Q1 2022 SPX Corp Earnings Call
[music].
Okay.
Thank you for standing by.
Welcome to the SPX Corporation's first quarter 2022 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session. Jessa question. During the session you will need to press star one on your telephone.
If you require assistance. Please press star zero I would like to hand, the conference over to your Speaker today, Paul Clegg, Vice President Investor Relations and Communications. Please go ahead.
Thank you and good afternoon, everyone. Thanks for joining us with me on the call today are gene Lowe, our president and Chief Executive Officer, and Jamie Harris, Our Chief Financial Officer.
A press release containing our first quarter results was issued today after market close.
You can find the release and our earnings slide presentation as well as a link to a live webcast. This call in the Investor Relations section of our website at SPX Dot com.
I encourage you to review our disclosure and discussion of GAAP results in the press release and to follow along with our slide presentation during our prepared remarks.
A replay of the webcast will be available on our website until may 11.
As a reminder, portions of our presentation and comments are forward looking and subject to safe Harbor provisions. Please also note the risk factors in our most recent SEC filings, including our disclosures related to the ongoing COVID-19 pandemic.
Our comments today will largely focus on adjusted financial results and comparisons will be to the results of continued operations only.
You can find detailed reconciliations of historical adjusted figures to their respective GAAP measures in the appendix to today's presentation.
Our adjusted earnings per share also excludes non service pension items amortization expense and investment gain certain favorable discrete tax items and other strategic related items.
Finally, we will be conducting virtual meetings with investors over the coming months, including at the loop capital Investor Conference in New York on June 2nd.
With that I will turn the call over to James.
Yes.
Thanks, Paul Good afternoon, everyone and thank you for joining us.
On the call today, we will provide you with a brief update on our consolidated and segment results for the first quarter.
We will also provide an update to our full year guidance, which includes the impact of our most recent acquisition.
Now I'll touch on some of the highlights from the quarter.
We had a stronger than anticipated start to the year exceeding the overall expectations that we laid out during our last call in February .
As expected, we continued to see challenges related to production and labor, but we've also seen improvements throughout the quarter and expect further improvements during the remainder of the year, particularly in the second half.
During the quarter, we continued to execute on our value creation framework with another strategic acquisition that further builds and strengthens our AIDS to navigation or <unk> business, and our detection and measurement segment.
We believe that international tower lighting for ITI <unk> is an excellent strategic addition to our existing <unk> platform.
Today, we are updating our full year guidance for the acquisition of <unk>, which we completed on March 31.
We are on track to achieve solid earnings growth with growth for the full year approximately 16% at the midpoint of our updated range.
As a reminder, when we initiated our 2022 guidance, we indicated that Q1 would be low versus the prior year due to the timing of certain project revenue in detection and measurement.
The impact of a customer rate case on our <unk> business.
For the quarter, our operational outperformance versus expectations was due to upside in our location and inspection and transfer quotation platforms.
Including the impact of some earlier than anticipated transportation deliveries.
Overall, we continue to see strong demand across our markets and managing production constraints remains a key driver of our full year performance.
In summary, I am pleased with our results for the quarter.
And our positioning for the future.
With significant capital availability and attractive M&A pipeline and several ongoing organic growth and continuous improvement initiatives SPX is poised to continue driving value for years to come.
As always I'd like to touch on our value creation framework.
We continue to make progress in a number of areas during Q1.
Our digital initiative progressed further during the quarter, particularly in our location and inspection platform, where the value proposition of our data offerings is gaining significant traction with utilities and other customers.
Our continuous improvement or Ci initiatives remain critical.
To our management of the current supply chain labor constraints as.
As well as our integration processes for new acquisitions.
Several of our Ci initiatives over the last two years have been focused on throughput and sourcing.
Which have helped us to navigate the current environment.
During Q1, we saw the benefit of these initiatives and the ability of our businesses to meet customer demand in the face of continued challenges.
Our ESG initiative also continues to gain traction in shares many benefits for the Ci initiatives.
As an example, our primary U S cooling plant drove savings in net input costs when they invested in a recycling process to eliminate 950 tons per year of <unk>.
Wood waste from pallets in cranes.
They also worked for third party to transform 625 tons per year of PVC scrap into eco friendly decking material.
We also continue to advance our growth initiatives in Q1 further building out our <unk> platform with the acquisition of <unk>.
<unk> adds approximately $18 million of annualized revenue to our detection and measurement segment at accretive margins.
It strengthens our terrestrial lighting business flash technologies with a broader set of high quality obstruction lighting as well as parts and services, including value added monitoring and communications.
We are very pleased to welcome the <unk> team to the <unk> family.
Since our first acquisition with within our <unk> platform in early 2019, we have.
Transformed a roughly $50 million north American obstruction lighting business into a $150 million global end to end AIDS to navigation market leader.
With our enhanced scale global presence and broad technology and product expertise, we offer our customers greater value added solutions that are helping us win in our end markets.
Before moving on to Jamie's discussion of our results I would like to take a moment to review our capital deployment strategy.
Since early 2021, when we committed to the process of selling the transformer solutions business. We have made four highly strategic acquisitions within our HVAC and detection and measurement segments.
ECS Cincinnati fan.
Al.
These additions expand our market presence and our growth and margin profile, while creating significant opportunities to benefit our customers employees and shareholders.
Our transformer solutions was a profitable business for us and experienced cyclicality and its results.
As we discussed at the time of the disposition our strategic goal was to redeploy capital into higher growth higher margin businesses that are more aligned with our strategic platforms.
As we monitor the strategic redeployment of this capital on a pro forma basis. We believe we have replaced approximately 60%.
Transformers average segment income.
We are especially pleased that we've been able to acquire businesses with significantly higher margins and growth opportunities at reasonable multiples.
We are very excited about our progress to date and our opportunities to continue executing on the strategic transformation of SPX as we work towards the 2025 targets that.
That we shared in June of 2021.
Our business development team remains busy and we continue to have a strong front log.
Of acquisition prospects.
And substantial capital available to deploy.
And now I'll turn the call over to Jamie to review our financial performance in detail.
Thank you Jamie.
As gene noted our adjusted EPS of <unk> 40.
<unk> internal modeling previously communicated expectations.
As discussed last quarter, our Q1 results were constrained by the timing of project orders in content and the impact of a rate case in our <unk> business.
In addition to the segment income drivers.
We will review later on below the line items had a modest impact on a year on year earnings and lower corporate and interest costs and higher tax rate.
Overall, we are pleased with our performance for the quarter and believe we are well positioned for the full year 2022.
A review of our adjusted segment results reflects stronger than anticipated performance, but as expected with an overall decline in segment income and margin when compared to the prior year.
Revenues increased six 9%.
Revenues from the acquisitions, let's see light ECS in Cincinnati fan accounted for nine 9%.
While our organic revenues decreased two 5%.
As anticipated organic revenue decreased due to lower detection and measurement revenue.
It was better than expected.
It was partially offset by price increases.
<unk> cost of modest margin headwind for the quarter for the full year. We currently anticipate price cost will be a modest tailwind.
Lower organic revenue combined with production constraints in APAC declined seven 4 million in segment income at 350 basis points decline in margin.
Segment revenue income and margins reflect the blended impact of acquisitions and lower overall organic revenue.
Let's now review the details of our segments.
Okay.
In our HVAC segment for the quarter revenues increased 10% driven largely by our acquisition.
Fan and a modest organic increase.
While overall demand was strong across our end markets. The impact on our result, moderated by supply chain challenges, primarily in heating and labor in both heating and cooling org.
Organically revenue declined modestly with stronger pricing offset by moderate declines in volume.
Key revenue grew solidly with strong revenue and strong growth in <unk> revenue largely due to pricing, partially offset by lower electrical heat volume and revenue.
Adjusted segment income margin decreased by $2 $4 million and 240 basis points.
As mentioned, while managing these constraints remains a critical factor in our full year performance, we have seen and continue to see some improvement in both areas.
In detection and measurement revenues were up two 2% year over year, the acquisitions of <unk> and Etfs drove a 10, 3% increase while organic revenues declined 7%.
We also experienced a higher than typical currency impact due to the strengthening U S dollar.
A 1% translation headwind.
As we indicated would be the case the decline in organic revenue will be the determinant contact project shipments and lower you won't see revenue.
Even though the performance for Q1 exceeded our expectations due to strong located so early delivery of transportation project initially anticipated for mid year.
Adjusted segment income decreased $5 million, while margin decreased 480 basis points, even lower revenue, particularly the timing of content projects, just curious high incremental margin.
For the remaining quarters of the year, we continue to expect higher year on year segment.
Overall, we continue to see significant demand in both our run rate and project business.
The primary driver of our full year results for the detection and measurement segment being the timing of project orders and shipments.
Turning now to our financial position at the end of the quarter.
Our balance sheet remains strong and we continue to have more cash than debt.
Notable cash uses this quarter included $42 million acquisition of IPO.
Strategic investments in inventory associated with managing supply chain constraints and various other items associated with discontinued operations.
And reducing our exposure to legacy liabilities.
For the full year, we continue to anticipate a solid free cash flow performance with the bulk of the cash generated in the second half of the year.
Overall, our balance sheet and available liquidity place us in a strong position to continue our organic and inorganic growth initiatives.
As a reminder, we have a $100 million share repurchase authorization, we have in place a program under which we may engage when appropriate and opportunistic share repurchases included on the open market as part of our capital allocation policy.
Moving onto guidance.
We have updated our full year 2022 got it should reflect the IPO acquisition, which we anticipate will add approximately <unk> <unk> per share to EPS based on nine months of ownership.
While our prior guidance included a modest amount of direct Russia, Ukraine revenue exposure, we have removed this from our current guidance.
All set by better operational execution trends.
We now estimate adjusted earnings per share in the range of $2 55 to $2 85. This represents an increase of about 16% at the midpoint $2 70, compared with 2021 adjusted EPS of $2 33.
As a reminder, we have approximately $270 million of cash on the balance sheet. If we use our cash to repay debt our midpoint EPS would be approximately <unk> 11 per share higher.
As always you can find modeling considerations in the appendix of our presentation.
<unk> made some modest adjustments to interest costs tax rate and other factors.
These have no material effect on our net results.
I will now turn the call back deeper review of our end markets and his closing comments.
Thanks, Jamie.
We continue to monitor and manage through macro risks, including supply chain input cost inflation labor and the exacerbating effects of geopolitical tensions and regional pandemic restrictions.
We also remain encouraged by the strong level of demand and the positive trends. We are seeing in our end markets. These include growing opportunities related to spending on infrastructure.
And digital offerings and the efficiency benefit they provide and a skilled labor shortage market.
And HVAC several macro indicators point to continued strength in non resi activity, particularly in the U S. As they pertain to our cooling and commercially focused heating businesses.
And our boiler business, which encompasses both residential and nonresidential.
We continue to see strong order demand across the board.
In detection and measurement locator demand continues to reach new levels of strength and to benefit from our internal growth initiatives.
Overall etan demand remained steady.
We're also seeing growing interest in our innovative comment or communications intelligence solutions, we are assessing the timing of potential customer needs.
Yeah.
In summary, I am pleased with our better than expected Q1 performance and proud of the way. Our team has continued to execute on our initiatives for future growth.
I am excited about our recent acquisition of <unk>, which further extends our <unk> platform and creates additional growth opportunities and value for our customers.
I'm also encouraged by our setup for the remainder of the year, while remaining vigilant in addressing the current macro risks.
With a strong balance sheet and highly capable experienced team I'm looking forward to the opportunities that lie ahead, as we continue to create and deliver value for shareholders.
And now I'll turn the call back over to Paul.
Thanks, Jim Operator, we are ready to go to Q&A.
As a reminder to ask a question you will need to press star one on your telephone.
Troy a question just press the pound key.
Please stand by while we compile the Q&A roster.
Our first question will come from the line of Damian Cross from UBS. Your line is open.
Hi, good evening guys.
Hey, Damian Hey, David.
Gene you mentioned.
Yeah, we're still seeing.
No challenges out there in the supply chain, but you are seeing some signs of improvement could you maybe just talk a little bit more about that where are you seeing the improvement versus where is it is it still a struggle out there.
Yes, I think.
At a high level, what I would say is.
Internally, what we have done and how we've managed.
I'd say that we feel very good about the actions that we've taken and the the countermeasures we have put in place.
From a whole host of different levers we've been pulling from.
Investing in some safety stock.
Engineering alternative components solution.
Looking at our reorder rates in terms of how we manage.
Our our orders with data and analytics across all of our businesses has a lot of levers that we've pulled.
And I would say that combined with what we're seeing is a little bit of modest improvement in the market overall I would say the one.
Item that would be.
The headwind that we are seeing right now would be some of the China Lockdown.
In Shanghai with Jamie you spent you spent an enormous amount of time on this do you want to give some color here, yes. Thanks gene.
We are then we are seeing modest improvement.
If you look back.
Really felt supply chain more prevalent in our cooling.
I'll include some labor there as well.
Stainless and in our heating with just general components.
On the D&S side.
Managed it very well it hasnt, causing disruptions we continue to do that.
Jim mentioned some of the kind of operational steps that we've taken.
You will notice on our balance sheet.
And the investment in some safety stock.
Year over year, we were about $22 3 million.
More investments in inventory that was intentional.
To try to get ahead of some of the areas that we saw some potential shortages coming in.
We have.
So don't have a lot of disruption from an availability standpoint from Russia, and Ukraine situations, you mentioned, China, we are experiencing some slowness in ocean freight and so thats something we got to be very diligent on and on order times and our lead time to build out further than what would typically been the case.
But overall I think we're seeing against the modest improvement if you looked at it from a year ago is clearly challenge. If you look at it from last Q3, when we first raised the issue on the call.
<unk> seen some improvement there.
And I'd also say somewhat correlated Damian on the labor side.
We are seeing some improvement across our facilities and a lot of our countermeasures had been making making some impact. So so yeah. We're also seeing some modest improvement there as well.
And then another thing I might add.
If you look at cost.
Back in <unk>.
And the items that are prevalent in our supply chain.
Year over year costs are still up.
Inefficiently.
But if you look over the last 90 days, we are seeing pricing.
Of the commodity underlying commodities go down with the exception of those items.
<unk> had been impacted by the Russia, and Ukraine nickel.
<unk> doubled quickly after the first basin.
That down it's up about 20% since that time of course crude oil is up so those things are directly related we're seeing some continued price increase but in many other areas we are exiting.
<unk> come down.
Over the last 90 days, which is encouraging.
That's helpful.
That's actually a good segue to my next question. Thank.
Thank you mentioned earlier that you are actually expecting price cost to be a tailwind for the year.
Interesting.
Considering there is.
I think general inflationary pressure still out there so.
Have you have you been aggressive on pricing or is it.
I think you'd just kind of alluded to that you're maybe actually expecting to have lower costs.
Material costs through the rest of the year and is that kind of.
Reflecting your updated margin guidance.
Yes, I would say we have been aggressive on price.
Last year I think for everybody. It was hard to keep up with some of the some of the cost pressures that we've got into a really good cadence.
Ben.
Again aggressive to cover costs with our with our customers.
Given the fact that we measure.
<unk> highly engineered products, our aten specially ordered that gives us some some some better pricing power in the marketplace. If you will.
That said.
The cost we have seen some decline over the last 90 days.
The base commodity.
We still have some backlog to work through.
But the good news is our backlog was up substantially year over year, but there is some backlog to work through with some pricing pressure on it.
And to the point about seeing costs go down.
We are looking at that as part of our guidance, we've taken what we see the risk factors.
Price escalation and availability as well as potential.
Pick up because of some maybe some cost reductions all of that baked into our guidance.
So I'd say we're.
We're optimistic about it.
A lot of work to do.
Great. Thanks for all the details I'll get back in the queue.
Thanks, Jamie.
Our next question comes from the line of <unk>.
Bryan Blair.
Begin.
Brian Your line is open.
Bryan Blair from Oppenheimer.
Alright. Our next question comes from the line of Steve <unk> from Sidoti you may begin.
Thanks evening chain Jamie.
Wanted to ask you it sounds like demand remains very healthy I'm trying to think about.
Risks of a rising rate environment and impact down the road on demand I know you have significant aftermarket exposure significant infrastructure exposure, which helps you into 2023, but how are you thinking about the demand equation and maybe particularly on non resi construction and the environment, we appear to be anchoring.
Yeah sure, Steve I'll take that I think.
You know if you think about our HVAC business I would say.
It's in a very healthy position. So this is approximately $900 million business.
More than $700 million of that is non resi and all of the submarkets that would be a part of that hospitals data centers commercial.
If you look at the Dodge Index.
The latest projections are about 9% growth in 'twenty, two and around 11% growth in 'twenty three.
Additionally, some of the.
The more leading indicators are more canary in the coal mines. There also look positive that would be the.
The Dodge momentum index.
The Abi architectural billings.
So overall I would say we feel good.
Obviously, we have to keep our eyes on on.
On the macro, but if I look across our HVAC businesses, we feel very solid.
The other question that we always look at on our hydronic side, our boiler side.
Is the stocking of the channel.
Channel Overstock under stocked and we actually feel like we're in a good position there.
Channels very much wanting more of our product and.
To be ready for this year, that's something we'll have to keep our eyes on in 2023 to make sure. The pull through demand is there, but as you know that's a good chunk of that the big portion of that business is largely replacement.
So when I sit and look at the HVAC segment I actually feel really good about what we're seeing over the next year.
Year, and a half with how things are forming in front of us.
On the D&S side, I would say, it's overall very healthy.
The run rate is very solid.
Our projects are strong and our backlog supports 22.
And I would say what I see today.
Sets us up very well for 'twenty, three and beyond some of the project businesses I'll call out transportation in context, specifically.
Have a higher amount of activity and we have some larger wins.
And some also some impacts.
From the infrastructure Bill that we see starting to manifest so I think.
When I look at Dnm actually feel very positive about where that's going now.
I'll caution all of this with if everything were to slip into a recession, that's something we have to keep our eyes on.
As you know from.
When.
Covid had also when we've looked at this in two.
2008, our businesses.
Tend to be more resistant to recessions because a lot of our products our safety products are manned mandated by government.
Regulations and so.
The products are less discretionary that's that's.
That's not the case across all of our businesses, but theres a substantial amount so.
As a reminder, when we went through the first year of Covid actually are our earnings are flat.
Despite a lot of markets facing some some real headwinds so.
Where we sit today, we feel good.
And we are keeping our eyes on.
If there is any economic impacts.
And smartly managing that if.
And that were to happen.
Okay.
Tastic and if I could then use that as the framing device for the question in terms of pipeline.
What's out there and do you see any impact on maybe lower prices for certain acquisitions given.
The environment is certainly the idea that there's more risks out there.
Yes, that's a good question I think overall, we feel really good about our our growth strategy. We closed IPL. That's our 11th deal that was a great strategic fit they've got really good technology really good network operation Center monitoring capabilities and as you know our average over our <unk>.
11 deals has been 10 five times pre eight five times post.
I think.
We feel really good about about that pricing, we've been very disciplined there.
I don't see changes.
At least from what we've seen in front of us below that we actually see and particularly in our detection and measurement businesses and you get into some larger sizes are much much higher multiples.
We're fairly careful and focused about where we build out our platforms, but.
Right.
If I look at it if you look at our our HVAC and detection measurement businesses. These are in the neighborhood of $700 million at the time of spin.
Six five years ago.
Sitting today at about $1 billion for <unk>.
Right now we're sitting here with as you know an incredibly strong balance sheet.
So we really have an attractive opportunity in front of us and I would say the areas that we see a good amount of activity would be in the location and inspection platform. We see some opportunities there to continue building I'd say, our cooling are engineered air quality.
I'd say there is good opportunities for growth and Adjacencies, there and then our contact business, where we did our first bolt on last year.
Which is performing.
Which is really opening some doors, we're really seeing the synergy opportunity there.
We actually see some nice opportunities there as well so those would be I'd say three of the platforms that we see some some attractive opportunities in front of us, but overall, we feel really good and we feel like we're in the early innings of our of our value creation model there.
Great. Thanks for the color Jim.
Sure.
Our next question comes from.
Well.
Let's talk from Seaport you may begin.
Hey, Thanks, Good evening guys.
Good evening.
Hey will.
So.
I would like to ask first about the.
The <unk> business.
It sounds like the macros going in the right direction.
So at this point now that we've got three.
Three four months under our belt.
How are you feeling about the.
Our guidance range.
Is there enough macro out there enough projects that are fully up to Q that.
You'd be towards the mid range or high part of the range any thoughts there.
And youre talking about engineered quality or Cincinnati fan.
Specifically, we're talking about.
I'm talking about the HVAC segment as a whole Oh sorry.
I'm, sorry, yes, the HST $5 million to $890 million in sales.
Yes.
Just wondering.
How are the projects filling up it sounds like the macros going in the right direction.
Yes.
I guess, maybe the question is.
It takes us to the low end of that range and what gets us to the high end of that <unk> guidance range.
Yes, why don't I start there I would say on the demand side and as Youll see in our bookings and our backlog we are winning in the markets and we feel very.
Very good about the demand profile as well as the value proposition of our products and I thought you said EAA Q engineered.
Engineered our quality our newest product line, where we're also seeing very strong demand there since we've taken them over over the past quarter. So I would say that the constraining factor for us is not going to be orders its going to be getting the product out the door and so Jamie or Paul do you.
Kind of give a little more color on what it would take for those things, yes, I would say.
Bruce what gene said I think.
What might take us to the low end of the range is.
Obviously, the slowing of the macro economy slightly but we do have a lot of order books.
Fleet those.
Really the labor the labor pool, being able to get the labor and productivity.
Continuing difficulties in supply chain, but take us to the lower end I think what would take us to the higher end.
As we really the same factors going in a positive direction I think if we can continue some of the momentum that we are beginning to see build with some labor availability continue to see some supply chain improvement.
That would move us towards the top end and I think if we were to see prices.
Moving in a positive direction down with some of our key components that would also help us.
One of the constraints that we have from a from a margin perspective right. Now is we do have some backlog to work through.
At.
Current pricing current calls, but some pricing that was put in place back in the fall. So as we as we see some of our cost tends to move down that would clearly help us move towards the upper end.
Okay, great. Thanks for that.
And switching over to the Dms segment.
What do you attribute the locator growth too and is that something that's sustainable in the second quarter second half.
Yes, I think.
Location and inspection.
Feel really good about that platform as you know that's our <unk>.
Dominant platform and detection and measurement, that's let's say, 60% of our or more than half of our of our segment I would say our locators.
I would include ground penetrating radar.
As well as our <unk> brands really have just on very nicely I think they've done good on innovation and I think they've done a really good on digital we have rolled out a new digital solution there for that with our largest customer thats going very well and we are seeing.
A good amount of activity there.
And a very strong interest with some other customers.
Go to our Qs brand really the underground robotics, we also have a digital offering where we had a cloud offering that we introduced last year that we won double digit customers and it is continuing this year and even even moving faster so.
Overall, I feel I feel very good about where we are there and the opportunities we see in front of us.
Okay great.
Okay and also in that.
PNM you mentioned the project work that.
The debt.
No.
Theres a good funnel there for projects.
We do see orders come in would those be for shipment at the end of the year 2023, what do you think the timing could be.
So so some of the bigger ones that we see in some that we've.
We are progressing nicely on have been verbal dawn.
One I would say the demand profile for transportation has increased the run rate and then we're seeing more just of the midsized projects there that would be a project that could be.
$1 million to $5 million, let's say, but then they're very large projects at $15 million plus what we call. The megas, we're seeing more activity there and we feel very good.
A number of those.
What I would say is for those I can think of several of those that were currently in the process of.
We would likely.
Be awarded.
<unk> booked in this year, but the in terms of revenue impact I'd say.
Say it would be a combination of 2023 and 2024, if you look at it.
<unk>.
It's going to be a really nice tailwind for us.
Transportation business and then similarly.
The one business that we've called out it has been I would say.
Theres been very flattish on growth has been our comtech business.
And where we see sit today.
We have seen.
Hey, a nice tick uptick in.
And some of these larger projects and so this is something.
That we're tracking as well so yeah, we feel.
We feel like the projects that we have in front of us for 2022, we feel very good about.
And then as we look ahead to 'twenty three 'twenty four we actually think that's going to be a tailwind for us.
Okay got it okay. Thank you.
Paul.
Yeah. It was again another one for any questions. Our next follow up will be from the line of Damian Karas from UBS you may begin.
Hey, just a few follow up questions here.
Sure.
So the last few quarters I recall, you calling out the backlog.
Maybe you could just I was wondering if you could give us an update there have you started working down that.
That backlog are still building out.
Yes, I'd say, we're working we're working it.
Sequentially as an example.
Our backlog.
The year sequentially our backlog.
On an organic basis taken out acquisitions was up.
10% to 15%.
Range, which is which is good.
We're able to get through some backlog, but I think they're really good news as we replace that backlog with new orders.
And as an example, our order base footprint fleet.
It was actually pretty flat.
And our heating side of the business.
Coming out of a strong demand quarter.
Moving into our strong order quarter in Q1 actually it makes me feel really good about the demand profile there.
So I would say.
Order book is good we are working down the backlog not as rapidly as we would like.
They've had some productivity constraints from the labor and some of the components, but I'd say, it's growing well more so because the demand.
So that was solid on production.
One thing I would also add as there was.
A pretty fair amount of Covid impact in January so if you look at the amount of quarantining and some of the challenges there. It was very disruptive and if you look at the run rate that we're currently tracking at in February and March and April .
We are working down more of that backlog, so we actually.
Believe we are on a more favorable trend there. So so I think I think we're still winning in the in the end markets and we are starting to make a dent in that and that backlog, but it did grow.
So it is.
That's the good news bad news the good news you win a lot of business.
But you still got to get it out the door and I think we are making progress towards accelerating that.
Got it makes sense.
And then Jamie you mentioned.
If you pay down the debt that's <unk> of additional EPS and then you kind of dangle. This carrot out there on the $100 million of share repurchase authorization.
When when you deem appropriate.
So I'd just ask you guys.
When is the appropriate time.
Stocks corrected.
A good debt you've got net cash on the balance sheet. So.
And you guys asked when would be the appropriate time.
Yes, that's great question.
We have a lot of feedback about the share repurchase from folks in.
Look we've been watching that our sales stocks down 25%, 30% off its high.
We felt like the stock is.
Have a good value in it.
We have moved to a.
Not only do we have the authorization we have all the execution mechanisms in place we've got some price targets in our mind about what that number should be in.
We will watch it closely and we'll be in the open market as we did this.
What I would what I would also say Damon is.
As you know our focus since the spin has been on investing for growth. We think we have a really good.
Flywheel here and particularly with the completion of the disposition of really our power, we really have some attractive segments.
But as you know we have <unk>.
And our.
Well more than that in terms of.
Our balance sheet and I actually think that.
Yes.
Share repurchases as a very logical addition to our portfolio capital allocation.
Thank the vast bulk of our investments will be on growth, but particularly with where our share price is today I think it's very logical to have that as a portion of our.
Capital allocation program.
Thanks, again have a great evening.
You too Jamie Thanks, Jamie.
Thank you I'm not showing further questions in the queue I would like.
To turn the call back over to Paul Clegg for any closing remarks.
Okay. Thank you everybody for joining us and we look forward to catching up again next quarter have a great evening.
This concludes today's conference call. Thank you.
You may now disconnect everyone have a good day.
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