Q4 2022 AZZ Inc Earnings Call
Good day and welcome to the AZZ, Inc, fourth quarter and fiscal year 2022 financial results conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone.
To withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Joe Dormie at Lytham Partners. Please go ahead Sir.
Thank you Matt Good morning, and thank you for joining us today to review Azz's financial results for the fourth quarter and fiscal year 'twenty 'twenty. Two ended February 28 2022.
Joining the call today are Tom Ferguson, Chief Executive Officer, Philip Sloane, Chief Financial Officer, and David <unk>, Senior Vice President marketing Communications and IR.
After the conclusion of today's prepared remarks, we'll open the call for questions. Please note. There is a slide presentation for today's call, which can be found on Azz's Investor Relations page under our latest earnings release presentation at AZZ Dot com.
Before we begin with prepared remarks, I would like to remind everyone. Certain statements made by the management team of AZZ. During this conference call constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1990 fives.
Except for the statements of historical fact this conference call may contain forward looking statements that involve risks and uncertainties. Some of which are detailed from time to time in documents filed by AZZ with the Securities and Exchange Commission, including the annual report on Form 10-K for the fiscal year ended February 28 2022.
Those risks and uncertainties include but are not limited to changes in customer demand and response to products and services offered by the company, including demand by the power generation markets electrical transmission and distribution markets, the industrial markets and the metal coatings markets prices and raw material costs, including zinc and natural gas which are used to.
Our galvanizing process changes in the political stability and economic conditions of the various markets that AZZ serves foreign and domestic.
Customer requested delays of shipments acquisition opportunities.
Currency exchange rates adequate financing and availability of experienced management and employees to implement the company's growth strategies.
In addition, azz's customers and its operations could potentially be adversely impacted by ongoing.
COVID-19 pandemic the company can give no assurance that such forward looking statements will prove to be correct. These statements are based on information as of the date hereof and AZZ assumes no obligation to update any forward looking statements, whether as a result of new information future events or otherwise with that out of the way, let me turn the call over to Tom.
Isn't chief Executive Officer of AZZ Tom.
Thanks, Joe and welcome to our fourth quarter and full year fiscal 2022 earnings call. Thank.
Thank you for joining us this morning.
Let me first express my great appreciation to our employees for their outstanding efforts during the past year, despite lingering effects COVID-19 high inflation supply chain disruptions labor shortages and a war in Europe I'm extremely proud of the way our folks stepped up to take care of their customers and each other while continuing to operate in a safe manner.
For fiscal 2022 total sales grew seven 6% versus prior year, reaching a total of $903 million.
Primarily as a result of metal coatings exemplary efforts infrastructure solutions total sales were relatively flat over the prior year, primarily due to experiencing a greater impact from the previously mentioned disruptions infrastructure.
<unk> solutions did improve its backlog during the year with the electrical platform generating strong bookings and they are well positioned to convert these bookings into revenue in fiscal 2023.
Yeah.
We're pleased to have completed our 35th consecutive year of profitability, while achieving strong growth in sales and operating income for the 2022 fiscal year. We continued to generate strong cash flow from operations in fiscal 2022 generated $86 million and net cash flow.
For the fiscal year, excluding one time expenses, we delivered adjusted EPS of $3.34 per diluted share.
An increase of more than 58% as compared to the prior year, we were bolstered by a great finish to the year with fourth quarter EPS of <unk> 87 cents.
Give both Bryan Stovall, and Gary Hill tremendous credit for keeping their teams focused while we pursued pre COVID-19 metals and continued our strategic efforts for Aaas.
We successfully completed two metal coatings acquisitions during our fiscal year.
In the fourth quarter, our strategic review our infrastructure solutions business was completed as a result of that review, we pursued a select set of strategic recommendations for the segment.
These efforts have taken longer than expected and were affected by the presale process that ramped up after Thanksgiving.
But we now have refocused resources towards continuing to work on these opportunities due to several confidentiality agreements I cannot comment further at this time, but I would like to emphasize that our remaining increasingly hopeful that we will have more details to disclose to our shareholders in the upcoming weeks.
Overall sales growth was driven by increased volumes and higher selling prices in our metal coating segment.
Yeah.
The metal coatings team grew operating income on an adjusted basis to $127 million, an increase of over 32% versus reported fiscal 2021, our results within infrastructure solutions were driven by improved turnaround activity for our welding solutions business as well as improved bookings in our electrical platform.
Operating income grew as a result of increased operating leverage across both the metal coatings and infrastructure solutions segments fully realizing the benefit of realignment alignment actions taken in the prior year, we continue to execute on our commitment to return value to our shareholders through both quarterly cash dividends and purchasing almost 600 in 2000 shares of <unk>.
Company common stock throughout the year.
In metal coatings, we posted record sales of $519 million and improved operating margins to 24, 5% results were primarily due to higher volumes of steel process growth in spend galvanizing and higher price realization as a result of product mix and price surcharges that were in.
Implemented to offset higher operating costs, including zinc labor and energy.
Growth in our metal coatings segment, primarily resulted from continued organic growth in galvanizing with only slight contribution from the recent acquisition of Steele Creek at the end of the year.
Our infrastructure solutions segment for fiscal 2022 grew sales.
Just slightly to $384 million.
While increasing adjusted operating income by.
115% and operating margins by 470 basis points over the previous year.
Sales growth resulted from an improved turnaround season within the industrial platform as they completed more turnaround projects during the year, particularly in North America.
So our industrial business had a reasonably good year internationally, our crews still encountered COVID-19 related travel restrictions in several international markets.
Within our electrical platform demand for switch gear Niehaus business was robust and the team booked our largest ever order for battery energy storage E houses.
This project is now in our backlog and will be delivered one of north America's largest renewable energy sites next year.
This order demonstrates that AZZ electrical platform is well positioned to capitalize upon the future growth within the renewable energy market and our commitment to deliver more products and services that support environmental sustainability.
Last month, we announced that we've entered into a definitive agreement whereby AZZ will acquire sic was pre coat metals business for a purchase price of approximately one point to $8 billion.
When adjusted for the net present value of about $150 million of expected tax benefits. The net purchase price is approaching 1.13 billion.
Which represents about $8 two times pre coach adjusted EBITDA for the 12 months ended December 31 2021.
We are pleased to acquire north America's largest independent provider of metal coat coil coatings and related services through this acquisition AZZ will significantly broaden our metal coatings offerings create unrivaled scale and breadth of metal coating solutions in both the prefabricated and post fabricated coatings markets.
We believe the KOL coating market will provide sustainable future growth for AZZ and plan on providing pre COVID-19 with the appropriate financial resources to expand and grow its business and market share.
The breakout acquisition is consistent with our previously communicated strategy to focus our M&A efforts on North American coatings targets that have a strong strategic fit and accretive within the first year of operation.
It is also a testament to our commitment to drive profitable growth and we're excited to have Kurt Russell and his team joining the AZZ family.
This acquisition represents a continued transition of AZZ from a diverse holding company to a focused provider of galvanizing in coating solutions.
As we previously stated we expect the transaction to close in the first quarter of AZZ as fiscal year 2023 subject to customary closing conditions I am pleased with the progress the team is making and we have recently received regulatory approval to proceed to closing.
Due to our recent announcement related to the acquisition of pre coat metals, we will not issue fiscal year 2023 guidance at this time.
However, based upon the evaluation of information currently available to management, we anticipate metal coatings will exceed $150 million in sales and exceed 30% EBIT.
For the first quarter of fiscal year 2023, we anticipate infrastructure solutions for the first quarter will exceed their good results from the first quarter of fiscal 2022.
This reflects our best estimates given current market conditions existing execution on our current backlog and does not include the impact of any additional acquisitions or divestitures related expenditures, nor any federal regulatory changes that may emerge.
And I have to note that we couldn't have asked for better financial and operational strength during which to execute on a transformational acquisition.
The businesses that make up AZZ today are tracking to generate over $1 EPS for the first quarter and well over $4 EPS for the full year.
But naturally we will not be completing the quarter or the year with our current mix of businesses.
We have a lot of great people that remain focused on doing their jobs, well and they have much to be proud of.
Within our metal coatings business, we continued to see strong demand from several end markets, including solar transmission utility industrial and construction were also seeing continued growth from our spin golf operations.
This first quarter will also include the full benefit of both the Steele Creek and Dom acquisitions.
Uninterrupted manufacturing operations continue within our electrical platform, despite seeing some supply chain delays for certain switch gear in the house components bus direct business remains good with increasing service work from several utility customers and hazardous duty lighting and tubular products are seeing improved demand due to higher oil prices.
Our industrial solutions platform is seeing improved demand as refiners schedule more turnarounds and with crews deployed during the normal spring season.
With that said I'll turn it over to Philip.
Tom.
I'd like to thank you for joining our call today and like Tom Thank each of our employees for executing so well and another year of existing uncertainty.
As you can see how our results of operations reflect the accomplishments our hard work of our teams have had on our business.
Fiscal year fourth quarter reported sales of $224 7 million or $29 million or 15% above the $196 million reported the same quarter last year.
Within our metal coatings segment was up 28.
8% to $128 $3 million and our infrastructure solutions segment sales were up seven 7% to $96 $4 million on improved order volume pricing and improving market conditions within the infrastructure solutions markets.
Fourth quarter cost I'm, sorry, fourth quarter gross margin of $55 2 million exceeded prior year by $9 4 million or 26% of sales.
<unk> margin increased 120 basis points to 24, 6% from 23, 4% of sales in the prior year as margins in both segments expanded during the fourth quarter.
Net income for the quarter was $21 6 million $5 4 million or 34% above the prior year's fourth quarter as the business itself and I'll pass it given the market uncertainties that exist.
Ported diluted EPS for the fourth quarter was 87 cents 24 or 38% above the prior year.
For the full fiscal year sales of $903 million were up seven 6% or $63 7 million compared with the prior year sales of $838 million.
Improved sales were driven by increased metal coatings.
Williams and increased commodity pricing, while infrastructure solutions segment sales were flat versus the prior year.
Year over year reported gross margins improved a very solid 250 basis points to 25% from 22, 5% on continued strong metal coatings performance and improved market conditions and infrastructure.
The segment that is recovering from a P.
Pandemic era.
Reported operating profit in fiscal year, 2022 was $113 3 million.
84.0% above the $61 6 million recorded in the prior year.
Adjustments in the fourth quarter included a $1.8 million gain associated with returning assets assets previously held for sale to operating status.
Partially offsetting this adjustment was $1 5 million related to the due diligence legal fees incurred as part of our recent acquisitions as well as our pending acquisition of Precut metals from sequel, I Carlisle Company.
On an adjusted basis fiscal 2022 operating income of $113 1 million exceeded prior year adjusted operating income of $81.6 million by 31, and a half million dollars or 39%.
EBITDA as adjusted for the year was $157 2 million compared with adjusted EBITDA of $125 $2 million in the prior year on higher earnings and improved operational performance.
The company reported diluted earnings per share for the year of $3 35.
Increases of 120, and 58% compared to $1 52, and $2.11 on a reported and adjusted basis in the prior year.
Cash flows from operations in the current year were $86 million compared with $92 million in the prior year.
The $6 million decrease was primarily attributable to increases in inventories and timing of receipts on contracts and timing of payments to suppliers and.
The company continued to invest in the business over the year, having invested $28 4 million in capital expenditures for both growth and capital maintenance projects or $10 2 million below last year's Capex spend.
Part of that was related to delays in spending from supply chain.
For fiscal 'twenty, three we expect to invest $25 million to $30 million in our base business.
During the year, the company repurchased $38 million in outstanding shares compared with $48 3 million in the prior year during.
During the fourth quarter the company reduced our purchase activity due to the acquisitions of Steele Creek, Galvanizing, Dom galvanizing and our pending acquisition of Krefeld metals.
During the year, we continued to return capital to our shareholders, returning $16 9 million to shareholders through dividend payments.
As we progress forward with our acquisition of Precut metals are lovage profile will change significantly as we incur higher higher borrowings to.
To pay for this highly a credit accretive acquisition, we expect our leverage following our equity raise Steve approximately four two times compared with our current leverage of approximately 1.4 times.
We are fully secured term loan financing for the acquisition financing through our bank group and we will begin marketing our term loan very shortly.
We are under an NDA on the equity financing component have finished due diligence are well down our contractual path and expect to shortly have our capital allocation desire to effectively funds and close on the pre coat acquisition.
We have just completed a very strong fourth quarter.
And have started our fiscal year 'twenty 'twenty three with continued strength across our segments.
Once we complete the pre cleared acquisition, we'll continue to focus strongly on utilizing our strong cash flow generation to repay newly established debt and deleverage quickly.
With that I'll turn it back over to you Tom.
Thanks, Phil.
Well, we have discontinued our guidance, let me give you some key indicators that we are paying particular attention to for the metal coatings segment's galvanizing business, we are carefully tracking input costs, especially the cost of zinc and our kettles, which we expect will continue to arise.
We believe we will be able to to continue to offset increasing costs with both price surcharges general price increases and operating efficiencies within the industrial solutions platform, we're seeing improved spring turnaround activity and the outlook for the fall turnaround schedule is filling in nicely.
Including internationally for the electrical platform, we continue to track proposal activity and have strong backlogs for most of our business units, particularly switch gear and enclosures.
Finally for corporate we will work to complete the acquisition of pre Covid metals continue our strong cash management processes, and we'll focus on paying down debt associated with the recent acquisition or the pending acquisition of breakout.
We anticipate closing the pre Covid metals acquisition in May and we are optimistic regarding the contribution we will soon begin to realize for the balance of fiscal year 2023.
I do not want to distract from the great operating results in bright prospects for fiscal 2023, I will note that we should have an announcement out soon on the equity.
As Philip mentioned.
Sure.
We will remain committed to our growth strategy around metal coatings believe the acquisition of pre Covid will allow azz's combined metal coatings businesses to support our 21% to 23% operating margin targets.
Even factoring in inflation inflationary commodity pressures for infrastructure solutions, we will continue to focus on improving profitability, what finalizing strategic negotiations currently in process.
We survived the disruption of Covid in 'twenty 2020 gained momentum in 2021 and have been able to hit fiscal year 'twenty 'twenty.
2023 at a gallop.
We are on the cusp of fulfilling our commitment over a year ago, a become a predominantly a highly profitable growth oriented metal coatings company. We thank you for your patience as we take these significant next steps and with that we'll open it up for questions.
We will now begin the question and answer session. Tabasco question You May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our stuff.
Our first question will come from John Fran trap with Sidoti and company. Please go ahead.
Good morning, Tom filling David.
Congratulations on nice quarter.
Quick question on the zinc prices and other commodity prices.
Tom you mentioned that you're instituting surcharges and price increases can you talk a little bit about the.
If you are ahead of the curve on this.
As far as the price increases.
Thanks.
At the highest level since 2005.
How much it's impacting your margin profile right now.
Okay.
Yeah, you know, we've we've been able to.
I'd say somewhat stay somewhat ahead of the curve.
But yeah were just looking to continually rising prices are weak we track what we've gotta do very carefully to to to stay even or abreast of.
And ahead of that curve and so are Brian and his team are reacting to it I'd say on a daily weekly basis.
When it comes to.
Our electrical businesses more project related and so there's those kind of things.
We have escalation clauses in most of our contracts and we're taking advantage of that but but there I'd say, we've the cost curve and the price curves.
Pretty much in sync.
Moving forward, we will try to get more escalation in and then on the.
On the WSI or the industrial solutions.
They're deploying to jobs and they their escalations come on welding wire.
But they had pretty good inventories of that in place so.
So I'd say, they're even to you or maybe even a little bit ahead of the curve.
And any thoughts on how much the commodity costs impacted the gross margin in the fourth quarter.
Hum.
And then.
I don't believe that didn't have as big an impact on our margins in the fourth quarter yeah.
Got it and on the reversal of the impairment charge on what asset is now not for sale.
It was one of our electrical facilities and then.
And our.
The electrical platform than we had it.
Our for sale under negotiations and it fell out and you know with it.
Expansion of a year's point of time, we looked at it in.
In determining to return it back to operating status.
Got it and regarding the 150 million revenue or exceed 150 million revenue outlook for metal coatings, how much of that contribution is coming from Steele Creek, and and then as far as the revenue in the quarter.
It's still relatively small I mean, it's probably 3% three 4%.
Yeah.
Okay, Alright, I will get back in queue. Thanks for taking my questions.
Sure.
Our next question will come from Noelle Dilts with Stifel. Please go ahead.
Hi, Thanks.
Just following up on that last question from John maybe a little bit more clarification.
When you look at the metal coatings business for this.
This past year and also looking forward into fiscal 'twenty. Three can you give us a sense of what you're seeing from a volume perspective, and if you're expecting that.
<unk> element of growth to pick up as you get into 2020 fiscal 'twenty three.
Well you know we're off to a good start in the first quarter.
We would hope that that pace continues.
Obviously, if zinc costs continue to.
To rise and we will seek to keep our prices in line with with that so.
But I think first quarter is we would hope it's fairly indicative of at least the first half of the year second half of the year.
Normally our fourth quarter weakens a little bit as we you know may have winter storms and things like that so we anticipate kind of the same cadence, but obviously at a.
You know.
At nine or 10% improvement over prior year as you look at it just partly from the acquisitions, partly from the organic growth and a continued expansion of things like spin galvanizing.
Okay.
And then yeah.
Solar in the past has been a key driver of growth and I know you've talked about it a bit recently.
Recently, we heard that the U S.
Being a department of Commerce investigation into solar panels and that that may differ.
First some work anything you're seeing on that front in terms of projects or deliveries getting delayed.
Yeah, Hey, Noel this is David Yeah. At this time, we're not seeing any delays in and what we've got from our team.
We're working at this point, but we're tracking that closely and.
We think that if anything shows up it's going to be well out in the.
The latter part of the second half of this year, but right now where we're.
We're not seeing any impact from that at all.
And then.
And then just lastly, I was hoping you could go back to pre Covid and just discussed.
See any synergies either on the sale or the cost side.
You expect to.
Materialize over the next several years.
Oh, absolutely yeah, we've the sales side, particularly its it's interesting we have a lot of.
Similar cut while same customers.
But we probably call out of them in different parts of the process. So you know R. R.
Yes.
Particularly our galvanizing sales team and in the pre Covid sales team.
We have a we have a really nice.
Plan to explore opportunities across joint customers as well as into new opportunities with a with each other's customers. So.
We're pretty excited about that we haven't quantified it yet we actually have a meeting next week, we'll start to pin some of these things down a little tighter but.
We think that's going to be a nice part of the synergies is just opportunity across the fabrication line, both both pre prefab and posed fab.
Then on the cost side, we've got the.
Stand alone.
Cost and things like that where we'll look to leverage some of these things and we had teams teams engage this well this week and we will continue to have teams engaged from now until close and obviously thereafter.
Looking for other opportunities whether it be on the system side or.
Process side. So you know while cost synergies are not a big part of this we just think we're going to have some scale opportunities and we've got some pretty good teams.
That hopefully we can get some benefits from some some of our contracts on insurance and things like that.
Great. Thank you.
Our next question will come from Jon Braatz with Kansas City Capital. Please go ahead.
Excuse me good morning, everyone.
Tom you mentioned that you've seen some.
Strong order flows good backlog growth in the electrical products platform.
End markets are you seeing that business come from.
Yes.
We booked as large battery energy storage system projects, we call that the big burst in order.
Unfortunately, we can't quantify it for confidentiality reasons, but.
But we see more opportunities for that just because in the renewable space.
You've got to have battery energy storage to be able to get.
Store, it and get the electricity to the grid.
So those are large opportunities they fit well with us because we've got five plants that building closures three of which are pure E house businesses.
Data centers continues to be strong.
And and then transmission distribution is is also solid and we think that's going to stay that way for.
Several years.
Theres just firming up our the grid is critical.
David on it.
Adding to that I can add one point on there I just think the cros are back our businesses in the electrical side, we're seeing increases in backlog, whether its our lighting and tubing switch gears strong. So we're seeing improvements across the electrical platform. Okay.
Okay. So it's more than just the better battery energy storage.
Okay.
Yes, if you take out the.
Some of the reductions in China backlog, and then you take out the battery energy storage were up about 28% okay.
Year over year on base business, Okay. Good okay, Okay, and then secondly.
Now when you announced the acquisition of <unk>.
Our acquisition of pre coat a.
About a month ago or whenever it was.
Hum.
Subsequently interest rates have risen.
Considerably and I guess, Phil, but when you look at.
The economics of the acquisition has it changed at all.
During this this past month because of the rising rates.
I mean, not really and we're gonna have to pay a little more in interest, but we have a term loan facility. That's got colors on it and so we are proceeding.
Down that financing path, we're working on the equity piece of the capital allocation strategies that were working to employ is moving along really nicely. So I don't see that this is a really accretive opportunity for us.
When you look at the cash flow generation for AZZ that we just discussed and you know kind of how we're starting off you know our fiscal 'twenty three.
We're not we don't on them, yet, but we do have some communication going back and forth it looks like they're still having some some nice opt.
Operations and so we think this is a great opportunity regardless of the current market to to take advantage of that accretion in the tax space savings and everything to move this forward.
Okay alright, thank you.
Thanks.
Our next question will come from Brett Kearney with Gabelli funds. Please go ahead.
Hi, guys. Good morning, Thanks for taking my questions.
Good morning.
Oh, we touched on it Tom in your prepared remarks and.
Q&A, so far but just.
Any additional update you can provide around latest thinking in terms of the financing components and then I guess the timing of each of those to close the deal next month.
Yes.
Yeah.
It into the market now we've got the committed financing in place and so I won't go too much further, but just to say that we.
We will begin shortly a marketing campaign to push out our term loan b and finalize our equity transaction.
Okay.
Okay great.
Then.
Just a follow up I'm curious what the key inputs to pre Covid metals formulations are I imagine.
And some amount of zinc if you could just help me think about.
The major inputs on that.
Yeah, Brett when you take a look at it there are major input is pain and <unk>.
So that's really the big driver, it's it's definitely Ah.
A high variable cost business and very similar.
Just overall mechanics wise on how we operate on a tolling business on the on the galvanizing side. So, it's really just paint and and labor costs.
Okay. Thanks, so much.
Sure.
Again, if you have a question. Please press Star then one our next question will come from Deforest Hinman.
Hi, It's <unk> company. Please go ahead.
Hey, Thanks for taking my questions just another one on the pre Covid transaction may close.
Within 40 days.
Can you just help us with a little bit more color on the mix of the equity.
Is there a range we should be thinking about in terms of how youre looking at on this transaction.
Yeah I think.
Close up before but we're looking at.
Roughly.
$1 5 billion borrowing facility and a $400 million.
Revolver.
For $240 million of that would be the equity component.
Okay.
And then.
Can you talk a little bit more about the backlog to the extent that you can I mean, just a really.
Big number you make mention in the press release of the.
Battery storage.
Contract, but then in your <unk>.
Verbal comments, you said you can't really talk a lot about it.
But I mean, just sequentially and even on a year over year basis, I mean, that's a really big.
Dollar.
Increase in your in your backlog and he said there are sizable opportunities.
Simplistic question is that you know.
Over 100 million dollar increase in backlog is that the battery order or is that a fair statement, most COVID-19 or all of it.
I think when you look at that it's.
Kind of explain the 20% when you take out the best order on the China backlog decreases that we had so it's not over $100 million of nice sizeable orders of 120 plus units.
And then so it'll come in and out of our backlog during as Tom was speaking to our fiscal 'twenty three so it's already under construction and it will ship or its plan to ship during the fiscal year. We believe based on what we're seeing this as a great opportunity for us to execute well and there's an expanded market.
Potential for he is with us.
Battery energy storage facilities going forward. Yes. This is a discipline of design, we had been working for the battery energy storage. It was a design we've been working on for a while so we.
So there's a there's a need out there and.
We see this over the next two or three years being.
Two three or $400 million of opportunities over that period.
Yes.
And we think we've got a great solution for it so.
So were you know a significant portion of the increases in the enclosures space, which is three three facilities.
And then we've got strong backlog in our in our switch gear as well.
And we've got two of those facilities and as Phil mentioned, then our bus businesses have been performing well.
But reduced input on the international front, but more on domestic and service and our oil patch businesses of improve.
Improved significantly so so it's a broad based improvement in that backlog not not just from the battery energy storage.
Yeah, that's helpful and then.
When you think about some of the battery solution.
You have one business line is this.
Alright.
They're asking about it but I mean is it in our wheelhouse is this something you know from an engineering perspective, we've done before or is this you know some new things, where maybe where we're buying batteries from a third party and that's part of the backlog in there or.
What is it exactly that we're doing with the new design.
Yes. This is a this is a very traditional fabricate the enclosure do the integration work in wiring and.
Certain components supplied from from the customer.
So the backlog is represents very much our traditional backlog for the enclosure space.
Because it's the heavy fabrication wiring integration.
Relay panels things like that so very very traditional.
There's nuances in the design, but it's structurally in an electrically it's the same thing we do.
Consistently year in year out.
Okay, and then just just a follow up the last piece on the infrastructure side I think going back if we.
It had some backlog and 300 million dollar range in the past and you know obviously there is the Mexican border in there as well but for that.
Segment had generated 10% type.
Operating margins with those type of backlog is that.
What youre seeing currently from a mixed perspective is the opportunity for that business.
Yeah. It is the you know theres good when we when we get that kind of backlog theres good scale leverage and our focus is just on managing the supply chain, making sure we get components in time keeping labor.
Focused and productive and efficient.
Which are you know that there's a few more challenges.
These days, but but still yet we get a nice margin pop when we get this kind of volume.
Okay. Thank you and then the last question is just on a rundown of the labor situation within the two segments.
Anything you're seeing there.
Uh huh.
Better worse same.
Very helpful.
Yes, I think on the metal coating side. The team has done a great job, we felt we're doing better with retention and.
Due to some programs we have.
Hiring has improved we did increase wages. So when we talk about inflation that's part of it.
But I think the teams do a great job, we've got programs that help employees get on boarded and engaged in which is helping us with our retention.
When it comes to the.
Infrastructure solutions.
You know I think on the industrial side, the WSI side they've.
In the U S were used as an <unk>.
Contract.
Kraft and I'd say, we've done a good job there I don't know that it's improving or or not but it's a but it's at least stable and on the electrical side, where we're trying to get its more related to semi skilled skilled craft.
I'd say, it's improved a little bit you know and part of this is our programs for recruiting and hiring have continued to mature.
And yet.
Engaged with new ways to to recruit.
So I'd say, it's improving and moving from.
The into more of a stable situation so.
So we actually feel pretty good and I, but I think it's a lot of what our teams have been able to do to get to get us to that point.
Okay. Thank you for taking my question.
Great. Thanks.
Our next question will come from Bill Baldwin with Baldwin Anthony Securities. Please go ahead.
Thank you and.
Good job okay.
Folks on the job you've been doing over there.
Thanks, Bill been a long journey, but.
But it's paying off paying off.
On the bus side of the business can you remind me again, what the major market drivers are for your both your medium.
Thus and high voltage bus.
Products.
Yeah Sure thing Bill you know the main drivers there are really transformer swap outs also some of the work.
It goes into connecting up to existing and new switch gear.
So that's really it for for medium voltage bus medium voltage bus also doing.
A fair amount of service work as.
As well, where they are going out into the field and helping folks.
Retrofit and refurbished equipment.
And then the high voltage bus side.
It's really about power Gen.
Again, we had the big project in China last year.
And.
Group continues to work with a couple of very large customers here domestically.
Awesome power Gen projects.
What would be the are those power Gen products.
Gas power Gen or would it be hydro power Gen or is it does it make any real difference what the source of the Paris.
So it really doesn't make really doesn't make any difference for us we see.
Projects on both sides of those so yeah really really no different.
When we see the manufacturing side of our economy, you really spent a lot of money on.
Upgrades expansions and so forth does that does that.
Is that a driver for what we're talking about here on the medium bus side of the business.
Yeah, it can be and where we really see it a lot is you know.
On the medium voltage switch gear, and then again to that extent, you'll have some medium voltage bus coming off that to connect into some of these industrial plants and manufacturing plants as you just described.
Is that order flow is looking pretty good there and on the medium bus side.
They're kind of run at their normal rates.
Okay.
But we pivoted more towards services, so they're able to pursue more opportunities than just the project side yeah. Okay.
Thank you very much.
Alright, Thank you Bill.
This concludes our question and answer session I would like to turn the conference back over to Tom Ferguson for any closing remarks.
Alright, Thank you well thanks for joining us today, we look forward to.
Continuing to get some announcements out there so that everybody.
Gibbs confirmation on the things, we've been planning and involved in.
So we're hopeful over the next few weeks Youll see.
More of that in the June Youll get a good announcement when we close on the pre Covid metals acquisition.
We're looking forward to that and as.
As well as continuing to make progress in our in our businesses and on our strategic initiatives. Thanks, very much look forward to talking to you next time.
Yeah.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.