Q1 2023 Dycom Industries Inc Earnings Call
Hello, Thank you for standing by and welcome to the Diatom Industries, Inc. First quarter 2022 results conference call. At this time all participants are in a listen only mode. After the speaker presentation there'll be a question and answer session.
Good question during the session you will need to press star one on your telephone. Please be advised that today's conference maybe recorded if you require any further assistance. Please press star zero.
I would now like to hand, the conference over to your host today, Mr. Steven Nielsen President and Chief Executive Officer. Please go ahead Sir.
Thank you operator.
Everyone I'd like to thank you for attending this conference call to review our first quarter 2023 result.
Going to slide two during this call we will be referring to a slide presentation, which can be found on our website's Investor Center main page relevant slides will be identified by number throughout our presentation.
Today, we have on the call drew that Ferrari, our Chief Financial Officer, and Ryan Urness, Our general counsel.
Now I will turn the call over to Ryan or Dash.
Thank you Steve.
All forward looking statements made during this call I provided pursuant to the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Forward looking statements include all comments, reflecting our expectations assumptions or beliefs about future events or performance that do not relate solely to historical periods.
Forward looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from our current projections.
Including those risks described in our annual report on Form 10-K filed March four 2022nd together with our other filings with the U S Securities and Exchange Commission, we assume no obligation to update any forward looking statements Steve.
Thanks, Ryan now moving to slide four and a review of our first quarter results.
As we review our results. Please note that our comments today in India accompanying slides, we reference certain non-GAAP measures. We refer you to the quarterly report section of our website for a reconciliation of these non-GAAP measures to their corresponding GAAP measures.
To begin I want to express my sincere thanks to our employees, who have served our customers with real fortitude and difficult times now for the quarter.
Revenue was $876 3 million, an organic increase of 21, 1% as.
As we deployed gigabit wireline networks wireless wireline converged networks and wireless networks. This quarter reflected an increase in demand from three of our top five customers.
Gross margin was 14, 9% of revenue and increased approximately 13 basis points compared to the first quarter of 2022.
Improved operating performance of over 70 basis points in Q1 was partially offset by 58 basis points of higher fuel costs.
General and administrative expenses were seven 9% of revenue at all of these factors produced adjusted EBITDA of $63 7 million or seven 3% of revenue and earnings per share of <unk> 65 cents compared to <unk> in the year ago quarter.
Included in earnings per share in the first quarter of 2023, our incremental tax benefits of <unk> 14 per share compared to nine cents per share in the year ago quarter.
Liquidity was solid at $309 5 million and sequentially days sale outstanding declined three days.
During the quarter, we repurchased 200000 shares for $18 $5 million.
Now going to slide five.
Today major industry participants are constructing or upgrading significant wireline networks across broad sections of the country. These wireline networks are generally designed to provision gigabit network speeds to individual consumers and businesses either directly or wirelessly using <unk> technologies industry participants have stated their belief.
That a single high capacity fiber network can most cost effectively deliver services to both consumers and businesses, enabling multiple revenue stream from a single investment.
This view is increasing the appetite for fiber deployments and we believe that the industry effort to deploy high capacity fiber networks continues to meaningfully broaden the set of opportunities for our industry.
Increasing access to high capacity telecommunications continues to be crucial to society, especially in rural America, the infrastructure investment and job Jacked included over $40 billion for the construction of rural Communications networks, and Unserved and underserved areas across the country. This represents an unprecedented.
That level of support in addition, an increasing number of states are commencing programs that will provide funding for telecommunications networks, even prior to the initiation of funding under the infrastructure Act.
We are providing program management planning engineering and design aerial underground and wireless construction and fulfillment services for gigabit deployments.
These services are being provided across the country and numerous geographic areas to multiple customers.
These deployments include networks, consisting entirely of wired network elements and converged wireless wireline multi use networks.
Fiber network deployment opportunities are increasing in rural America, as new industry participants respond to emerging societal initiatives.
We continue to provide integrated planning engineering and design procurement and construction and maintenance services to several industry participants.
Macroeconomic effects and supply constraints may influence of near term execution of some customer plants.
Broad increases in demand for fiber optic cable and related equipment may cause delivery volatility in the short to intermediate term.
In addition, the market for labor remains tight in many regions around the country. It.
It remains to be seen how long this condition persists.
Furthermore, the automotive and equipment supply chain remains challenged particularly for the large truck chassis required for specialty equipment prices for capital equipment are increasing.
As we contend with these factors we are encouraged that industry participants increasingly understand industry wide cost pressures and are beginning in some instances to address those impacts within this context, we remain confident that our scale and financial strength position us well to deliver valuable service to our customers.
Moving to slide six.
During the quarter organic revenue increased 21, 1% our top five customers combined produced 67, 3% of revenue increasing 19, 8% organically.
Demand increased from three of our top five customers all other customers increased 23, 9% organically.
AT&T was our largest customer at 27, 1% of total revenue or $237 4 million.
AT&T grew 52, 7% organically this was our fifth consecutive quarter of organic growth with AT&T.
Revenue from Comcast was $111 3 million or 12, 7% of revenue Comcast was <unk> second largest customer.
<unk> was our third largest customer at 11, 7% of revenue or $102 8 million.
Alumina grew organically, 23%. This was our first organic growth with lumen and seven quarters.
Verizon was our fourth largest customer at 81 million or nine 2% of revenue and finally revenue from frontier was $57 2 million or six 5% of revenue.
Interior grew a 127, 1% organically.
This is the first quarter since April of 2019 were our top five customers grew organically in excess of 15% and the 13th consecutive quarter, where all of our other customers in aggregate, excluding the top five customers have grown organically.
Of note fiber construction revenue from electric utilities was $69 6 million in the quarter and increased organically, 47% year over year.
We have extended our geographic reach and expanded our program management network planning services in fact over the last several years. We believe we have meaningfully increased the long term value of our maintenance and operations business a.
Trend, which we believe will parallel our deployment of gigabit wireline direct and wireless wireline converged networks as those deployments dramatically increase the amount of outside plant network that must be extended and maintained.
Now going to slide seven.
Backlog at the end of the first quarter was $5 $5 93 billion versus 5.8.
Two 2 billion at the end of the January 2022 quarter, a decline of $229 million of.
Of this backlog approximately $2 95 9 billion is expected to be completed in the next 12 months.
Backlog activity during the first quarter reflect solid performance as we book New work and renewed existing work, we continue to anticipate substantial future opportunities across a broad array of our customers.
During the quarter, we received from AT&T placement services agreements in North Carolina, South Carolina, Georgia and Florida.
For frontier fiber construction agreement for Illinois, and Michigan for a bright speed a fiber construction agreement in North Carolina.
For Verizon and engineering agreement for Massachusetts, and Rhode Island, and maintenance and restoration agreement in Florida.
And various rural fiber construction agreements in Arkansas, Wisconsin, Indiana, Kentucky, and Tennessee head.
Headcount increased during the quarter to 15221 now.
Now I will turn the call over to drew for his financial review and outlook.
Thanks, Steve and good morning, everyone going to slide eight contract revenues were $876 3 million and organic revenue increased 21, 1% for the quarter.
Q1 of the prior year included a $3 9 million of revenue.
On storm restoration services compared to none in Q1 of this year.
Adjusted EBITDA in Q1 was $63 7 million or seven 3% of revenue.
Compared to $44 1 million or six 1% of revenue in Q1 of last year.
Gross margin was 14, 9% of revenue for the April quarter, and increased approximately 13 basis points.
<unk> Q1 'twenty two.
Improved operating performance of over 70 basis points in Q1 was partially offset by 58 basis points of higher fuel costs.
G&A expense of seven 9% decreased 129 basis points compared to Q1 'twenty two.
From improved operating leverage at the higher level of revenue in the quarter and tight management of costs.
Net income was <unk> 65 per share compared to <unk> <unk> per share in the year ago period.
In the first quarter of each fiscal year, we have share based awards that vest and income taxes are impacted.
In Q1 of this year net income included tax benefits of $2 5 million or <unk> <unk> per share for the vesting and exercise of share based awards.
In Q1, we also had tax benefits of $1 7 million or <unk> <unk> per share for certain credits related to a tax filing for a prior year.
For comparison purposes in Q1 of last year net income included tax benefits of $2 6 million or <unk> <unk> per share for the vesting and exercise of share based awards.
Including these items the total variance in net income reflects an increase in adjusted EBITDA, lower depreciation amortization and stock based compensation and higher gains on asset sales.
All set by higher interest expense in Q1 of this year.
Going to slide nine our financial position and balance sheet remains strong.
We ended the quarter with $500 million of senior notes $345 $6 million of term loan and no revolver borrowings.
Cash and equivalents were $185 6 million and liquidity was solid at $309 5 million.
Our capital allocation prioritizing organic growth followed by opportunistic share repurchases and M&A within the context of our historical range of net leverage.
Going to slide 10 cash flow used for operating activities was $64 9 million to fund the sequential growth in Q1.
Capital expenditures were $33 million net of disposal proceeds and gross Capex was $38 4 million.
During Q1, we repurchased 200000 shares of our common stock for $18 5 million.
The combined Dsos of accounts receivable and net contract assets of 105 days improved three days sequentially compared to Q4 'twenty two.
Going to slide 11, as we look ahead to the quarter ending July 32022, the company expects contract revenues to increase mid teens to 20% as a percentage of contract revenues as compared to the quarter ended July 31, 2021 and.
And we expect non-GAAP adjusted EBITDA percentage of contract revenues to range from in line to modestly higher as compared to Q2 of last year.
We also expect $9 5 million of interest expense, reflecting reflective of higher market interest rates.
A 27% effective income tax rate.
30 million diluted shares now I will turn the call back to Steve.
Thanks drew moving to slide 12, this quarter, we experienced solid activity and capitalized on our significant strengths first and foremost we maintained significant customer presence throughout our markets. We are encouraged by the breadth in our business. Our extensive market presence has allowed us to be at the port.
Front of evolving industry opportunities telephone companies are deploying fiber to the home to enable gigabit high speed connections increasingly rural electric utilities are doing the same.
Dramatically increased speeds to consumers are being provisioned and consumer data usage is growing particularly upstream.
Wireless construction activity in support of newly available spectrum bands is expected to increase this year.
Federal and state support for rural deployments of communications networks is dramatically increasing in scale and duration.
Cable operators are deploying fiber to small and medium businesses and enterprises a portion of these deployments are in anticipation of the customer sales process.
Appointment to expand capacity as well as new build opportunities are underway.
Customers are consolidating supply change, creating opportunities for market share growth and increasing long term value of our maintenance and operations business.
As our nation and industry navigate some increased economic uncertainty we remain encouraged that a growing number of our customers are committed to multiyear capital spending initiatives.
We are confident in our strategies the prospects for our company the capabilities of our dedicated employees and the experience of our management team.
Now operator, we will open the call for questions.
Thank you.
A question you will need to press star one on your telephone.
Your question press the pound key.
Our first question comes from Steven Fisher with UBS you May proceed.
Great. Thanks. Good morning, just wondering if you could clarify Steve you mentioned it in your comments and the slides as well about industry participants increasingly kind of understand the industry wide cost pressures beginning in some instances to address those impacts can you just give a little more color on on what you mean.
Yeah, Steve I guess, what I would say is.
Given the impact on fuel cost and labor availability and cost pressures coming out of labor.
Think there is a.
You know an emerging understanding that those types of cost pressures are industry wide.
There are you know that.
There are ways to address those.
That that we're seeing developing in the in the marketplace.
Okay.
I guess, maybe then a follow up would be.
Your fuel costs the impact of the 58 basis points of margin impact you mentioned in the quarter.
How does that compare to your expectations.
Do you have embedded in there for <unk> for the second quarter and you know I guess, just the general pressures you're seeing in the marketplace are you confident you were able to overcome them.
Yeah, Steve This is drew so.
We're generally in line with our expectations in the first quarter.
Our fuel costs did come out obviously it increased during the period.
And then as we think about Q2.
We think there is a similar headwind year over year.
As we go into Q2 as well.
Okay, and then if I could just ask you a higher level question.
I guess I'm just curious.
Are you thinking that what youre seeing in the marketplace. Today, you know obviously, we're looking at.
A pretty big acceleration in revenue growth is this sort of the have we have we reached finally, the inflection point where.
The drags you've had from from some of the legacy programs really starting to wear off and we can kind of continue to see the.
The acceleration is this the point we're at now this is the inflection.
Well clearly Steve the organic growth in the first quarter I think was the.
The fastest organic growth rate that we've had since.
I think it was April of 2017.
So clearly it picked up and we see a similar growth rate in the July quarter.
I think when you look at the customer detail. When you have your largest customer growing at 52% you have a another customer who has been growing nicely and continues to grow and then I think probably importantly, our third largest customer resumed growth.
Along with continuing to outlined pretty aggressive plans around fiber deployments I think that that really shows that we're starting to see the breadth of the business grow.
Inside the top five and of course, we had another great quarter for all other.
You know with 23%.
Organic growth.
Or almost 24 and you know just as a as we also mentioned in the comments continue to be pleased with our performance of Rural America with with almost $70 million of revenue from electrical a rural electrical utilities growing 47% year over year. So I.
Thank the breadth of the business.
As a continuing to expand.
And we're continuing to get good performance out of it.
<unk> catalyst and hopefully see some emerging catalyst.
Also coming into the business.
Great. Thank you.
Thank you. Our next question comes from Adam polymer with Thompson Davis.
Proceed.
Oh, Hey, good morning, guys great quarter.
Adam.
What's that Steve was there any impact from the large customer program in Q1 and does that carry into Q2 at all.
Adam as we talked about on the last call in our fourth quarter call. There was an impact it was less than the fourth quarter, we expect that trend to continue through the balance of the year.
To where by the end of the year, it's insignificant, but there was there was some impact but it continues to diminish.
And just Steve what's the bidding environment.
Like today.
You know I just point you back to the to Steve's question and say there are industry wide cost pressures that everybody has to contemplate as they think about.
<unk>.
The work as we said last quarter.
You know what we're trying to do is be very careful about where we commit capacity I mean think about this we grew organically over $150 million year over year. It takes a lot of effort a lot of hard work.
But mostly by people not in this room and we wanted to make sure that we commit their capacity and their talent in the right places.
So that we can serve customers well with them in doing that.
Hopefully serve our investors well.
Okay.
Pinpointed fuel, but can you just kind of broadly talk about.
You know the impact of inflation, what you're seeing today and how you expect that to trend.
Adam I think beyond fuel, which I think Peru is [laughter] dimensions. It precisely as we can.
We continue to see.
Labor cost is going up I mean, particularly around new hires semi skilled people that we're trying to get in the door I mean somebody that you want a higher today to train cost more initially than it did then that person did a year or year and a half ago.
The other thing to highlight is as we did in our comments that kept the cost of capital equipment is going up.
And so we're trying to make sure as we commit to new.
Initiatives, where we're gonna be making investments in fixed assets. The current cost of those fixed assets as the way we're thinking about.
Their impact.
<unk>.
Returns with that particular program.
Understood. Thanks, Dave.
Okay.
Thank you. Our next question comes from Sean Eastman with Keybanc capital markets. You May proceed.
Good morning, Steve drew thanks for taking my questions. So so.
We've kind of addressed some of this already but it's really great to see the revenues coming through them.
I just would have thought we would be seeing a little bit more operating leverage on those strong revenue trends here, yes, we addressed that fuel the labor inflation, but.
You know, particularly from a year on year perspective, I thought that complex customer program, having a lessening impact would be.
More powerful than flat.
Flat year on year revenue.
It really would be in the range of expectations for <unk>. So I mean, what do we infer from that do we need to sort of rethink.
D wise sort of historical margin performance and in this operating environment.
Is there something else specific to Q that.
You know maybe it makes that not the case could you just help us out a little bit more with that Steve.
Sure. So let's start with operating leverage right. One one area that that obviously, we performed very well in the current quarter. We expect that to continue as the operating leverage on G&A I mean, the business grew $150 million year over year and the G&A was essentially in line right. So we've got.
Good tight cost controls around those areas that that that are in the G&A area and then if you think about again, if you think about the operating margins.
We're taking a prudent view to the second quarter, we have labor costs that are going up we have fuel costs that are still up on a year over year basis, and we just don't want to get ahead of ourselves Sean I mean, there is tremendous amounts of opportunity.
We're addressing that opportunity in a way that we expect not to get back to the average but to be better than average as we address those new opportunities.
And and we think we can work that into the business.
But the cost environment is something that that.
That has to be contemplated as we thought at least in the near term.
Where where margins would be.
Yeah, Okay, Alright, that's helpful Stephen and just coming back to the comment about industry participants.
Starting to address those broad based cost increases.
I'm still not sure I totally understand what you're trying to say there is it.
Are you trying to say that there is.
Maybe some pause and.
Contract Awards is as these costs sort of.
You know get mark to market or.
Hum.
You know maybe a pause in decision, making what exactly are you trying to say I mean, Sean rent revenue was up organically a little over 20% in the April quarter, we expect that.
To be you know essentially in line for the current quarter, there new opportunities developing all the time.
What we're what we're saying is as we address those new opportunities and everybody else does.
They've got to be cognizant of where cost are.
And you know are quite a number of our clients spoke at industry conferences over the last two weeks I think some are speaking today nobody is slowing down in terms of what their plans are as anything.
Their plans are accelerating.
Hey, just a question of making sure that we are addressing opportunity in a way that we can perform well for clients and have good returns and we're not looking for average returns. We're looking for good returns as we make commitments.
Okay got it and then one last quick one I mean, what what is.
The icons market presence.
And scale mean in this environment from a from a competitive perspective, what would you highlight to investors there.
Yeah, I think China, we've talked about this before.
Yeah.
We don't see every opportunity that's out there in the marketplace, but I think we see a significant percentage or.
The vast majority of those that those opportunities are that are significant.
Where are where we're sensing the market all the time again, because we want to make sure that when we make a commitment that we can deliver.
Because in a in an environment of some cost inflation and lots of demand, we don't want to be in a position, where we can't deliver we'd rather not signed up and not deliver.
Mhm.
Got it okay, great I'll turn it over there thanks so much.
Thank you. Our next question comes from Eric Loop Child Wells Fargo. You May proceed.
Hi, Thanks for taking the question Steve.
Steve So it looks like your employee head count was up little over 6% I'm just wondering given all the opportunities kind of ahead of you in the business, what's the environment like for getting new employees in the door Alternatively, the subcontractor environment.
Maybe you could provide some color on kind of labor productivity metrics you track.
From the new employees, you have on getting them up to speed.
Yeah.
Yeah. So Eric I mean, we did we did we were able to grow head count both year over year about little under 900, and then sequentially just under 200.
You know this is a business, where we have to recruit folks we have churn and there was one week earlier in the month of May where we were able to onboard over 250, new employees. So we're getting we're getting applications were getting new folks were doing lots of training, there's cost associated with that but that's part of what.
It takes to grow capacity.
And again.
I think about sub contractors and in the same way, they're thinking about where they commit their capacity to make sure that they can deliver and we think that we do a good job of working with our subcontractors.
To be an attractive.
Place for them to work because we keep them busy and we try to keep an even cadence.
And I think as long as we do that.
They're they're not theirs.
There's every opportunity that we will get fair share of the resources that are available.
We work with our subcontractors as like we work with our in house to help them grow capacity, because that's what the industry needs right now.
Yes.
<unk>.
Steve I also just wanted to get your bigger picture perspective on the latest guidance from the NTIA.
Infrastructure Bill it looks like it's going to be really prioritizing fiber deployments and.
Underserved locations. So just wondering kind of how you look at that.
Multi year perspective, the potential for that along with substantial amounts of private capital to really expand kind of the addressable footprint that you have today.
Yeah, Eric I completely agree.
Our reading of this notice of funding opportunity what was I think pretty much.
Shared throughout the industry that it is heavily favored our preferred maybe not favor, but heavily for fiber as a future proof solution to the deployment of Rural America.
And so I think.
Based on that.
Communication for Med D. I E. I think are addressable market got bigger.
Because I think unlike guard off where there was some satellite funding and perhaps some unlicensed spectrum.
Clearly is heavily focused on.
On fiber.
I think the other thing is you know there are a number of other interesting provisions.
But I think generally our industry observers had said would be encouraging to incumbent operators and so I think we're always.
Encourage a win win there's a new funding source to existing customers to supplement their own budgets, but I think generally it was a positive.
Communication.
No that's great and just one more for me Steve.
Maybe just an update on your wireless business.
Kind of percentage of revenues and then as you look out the next year or two especially with C band deployments continuing in three four or five spectrum starting to get deployed.
How do you look at the wireless business kind of growth ramping in the next year or so.
Sure you know it was about 6% of revenue Eric and it was down just less than 4% year over year, we think its up through the balance of the year and into next year and for all all the reasons you just outlined it clearly there are pretty significant C band auction 110 frequency deployments that are underway.
And an expected to accelerate.
And you know we have a good position.
With a with a couple of customers against that I think we will see some up some nice growth.
Alright, Thanks, Steve.
Thank you and as a reminder to ask a question you will need to press star one on your telephone.
Our next question comes from Noelle Dilts with Stifel. You May proceed.
Hey, guys. Thanks, and good morning, first I'm, sorry, if I missed this number but could you could.
Could you.
Revisit your capex expectation for the year and just curious you know you mentioned.
Equipment availability challenges.
Is that impacting how you're how you're thinking about capex. Thank you.
No all our Capex expectation is in line with where we were in the first quarter.
So what we what we talked about there was $180 million to $190 million.
Right.
The gross number for the quarter was right around $38 million.
And so we expect to increase that as the year goes on to get.
Get to the annual number.
No I'll just comment on availability I think as long as we plan ahead, and we get our orders in I think we're getting a good.
Spot from our suppliers given kind of all of those supply chain challenges that everybody, who manufactures anything is dealing with right now.
You know I think we can work through it.
Okay, Great and then I was hoping you could expand a little bit more on the labor challenges. Obviously, you were able to grow your head count in the quarter.
Obviously hearing it's just tough to find people.
As you know are you are you just overall you know kind of increasing wages. How are you attracting books and are there regional differences in terms of your ability to find the folks you need if you could just expand a little bit on.
You know what you're seeing on that front that would be helpful. Thank you.
Yeah, no well so with respect to wages I think it was a year ago that we outlined at particularly for new hires and some semi skilled positions.
That we were seeing wages going up I mean, that's continued it takes more to get folks through the door.
And we've reflected that in our <unk>.
In terms of.
Kind of just the the overall tightness of the marketplace. It shows that there's so much demand out there.
That you've got again to repeat myself, you gotta be careful about where you commit your capacity.
Right.
Okay. Thank you.
Yeah.
Thank you and as a reminder to ask a question you will need to press star one on your telephone. Our next question comes from.
Alan <unk> with Sylvan Lake asset management you May proceed.
Hey, guys. Thank you.
I went back and is this am I right is this the largest quarter you've ever had with AT&T in your history.
If it isn't it's close al and I think we may have.
I think we may have done 231 million prior quarter.
So right. So so what's interesting about that is it came in your calendar calendar first quarter call it or the calendar first quarter and they're just getting started I listened to their calls they've been conferences recently, they basically said, they're just getting started and they expect to meaningfully expand their footprint in the next year to two years in.
Terms of passing so.
Looking at the industry again, like I asked last quarter, but I see it again, the cable industry doesn't seem to yet be responding and looking at where their capex is and what they're doing but once some of the large telcos commit to these kind of programs is like a battleship, it's hard to turn them around I mean, unless we get a really bad recession outside of just the mild one here.
But we're probably going to get in the next year. So my question really is if the company's if your other customers don't seem to be stepping up to try to book commitments now from me.
Seemingly very tight industry.
How are they going to be able to do that in the next year and a half when they do turn like you know is there is there some is it just simply higher prices period.
Do you step up in line or I mean is that the way you're viewing this industry.
Well.
First what I would say is look the cable operators at very large very successful businesses there in a competitive industry and they have figured out how to compete their way to a pretty significant share.
Share of all broadband connections in the country, So I would never count out their ability to compete.
I think what they've outlined and again outlined most recently in some investor presentations is that they have an approach to addressing capacity into that work. That's that's heavily focused on technical services rather than construction services that they think that they will be able to accomplish that within their existing.
Capital intensity.
Envelope so to speak.
Again, I would never challenge their ability to compete and you know for us It just to make sure again that.
Where we commit to any customer that we could we commit.
With the confidence that we can deliver.
And that that will have the right resources available to us to be able to do that.
Yeah.
Okay can you comment also you have a very entrepreneurial management team a lot of these guy most of these guys I guess ran their own businesses still run their own businesses and side can you tell us how you're finding it maybe that's an advantage here as you go through this inflationary environment. Because these guys were essentially running their own businesses.
Management teams of your companies how.
They see the P&L and how they're compensated to be able to make sure they get profits in this inflationary environment.
Yeah, I mean without going into any sensor.
Sensitive details, we've always had our incentive plans based on margin.
So we you know the organization gets paid based on their ability to deliver value not just to deliver top line, obviously topline as part of delivering value.
And and.
Margin is something where.
You're never satisfied because you can always find something to work on.
That you can do better.
Seems kind of trite, but I've always said to the street.
Half our business is worse than average and so there's always plenty of opportunities to get better and.
The entire organization.
Working to get better every day.
Great. Thank you.
Thank you and I'm not showing any further questions at this time I would now like to.
Turn the call back over to Mr. Steven Nielsen for any further remarks.
We thank everybody for your time and attention wish you the best over the holiday weekend, and we'll speak again.
Towards the end of August thank you.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
[music].
Yes.
Yes.
[music].
Sure.
Yes.
Sure.
Yes.
<unk>.
[music].
Yes.
[music].