's starting to become a real sizable business now and we really expect debt at some point in time and thats going to happen to our business and Asia Pacific as well, so while we like to see the growth rates and we are feeling good about what the team is working on and that's a small business and it needs to be bigger.
Yeah, and less less and then obviously capex a little extended this year versus normal just because of all the facility expansions, maybe just some thoughts on how you think about your capacity across the divisions as it sits here today constraints and and.
And when you see those kind of easing where they exist.
Yes, I think we are in decent shape, obviously, we're building and new factory here in Minnesota, which will really help out our process and.
Part of our industrial business so.
And that will help from a brick and mortar capacity standpoint, I think it's put us in pretty good shape here for a while I can't predict the future but.
And I would say, maybe five years or so at least before we'd have to think about doing something else.
And the equipment side, you probably notice that our overall spend ticked up on the non brick and mortar stuff here in Q1, and Thats really just the result of I think the business picking up you can obviously justify more capital and you've got volume and then also.
The fact that the divisions at this point or just seeing good opportunities to bring capital and were seeing everything from some more vertical integration to just volume based.
And just retiring old old tired equipment that is ready to go out the door or so.
Overall I feel like we're in great shape, obviously, we've got capital to deploy that as a really good factor for our employees our engineers, our manufacturing people and they noted that <unk> got things that need to be fixed or upgraded that we're going to we're going to fund it. So.
All good about where we're at.
Thanks for that best of luck, Pat take care, everyone. Alright. Thanks, guys. Thank you. Thanks, Mike.
Thank you. Our next question comes from Andrew Buscaglia with Wehrenberg and you May proceed with your question.
Hey, guys, sorry about that and morning earlier.
No problem.
So I wanted to.
Just digging a little bit and a couple of areas that I thought was interesting process, Scott I thought that would continue to be weak and that's and.
Picked up pretty nicely and then same with industrial and <unk>.
It's better than what I was expecting and I'm wondering how much maybe oil has influenced let's just maybe.
And maybe not directly but are any of your conversations with distributors.
Adjusting that maybe Theres, Inc.
Kris and competence and.
And spending with oil really improving a lot and the last three and six months.
Yes, I would say, we're seeing positives on the pricing side the price of oil, which is you should trickle through but from a great growth standpoint, I would say that our numbers and Q1 were not helped by what's going on in oil and we didn't see it yes, no we saw the pretty broad based and.
<unk> and our liquid finishing business, our powder coating business, our semiconductor business, our lubrication business, our environmental business. So those are the things that really drove the growth.
Okay.
Pretty much broad based.
Not any one area you can really point to.
And not driven by the price of oil.
Yes.
Okay, and then just lastly on M&A I know you've talked about.
And I know valuations are high.
But what other areas are proactively looking to add some bolt ons, where if you get the right value ratio youll move or is it more like whatever it comes up our debt opportunistically yield, let's take a look at how I guess, how are you thinking about going about it.
No. We've got we've got and actual process here and place that we used to be proactive in terms of targeting the markets and the.
Product lines and the other things that we're interested in doing and.
So that is active we will also look at things on an opportunistic basis, if they if they are not.
And maybe right and our targeted area, but we think that they're close enough. So we've got a we've got a process going on and I think what you should expect over time, given the nature of the markets is is that our.
Deals that we do a lot more likely to be and the industrial and process segments and less likely to be and the contractor segment and I don't want Mark weigh in here too if he like yes, I think we definitely continue to look for good opportunities and our existing businesses I think that the business units that currently we operate they all have teams that are talking with the companies and I feel pretty good.
The pipeline, there and going forward I think that we will also consider adjacencies, but those have got to be tied in with our competencies somewhere where graco adds value to the equation and as I said before I think we bring a lot to the table. So hopefully we're successful there as well.
Okay. That's helpful. Thanks, guys.
Thank you and our next question comes from Brian Glynn with Oppenheimer. You May proceed with your question.
And congrats Pat and Mark and the pending transition.
Alright.
Most of my questions have been answered, but I can follow up a couple of quick clarifications and.
In terms of.
Improving facility access and the impact to industrial and process operations.
Is there and a meaningful difference by geography.
Specifically thinking as some of the restrictions still in place in Europe and.
And how that may still be.
Strict and growth there.
Yes, China has been pretty good for a while other than sporadic.
Localized kind of restrictions.
And my view is is that we're well ahead of Europe in terms of our.
Vaccine rollout here and kind of the.
The direction of the restrictions that we've got in place.
Based upon what I see I think.
Europe's likely to be last.
Thanks, Vince and.
You mentioned the.
The strong growth in contractor EMEA.
And a multiyear trajectory that you've had there and the opportunity and.
And Asia Pacific.
On an industry level do you have.
And do you have numbers on sprayer penetration and EMEA versus what I <expletive>ume is a much lower number and APAC.
Yes, I don't have exact numbers and it does vary dramatically by country, Australia doesn't look anything at all like India of course, but.
One of the things you can take a look at as you can look at gallons of paint that data is out there and is available and if you look at the amount of equipment that is sold per gallon of paint in the U S or places like Australia, It's very high and Europe, I would say and particularly in the west It's medium and then when you look into that emerge.
Markets are slow and what we really need to continue to see is we need to continue to see increases in wage rates and those geographies.
And are making choices between.
Labor and capital and as Labor cost goes up your seat and implant and Asia now and a lot of that is driven by quality, but also aided by higher labor rates as youre seeing and automation and so.
And the extent that labor rates get high enough that we start to see more demand for automation and equipment in.
And our markets that are really Underpenetrated right now, we think that that should help us and eventually it's going to happen. It's just a question of when.
Got it I appreciate the color. Thank you.
Alright.
Thank you. Our next question comes from Walter Liptak with Seaport and you May proceed with your question.
Hey, Thank you Mark wanted to say good luck to you and your retirement two we've enjoyed doing these conference calls with you and watch it and you do your work.
Thanks, Paul.
But I wanted to ask on industrial and you touched a little bit on the channel and I wondered are you starting to see and inventory refresh or is there such a thing with with great co products.
I think generally know on the industrial side, it's not this isn't a stocking destocking kind of a thing.
Our manufacturing operations and warehousing operations are set up here to ship fast.
We ship.
And thousands of products same day distributors are generally sell on and off of a pretty debt catalog and to have them stock all the things that they might be selling on a daily basis is not very practical. So they typically will stocked out I'll call it the bread and butter items repair parts.
Standard products, they know theyre going to sell and then everything else they place an order and we ship it so and good times and and bad there as I am sure that there is some impact of distributors trying to cut their inventory down or or boost it back up but I think that that's that's muted.
Okay, Alright, great and then.
We talked a little bit about vaccines and things getting back to normal I Wonder are you are your salespeople back and went on the street or are they still doing zoom meetings to put together projects per industrial or.
On the process side.
Really ever since this started that at least here and the U S. That's been driven by the customer. So our salespeople have never went into hiding our salespeople have always been out and willing to meet with customers that were willing to meet but frankly, the number of customers willing to meet has varied pretty dramatically over the course of the last year.
When you go back to spring or when there was the big Spike in November December here.
And it wasn't going to happen that you weren't going to just weren't going to get into most facilities, but yes. It's never been really a graco issue. It's really more been based upon whatever customers want to do so we're still doing both and I anticipate that that's going to.
Continue although hopefully as one where people get vaccinated will have less.
Webex and zoom and more in person and of course, I'm, a dinosaur and like in person there are probably going to be younger folks out there that are going to think that there are some benefits to zoom that can get to more customers and a day and and my guess is it's probably going to be part of our future.
Okay, Alright, great and I think Mark you mentioned.
The lube business is picking up.
And I think those tend to be or can be larger capex rollouts.
What are you seeing from the project funnel or the order funnel from some of your larger customers.
Yes, it's definitely better than it was last year. So the pickup is really compared to what we saw which was a pretty steep decline in 2020, I would say it's more across the board, it's not any not driven by any significant large projects that just a general pickup across multiple product categories.
Okay got it alright, thank you.
Okay.
Thank you.
And if there are no further questions I will now turn the call over to Africa.
Alright, thanks, everybody for their time this morning and.
And my last call I am sure Mark we will look forward to talking to you at the end of July and probably talking about good numbers thats, what im hoping alright. Thank you everyone.
Yeah.
Thank you Mr <unk>.
<unk> our conference for today. Thank you all for participating and have a nice day.
All parties may now disconnect.
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