Q4 2022 Apogee Enterprises Inc Earnings Call
Good morning, and thank you for standing by welcome to the Apogee fiscal year 2022 fourth quarter earnings conference call at.
At this time all participants are in listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the.
Session you'd need to press star one on your telephone.
I would now like to turn the conference over to your host today, Jeff Hibshman. Please go ahead.
Thank you Catherine and good morning, everyone and welcome to Apogee Enterprises fiscal 2022 fourth quarter earnings call with me today are tie silver Horn apogee as Chief Executive Officer, and Ashish Gupta, Chief Financial Officer.
Like to remind everyone that there are slides to accompany todays remarks.
These are available in the Investor Relations section of Apogees website. During this call we will reference certain non-GAAP financial measures definitions of these measures and a reconciliation to the nearest GAAP measures are provided in the earnings release, we issued this morning.
As a reminder, unless otherwise mentioned architectural framing systems segment results include the soda wall business unit consistent with prior quarters.
Beginning with the first quarter of fiscal 2023, the soda wall business unit will be included in the architectural services segment.
I'd like to remind everyone that our call will contain forward looking statements. These reflect management's expectations based on currently available information actual results may differ materially.
More information about factors that could affect apogees business and financial results can be found in today's press release.
And in our SEC filings.
With that I'll turn the call over to Utah. Thank.
Thank you, Jeff and thanks, everyone for joining us this morning.
We continue to build momentum in the fourth quarter delivering solid results to wrap up our fiscal year.
I'm proud of what our team accomplished this year and I'm very excited to update you on our progress and how that work is shaping our fiscal 'twenty three outlook.
This morning, I will touch on how we are advancing our new strategy.
Preview some highlights from the quarter and the full year.
And comment on our solid outlook for fiscal 'twenty three.
Then the sheet will provide more details on the quarter and our full year outlook.
After that we'll take your questions.
Entering fiscal 'twenty, two we expected this would be a challenging year.
We were embarking on a new strategic direction, while managing through the pandemic and dealing with a downturn in nonresidential construction.
As the year progressed cost inflation and supply chain issues were added to our list of challenges.
But our team rose to take those head on.
I want to thank the entire apogee team for their tremendous efforts.
We navigated through a difficult but in the end are very meaningful and productive year.
Our teams work, we have set the company on a path for significant long term improvements while also delivering near term results that were above last year.
In the fourth quarter, we continued to execute our new strategy.
As a reminder, our strategy has three pillars, which are outlined on page four of our deck.
First we are working to become the economic leader in our target markets. This means growing differentiated product and service offerings, while also building competitive cost structures and more efficient operations.
Our goal is to become a top margin generator in our target markets.
Second we will be an active portfolio manager.
We plan to grow our best performing businesses.
Dress the Underperformers.
And invest to add more differentiated things.
Our overall goal is to improve our return on invested capital.
Third.
We will strengthen our core capabilities.
We are building, an operating model processes and systems that better support our businesses enable greater efficiency and lower costs and provides more scalability as we look to grow and acquire in the future.
These shifts will allow us to create peak value for all stakeholders.
During the year, we drove progress across all three of these pillars.
Some of the highlights are listed on page six of our presentation and I will comment on a few.
We completed the realignment of framing systems, creating a more integrated business that better leverages, our scale and capabilities with more clarity in how we go to market and serve customers.
In architectural glass, we completed the sale of our Statesboro, Georgia facility.
We exited the velocity business.
And we transitioned all remaining production to our flagship plant in Minnesota.
These actions position us to pursue our strategy of focusing focusing on premium offerings.
Where we can differentiate and deliver higher value for customers.
During the year, we also took steps to strengthen our core capabilities.
Drove progress on several projects that will improve back office operations.
We also added key talent across the organization.
This included establishing our new transformation management office to drive stronger execution of key initiatives.
We brought in a new segment president for glass with strong operations skill set and relevant business experience.
And we added new leadership for our lean continuous improvement program.
Our revitalized lean efforts are already having a positive impact.
The initial focus was our glass segment, where we are driving productivity improvements that are now beginning to show in the P&L.
And we are expanding lean to other parts of the organization with an emphasis on the framing segment this year.
As we move into fiscal 'twenty, three we will continue to execute our strategy through the priorities listed on slide seven of the presentation.
From a broader economic perspective, the external challenges we faced in fiscal 'twenty two are likely to persist through much of our fiscal 'twenty three.
We expect continued inflation in tight markets for some raw materials freight and other categories.
With that in mind pricing and cost management will remain key focus areas.
Additionally.
Our business units and procurement teams are working to ensure the supply of key raw materials.
This will allow us to maintain our offer better than market service levels for our customers.
Despite these headwinds we do expect to drive meaningful margin expansion, primarily in the framing and glass segments.
We will do this by securing the benefits of the restructuring and cost reduction actions. We completed this year.
Along with continued productivity improvements through our lean efforts.
Turning to active portfolio management during our Investor day, we highlighted that acquisitions would be a key part of our growth strategy.
To support this we plan to strengthen our M&A capability, adding key talent and improving our processes for identifying evaluating and integrating acquisitions.
We've started the work to rebuild our M&A pipeline and we'll continue to evaluate potential acquisitions as we move forward.
For us portfolio management is more than just buying and selling businesses.
As part of managing the existing portfolio, we conducted a thorough review of the soda wall business as we staged it to move from framing to the services segment.
In recent years soda wall has underperformed its potential and it generated a loss in fiscal 'twenty two.
As we previously announced soda wall will move into architectural services during the first quarter of fiscal 'twenty three.
We plan to fully integrate soda law with our Harmon business within architectural services.
They will have a single leadership team operating with a proven business model.
We expect this transition will drive significant operational improvements in the coming years.
And we will add scale and capabilities to position architectural services for long term growth, while maintaining its position as an economic leader.
We're also working to improve the sales mix in our existing businesses, increasing the portion of revenue that comes from differentiated higher margin offerings.
We've had great success with this in large scale optical we have consistently offered and shifted sales towards higher value products.
We aim to make similar progress in architectural glass with our shift towards the premium segment of the market.
And in framing systems, our new alignment enables more focus on the parts of the market, where we have the strongest competitive advantages.
We expect to accelerate this shift to our selling and bidding activities in both segments, which will position us for additional margin expansion expansion in fiscal 'twenty four.
Our third priority is continuing to strengthen our core capabilities.
We will expand our lean program and begin to build out other elements of our apogee management system.
And we will continue to advance our enterprise transformation projects.
Optimize and simplify back office processes.
In support of this we plan to make further investments to add capabilities and improve productivity.
Through all these efforts, we expect to make further progress toward our financial goals.
Improving margins.
Increasing return on invested capital.
And positioning the company for above market growth.
This should translate into significant earnings growth in fiscal 'twenty three and beyond.
Let me close by once again thanking the apogee team for their contributions this year.
I am confident we have the right strategy.
We're executing it well and are positioned for continued success as we move forward.
With that let me turn it over to <unk> to provide more details on our results and the outlook Ashish.
The sheet.
Thank you Ty and good morning, everyone.
Fourth quarter with a strong close to our fiscal year.
We achieved top and bottom line growth.
Pricing and cost actions offset the impact of inflation and we generated solid cash flow, allowing us to return cash to shareholders.
Let me provide some more details starting with fourth quarter results on page eight of our presentation.
Fourth quarter revenue grew 6%.
This was led by over 20% growth in both architectural services and as those segments, along with 9% growth in framing systems.
The quarter included several items that we excluded from adjusted results.
First we took an impairment charge related to sort of one.
As Tom mentioned and previously announced we plan to fully integrate <unk> into architectural services segment, starting in Q1 of fiscal 'twenty three.
During the fourth quarter, we continue to evaluate the optimal strategy approach to integrate sort of war into architectural services and finalized our integration plan.
As part of this.
We need to sort of assets and determined that certain assets, mainly intangible assets were impaired.
We expect to see improved performance in the future.
<unk> business under the leadership of services segment.
During the quarter, we continued to execute the restructuring actions, we announced last summer.
In the fourth quarter, we had $6 $3 million of restructuring costs.
As part of the restructuring, we solar glass facility in Statesboro, Georgia.
This has led to a $19 5 million gain in the quarter.
We are pleased with how our teams have executed the restructuring.
Everything has proceeded on schedule and is largely complete.
And we are beginning to achieve the targeted cost savings.
Overall during the year, we incurred $35 million of restructuring costs of this $9 million was cash expense.
When you include the proceeds from stage through sale. The overall restructuring program was significantly cash positive for the fiscal year.
Excluding the impairment restructuring and gain on sale of assets.
Adjusted operating income was $27 $7 million and adjusted operating margin improved to eight 4%.
This was 130 basis points better than last year's fourth quarter.
The primary driver was the impact of our pricing actions, especially in framing systems.
Improved pricing fully offset the impact of inflation in the quarter.
Margins also benefited from our restructuring and cost saving efforts.
Adjusted earnings were <unk> 91 per diluted share.
This was 44% higher than last year's fourth quarter.
I would like to highlight that adjusted margins and earnings improved sequentially each quarter during the fiscal year.
This demonstrates the positive momentum we've established in the business.
Full year reserves as shown on slide nine.
Full year revenue grew 7% led by architectural services.
Which achieved record full year revenue of $349 million.
Large scale optical fully recovered from last year's Covid related shutdowns.
And saw renewed growth in its core markets.
And exceeded $100 million of annualized sales for the first time.
Full year operating income and margins were down from last year.
This mainly reflects the impact of inflation.
Adjusted earnings grew to $2 48 per share. This was driven by top line growth and a lower share count.
Finally.
Key performance metric of ROIC improved by 40 basis points.
We have included a new reconciliation table in our earnings presentation that shows our ROIC calculation.
Going forward, we will continue to share <unk> performance on an annual basis.
Let's turn to the segment results.
<unk> 10.
Starting with architectural framing systems' fourth quarter revenue grew 9%.
This was primarily driven by pricing actions taken to offset inflation.
Volumes were lower than last year.
Adjusted operating margin was three 8% that is 110 basis points better than last year, but well below the segment's long term potential.
Going forward, we expect to see improved margin performance in framing as we achieve the benefits from our restructuring and cost reduction efforts.
Moving to architectural glass.
Revenue was down 12%.
As expected this was mainly driven by lower volumes.
You had fewer new project awards over the past year, while nonresidential construction has been in a downturn.
We had also strategically shifting away from some low margin sales.
Adjusted operating margin was six 4%. This was 200 basis points better than last year, and it's 340 basis points higher than third quarter.
We are beginning to achieve cost savings from our restructuring along with productivity gains from our lean program.
Moving to architectural services revenue grew 21% to a record $99 million.
Operating income of $11 $8 million was also a record high.
This was driven by strong project execution and leverage from increased volume.
Services backlog declined to five 9 million.
This was driven by strong revenue conversion in the quarter, along with lower new order volumes.
As a reminder, services orders can be uneven from quarter to quarter.
We are encouraged by increasing bidding activity in the recent months, which should lead to a rebound in orders over the next few quarters.
Turning to large scale optical revenue.
$87 million grew 23% compared to last year's fourth quarter.
This was mainly driven by increased sales of high value products and margins were strong at 23, 7%.
Finally fourth quarter corporate costs were lower than last year and below the run rate we've seen in the past several quarters.
This was mainly driven by favorable insurance costs.
Turning to page 11.
Cash flow and balance sheet remained very strong.
Full year cash flow from operations was $100 million. This was followed by last year's record cash flow of $142 million.
We also brought in $31 million of cash from sale of assets.
Our capital spending remains lower than normal this year as it slowed some investments while we completed our strategic review.
Our net leverage remains less than one times adjusted EBITDA.
This is well below our target of one five times EBITDA.
We have no near term debt maturities and our revolving credit facility is undrawn.
With a strong cash flow low leverage and limited capital spending we were building cash on our balance sheet.
In the fourth quarter, we decided to put some of this cash to work buying back stock.
During the quarter, we purchased one 5 million shares for $71 million.
The full year, we purchased $100 million of stone.
Going forward, we'll continue to deploy cash and.
Value for shareholders.
The capital allocation strategy, we shared at the Investor day on our Investor Day is on page 12 of today's presentation.
Our first priority is investing to drive profitable growth. This.
This will include both organic investments and M&A.
Our second priority is returning capital to shareholders.
We recently increased our dividend and we'll continue to evaluate opportunistic share buybacks.
We will also work to maintain a strong balance sheet.
Let me wrap up by discussing our outlook, which is on page 30.
We are providing initial guidance for fiscal 'twenty three of adjusted EPS in a range of $2 $9 to $3 $3 per share.
At the midpoint this would be 25% year over year growth.
We expect total company revenue will grow in fiscal 'twenty. Three this will be mainly driven by pricing in framing systems.
We expect revenue in other three segments to be relatively flat given that services backlog declined during the bottom of the pandemic and glass is focused on value not volume.
We also expect to drive significant margin expansion during the year.
This will be mainly in framing systems in Clos as we achieve the benefits from our restructuring and continuing to drive operational improvements.
While we are not providing quarterly guidance, we expect the flow earnings next year will be similar to what we saw in fiscal 'twenty two.
As we've mentioned we plan to move sort of wall into architectural services in the first quarter of fiscal 'twenty three.
To help the year over year comparisons we included tables with pro forma segment reserves in the appendix over earnings presentation.
Also on page 14 of today's presentation. We are updating the long term margin guidance, we presented during our Investor day to reflect the move of soda wall into architectural services.
To close I would like to tank apogee team for all their work over the past year. We have delivered strong results. Despite many challenges during the year, we delivered EPS growth we had.
Strengthen our core by investing in standard processes and deploy new systems.
We have begun to execute on our new strategy and we are well positioned for even stronger reserves in our next fiscal year.
With that I'll turn.
Turn it back over to Ty for some concluding remarks.
Thanks in the sheet.
Apogee significant strategic shift is well underway, we've taken steps to align and simplify our business we.
We are building a more competitive cost structure.
We are establishing a new operating model grounded in our lean program.
And we are advancing our enterprise transformation initiatives.
Our progress is beginning to show in our financial results with adjusted margins and earnings improving sequentially each quarter during the year.
In fiscal 'twenty, three we will continue to execute our new strategy.
We expect to deliver significant earnings growth this year, even without meaningful volume growth as put in place spend is projected to only be marginally positive.
We do see a long run rate for further improvements in the years ahead as our core markets recover economy stabilizes and we shift our mix to higher value offerings.
With that we're ready to take your questions.
Thank you 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.
Our first question comes from Chris Moore with CJS Securities. Your line is open.
Hey, good morning, guys. Thanks for taking a couple of questions.
Good morning, good morning, so pricing fully offset inflation in Q4 is that assumption built into the fiscal 'twenty three guidance.
Chris.
Good morning first of all.
Im pleased with the work that our teams have done over the last quarter. This is the first quarter, where we have been able to offset all of the inflation impact across our businesses. So that trend is new muscle that we've built on offsetting inflation is going to continue throughout the fiscal 'twenty three we do have a lot of.
Water duty in the market right now as you can see on the commodity prices aluminium energy prices. Most recently and therefore, we are cautiously optimistic that our teams will be it will be.
We'll continue to offset inflation throughout fiscal 'twenty, three and that has been built into our guidance.
Got it thanks.
On the Investor Day, you guys talked about revenue growth targeted at one two times nonresidential construction growth.
The last I think CFM I index that you guys focus on really the last number I saw there I believe it was 3% for calendar 'twenty two.
Given the lag of some of your business lines.
That 3% is accurate for 'twenty two is that a is that a better baseline for apogee in calendar 'twenty three.
Yeah. Thanks, Chris This is Ty.
You look at <unk>. The reason, we chose that and use it at Investor day, as we felt it was closer to kind of matching up with our current year, it's not perfect, but it's directionally, correct, where Dodge and Abi kind of give more of a in 18 to 2024 month view of how that would hit our revenue.
So that number it has recently been revised down to 1%, but that that was in current dollars. So there's likely to be some price inflation, even in that number but that is a good guide you know I made the comment.
At my wrap up here that we do see marginally positive growth at 1% to 3% is what we were looking at.
And factoring that into our assumptions.
Got it that's very helpful and last one for me is on that on the revenue growth. So.
It looks like you'll get some growth out of framing.
Glass services L. S. So you know you're talking about roughly flat, which one of those has those three the highest likelihood of surprising in either direction.
Well I'd say framing has the shorter cycle time, you know a larger percent of their revenues has shorter cycle. So we tend to see that respond faster. So if there's a pickup in demand whether that's driven by by projects on the ground or even people trying to get ahead.
From a supply standpoint, we're likely to see that in framing that's where we've seen pricing.
Take hold we're also doing some work of course to offset cost because we have to stay competitive in the marketplace from a customer perspective, but when we look at kind of where we expect the drivers to come from it it's likely going to be led by framing pricing being a large part of that.
Got it I'll leave it there I appreciate it guys.
Thank you Chris Thanks, Chris.
Thank you. Our next question comes from Eric Stine with Craig Hallum. Your line is open.
Good morning, everyone.
Hey, so maybe just to stick with framing just kind of.
Dig in there a little bit and take your temperature.
So on one hand, a lot of your commentary certainly in the release kind of feels like your thought is that you've turned the corner there, but yet. It also seems like you know your expectation as that turns much more improvement to go so just.
Maybe just expand on that a little bit.
Where you think that business is I know you've got the the changes going on with soda wall and that that will be exiting but maybe just some thoughts.
Band it on framing.
Sure I appreciate the question Eric.
As we look at framing the one area you have to pay attention to rate as that soda wall shift. So we've got in our appendix that pro forma view when we look at framing performance.
<unk> was a drag in that fourth quarter.
So that did post a loss for the year and the bulk of that loss did come in that fourth quarter setting that aside.
Framing actually sequentially was relatively flat from a margin perspective, we do expect them to do better what we saw as we closed out the quarter in terms of both pricing and cost we saw improvements there. So we do expect that momentum to carry forward here in fiscal 'twenty three.
Staying ahead on the price and inflationary side and then also taking advantage of the cost structure efforts that they did last year.
And frankly, there is some upside there because we're really just reinvigorating the lean efforts in framing we started out with glass, we shifted that to framing. So there's there's even some upside there from a margin perspective for framing as we move through the year.
Okay No that's helpful.
Maybe just turning to services then you know I know this is a business that's late cycle.
The outlook or the question that you hadn't been upfront about is will you be able to fill in.
Fill in the backlog there.
So that there is not a dip.
As you work through projects. So maybe just some thoughts on that where you see services.
I know you've guided to for fiscal 'twenty, three flat year over year, but just more kind of high level view as you think.
Multi year view.
Yes.
You hit it right on there that is our longer cycle business.
That downturn the last 18 months.
The valley of that downturn, if you will in terms of jobs awarded that is now flowing through our.
Our services business. So for them to you ended up relatively flat with once again point to that they've outperformed the market with respect to that.
So as we look at the year I think that that's a good guide if there maybe a little bit of upside but their work now is focused on building that backlog, which is still strong it's over $500 million that continues to be well above historical levels. So that bodes well as we look at fiscal <unk>.
24, and beyond as well.
So the team just as they did last year, they kind of were able to fill in some of the gap that they potentially were looking at for fiscal <unk>.
'twenty three now Theyre turned attention not just executing on the job flow, but working on starting to build up fiscal 'twenty four.
Okay No that's.
That's great and yeah, I mean, clearly the the trends there have been have been good in light of everything going on maybe last one for me just.
And I know, there's so many moving parts here, but I would just love your thoughts on on some of the headwinds that are in the market right now.
And I know you factor these into your guidance to it to a large degree or at least to some degree, but whether it's labor supply chain potentially higher interest rates, how that impacts the projects that you are going after.
Would just love your kind of high level thoughts on all of those.
Sure I would say material raw material inflation still you know the biggest concern and that we're monitoring and watching that and we're working from a customer perspective, we're trying to balance what we need to do on price with also taking cost out where we can.
To offset some of that and stay competitive.
A lot of the challenges we saw last year I think carry through most of this calendar year, which is the bulk of our fiscal 'twenty three so pricing on raw materials, and just general supply of raw materials.
We continue to lean heavily on our very strong procurement organization that not only within our business units, but we built up some additional muscle and support at the corporate level. So their focus will be not only to help manage costs, but probably even most importantly, ensuring that we continue to get the right level of supply.
To service those customers from a broader market perspective, we are keeping an eye on that just in terms of how it is that potentially impact projects that might be greenlighted or not as they reassess cost associated with doing those projects.
We haven't seen a negative trend in that area. We continue to see just as the market reports have shown an.
Expansionary numbers, so so growth, where we see a pickup in some bidding activity it's bumpy.
Just given the backdrop of the economy.
But right now that you know that's another piece we're looking at long term is at what point do interest rates are higher material cost at a minimum start to cause some folks to rethink size of projects or timing of projects.
Okay. That's helpful. Thanks.
Alright.
Thank you. Our next question comes from Julio Romero with Sidoti Your line is open.
Hey, good morning, Thanks for taking the questions.
Morning.
On the glass segment, you saw a really nice sequential jump in the margin there on flattish sequential sales could you just talk about what's driving the margin there and does that strength continue into the first quarter.
Yeah, I mean, I would say that the work we touched on before around productivity improvements as well as really capturing the benefits of the restructuring that started to really show in the fourth quarter.
We do expect that to continue so so glass, even if it's flat on volume.
We expect them to continue to see margin improvement so year over year from a total year perspective on our margin as a percentage of revenue that's the business that we'll probably see the biggest step up.
The improvement on that and it has to do with that work that theyre doing from a productivity standpoint, as well not just capturing the restructuring side and who loses two and if you think about the two sites that we have shut down as part of the restructuring that I mentioned, we have shut down the velocity business that was not making money for us.
So we have the stage growth side fiduciary down. So we are really improving the productivity of the statesboro and those losses are not there anymore in the fourth quarter.
Okay, Great that's really helpful. There.
Could you maybe just speak a little bit on volume in the framing segment I know you had volumes down.
Down year over year, and I think the orders in the quarter were.
Down sequentially, but off of a high base. So can you just talk about your expectations for volumes in the framing segment.
Well I think when we look at revenue.
For framing it was led by price.
So there was a negative volume.
As we look at fiscal 'twenty, three I think we'll still see we're.
We're going to see revenue growth and we'll still see that primarily led by price, but some of the indicators are that we will see positive volume starting to come through on that business as well.
You're definitely seeing some increase in that bidding activity in the framing segment also and we are monitoring it very carefully.
As you know the story on framing gain for this year is not much about volume, it's about improving our profitability and we are well on track to achieve that.
Yep understood and maybe a last one for me is just.
On the corporate cost line you mentioned there was some favorable insurance costs that drove that a little bit lower than normal can you just remind us what's a good run rate for corporate as we head into fiscal 'twenty three.
Yeah. So corporate has got a lot of ins and outs that go into it. If you think about quarter. Three we had a $7 million in corporate we had a $1 $9 million last year, and we have a half a million in this year.
I would expect about a $3 million to $5 million of corporate costs that will go in a normal quarter. It depends on many things can happen.
In corporate we true up crude down insurance cost and medical cost last year. The medical costs were a significant headwind for us So we expect that.
Those two ups into loans with normalized during the course of this year.
<unk> enables the charge would be a normal run rate.
Very helpful. Thanks, very much.
Thanks Julio.
Thank you. Our next question comes from Jon Braatz with Kansas City Capital. Your line is open good morning, everyone.
Oh.
A question and in the third quarter.
Call, you mentioned that Unrecovered raw material cost amounted to about $28 million through that through the first nine months.
Where do you stand now given that you know aluminum costs have gone up significantly.
Are we worst today than where we were at the end of the third quarter.
I would say, we're slightly better Jon and you know as we commented in the fourth quarter. We saw you know price versus inflation.
Offset.
Probably slightly positive and so if we look at the full year.
That number has not gotten worse has probably gotten a little bit better as we go forward, we're working to balance those things out to stay competitive in the market and will continue to drive make sure. We can stay whole from a pricing standpoint, but also continue to work on costs. So that we're adding value for our customers at the same time.
So as we look ahead towards next year on balance.
Fiscal 2023, you expect that to continue to come come down a little bit and you begin to recover.
Recover more of those costs.
Yes, so just to clarify as we think about the quarter. Four this is the first quarter and Richard teams have been able to offset all of the inflation.
Price increase in productivity. So that's the first good data point in US we had for quarter four.
Moving to the next year, our teams have built that muscle that all of the material inflation that will come through will be offset with price increases unless there is significant volatility that kind of impacted short term short lead time businesses. So to answer your question the RMS position not to have a very big hedge.
On inflation in fiscal 'twenty, three unless there is a lot of volatility in the market, yes, absolutely understood. Okay. And then secondly, as you are transitioning to soda Walter services.
Do you envision any any restructuring costs.
Our assimilation costs or integration costs.
And this year.
At this point the team has built into their plan whatever costs they'll have with doing that integration.
So while it was it was a business unit that had been operated much like most of the acquisitions historically, so a standalone business unit, so getting them on the same systems same platforms theres some expense related to that that's built into our guidance and services.
<unk> built that into their budget and plan for the year, we're not expecting any large restructuring charge happening or sort of more integration in this fiscal 'twenty three.
Thank you.
Thank you John .
Thank you and we have a question from Zane Karimi with D. A Davidson your line is open.
Hey, good morning, gentlemen, and I appreciate the color so far.
Good morning, Zane wanting.
So first off here when we're looking at the outlook for fiscal 'twenty three the backlog has improved some in framing. So I'm just trying to understand between the self help initiatives and segment growth expectations.
Which the tool that really drive the material increase in earnings over this year and now you're implying within guidance.
So if you think about the earnings guidance, where.
We landed at $248 for this year and we're looking at a midpoint of $3 one $0 right. So couple of things are happening there first the <unk>.
Share repurchase that we did in all of fiscal 'twenty, two and a majority of that in the fourth quarter will have a big impact to the EPS.
For next year, that's the first big driver. The second is all of the restructuring actions. We are taking all of those actions will have a full year impact coming into next year that would be the second big driver on the EPS gain year over year and it's early in fiscal 'twenty. Two we had a lot of net inflation negative impact in the first three quarters, we had negative <unk>.
In fact, we were only able to offset that in the fourth quarter that is not going to be the story for next year and that's the third big driver. They will not have a negative impact year over year. So those are the three big ticket items.
And we believe there are guidance at three point once you a mid point.
Well within the range of us.
Our teams are achieving.
Great I appreciate that and then maybe a little bit more but.
What's the thought process today on acquisition. After you include the restructuring actions over the next quarter or so.
Yes.
Talk to that point.
As we said in Investor day acquisitions will be a lever that we intend to pull as part of our growth strategy. So we're going to take a disciplined approach in how we do that as I commented in my remarks.
That's an area of focus as we strengthen our capabilities there and strengthen the process associated with that so we started rebuilding that M&A pipeline. If you will over the past few months and that work will continue as we go forward.
And it will be an area that we'll look to action at some point in the future.
Okay I appreciate it.
Thank you and there are no other questions in the queue I'd like to turn the call back to high silver Horn for any closing comments.
Alright, well thank you.
Let me end the call today by once again thanking and congratulating our employees.
We've accomplished a great deal and what was a turbulent year and we position the company for greater success in fiscal 'twenty, three as well as the years ahead.
For those on the calls thanks for joining us today as well and we look forward to updating you on our first quarter results and a couple of months have a great day.
Yeah.
This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
Hum.
[music].
Yes.
Yes.
Yes.
Yes.
Okay.
Okay.
Yes.
Yes.
Okay.
[music].
Yes.
[music].
Okay.
Yes.
Yes.
Good morning.
Okay.
[music].
Okay.
[music].
Yes.
Okay.
Yes.
Yes.
Okay.
Sure.
[music].
Yes.
[music].
Okay.
Yes.
[music].