Q1 2022 Kadant Inc Earnings Call
[music].
Good day and thank you for standing by welcome to the Q1 2022 Cadent, Inc 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 to ask a question. During the session you will need depressed power one on your telephone.
Please be advised that today's conference is being recorded if you require any further assistance. Please press star Zero I will now hand, the conference over to your first speaker today, Michael Mckenney Executive Vice President and Chief Financial Officer, Sir you may begin.
Thank you Peter Good morning, everyone welcome to cadence first quarter 2022 earnings calls.
With me on the call today is Jeff Hall, our President and Chief Executive Officer.
Before we begin let me read our safe Harbor statement.
Various remarks that we may make today about cadence future plans and expectations financial and operating results and prospects are forward looking statements for purposes of the safe Harbor provisions under the private Securities Litigation Reform Act of 1095.
These forward looking statements are subject to known and unknown risks and uncertainties that may cause our actual results to differ materially from these forward looking statements as a result of various important factors, including those outlined at the beginning of our slide presentation and those discussed under the heading risk factors in our annual report.
<unk> Form 10-K for the fiscal year ended January one 2022, and subsequent filings with the Securities and Exchange Commission.
In addition, any forward looking statements we make during this webcast represent our views and estimates only as of today.
While we may elect to update forward looking statements at some point in the future. We specifically disclaim any obligation to do so even if our views or estimates change.
During this webcast, we will refer to some non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is contained in our first quarter earnings press release, and the slides presented on the webcast and discussed.
And the conference call, which are available in the investors section of our website at Www Dot Cadent dotcom.
Finally, I wanted to note that when we refer to GAAP earnings per share or EPS and adjusted EPS on this call referring to each of these measures as calculated on a diluted basis with that I will turn the call over to Jeff Powell, who will give you an update on cadence business and future prospects.
During Jeff's remarks, I'll give an overview of our financial results for the quarter and we will then have a Q&A session Jeff.
Thanks, Mike Hello, everyone. Thank you for joining us this morning to review, our first quarter results and discuss our business outlook for 2022.
We had an excellent start to 2022 with high demand for parts and robust capital project activity, which led to record bookings revenue and adjusted EBITDA in the first quarter.
Business activity was strong in most regions of the world a new order activity was driven by solid demand across all our operating segments.
Capital project activity continued its momentum from last quarter and this was especially true in our industrial process segment, which had another great quarterly performance I will provide more details on that in a review of our operating segments.
Overall, our healthy balance sheet and strong cash flow have us positioned well to capitalize on growth opportunities.
Before moving onto our Q1 financial performance I want to comment on the global supply chain and how we are continuing to manage this complex situation.
Ongoing constraints throughout our global supply chain have continued to push out expected deliveries of materials and components.
These challenges have been further affected by the more recent shutdowns in China with that country's busiest ports severely limited for an extended period.
While our decentralized structure helps us to alleviate these temporary shutdowns and logistical delays.
The interconnected global supply chain continues to be a challenge.
Significant work to keep our delivery promises to our customers.
Operations teams are proactively managing these issues and working tirelessly to meet our customers' needs.
This resilience is reflected in our first quarter operating results and the solid execution by our businesses.
Turning now to slide six and our Q1 financial performance.
You can see we had significant increases across these financial metrics compared to Q1 of last year.
One of the more notable highlights was our record bookings performance up 30% compared to last year.
Q1 revenue was up 31% compared to the first quarter of 2021 to a record $226 million, excluding acquisitions and the unfavorable impact of FX revenue was up 22% compared to the same period last year.
Aftermarket parts revenue was up 24% to a record $146 million and made up 65% Q1 revenue.
Improved operating performance led to our adjusted EBITDA margin of 22% and record adjusted EBITDA of $46 million.
All of our operating segments delivered excellent adjusted EBITA margin performance, despite inflationary pressures for materials and ongoing supply chain issues.
We generated $3.53 of GAAP diluted EPS, which included a gain on the sale of the building and our adjusted EPS was up 49% to $2 28.
Cash flow in Q1, which is historically a weaker quarter increased 24% compared to the same period last year to $24 million, while our free cash flow was $21 million.
All three of our operating segments experienced increased business activity and delivered solid financial results I'll review these segments mix.
Our full control segment achieved its third consecutive increase in quarterly bookings and set a new bookings record at $100 million.
This performance was led by strong contribution from aftermarket parts orders and our recent acquisition.
Excluding our acquisition and then favorable impact of FX bookings were up 18% compared to the same period last year.
Q1 revenue was also a record up 35% compared to the first quarter of last year $86 million, while organic revenue, which excludes acquisitions and FX was up 18%.
Improved operating leverage led to a 33% increase in adjusted EBITDA compared to Q1 of 2021, and an adjusted EBITDA margin of 28%.
Although we expect to deliver another record setting performance. This year in our flow control segment. The strong start to the year is expected to moderate as the year progresses for several reasons.
The first one is seasonality as many of you know the first quarter of the year is historically, our strongest quarter in terms of bookings as our customers prepare for annual spring maintenance shutdowns.
Second strengthening the economic headwinds and the Russia, Ukraine conflict lead us to believe business activity in the latter part of the year could moderate.
That said, we believe the fundamental drivers of our core end markets remained strong.
Turning now to our industrial processing segment, we continued to experience strong demand for both capital and parts in the first quarter.
Q1 bookings increased 23% compared to the prior year with robust capital project activity in the recycled packaging and wood processing sectors, leading the growth.
Revenue in this segment increased 35% to $93 million as our customers continue to experience strong end market demand and maintained high operating rates to meet that demand.
Good execution and improved operating leverage led to a 260 basis point improvement in our adjusted EBITDA margin.
Our wood processing and packaging customers have been investing at an accelerated pace over the past 18 months to meet customer demand.
As more capacity comes online later this year.
Capital project activity is expected to return to a more balanced level compared to the record setting pace, we had been experiencing.
An area, where we are seeing growing interest in the application of OSB as a substitute for medium density Fiberboard also known as MTF used in furniture.
This is particularly evident in China, where a growing number of furniture manufacturers are exploring the use of OSB in furniture production.
So far this year, we have booked orders for six stranding systems for producers in China and are in active discussions for several more projects.
We currently have nine of our standards operating in China and once these six additional machines are up and running we will have 15 OSB production lines operating in China. This emerging market segment its potential develop rapidly once the application has proven successful and we are encouraged by the activity already this year.
In our material handling segment strong demand for our pillars in bulk material handling equipment led to record bookings of $60 million in the first quarter.
While this increase benefited from our recent acquisition organic bookings were up 23%.
Demand for our high performance pillars was excellent as box plants and distribution centers continued to invest in their facilities.
Revenue increased 20% to $48 million in parts revenue in the first quarter made up 61% total revenue.
Excluding our acquisition and FX Q1 revenue was up 4% compared to the relatively strong prior year quarter.
Adjusted EBITDA margin increased 230 basis points and is expected to benefit from improved operating performance as the year progresses.
As we look ahead to the second quarter of 2022 and the full year.
Ongoing project activity is healthy and we expect industrial production to maintain its momentum.
Our record backlog and ability to generate robust cash flows has us well positioned to capitalize on opportunities that may emerge as the year unfolds.
We expect to deliver record financial performance again, this year and are raising our full year 2022 guidance, Mike will discuss this in more detail and with that I'll turn the call over to Mike.
Thank you Jeff.
I'll start with some key financial metrics for our first quarter.
Consolidated gross margins were 43, 4% from the first quarter of 2020 to down 50 basis points compared to 43, 9% in the first quarter of 2021.
This decrease was due to a lower overall percentage of parts and consumables revenue, which represented 65% of revenue in the first quarter of 2022 compared to 68% in the prior year, partially offset by higher gross margin profile from our acquisitions.
SG&A expenses were $59 2 million in the first quarter 2022, an increase of $9 8 million compared to $49 4 million in the first quarter of 2021.
The first quarter of 2022, SG&A includes $6 1 million in SG&A from our acquisitions.
$1 3 million of nonrecurring noncash acquisition related costs.
And a <unk> 9 million favorable effect from foreign currency translation.
The remaining accretion SG&A is primarily associated with increased compensation expense related to wages and additional head count and increased selling costs associated with improved business conditions compared to the first quarter of 2021.
As a percentage of revenue SG&A expenses decreased to 26, 1% in the first quarter 2022, compared to 28, 7% in the prior year period.
Our diluted EPS was $3 53 in the first quarter compared to $1 43 in the first quarter 2021.
Our diluted EPS in the first quarter of 2022 includes a $1 30 gain on the sale of one of our Chinese facilities related to our relocation project.
<unk> and acquisition related costs.
And a <unk> impairment charge.
As we outlined in our February earnings call. We reached an agreement with the local government in China to by our existing facility that supports our stock preparation product line and over the next two years, we will build and move to a new facility.
Final down payment related to the sale of the facility was received from the government and disagreement became effective in the first quarter, resulting in a $22 million pre tax gain on sale or $1 30 per diluted share after tax.
We have received a 31% down payment and the remaining proceeds from the sale of the facility will be due at the earlier of when the government sells the property or within two years of the effective date of the agreement.
We currently estimate the Capex for this project to be approximately $20 million with most of the capex costs being incurred over the next 18 months.
The proceeds from selling the facility will pay for the new facility and the relocation costs that will be incurred.
Our adjusted diluted EPS was $2 28.
In the first quarter of 2022.
And exceeded the high end of our guidance range by <unk> 18.
Due to higher revenue and a lower tax rate and forecast.
Tax rate in the first quarter was 24, 4% and included approximately <unk> <unk> of tax benefit related to the vesting of equity awards and a change in tax reserves associated with uncertain tax positions.
And in addition, the tax provision included a point $6 million benefit from the reversal of a tax reserve, which is offset by a corresponding expense in SG&A related to the reversal of an indemnification asset.
Excluding these items our tax rate would have been 27%.
Adjusted EBITDA increased 41% to a record $45 8 million compared to $32 4 million in the first quarter of 2021.
Due to strong performance in all our segments.
As a percentage of revenue adjusted EBITDA increased to 22% compared to 18, 8% in the first quarter of 'twenty, one due to improved performance in our industrial processing and material handling segment.
Operating cash flow increased 24% to $23 8 million in the first quarter of 2022 compared to $19 1 million in the first quarter 'twenty one.
Historically, the first quarter has been a weak quarter for operating cash flow. This represents a strong start for 2022 with both operating and free cash flow being our highest first quarter performance.
We had several notable non operating uses of cash in the first quarter of 2022.
We paid down debt by $19 2 million.
Paid $2 9 million for capital expenditures.
Paid two point I paid a $2 9 million dividend on our common stock.
Paid $4 6 million and tax withholding payments related to divesting of stock Awards.
Free cash flow increased 24% to $20 9 million in the first quarter of 2022 compared to $16 8 million in the first quarter 'twenty one.
Let me turn next to our EPS results for the quarter.
In the first quarter of 2022 GAAP diluted earnings per share was $3 53, and adjusted diluted EPS was $2 28.
In the first quarter of 2021 GAAP diluted earnings per share was $1 43, and after adding back <unk> 10 of acquisition costs adjusted diluted EPS was $1 53.
As shown in the chart the increase of 75 and adjusted diluted EPS in the first quarter of 2022 compared to the first quarter of 'twenty. One consists of the following.
96, due to higher revenue 16 from acquisitions net of interest expense on acquisition borrowings.
<unk> due to lower interest expense and <unk> from a lower recurring tax rate.
These increases were partially offset by 26 due to higher operating costs <unk> <unk>.
Due to a lower gross margin percentage and <unk> <unk> due to government assistance programs in the prior period and <unk> due to higher weighted average shares outstanding.
Collectively included in all the categories I, just mentioned was an unfavorable foreign currency translation effect of <unk> in the first quarter of <unk> 22, compared to the first quarter of last year due to the strengthening of the U S. Dollar.
Looking at our liquidity metrics on slide 15, our cash conversion days, which we calculate by taking days in receivables plus days in inventory and subtracting days in accounts payable.
Decreased to 104 at the end of the first quarter 2022 compared to 123 at the end of the first quarter 'twenty one.
This decrease was driven by a higher number of days in accounts payable.
Working capital as a percentage of revenue was 10, 8% from the first quarter of 'twenty, two compared to 15, 1% in the first quarter of 'twenty one.
Our net debt that is debt less cash decreased $16 million or 9% sequentially to $159 million at the end of the first quarter 'twenty two.
In the first quarter, we continued our pattern of paying down our debt and we were able to further lower our leverage ratio calculated in accordance with our credit agreement to 116 at the end of the first quarter 'twenty two compared to 134 at the end of 'twenty, one and one five at.
At the end of the first quarter of 2000.
At the end of the first quarter 2022, we had $170 million of borrowing capacity available under our revolving credit facility, which matures in December of 'twenty three.
Now lets review our updated guidance for 2022.
As a result of our strong start to the year, we are increasing our full year revenue guidance to $885 million to $905 million from $870 million to $890 million and we are increasing our adjusted diluted EPS guidance for the full year to $8 eight.
<unk>.
Two $9 from $8 55.
Two $8 75.
The adjusted diluted EPS guidance excludes the $1 30 gain on the sale from our facility in China and the associated one impairment charge as well as before <unk> of acquisition related costs.
Our revenue guidance for the second quarter of 2002.
Is $215 million to $220 million and our EPS guidance is $1 86 to $1 96.
As always I will caution here that there could be some choppiness and variability in our quarterly results due to several factors, including the variability of quarter flow and the timing of capital shipments.
In addition, other risks that could impact our guidance includes supply chain challenges strengthening of the U S dollar geopolitical tensions inflation and China's zero Covid policy.
The 2022 guidance includes an unfavorable foreign currency translation impact of approximately $14 million in revenue and 14 in adjusted diluted EPS due to the strengthening of the U S dollar.
As a result of the increase in revenue guidance and with the mix when the mix moving a little more towards capital.
We now anticipate gross margins for 2022 will be close to 43.0%.
In addition, as I had mentioned during the Q&A on our last call. We anticipate second quarter gross margins will be approximately 42, 5% as a result of capital gross margins on forecasted revenue in the quarter.
As a percentage of revenue, we still anticipate SG&A will be approximately 25 to 25, 5% and R&D expense will be approximately one 5% of revenue.
We expect our tax rate for the remaining quarters will be approximately 28% and 22.
And we continue to expect depreciation and amortization will be approximately $36 million to $37 million.
We continue to anticipate regular capex spending.
In 2022 to be approximately 2% of revenue and.
In addition to that.
In addition to that amount, we estimate capex related to the China facility relocation project will be approximately $12 million in 2022.
That concludes my review of the financials now I'll now turn the call back over to the operator for our Q&A session operator.
Thank you as a reminder to ask a question you will need to press star one on your telephone again that is star then the number one do we draw your question press the pound key.
Nathan while we compile the Q&A roster.
And your first question will come from Chris Howe Barrington Research. Your line is open.
Good morning, Jeff Good morning, Mike.
Chris Good morning, Chris.
Morning.
As it relates to the business outlook for fiscal year, 'twenty, two whether qualitative or quantitative.
You discuss again the different challenges that we're seeing in this environment as it relates to order flow and the timing of capital shipments supply chain constraints foreign currency geopolitical.
And then lastly, the zero Covid policy.
Leading off with the zero Covid policy can you kind of describe what your thoughts are in the region and what Youre hearing from on the ground.
Is it.
Potential for worsening there as it relates to China, and the zero Covid policy or what's the latest on that.
Yes.
Very interesting Chris because we have as you know a very large employee base over there.
This account is now, but it's probably over 400 employees and.
To our knowledge, we have not had a single employee get Covid of course, we're here in the U S. They are estimating maybe 60% of the population.
Contracted COVID-19 so they have really.
Adhere to a pretty strict.
Program over there that as soon as.
Individual test positive they get isolated it's common for them to isolate the talent in the region as they have a bit of an outbreak so.
It's a challenge if you think about are we may have suppliers that are in our region.
That is under quarantine for a period of time, so it's slowing down the.
The delivery of materials that we need but also for workers b they are workers or workers of our suppliers. If theres an outbreak in your apartment complex <unk> for two to four weeks. They don't anybody leave the complex. So it's fairly I would say draconian relative to the rest of the world.
I guess, it's been effective if your goal is to have zero COVID-19 infections, well within our employee base. They have achieved that but you do it at some cost.
Slowing interruptions within the economy. So it's something that is a challenge for us R. R.
Our employee so far have done a great job in finding alternative suppliers and working around and through this time.
Trying to stay ahead of our of our our material needs from an inventory management standpoint, but it's it's.
It's just so uncertain that you just don't know where and if an outbreak is going to occur and how that might impact you going forward. So this is probably one of our biggest uncertainties I would say around the world right now is the China Covid policy.
Okay.
That's very helpful and then staying along general themes.
In the industrial processing segment.
Transition from OSB to OSB from Mds as it relates to furniture.
You mentioned six stranding systems being put into place nine existing a total of 15.
How should I.
We think about this long term opportunity.
For furniture, so I would say we're in the somewhat early.
Stages of them evaluating this we sold our first systems in there I think in around 2013, and we've got some subsequent orders from that customer and now it seems to be start and then it was.
There was a lot of activity before COVID-19 hit and when Covid hit things got quiet for I would say two years and then all of a sudden they started back up again and is often the case in China when things get moving they can they can go quite quickly. So all of a sudden the activity level has been quite high with these orders the six systems that we've booked so far this year.
It came quickly and some of them actually weren't even in our pipeline that weren't on our radar. So it's one of these things where once China decide because they have such.
We have such a massive manufacturing base there once they decide to do something the order flow can be has the potential to be quite significant so we're in the early stages.
But I think we're quite encouraged we do think OSB is a better product and MDF. It's wider it sturdier theres a lot of pluses to that and so we think there is the potential for for them to continue transitioning over to that as a material of construction for furniture and it has potential of being quite large.
If they were to fully embrace it and really start to convert a lot over it could be a fairly significant.
New new market for us.
Okay and my last question before I hop back into the queue.
Mike You mentioned.
Q2 gross margin pressure just based on higher capital orders.
There was a change to the revenue guidance to the upside as we look at the as we look at the last nine months of the year any change to the commentary you previously stated on the last conference call as it relates to revenue.
First you mentioned the even split between the first half and second half with the strongest quarters being.
Q2, and Q3 in combination as well as better operating leverage in the second half is that still consistent.
Good good question Chris.
Yes, I would say the update on that is.
Now.
The second half of the year has really firmed up so whereas on when we gave the guidance in February it was relatively evenly split now the second half of the year is stronger and the.
<unk> operating margins as a result of the better operating leverage have also improved so the back half of the year is going to be stronger for us than the than the front half year.
Perfect. Thank you for taking my questions.
Your next question will come from Bobby Eubank with Chevy Chase Trust. Your line is open.
Good morning, Doug.
Congrats on a solid execution in a very challenged environment.
I appreciate the conservatism.
In your commentary look you you've talked in the past about your 80 20 pricing can you kind of walk through what type of inflationary inputs you are seeing in your ability to continue to pass through.
This extreme raw material increases thanks, guys.
Yes, thanks, Bobby so.
As you know the 80 20 program kind of looks at your profitability by product and by customer and you take some pricing action as a as a result of that but what we've experienced I think what you are alluding to right. Now is that we're in an unusual period certainly for the last 30 or 40 years, where we're seeing fares.
Fairly significant.
Cost increases on our raw materials.
As I've said before we always work very hard to try to minimize the.
The costs that we have to pass onto our customer that's part of our value proposition and because we manufacture everything from basic raw materials, we don't buy.
We're not submit advice sub assemblies and just assembles them were primarily manufacturing we are a little more control over that than you might if you are selling a lot of your manufacturing out to others that being said, we certainly have experienced cost increases and in many cases, we've had to pass those on to our customers our customers of course are.
Experiencing that across the board.
And so it's not a big surprise to our passing on their cost increases with our customers. So we're just in this general environment right now where inflationary pressures are really.
Really increasing kind of pricing across the board throughout the supply chain.
And I think they understand.
What we're dealing with as I said, we work hard to try to minimize the impact of that.
But they they certainly understand that there are any.
Instances, where the cost have gone up considerably and we have no no other alternative other than to pass those costs onto them.
Makes a lot of sense could.
Could you maybe give some high level commentary around expectations for material handling segment in the second half of the year maybe into 2003, we have the infrastructure Bill here in the U S of course, the recycling component of that has been very strong, but more on the maybe mining and aggregate side and the outlook there.
Yes, so we had a very strong first quarter on that particular side of the business on the mining and aggregate side and I think the gentle the general sentiment from our from our operating team. There is that there is a sense of optimism there is.
There is.
Infrastructure build that is.
A lot of that money has not been spent yet but people are getting prepared for that and so they are starting to make investments in their operations. So that they can meet the demand when that does occur.
And so I think there is a kind of as I said the level of optimism that we're going to see.
Some increases in demand over the next few years. The other thing. That's happened is of course with the Russia, Ukraine conflict a lot of raw materials come from that region.
And with the sanctions.
Those we're seeing customers have to start to make investments and ramp up production to to replace that lost supply chain.
So.
Yes, things like potash theres, certain raw materials that that Russia, and Ukraine, where major exporters out when that goes away. The rest of the market has to try to.
Wrap up their production to.
To replace that loss and so we're starting to see that.
Customers are starting to make some investments and we are in discussions with customers on projects that are.
That are really the result of that conflict. So.
That's a kind of a market disruption that will force some.
Some increase in production and some shifting of production.
Yes, it makes a lot of sense.
And my final question and ill hub.
Maybe one follow up to that.
Acquisition pipeline remains healthy.
Near term things that we should be expecting.
Well, we're always as you know we're always our corporate development.
The team is always very busy looking and talking to two as many sometimes tracking has made a couple of other companies trying to find ones that are a good strategic fit for us.
We have two two fairly high hurdles one it has to be a good strategic fit for us and second is it has to be an acquisition that we think we can create value through the combination of the price we pay and the improvements we might be able to make in the business. They are fairly high hurdles and so.
A couple of hundred companies quickly gets funneled down to a much smaller number.
That being said our balance sheet is in good shape, we're generating a lot of free cash.
And there is a fairly healthy pipeline.
The opportunities out there.
During the pandemic of course things were quite slow for a year and a half or so so there were some deals that came to the market that we're just sitting there waiting for things to recover.
And then of course companies are operating at a fairly high level and some people want to take advantage of the.
Good performance too.
To sell the business so.
As a healthy <unk>.
Activity level out there the challenge for US is always find something thats a good fit.
At a reasonable price.
And we're working hard on it.
Never really slowed down that effort, that's kind of a continual effort.
It makes a lot of sense and last.
You mentioned the challenges of operating factories all around the world is there any trend between you and your customers are kind of evaluating supply chains are near shoring or anything like that thanks. So much.
Well when.
When you get into environments like this everybody is searching for for suppliers everywhere in the world. So you get quite.
You get quite flexible in.
And where youre going to get things. So I would say there is.
The principal concern of our customers have right. Now is can you can you meet deliveries in some cases can you deliver at all.
They are running very high operating rates, so they're consuming a lot of consumables and a lot of parts that are being used up. So the first thing. They want to know is just to make sure that we can continue to supply them.
Some cases.
We will.
Run a higher inventory level to give them assurance in some cases, they are running higher inventory levels. So they know they have more parts and consumables on the shelf.
Available when needed. So yes, I'd say there is a lot of discussion of activity going on between us and our customers when youre in an environment like this.
Thanks, That's all for me guys.
Again, if you would like to ask a question you May press star one on your telephone.
Your next question will come from Walter Liptak with Seaport. Your line is open.
Hey, good morning, guys great quarter.
Hi, well, thank you all right.
Let me try a couple of follow ups.
One on pricing.
It seems like.
Price cost inflation, you guys are doing a great job with it so I wonder if.
If I could ask you about how are you doing your price increases because I think.
In the industrial landscape, we see all kinds of things surcharges.
Price increases periodically more related to.
The projects I Wonder if you could.
Give us some insight into how youre doing it.
You're making them look.
Easier than what we've seen from some other companies.
Thanks, Paul well, where some of those things you mentioned are exactly what we're doing our folks are very connected to their input costs.
They monitor that very closely and are making adjustments accordingly, including.
Things that you just noted.
Putting in place trying to contractually limit the amount of time quotes are available and putting in place.
Surcharges, where are those will adhere.
I think for us.
Our parts and consumables turn quite quickly.
So they don't sit in backlog very long and that's the area that is.
We can quickly adjust to.
The area, we probably have the most exposure on is in capital, where we could take an order and even though we've limited the amount of time that the quote is open floor to protect ourselves and we when we get the order we will try to lock in pricing for the material, but if that order.
In our backlog for six to nine months and we haven't been able to secure all the components we do have.
Some exposure there.
But we are our folks are working all the levers.
And there.
It's quite a dynamic environment. So they are monitoring it closely continuously.
I might add also that this is where our decentralized structure really really helps us because as you might imagine supply chain issues and even inflationary issues are quite different around the world South America versus Asia, Europe , and North America, So with our decentralized structure, we've got all of our divisions focusing on this every.
Based on the local conditions they are experiencing on the ground and so you've got it's kind of like a force multiplier you have got a large number of people around the world that are focusing on this everyday and that kind of makes it a little more manageable for us.
Okay, great. Thanks for that.
Then.
Just a last one on the.
OSB projects out in China.
Can you give us a ballpark of what the value of like one OSB.
<unk> would be.
Obviously as you might imagine it kind of depends on everything they buy with them, but they can be a single often by two standards at a time, but normally our orders tend to fall between two and $4 million per order for OSB stuff tends to be the case, sometimes a little less depending on the options are picking up with it.
Okay, great. Okay. Thank you.
Again, if you would like to ask a question you May press star one on your telephone.
And I'm showing no further questions at this time I will now hand, it back over to Jeff Powell for closing remarks.
Thanks Peter.
Before wrapping up the call I just wanted to leave you with a few takeaways.
First quarter was an excellent start to 2022 with high demand for our parts and robust capital project activity, which led to record bookings and revenue.
And although their increase in economic and social political headwinds present, our employees around the globe continue to focus on meeting our customers' needs with innovative technology solutions that drive sustainable industrial processing and deliver long term value to our stakeholders.
Our financial health is excellent and our ability to generate strong free cash flow remains a cornerstone of our business model.
We look forward to delivering exceptional value for all our stakeholders again in 2022, we want to thank you for joining the call today and please stay safe.
Yeah.
This concludes today's conference call. Thank you for participating you may now disconnect.
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