Q4 2021 SPX Corp Earnings Call
Thank you for standing by and welcome to SPX Corporation's fourth quarter earnings Conference call. At this time, all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on.
Your telephone please be advised that today's conference is being recorded should you require any further assistance. Please press star zero I would now like to hand, the call over to your host Paul Clegg VP of Investor Relations.
Thank you operator, and good afternoon, everyone. Thanks for joining US with me on the call today are gene Lowe, our president and Chief Executive Officer, and Jamie <unk>, Our Chief Financial Officer.
A press release containing our fourth quarter and full year 2020 results 2021 results was issued today after market close.
Can find the release and our earnings slide presentation as well as a link to a live webcast of this call in the Investor Relations section of our website at SPX Dot com.
I encourage you to review our disclosure and discussion of GAAP results in the press release and to follow along with the slide presentation during our prepared remarks.
A replay of the webcast will be available on our website until March 2nd.
As a reminder, portions of our presentation and comments are forward looking.
Subject to safe Harbor provisions.
Please also note the risk factors in our most recent SEC filings, including our disclosures related to the COVID-19 pandemic.
Our comments today will largely focus on adjusted financial results you can find detailed reconciliations of historical adjusted figures to their respective GAAP measures in the appendix of today's presentation.
As noted in our press release, our South African operations are now being accounted for as discontinued operation.
For all periods presented and are no longer part of our non-GAAP adjustments as such our other segment has been eliminated bringing our GAAP reporting framework to two segments from three previously.
Our adjusted results excludes non service pension items amortization expense investment gains certain discrete tax items acquisition related items adjusted for certain legacy liability charges and the <unk>.
Certain other nonrecurring items.
Finally, we will be conducting virtual meetings with investors over the coming weeks, including at Sidoti Spring virtual small cap conference in March and with that I'll turn the call over to Jim.
Thanks, Paul Good afternoon, everyone and thank you for joining us.
On the call today, we will provide you with a brief update on our consolidated and segment results for the fourth quarter and full year 2021, I will also provide guidance for 2022 I'll start with some of the highlights from the quarter and the year.
We closed the year with solid results and the balance sheet that positions us well to achieve our growth plans.
Looking back 2021 was a transformational year for SPX Corporation.
We continued to execute on our value creation roadmap had several significant accomplishments.
Closed on three strategic acquisitions and completed the sale of our largest business transformer solutions.
This transaction simplified and strengthened SPX and allowed us to focus on our higher margin higher growth HVAC and detection and measurement segments.
We also advanced our digital and continuous improvement initiatives continued to invest in and develop our people.
Further progressed, our ESG and diversity and inclusion initiatives.
In 2022 we expect continued solid growth before taking into account any new capital deployment.
While the current environment prevents several challenges.
End market demand remains strong.
Our team continues to execute with focus and purpose to drive success.
We are well positioned to continue our value creation journey and look forward to reporting additional successes.
Throughout the year.
Turning to our results.
Our Q4 performance reflects strength in our detection and measurement segment, while our HVAC segment faced headwinds primarily related to supply chain.
Despite these pressures segment income and margin increased on a year on year basis, and we exceeded our updated full year EPS guidance.
Turning to our value creation framework.
We made solid progress in 2020 one on several fronts.
We introduced a number of innovative solutions and continued to scale several others.
Our HVAC heating platform, while Mcquain Ecotec premium high efficiency boiler continues to gain market traction and was the only hydronic boiler to win a prestigious dealer design award in 2021.
In our HVAC cooling platform are cool spec product selection tool continues to receive strong favorable customer feedback and interaction.
We believe this tool is a leap forward in customer experience when assessing and selecting the proper cooling solution for their needs and better positions us to achieve basis of design with engineers.
In our detection and measurement segment.
Location and inspection platform introduced new solutions to improve efficiency and safety for our end market utility customers, including innovative approaches to resolving cross for concerns about unintended intersections between different underground utility assets.
As well as less invasive and safer robotic approaches to road work in high traffic areas.
On the inorganic front, we closed three acquisitions last year, adding approximately $120 million and run rate revenue.
The integration of these three businesses is going well and we see meaningful opportunities for synergies and potential for additional investments to further strengthen and broaden our position in this attractive niche markets.
'twenty 'twenty. One is also an important year of growth for key initiatives as he made considerable strides in our continuous improvement digital diversity inclusion and ESG.
I feel very good about our continued progress on these fronts that are critical to building sustainable value.
And now I'll turn the call to Jamie to review our financial results.
Thanks Jane.
For the fourth quarter adjusted EPS was <unk> 88.
As Paul mentioned this is the first quarter with South Africa in discontinued operations and it is no longer a part of our adjustments.
Q4, we made a decision to harmonize our accounting method for inventory to FIFO converting the remaining businesses from LIFO.
Our method is now consistent within all segments and across the company and accordingly, we have restated prior quarters and prior years to reflect this change.
In addition to the segment drivers, which I will review momentarily interest costs were lower due to lower debt balances and a lower fixed rate on our swap agreement which began in April .
In the fourth quarter about 2021, and 2020, our tax provision benefited from discrete items, resulting in lower than normal effective tax rate in both periods.
Also this quarter, we have excluded charges, resulting from revisions to long term modeling assumption associated with legacy asbestos liabilities and the <unk>.
Rate at which these liabilities declined over time.
These charges do not reflect in periods, our near term cash uses they reflect our best estimates of future liabilities projected out to 2057.
For comparison purposes, we have also adjusted corresponding items from our 2020 results.
A table with our quarterly results.
Collecting these changes for 2020 in 2021 is available in the appendix to our presentation.
Yeah.
With regards to our high level results for Q4, despite strong orders and backlog revenue and adjusted operating income were only modestly higher compared with the prior year.
Organic growth in detection and measurement and the benefit of acquisitions were largely offset by organic declines eight specs.
We also made P&L investments in continuous improvement and other initiatives.
Experienced higher corporate expense related to performance related compensation.
Reviewing our segment results in Q4 acquisitions and strong project deliveries within our detection and measurement segment were the primary drivers of revenue growth.
Q4 margins were up year over year with an increase in detection and measurement, partially offset by a decline in HVAC.
For our HVAC segment revenues declined 8% with an organic decline of 9%, partially offset by half a month of ownership of Cincinnati fan, which we acquired on December 15.
The demand for both our heating and cooling businesses remained strong as evidenced by significant backlog, but both platforms where production constrained for the quarter.
<unk> revenues declined 7% against the backdrop of strong demand due largely to supply and production constraints related to the availability of certain components.
<unk> revenues were down approximately 9% during Q4, our Americas business continued to face production constraints related to supply chain and labor, which were exacerbated by rising Covid cases.
Adjusted segment income and margin decreased $4 $5 million and 60 basis points, respectively. The decline was largely due to supply chain availability at certain component parts cost inflation and labor constraints.
Together these impacted productivity shipments and cost overall demand levels remain very high for HVAC products organically backlog was up 38% compared with the prior year total ending backlog for HVAC was $227 million with the most significant increases from our heating platform, particularly for boilers.
And the addition of Cincinnati fan.
Based on our bookings and backlog, both heating and cooling are well positioned for growth in 2022.
Yeah.
The detection and measurement revenues were up 17% year over year, including an organic increase of four 2% and a 12, 8% impact from the acquisitions of <unk> and ECS.
Adjusted segment income and margin grew $6 $4 million and 130 basis points respectively.
Kris was largely due to higher project sales and transportation as well as the benefit of acquisitions.
As we discussed last quarter, our <unk> business has experienced some lower revenue near term as a result of a UK utility rate case.
<unk> revenue to improve during the second half of 2022.
The short term revenue decline, we continue to see this business is a great. Strategic addition, and among the most attractive growth opportunities over time.
Organically detection and measurement backlog was up 14%.
Ending backlog was approximately $154 million, including the benefit of acquisitions. Overall, we believe this segment is well positioned for growth in 2022 and beyond.
Turning now to our financial position at the end of the quarter.
We ended the quarter with cash of $396 million, which includes the impact of our purchase of Cincinnati fan in Q4.
Net of our term loan we are in a net cash position of $150 million adjust.
Adjusted free cash flow for the full year was approximately $104 million, representing approximately 96% conversion of adjusted net income.
This excludes $20 million of positive cash flow associated with South Africa, which includes tax benefits realized during the year.
Overall, our strong balance sheet and liquidity positions us to continue growing through organic and inorganic investments, we have a robust pipeline of acquisition opportunities, including several active prospects.
While we are confident in our ability to execute on growth investments, we will monitor for significant sustained value displacement in our stock price and.
And we will consider using our share repurchase authorization if appropriate.
As a reminder, our board has authorized stock repurchases of up to $100 million.
The details of which are included in our 10-K.
Regarding 2022, and HVAC demand outlook remains strong and we anticipate solid full year growth.
Tight labor and supply chain conditions have continued into Q1, leading us to expect flat segment income compared with the prior year first quarter.
In detection and measurement, we're seeing strong run rate and project front log activity.
Along with our acquisitions, we see this driving higher revenue and income for the full year.
However in Q1, we anticipate lower Comtech ULC revenues compared to solid prior year results.
In 2021 contact in particular, a revenue profile that was heavily weighted in the first quarter, which is atypical.
Revenue for both businesses strengthening throughout the year based on identified demand from customers.
As a result for the total company, we anticipate first quarter segment income to be approximately 20% lower than the prior year due to the high incremental margins of these detection and measurement project businesses.
For the balance of 2022, we expect year over year increases in segment income.
For the full year, we estimate an increase in total revenue of approximately 10% to 15% and adjusted earnings per share before capital deployment in the range of $2 50 to $2 80 per share the.
The midpoint of $2 65 reflects year on year growth of approximately 14%.
In addition, there are approximately <unk> 11 per share of interest expense that could be eliminated if we use part of our $396 million of cash to pay off our term loan we.
We are purposefully.
Decided not to pay off the term loan because we expect to deploy that capital for acquisition opportunities.
This 11 cents of earnings would bring our midpoint to $2 76.
And we believe this is a better representation of our operational earnings power.
Our full year midpoint of the EPS reflects overall strong demand, but with supply chain supply constraints continuing in early 2022.
Our range reflects various scenarios for supply chain and labor as well as the timing of project revenues and it takes that measurement as we progress through the year, we would expect to tighten this range.
Overall, we remain excited about our business outlook moving forward, we continue to aggressively address supply challenges and believe we are winning in the marketplace with our customers.
As always you will find more details on our guidance in the appendix to today's slides.
I will now turn the call back to Jim for a discussion of our end markets.
Thanks, Jamie.
Overall, our end markets continue to see favorable demand trends in.
In HVAC there are differences geographically with most with notable strength in the Americas and <unk>.
Detection and measurement, we continue to see a strong level of demand for run rate products across most regions.
Are more project oriented businesses continue to see attractive customer activity and bookings overall, although although we are seeing softer orders in our comtech platform.
In summary, we closed the year with a solid earnings performance and a very strong balance sheet, which supports our growth plans.
We entered 2020 to a more focused higher margin and higher growth business with a clear game plan to achieve our SPX 'twenty 'twenty five targets of approximately $2 billion in revenue.
18% EBITDA margins.
We continue to make progress on our key initiatives and look forward to reporting more successes.
Throughout the year.
Current demand trends remained strong and we are continuing to manage through headwinds on supply chain labor and inflation.
We anticipate solid growth in 2022 prior to any benefit for capital deployment and believe we are well positioned to continue advancing our value creation initiatives for years to come.
And now I'll turn the call back over to Paul.
Thanks, Jim Operator, we are ready to go to questions.
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.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Bryan Blair of Oppenheimer.
Your question please.
Thanks, Good evening guys.
Good evening.
Hey, Bryan Bryan.
Brian .
Offered.
Very useful detail on on Q1.
Dynamics.
What how should we think about the progression of <unk>.
Supply ends and labor constraints.
In HVAC.
Contemplated in your guide.
How would you frame the mid points relative to those factors. If we think about Q2 through Q4 progression.
Hey, Brian This is Jamie.
So I think.
The so far in 2022, we've seen.
A moderate improvement in supply chain.
Early on like most everybody in the country experienced a big uptake omicron cases, and therefore, we had some absenteeism that was over and above the normal.
We do see some moderate improvement in labor, we'd see some moderate improvement in supply chain.
We're taking a lot of aggressive actions in terms of managing and setting up.
Trying to improve our process and supply chain. So we do think it impacts us.
Also see that continuing to lessen as the year goes on and as we mentioned in our prepared remarks, we do have a tough comp in our content business from prior year.
The rate case with their customer in the UK on you'll see but as we look forward to the year and to your specific.
<unk> of guidance I.
I think we can.
Can take the mid point, we'd probably see.
<unk> got us a little bit broader than normal first of all but we see <unk>.
Supply chain is having.
Brakes, well some nice upside embedded in that there's also risk in it as you would imagine if we were saying we would probably say we've got more heavily weighted opportunities on the outside versus what the downside might look like but.
But we do see it continuing to improve in the first half of the year and as we entered the second half of the year.
We sell a lot of opportunities specifically.
Specifically to cooling.
Cooling has been primarily a labor therefore, our productivity.
Throughput matter.
<unk> seen some improvement, but it's still tough.
We are we have seen omnicom cases like country go down significantly over the past few weeks.
And in <unk>, we continue to have a huge backlog.
Working through.
We see that as a great way to start the year of course and.
The component parts and various businesses are still challenged as the weakness in food.
Prudent.
And just a few other comments from my side I think clearly supply chain is still choppy out there I do think we are seeing some moderate improvement the team's managing really well and as you know we with our business system. We have both the supply chain Council and the manufacturing counsel.
They've really done a nice job.
Lying best practices across all of our businesses, making sure we have robust S. N O P processes reorder points safety stock diversity of vendors all of the things combined with I would say pretty robust analytics.
Yes things as straightforward as looking at your bill of material items and looking at your order you.
Your manufacturing plan over the next several months and looking at what you got and what you're waiting on and we actually look at that every single day. So I think our operations has gotten much stronger.
And we actually feel good about the direction, we're going but it is something that it is still choppy out there I would say on the supply chain side.
That makes sense I appreciate the color to clarify on on cooling or labor constraints isolated to process cooling or more generalized.
I'd say the biggest impact we're seeing is not really on process cooling one what we have called HVAC cooling our package business and really.
The main facility there in Kansas is the one that we're seeing and it's and I would say last year that had been on a.
A negative trend over the year I would say as you know we've put a number of countermeasures, we have a number of initiatives and we've actually seen some some nice improvement month over month for the past four or five months modest.
But we are seeing things going in the right direction. There. So that's what that's probably the biggest area of impact of labor that we've seen.
Cross SPX.
Yes.
Understood.
And staying on <unk>.
<unk> what's <unk>.
Baked in for Cincinnati fan revenue in year, one margins and how should we think about normalized growth rates for that business and margin potential looking out a year.
There are two three in Oregon.
Yes, so Brian this is Paul for Cincinnati fan, we talked about $60 million to $70 million roughly being a good starting point for them from a revenue perspective modeling here I'd, probably break it up evenly throughout the year.
In terms of margin, we said that they would be.
<unk> accretive to segment margin, implying that they werent currently skewed model something a little bit below the segment average for the year.
Okay, That's fair and should we think of that business as a as potentially another platform with an HVAC or is it a.
Clear enough extension of cooling there.
That's likely where it's going to shift going forward.
Yeah, right now, we see a lot of overlap with the cooling and we actually think that can be a lot larger than it is today as you know every cooling tower has fans and air movement and blowers and we engineer the vast majority of those in design and test those RC.
<unk>.
Salvos, both with our cooling towers and without so we know air movement.
We have a lot of overlap in our technology there and then also on the channel.
You look at our go to market both.
On the the light industrial commercial side, and then more of the heavy industrial we see some real synergy there. So I think it's a really nice growth product area there.
Whether we would break it out in call. It one of our you know right now the way I think about is we have six platforms heating cooling and then our four platforms detection and measurement I'd say right now, we're not anticipating breaking it out separately, but as that grows I don't know if I wouldn't take it off the table for the future.
Got it okay. Thanks again guys.
Thanks, Thanks, Brian .
Thank you. Our next question comes from Damian Caron of UBS. Your line is open.
Hey, good evening guys.
Hey, Damian.
Question on HVAC.
You guys aren't expecting too much margin improvement this year at the midpoint.
And that's right.
20% or so incrementals.
Yes.
Elaborate.
Your margin.
Patients for the year and talk about kind of price cost, whether you're expecting any tailwind from lower steel prices potentially later this year.
Mixed factors, maybe you could just kind of spell out the.
At Marsh Scott.
Hey, David This is Jamie.
So let me start with price calls because I think it bleeds into the other question you asked specifically about Asia Pac I mean, if you go back into 'twenty one.
We we were.
Ever so slightly have a headwind on dollars with price cost.
The cost went up quite dramatically late in the year, we put in some pricing a couple of times in our HVAC.
Businesses.
The last one.
October so it really took effect late in the year and really positioned us probably better for 2022 in terms of capturing that price.
That had a negative implication, let's call it 50 basis points embedded in the price cost.
Just on total company rollout into 2020, we're seeing a couple of things we think from a price cost perspectives for new business. We will have we will more than cover our cost that we're projecting.
And regain some of that margin that we may have given up last year and a couple of things as both the late in the year or the call. It the first of the fourth quarter price increases as well as the price increases we have plan for 'twenty two.
That being said as we enter 2002, we do have large backlog that's got embedded in it some price that is reflective.
Placed late third quarter fourth quarter.
That still is compressing the margin a little bit so as you think about it.
Think about the new pricing new business, we definitely as far ahead, we think of the pricing will regain some of it we made a loss last year, but we still got to work through some compression from the backlog.
Okay got it.
And then I wanted to ask about capital allocation, you mentioned before possibly taking down your.
Great.
<unk>.
How are you thinking about.
Capital deployment.
In terms of timing.
Just pull the trigger on.
Some buyback or some debt paydown, if you haven't got any deals done.
And Jim just I know obviously.
You don't have a crystal ball can't comment on timing.
Deal execution, but maybe you could just kind of give an update on the on the pipeline.
Feeling whether you.
You will be relatively more or less active this year on the acquisition front.
Yes, sure I mean, why don't I start on the M&A side or the growth side, and then I'll, let Jamie take over the broader capital allocation question overall with M&A, we feel very good we like where we are today.
We've done 10, 10 bolt ons over the past couple of years, we've added around $350 million of revenue.
And if you look at last year, we added three deals with $120 million of revenue.
And as you know in our SPX 2025 plan.
We basically said.
We're going to go from one to $5 to $2 billion in 2025.
$250 million, that's organic and approximately 500 million that's acquisition. So that's 125 a year. So we're already at that run rate I would say.
The pipeline and what we see in front of US we see we see a lot of activity.
I'd say, there's also a fair amount of proprietary activity.
So overall, if I look at the opportunity and as you know where we sit today, we have approximately $1 billion of opportunity to invest in growth.
I think it's an attractive opportunity in front of us and <unk>.
Our target would be to be ahead of our plan for the SPX 2025 plan, but we're already running I would say at that run rate.
On the logical question would be hey, how's pricing pricing is still.
It's not a cheap market I'd say, it's a very aggressive market, particularly on some larger <unk>.
The opportunities I would say add particularly if youre looking at scale detection and measurement businesses, we're seeing some some very high multiples.
But with our strategy and with.
The way that we manage this we feel very good we'll be able to accomplish our goals. So that's the M&A side, why don't I hand, it over to Jamie to to keep going here, yes. So Damian I think Jim said set up the conversation well.
Yes.
When I joined it comes in one of the things that attracted me to the company, we had a very strong balance sheet with a lot of it.
A lot of energy around growing through acquisition and organically.
Having that $1 billion available.
We look at every day, how we're going to allocate capital and put it put it to use effectively.
In the remarks, we did note there was about 11 with interest in our P&L that we could take out if we wanted to we purposely made the decision not to do that at the present time, because we do think we have some really good opportunities in the acquisition front.
Where are we too.
Moved down with a larger type transactions we would.
Probably redo the capital structure at that time, and kind of extended out and just reposition it but.
But today is just to pay that down choice with choosing not to make.
That being said.
When it relates to buybacks in particular.
First of all we think we have a very good growth story.
So transformers, because we wanted to reposition the company.
In higher growth higher margin piece.
Pieces of our business and redeploy the capital in those areas that being said we.
Constantly watching the market.
And our stock in particular, and if we were to see where.
Where there is a dislocation if you will of what we see looking at it internally from a valuation perspective, we would definitely.
Take action against that.
We do have as a reminder, $100 million of authorization that the board has granted that.
We are.
Working working against or with.
In the market. We're in today as we all know what we don't want to do is get in front of a bad market. We do not want to do that but what we do want to do is support our stock. If we believe it is.
Singled out.
Being dislocated from what we see the value. So it is it is on the forefront of our thoughts.
But I'll kind of leave saying.
Our M&A strategy is our number one growth objective for capital allocation right now that being said buybacks are clearly something we've got in our in our site to keep an eye on.
Makes sense, thanks for the thoughts.
Good luck guys.
Thanks Amy.
Thank you. Our next question comes from Steve <unk> of Sidoti Your line is open.
Hi, Good evening, everyone I wanted to follow up a little bit on the M&A question.
Just wanted to ask and I know some of the previous acquisitions were in the PNM side, but you've always said you could still be looking on the HVAC side.
Notice the margin profile and the growth profile improve because you make more of those PNM acquisition. So I'm just trying to get a better sense of how how and why you think Cincinnati fan fits within sort of this progression over the next couple of years.
Sure.
Yes, Steve.
Good evening I think if you look at the data.
10, 10 old bonds that we have done three have been in HVAC and seven have been in PNM.
And we've said that these acquisitions before synergy, we're right around 20% or around nine.
19, 7%, if you aggregate them all up.
And we actually think we can get more margin.
VA cost synergies predominantly but also some some revenue synergies on some of these so we actually feel like these have been very accretive to our overall margin profile. We also think they've been very accretive to our growth profile.
And I actually think theres, some very attractive opportunities I don't see a lot of difference on DNN and HVAC in terms of the attractiveness of the opportunities with regards to Cincinnati fan I would say that would be modestly.
Yeah, a little bit under our segment average for HVAC. This year, I would anticipate that to be at or above the <unk>.
<unk> average next year so.
Yeah.
We acquired Cincinnati fan on December 15th So we've really started to get in there and.
Started all of the integration processes, and so forth, but I actually feel like that will end up being.
Very good.
Growth area for us going forward and I'm very excited.
At about that one in particular.
Great. Thanks.
And then just a question on the balance sheet I'm working capital certainly know that a lot of companies have built up inventory given the supply chain constraints trying to think about where how you're thinking about inventory and working capital in general in 2022, and where you are comfortable with given the current supply chain constraints and is that built on inventory.
Related to that or is that just the dollar cost higher dollar cost of the inventory you carry.
Yeah.
Couple of things there, Steve I think.
And specifically to management of working capital.
Initiative really kicked off in 'twenty one.
More emphasis on it in 2022, but not from a context so.
Minimizing or lowering working capital I would call it right sizing working capital given the supply chain challenges are out there.
A lot of times do you think about managing working capital is always taken it down.
Clearly wanted to use it effectively and so.
We've actually have our MBR, we actually encourage folks too.
Let's be buying safety stock or component parts, if we need to so called having yet and carrying the working capital is much more effective and advantageous than running out of it obviously and so it is an initiative that we want to look at but it's more about right seismic given the environment. We're in.
What you see I think on the balance sheet, probably most reflective of two things the higher cost of inventory generally and also the increase in inventories because of some of the acquisitions and when you look at period over period, you don't have that in the beginning balance sheet numbers.
Thanks Andrea.
Again to ask a question. Please press star one on your Touchtone telephone again Thats Star one on your Touchtone telephone task a question. Our next question comes from Walter Liptak of Seaport. Your line is open.
Hi, good evening guys.
And well.
So I wanted to ask about.
Dnm the operating margins with really nice in that segment and the operating leverage.
We are just terrific.
I'm wondering if you could just talk a little bit about that margin again was it.
The mix of business or was it leverage you also had some acquisitions coming through.
Are they accretive to the margin.
This is Jamie.
Yeah, Great question and something we're focused on.
Very much I think the if you look at the quarter in particular.
Driven by a number of things we had our locator business had a really strong quarter.
But also our project businesses, particularly our transportation business Zen fair in our Tcs business in context.
You've heard us talk in many quarters.
That we've seen projects pushed out and the incremental margin that flows down because of that I think what we saw in the fourth quarter.
Some of those projects coming to fruition.
And the incremental margin that goes to the bottom line or to the gross margin line because of those projects we had.
<unk> had a great quarter.
Was that a lot of things we've been working on for several months and several quarters came together.
Same for TCR. So I think you see the reflection in the margins of the really the power of the model.
Unfortunately, sometimes it's.
Volatile in a given quarter, but over the long run we think it's got some good attractive margin profile to it.
Okay, great and with the backlog.
<unk> thousand 14% organically in Vietnam.
I think there was a comment that you guys have a nice front log of business.
I was wondering about the guidance around dnm's margin for the year.
Is it.
Front loaded back loaded.
How will the the project workflow.
In 2022.
Yes, Walter this is Paul.
We talked about in the prepared remarks at least the first part of that the first quarter, obviously is going to be.
More of a challenge from a margin perspective given.
The projects.
<unk>.
Logs that were seeing.
Comtech and also because of the <unk> dynamic, but as you progress throughout the year, we would expect to see.
Those lift year over year.
As you get to the later in the year typically in our Comtech business because of budgetary cycles that tends to be a little bit late.
Late in the year.
Patrick.
In the year. So you would expect that to be higher margin.
Okay.
Okay sounds good and I'll just ask a final one on <unk>.
M&A.
We've seen.
Some companies valuations coming down here in the market with concerns about the Ukraine or.
The supply chain or other things how are you seeing the private company valuations are.
Are you starting to see.
Valuations come down at all.
You know I think just my perception, you don't see a lot of change on that week to week or month to month to rapidly I think that.
As you know, while we've been very careful our blended.
Prices in the neighborhood of 10, 10, 10, five times Thats before synergy and so we've been very careful about pricing I think you do see.
Particularly on larger deals, particularly larger dnm deals.
You will see a lot higher pricing you're talking <unk>.
Mid teens or very high teens and in some cases are there that we have seen.
So I don't think I've seen a lot of change I think it's a good point, however, particularly with.
There's a reset on multiples in the.
Ultimately in the public markets will that ultimately flow down to the private market pricing I think that that could happen, but we think we have a good model good value creation strategy and haven't seen any deviations that would cause us to change that going forward.
Okay, great. Thanks for taking my questions.
Thanks, Ron Thanks will thanks Walt.
Thank you at this time I'd like to turn the call back over to Paul Clegg for closing remarks, Sir.
Okay. Thank you all for joining us on the call today, and we look forward to updating you next quarter. Please feel free to reach out to our IR team underneath.
Further questions.
And this concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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[music].
Yes.
Hum.
[music].
Sure.
Yes.
[music].
Yes.
Sure.
Yes.
[music].
Okay.
Hum.
[music].
Okay.
John .
Okay.
[music].
Okay.
Yeah.
Yeah.
Okay.
Hello.
Okay.