Q1 2022 Altra Industrial Motion Corp Earnings Call
Year.
I would also.
To highlight a few significant strategic milestones that we've achieved since the start of the year.
We're making great progress actively managing the portfolio, including tremendous progress integrating nook industries.
The addition of Nook industries has expanded our motion control and power transmission capabilities and the attractive aerospace and defense marketplace. In Q1, <unk> was accretive to earnings and we remain on track to achieve our targeted cost synergies.
<unk> is an excellent example of how we are leveraging our refined approach to the three phases of the M&A cycle to be competitive in today's market, while continuing to add shareholder value.
One of the upsides surprises regarding nook with how great. The nook team is up and down the organization.
We swiftly completed the sale of the Jacobs vehicle system business, a significant milestone that is removed about $194 million of noncore cyclical business from our portfolio and improves our capital allocation optionality going forward.
Leveraging the proceeds from Jbs, we've paid down approximately $350 million of debt.
Today, our net leverage stands at two three times net debt to adjusted EBITDA, well within our target leverage range.
Our capital allocation priorities have not changed and returning capital to our shareholders remains one of our priorities.
As announced earlier this week, we have raised our quarterly dividend from <unk> to <unk> <unk>.
And authorized a $300 million share repurchase program.
We also remain committed to investing in profitable growth through high return organic investments and by pursuing disciplined and accretive ultra like M&A opportunities as they arise.
On the organic growth side, we're leveraging our ABS tools to win in higher growth end markets and increase altra has exposure to secular trends that will drive growth like digitization and automation, the aging population and sustainability as.
As an example during the quarter, we landed our largest ever remote monitoring order from a large mine in China.
Developing recurring revenue and integrating our technical expertise into the end user's problem solving is a key objective of our Iot initiative.
On the M&A front following the successful Nook industries acquisition during the quarter our businesses.
<unk> continued to actively build the funnel to find and nurture acquisition candidates that offer attractive market prospects and fit our defined ultra light criteria.
We will focus on businesses that design and manufacture highly engineered mission critical power transmission and motion control solutions have high share positions and well defined niches and participate in markets with strong secular trends.
During the quarter, we released our inaugural sustainability report.
We have a long history of leveraging our core values and the altra business system to drive positive impact create business value across a range of ESG issues.
I would like to thank Altra is ESG task Force board and the Altra team for contributing to deliver on this important milestone our ESG journey.
The materiality assessment that we completed last year was a key step forward as it helped us to identify the ESG issues that matter most for our business and our stakeholders.
We leveraged this effort to define altra as new sustainability pillar framework, which includes delivering solutions through innovation protecting the environment, reaching our full potential through teamwork and operating with integrity.
Going forward, we are focused on further enhancing our systems to collect and assess key ESG data and better quantify our impact.
We are committed to being transparent about our progress and look forward to keeping our investors updated throughout the year.
It is a great read and I encourage everyone to visit our website and take a look at our corporate sustainability report.
I am extremely extremely proud of all that we've accomplished so far this year.
As Todd will expand upon shortly today, we are resetting our 2022 guidance to reflect the sale of jbs and the increase in working capital to support our ongoing efforts to manage market demand.
We are also raising our 2022 guidance for our ongoing businesses to reflect very strong underlying demand, notably we expect to keep earnings consistent.
Compared to the prior year, despite a $194 million revenue reset related to the jbs divestiture.
We expect Q2 to be similar to Q1 and have not substantially changed our view on the second half.
Now turning to slide six for a review of the markets in more detail.
Over the past several years, we have made tremendous progress transforming altra portfolio today.
Today over 50% of our business is exposed to high growth markets with strong secular trends on this mornings call I will focus my market commentary on the six key end markets and our distribution business.
Starting with factory automation and specialty machinery, which represents about 14% of our business and is driven by secular trends, including global Digitization industrial Iot, reducing the length of supply chains, and collaborative robots and Q1 demand and robotics.
<unk> electronic assembly equipment specialty machinery, and general factory automation machinery re.
It remains strong and sales were up high double digits compared to the prior year.
We continue to expect 2022 to be another strong year in this market given the positive long term macro trends driving growth.
Turf and garden AG, and construction, which combined represent approximately 10% of our business is driven by trends like increased infrastructure spending in global population growth here.
Here, we continued to perform well in Q1 growing high double digits year over year with all three segments up sequentially.
Our outlook remains very positive for these markets in 2022 at the fundamental growth drivers in these markets appear to be strong.
Moving on to material handling, which represents about 8% of sales and is well aligned with trends such as e-commerce electrification and warehousing efficiency improvements.
In Q1 sales were up double digits, driven by continuing strength across all key segments, including conveyors forklifts and vertical lifting systems.
Long term, we remain positive about our growth prospects and material handling.
Medical equipment, which was about 8% of our sales is a very very attractive long term opportunity for ultra driven.
Driven by trends like the aging population and the growth of noninvasive and robotic surgeries in.
In Q1 sales were essentially flat year over year as medical capital equipment sales were strong offsetting a decline in surgical solutions, which faced some pressure as a result of the Covid surges late in 2021 and the beginning of 2022.
Surgical medical solution Oems are adjusting inventory levels near term because of the drop in demand for elective surgeries due to the delta and omicron surges.
We remain positive about the outlook for the medical market in 2022, given the anticipated evening easing of Covid restrictions and return to more normal levels of spending and investment as well as favorable prior year comps as we progress through the year.
Moving on to aerospace and defense, which combined is about 5% of sales.
Both markets were down low single digits, reflecting lumpiness and timing book.
Bookings, however remained very strong and we remain positive on the outlook for our A&D business, which is an important bottom line contributor with a very attractive margin profile, a strong competitive position and high barriers to entry.
Renewable energy, which represents about 4% of sales was down double digits versus Q1 last year, primarily due to a decline in China.
Looking ahead, we continue to expect Covid and supply chain headwinds to affect bookings into the first half of 2022, followed by a rebound as the year progresses.
Longer term given the global sustainability movement, and increasing demand for zero carbon energy solutions. We continue to believe the renewables represents a very exciting growth play for ultra and.
And finally distribution.
Which represents approximately 25% of sales was up low double digits from Q1 last year and up single digit sequentially.
Our sales in the distribution market continued to track in line with the general industrial economy.
Our bookings and book to Bill for the quarter were strong and we are anticipating a solid performance in this part of our business in 2022.
Looking forward, we expect continued broad based end market strength in 2022 with moderating growth as we go against tougher comps the fed raises interest rate.
China expands shutdowns and the war in Ukraine, all stunt growth potential.
As I said, we do not have much visibility into the second half and therefore, we have not changed our view on the second half and our improved guidance for the ongoing business.
Now turning to slide seven.
Looking ahead, we remain focused on executing on our strategy to optimize ultra's position as a premier industrial company and deliver strong and sustainable returns for shareholders.
As we outlined at our Investor Day. This includes leveraging our technology differentiation and proven altra business system tools and strong secular markets to achieve 3% to 5% annual organic growth factor.
Actively managing the portfolio through disciplined M&A to drive further upside deliver.
Delivering 300 basis points of margin expansion by 2024, and achieving consistent free cash flow conversion greater than 100%.
Longer term, we have great conviction that we are setting ultra up to be a true through the cycle compound or with the potential to achieve $3 billion in revenue by 2027.
With that I will turn the call to Todd.
Take you through our financial performance details and guidance update.
Thank you Carl and good morning, everyone. Please turn to slide eight having entered 2022 with record backlog and solid underlying market demand. We achieved record sales in the first quarter for the first time in ultras history, we eclipsed $500 million in revenue in a single quarter.
Despite the persistence of supply chain and logistics issues stemming from the ongoing pandemic Q sales Q1 sales were up over eight 4% year over year to $512 million. We ended the quarter with a book to bill ratio of 115% and again saw growth in our record level backlog now just shy of <unk>.
$900 million.
These are positive indicators that sales throughout the remainder of 2022 will remain strong.
Despite rising inflation, our pricing initiatives have been successful and as a result, we continue to expect price cost will be back in alignment and margins will be at historic levels in the second half of the year.
Gross margin was 35, 2% compared to 36, 4% for the same quarter, a year ago, but our pricing initiatives drove a 160 basis point sequential improvement from the fourth quarter, which was much quicker than we originally anticipated.
Taking a closer look at our top line performance price contributed 375 basis points for the quarter and FX had a negative effect of 180 basis points.
In Q1, 2022 overall organic sales growth was seven 9% compared with the first quarter of last year.
The power transmission technologies segment organic sales were up 17, 1%.
Year over year increase continues to demonstrate the resilience of our balanced portfolio of operating companies as well as the success of our ongoing pricing efforts within the segment.
The automation and specialty segments organic sales were down.
<unk>, 2% compared with the prior year the decline was driven by the extremely challenging comps for our heavy duty truck market in China, and the medical business due to heavy COVID-19 related sales into the ventilator market in the prior year on a pro forma organic basis, excluding jbs first quarter sales for <unk> increased eight five.
Percent overall year over year again, demonstrating the strong demand in the ongoing businesses.
Turning to our organic sales performance by geography organic sales were up 17, 7% in Europe , and 13, 4% in North America with strength across most of our end markets organic sales in Asia and the rest of the world were down 18, 3% year over year, mainly due.
The class eight truck and wind markets in China.
Pro forma Q1, 2022, North America organic sales were up 13, 9%.
Europe was up 18, 2% and Asia and the rest of the world were up one 2%.
Moving on to our operating performance non-GAAP net income from operations increased by $6 2 million from Q1 last year or seven 4%, primarily due to volume leverage partially offset by higher operating expenses due to inflation.
Price lagged cost by approximately 40 basis points in the quarter.
We have made progress in our pricing initiatives earlier than anticipated and assuming no significant additional inflation, we expect to continue to close the price cost gap over the remainder of the year.
non-GAAP adjusted EBITDA was $103 1 million for the first quarter up one 5% compared with Q1 last year or 21% of net sales down 140 basis points compared with Q1 last year, excluding jbs pro forma adjusted EBITDA grew to $93 8 million or 20.
1% of net sales down 30 basis points year over year.
non-GAAP operating margins are behind 20 basis points, when compared with Q1 of last year.
How on a pro forma basis, though when you exclude jbs operating margins grew by 40 basis points year over year, demonstrating the power of the ongoing business at Altra.
Interest expense was down approximately 33% due to lower debt levels and more favorable pricing as a result of our November 2021 refinancing.
Please turn to slide nine for a closer look at our balance sheet improvements cash flow and liquidity.
non-GAAP free cash flow in the quarter for the quarter was negative $42 7 million compared with $26 6 million in the year ago quarter.
Working capital grew from year end 2021 by approximately $80 million, reflecting growth in inventory and accounts receivable, primarily driven by strong March sales, which were up 25% when compared to the month of December 2021, and reflecting our investment in inventory to support the strong.
Buying demand.
Capital expenditures during the quarter totaled $17 8 million up 85% from the prior year quarter as we continued to invest in growth opportunities.
We finished the quarter with $183 7 million of cash.
Please turn to slide 10.
Looking ahead based on our current plans for debt Paydowns and returning capital to shareholders. We expect to exit 2022 with leverage of approximately two to two and a quarter times on a net debt basis, well within our target range as we outlined at our Investor day, we have been evaluating alternative methods to return capital to shareholders.
Holders, while continuing dividend growth earlier this week, we announced that our board of directors have approved a new share repurchase program. The program authorizes the repurchase of up to $300 million of Altra common stock through December 31, 2020 for the resumption of ultra stock repurchase program reflects the board and management.
Confidence in <unk> ability to continue generating free cash flow, while positioning the company for future investments in growth, both organically and through M&A opportunities that align with our ABS strategy.
Please turn to slide 11 for an update on our outlook for 2022.
As we further our work in 2022, we remain confident in ultras prospects for the year as we look to build on a very successful first quarter. We incurred we are encouraged by the team's resiliency and proactively addressing the challenges markets are facing in 2022 and while these continue we have demonstrated our ability to control.
What we can control and capitalize on robust demand with a historic quarter for ultra.
We look to continue leveraging our strong customer relationships to outperform our competitors and fulfilling customer needs in the quarters ahead.
Today, we are resetting our 2022 guidance to reflect the sale of GBS and the increase in working capital capital to support our ongoing efforts to manage market demand. We are also raising our guidance for our ongoing businesses to reflect the very strong underlying demand with that as background our guidance for.
The full year 2022 is as follows <unk>.
Including the Jbs contribution in 2022, we expect annual sales in the range of one nine to $1 94 billion GAAP diluted EPS in the range of $2 59 to $2 69.
non-GAAP adjusted EPS in the range of $3 35 to $3 50.
And non-GAAP adjusted EBITDA in the range of 388 million to $403 million.
Excluding jbs in 2022, we expect annual sales in the range of $1 $85 5 billion to one $8 95 billion GAAP diluted EPS in the range of $2 54 to $2 64.
non-GAAP adjusted EPS in the range of $3 22 to $3 37.
And non-GAAP adjusted EBITDA in the range of 379 million to $394 million.
Notably, we expect earnings to be equal or higher compared to the prior year. Despite a $194 million revenue reset related to the jbs divestiture.
For both scenarios, we are lowering our depreciation and amortization guidance to a new range of 95 to 100 million.
We are raising our capital expenditure expectations in the range of $50 to $55 million.
And adjusting normalized tax rate for the full year to be in the range of 22% to 23%. We are also lowering our adjusted non-GAAP free cash flow range to $1 $25 million to $140 million to reflect our investment to support the strong demand we are experiencing.
Please turn to slide 12 to.
To help everyone better understand the ongoing business. We have provided a comparison of the 2022 pro forma guidance versus the pro forma 2021 results as you can see we expect to deliver double digit adjusted EPS and adjusted EBITDA growth in 2022, while growing the topline at high single digit.
It's to low double digits. This again is a strong demonstration of the underlying strength of our transformed portfolio and the power of the altra business system.
Now please turn to slide 13.
In addition to the previous slide we have included a 2021 pro forma results table by quarter and full year to assist you in your ongoing analysis of ultra.
With that I'll now turn the call back to Karl before we take your questions. Thank you Todd and please turn to slide 14.
We're extremely pleased with the progress we have made towards our goal of being recognized as a premier company and I would like to wrap up with a few key messages.
First with the sale of Jbs acquisition of Nook.
And our organic growth initiatives, we are improving the underlying earnings power and exposure to markets with high secular growth.
Ultra is executing on the strategy, we discussed at our Investor day last month and capitalized on our opportunities with a record setting quarter.
Our team is doing an exceptional job managing through the dynamic market environment you see this on the bottom line as our pricing initiatives become apparent and on the topline as we continued to deliver exceptional bookings and sales growth.
Third.
We have strong conviction in our ability to expand margins generate strong cash flow and maintain a strong balance sheet. We.
We believe that by allocating our capital prudently and wisely, we will become a market compound or <unk>.
Finally, we recognize that the sale of jbs and the improvements we are working on complicate the outlook. So we have provided details and guidance to clarify the picture of the exceptional growth operating margin expansion and cash generation potential of the ongoing business.
We look forward to sharing our progress throughout fiscal 2022 and with that we will now open up the call for questions Sam.
Sam.
Thank you Carl we will now begin the Q&A session if.
If you'd like to ask a question. Please press star one on your telephone keypad and if you'd like to remove that question. Please press star two.
A reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question.
Our first question comes from Jeffrey Hammond of Keybanc capital markets. Jeffrey Your line is open.
Hey, Good morning, guys. This is David Tarantino on for Jeff.
Hi, David Hi, David.
Alright.
So clearly a pretty impressive step up in margins sequentially, and obviously kind of a lot of moving parts going forward.
Obviously price realization was kind of a.
Main driver, but could you give us some more detail on what you think specifically with an S moving forward.
Yes, so they made some great strides in the price cost gap, you're absolutely right we continue to.
Yes.
Initiate additional pricing actions through the first quarter, we will continue to do pricing actions as Carl mentioned as we see costs continuing to rise, but <unk> is experiencing extremely strong demand and it's very broad based across.
The Thompson and.
Kollmorgen businesses, the <unk> as Karl mentioned that medical sales were essentially flat just up modestly so where you are feeling some pressures.
In that end market and the E&S segment.
We continue to expect that they will.
Close the gap further.
On.
The gross profit line as we continue through the year.
Great and then just switching gears, maybe a little bit could you give some color on the announcement of the share repurchase program given it seems to kind of maybe it's apart from M&A and growth story outlined at the Investor day.
Yes sure.
So we had historically, we had a share repurchase plan authorized by the board. It expired. After we had completed the <unk> merger and at the time due to our leverage and our stated priorities of getting the leverage back into the leverage range our target leverage range.
We opted to not authorized a new share back share buyback program at that time as we did not feel it conveyed the right message and where we were going to be prioritizing our capital. We feel that now is the right time to do it it gives us greater flexibility now that our leverage is down in the target range.
Karl said, we're continuing to build our M&A funnel.
That will still remain a priority, but this gives us an option.
To deploy capital back to our shareholders. If that's the right thing to do.
At the right time.
And I think if I outline our priorities.
Series.
Top priority is to invest in organic growth initiatives.
Our next priority is to grow through M&A.
Our third priority is to continue to pay down the debt in the fourth priority would be to return cash to shareholders and we needed. The optionality since we didn't have a current share buyback program.
If there's a big dislocation in the stock price or.
Or there is a dislocation in the M&A environment, because people aren't selling companies, we want the optionality to be able to execute.
Returning cash to shareholders.
Great. Thank you.
Thank you for that question.
As a reminder to ask a question. It is star one to remove that question. It is start to our next question is from Jay Charnock of Baird. Your line is open.
Hey, good morning, Carl Good morning.
Yes, it's calling in for Mike and again today so question on.
Just kind of elaborate on your guidance and your approach to it.
For us it looks like <unk>.
<unk> overage you have good visibility into <unk>, and then basically kind of maintaining conservative assumptions in the second half.
Is that a fair assessment, and then quantitatively or qualitatively.
What's the kind of price and volume assumptions, maybe embedded in your organic growth, which looks like it's around mid single digits.
Any color on those would be helpful.
I'll start with the philosophy, Jeff and then Todd can get into the numbers, but I.
I mean youre exactly right for.
The visibility for the second half with the war in Ukraine.
Shutdowns in China.
Certainty, what's going to happen with the fed and interest rates.
There.
And then the supply chain issues.
We just did not we just don't have the visibility.
Really.
Predict how all that's going to impact.
A couple of those things get resolved could turn out to be a whole lot better. So we felt it was more prudent just to maintain the.
The outlook for the second half.
Yes, so related to Q2, yes, we would expect sort of similar growth rates that we saw in the first quarter of this year.
And quite frankly, when you look at it we're getting back to what we used to see more traditionally where we would do.
Slightly more than 50% of our revenues in the first half of the year with a little bit of seasonality in the summer months with our European exposures.
And as Carl said.
We felt comfortable with that leaving the back half of the year sort of in line with our original guidance from back in February .
With the visibility we have to queue to bumping pumping to guide up as a result of the Q1 beat and the expected performance in Q2.
Yes.
Got it and then.
Alright, Yes go ahead Rob.
Just regarding price cost I think we made significant progress in Q1 as we worked through some of the order book that have been priced lower than the price increase really started to take effect, we expect that to continue into Q2.
And then some of it will bleed over into Q3 and Q4, but.
What I hope by the end of Q2, we have we have the majority of it caught up.
And that has the one caveat that we do.
Don't see significantly higher inflation and have to go with another round of price increases.
I'll have to work through the orders that we have the <unk>.
Current pricing so so if inflation takes off again.
The one the one caveat.
Got it makes sense and then yes, I mean margins were really good this quarter.
A lot of those end markets and there are automation and material handling kind of the.
Hi, and inspections in terms of electronics and drives and things like that parts are there.
We've heard supply chain is particularly sensitive whack a mole.
And the way to put it I guess.
No.
Are you guys, you think youre managing better than maybe some peers in the area.
Whats the kind of like on the ground there maybe that leads into kind of the strategic.
Increases in working capital around there I guess, maybe your approach there what you're seeing on the ground.
Yes, I think one thing we have.
Some of the positions with some of our businesses are really mission critical.
And so in order to support those mission critical businesses, we worked with our customers to buy components that sometimes very elevated prices.
And I think some somebody that has more or less mission critical.
Business.
It probably didn't need or have to do that.
You didn't need to make the quick.
Quick decisions on what to buy when to buy and how much to pay for it.
Team did an outstanding job.
Getting out there and finding components that we needed to serve some of those industries defense medical in particular.
So I'd say, we executed extremely well and I think I would attribute it to partly because of the customer the nature of our customer base that we have.
We wanted to serve those very critical industries and the customers supported it so.
I think thats, probably the number one reason.
Yes, and we continue.
Working capital increase half of it is tied to inventory and we've taken the position with the demand and as Carl said the nature of our products.
If we can get the inventory to help serve our customers, we're going to get it to.
Got it appreciate all the color I'll jump back in the queue.
Thanks, Craig Thanks.
Thank you Jake.
A final reminder to ask a question. It is star one on your telephone keypad.
We will pause here very briefly for any remaining questions.
Okay. We have a follow up question from Jake <unk> with Baird. Please proceed.
Yes.
A few out here so.
I guess, what you guys are hearing and channel inventory.
Are they taking you guys in terms of the kind of safety stock or.
Are they still pretty normalized.
So we're looking to obtain more.
I think my impression is that in some cases they are looking to.
Based on the higher business levels and the longer lead times.
A little more inventory in place where.
Were they deem it as relatively low risk or very difficult to get components.
So I'd say there are definitely some spot inventory builds.
Got it and then.
We've talked about this in the past, but it looks like book to Bill still one plane that backlogs are.
Growing a little bit sequentially going forward internally are you expecting.
Orders to essentially flipped negative as we start lapping tough comps or.
Right now it looks like we're still growing off the base inflation, obviously still contributing.
That number but kind of thoughts on how <unk>.
Orders might cadence through the year.
Outline some expectations there.
Yes, I don't know when it's going to happen but.
In prior recoveries when theres been.
Demand has outstripped supply and lead times get extended.
Then there is a period of time, where the underlying demand is still really solid but you see a dip in the order book for a period of time, because the lead times are starting to come back in and starting to shorten up.
The consistency of supply gets better and so I anticipate we will see the same thing at some point, we will see a decline in orders and people will panic and go the world's coming to an end it'll be like chicken little when in reality.
<unk> the underlying demand is still there and.
And that the world is not coming to an end so there'll be an overshoot and then people will realize that the economy is still pretty solid or the industrial economy is still there and then it will recover so I think that's we've seen that in prior I've seen it.
I think I'm older New Jake but.
I've seen it a few times in my life.
People panic and for unnecessarily.
Got it yes, I think thats, a pretty safe assumption around.
To run the math on the differences.
Yes.
And then just one last one here more of a modeling question.
Sequentially.
You've kind of answered that before in E&S, but are you expecting margins to follow basically normal seasonal cadence here and does that imply.
That margin.
Grow here on a sequential basis.
Yes, we expect as they continue to work through their backlog that the margins will continue to expand and get back up to.
Yes.
More historic levels.
As we continue to work through various electronics.
Complexities in the supply chain side, and some of the cost materials and getting that pricing pricing through but that is our our working expectation.
Alright, Thanks, guys I'll jump back in the queue anywhere announcements.
Okay. Thanks Jake.
Thank you Jake.
The next question is from John <unk> of Sidoti.
John Your line is <unk>. Good morning, guys. Good morning, guys I.
I apologize if you addressed address this but.
Last quarter, if I recall, there was revenue deferred from the fourth quarter.
2022, and that was a partial explanation for the for the book to Bill is that still the case did you deliver on the deferred revenue and books and bookings are fundamentally solid or is there still a case of kind of this.
Pushing to the right of the revenue.
Sure.
No.
When I look at the order book.
Assumption is that there is still some portion of it is people trying to build inventories trying to take.
Account for longer lead times.
And just want to have things just in case I think when.
When you look at the shutdown of the Shanghai Port.
So a lot of stuff is going on in a bowl instead of Shanghai, but theres still going to be some supply disruptions. So people are still concerned.
<unk>.
And so theres, a little bit of that but right now I think we're at the point, where most of the order book is truly the underlying demand and that is still exceeding our shipments by.
<unk>, 15% or so our past due orders.
We've gotten a better handle on our lead times and.
Our delivery performance is better.
So, but but I believe that the underlying demand is the bulk of our of.
Our current order rate and it is still in excess of our shipments.
Yes.
I hope that answers your question.
Yes.
No.
I'm really just kind of looking to see if you satisfy the demand that you pushed when he talked about in the fourth quarter and whats. The current scenario look like so it definitely has answered the second part.
Did you catch up on the stuff that was deferred in the fourth or no.
Well I think the orders were in excess and we built past due backlog in the fourth quarter. So I wouldn't say, we catch up I'd say, we held our own kind of treading water, where we are right now versus still continuing to sink.
We're now back up to the surface and able to breathe.
Okay.
Fair enough.
And in regards to the realization of pricing.
Keeping.
Neutral if you will.
How.
Forward, we did we pull up the ability to recapture the price cost profitable.
Yes, it's a price cost, we still lagged about 40 basis points in the quarter. So we made.
Some really good progress from where we were we were about 100 basis points in Q4.
Alright, merrily on the electronics side of things and we've taken actions, we saw much better than we anticipated pricing flowing through in Q1, and we expect that to continue into Q2.
And then as we work through the backlog and then in the.
Back half of the year as we continue towards year end.
Get backup to ahead of the price cost and start <unk>.
Contributing some additional margin.
Okay, great. Thanks, guys for taking my questions I appreciate it.
Yes, Thanks, Sean.
Thank you John the next question is from Jeffrey Hammond of Keybanc capital markets. Jeffrey Your line is open.
Hey, guys I just wanted to follow up just kind of.
I wanted to see kind of what youre seeing maybe more near term from Europe pretty.
Obviously, good performance in Q1, but with the.
The war impacting the economies there I'd love to hear kind of what youre seeing more near term.
Yes, there is a few.
<unk>.
Markets that are being impacted negatively but surprisingly, it's not as bad as <unk>.
I would have thought.
So.
So a little bit of an impact and certainly more uncertainty.
But.
But.
Right now it's the incoming orders are still very solid.
Okay, great. Thank you.
Thank you Jeffrey Thanks, Dave.
Yes.
There are no further questions waiting at this time, so I'll hand, the call back over to Carl for closing remarks.
Okay. Thanks, Sam and thank you all for joining US today, we look forward to speaking with many of you in the weeks ahead, including next week's Oppenheimer industrial growth conference.
<unk> will be presenting on Tuesday may 3rd at 11, 15, Unfortunately, I will be traveling and unable to attend.
But I want to thank you again for your time and this concludes today's call.
Yeah.
That concludes the Altra industrial motion first quarter 2022 earnings call. Thank you all for your participation you may now disconnect your lines.
Okay.